Smart Investor Malaysia


Malaysia Digital Showing The Way Forward


The nation’s digital economy is proving healthy, with a plethora of investments helping both SMEs and foreign companies setting up shop

Emerging technologies such as artificial intelligence, blockchain and big data have become pivotal in boosting efficiency, increasing revenue opportunities and market reach. Financial technology (fintech) allows businesses and individuals to access services that were not available under traditional financial institutions.

In line with the tremendous growth in fintech, the number of mobile banking transactions jumped 125% to RM460 million in 2020, compared to 2019, according to Fintech Malaysia Report 2021. The usage of e-wallets has also reached new highs, with three million new mobile banking service subscribers in 2020. In terms of QR code acceptance, there was a jump of 164% to 400,000 new businesses registered in 2020, compared to the preceding year.

“More data centers and cloud investments in Malaysia will help push the country closer towards becoming the digital hub of ASEAN,” said Malaysia Digital Economy Corporation (MDEC) CEO Mahadhir Aziz.

A wider proliferation of cloud-based services in Malaysia will help drive further digitalisation. According to the Malaysia Data Center Market Report, the market here is likely to exceed US$800 million by 2025.

MDEC CEO Mahadhir Aziz

For 25 years, MDEC has driven the growth of the nation’s digital economy through the MSC Malaysia initiative. The agency has recently announced Malaysia Digital, the successor to MSC Malaysia. The enhanced and revamped initiative is set to drive digital investments to Malaysia, while allowing small and medium scale enterprises (SMEs) to invest in many of its promoted activities under its new framework for improved incentives, which covers broad areas of digitalisation and adoption of digital technologies.

Malaysia Digital has drawn up a new framework to further attract digital investments in terms of:

• Flexibility – by expanding its offerings beyond designated locations, it aims to provide more opportunities for companies to grow and reinvest in Malaysia.

• Agility – to provide more choices including competitive and fiscal and/or non-fiscal incentives.

• Relevance – with improved governance and processes, Malaysia Digital aims to meet industries’ diverse needs at speed.

Qualified companies can opt for fiscal such as tax incentives, and non-fiscal incentives involving facilitation of knowledge workers, market access and digital adoption. Among the initiatives under MDEC to expedite digitalisation include the Smart Automation Grant and 4IR Catalyst Grant. Other areas of investment include Internet of Things (IoT), creative media technology as well as user interface and user experience.

When it comes to digitalisation, major issues faced by SMEs include limited knowledge and expertise as well as a lack of talent and budget. Despite the soaring ecommerce, it is estimated that 77% of SMEs remain at the stage of basic digitalisation, according to estimates by consulting firms. Investment in digitalisation does not necessarily involve a high level of expertise or a big budget.

For instance:

• Adopting a cashless payment system such as e-wallet support via a QR code as well as social media for marketing and branding is already a major step towards digitalisation.

• Cloud-based POS systems, which come in various forms and sizes to suit different business types and requirements, is also a good place to start.

• Telcos also offer cloud-based POS systems that come together with the appropriate broadband plan; these packages suit various budgetary requirements.

• eCommerce platforms and retail POS services like Shopify as well as platforms like Shopee and Lazada are eCommerce jump pads for SMEs.

Digital resonance
The Global Business Services or GBS is now one of the key contributors to Malaysia’s digital economy. According to Kearney, a global consulting firm, Malaysia ranks in the top three as the world’s most competitive GBS locations since 2004. The average monthly salary offered by GBS companies in MSC Malaysia is RM7,408, which is 60% higher than the average salary for skilled workers in Malaysia (which is RM4,619, according to the Department of Statistics Malaysia 2020), informs MDEC.

“Malaysia is ranked third globally, not just on financial attractiveness alone, but with talent and business environment taken into account as well,” Mahadhir highlights. The Kearney’s Global Services Location Index 2021 (GLSI) ranks countries based on three primary factors: financial attractiveness, people skills and availability, and business environment.

However, the report noted that further effort is needed in the area of digital resonance, a metric that measures on digital skills, legal system adaptability and other key elements of business in the digital age. Given the accelerated pace of technology investments, digital resonance has become more prominent in business decision-making relative to such traditional outsourcing parameters as labour-cost considerations.

On this, Mahadhir says that they are already making headway into improving the country’s digital resonance scores, which is related to the growth and development of a robust digital economy ecosystem. Many initiatives have been taken to drive digital skills in Malaysia, lending itself towards improving digital resonance score, including the Malaysia Digital initiative. “With Malaysia Digital, we are set to expand digital transformation nationwide, thus spurring investment by developing new key sectors,” he adds.

Malaysia Digital’s new, enhanced framework is expected to drive further digital investments into Malaysia as well as open new areas of growth via its catalytic programmes Through intervention, catalytic programmes, grants and industrial support, the Malaysian digital creative content industry has grown into a RM7 billion industry encompassing animation and video games. This, in turn, had brought renowned international video game studios such as PlayStation Studios Malaysia, Double Eleven, Bandai Namco, Larian Games and Galaxy Racer.

MDEC expects more catalytic programmes and initiatives to create substantial digital economic spillover through equitable access to digital tools, knowledge and income opportunities.

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