Why investors are bullish on Malaysia’s Digital Economy

Part 2

Malaysia has a rich history as a multinational hub for traders. The Straits of Malacca has long been favoured as a major route connecting Asia, Europe and the Middle East. Today, Malaysia has evolved to being a hub of highly skilled talent, thriving within a vibrant business ecosystem founded on world-class infrastructure.

Opportunities for everyone

As the world moves rapidly into the 4th Industrial Revolution (IR4.0), MDEC is ready and fully focused on leading Malaysia’s digital economy forward by accelerating:

  1. Formulation of policies and coordination of agencies to enable success
  2. Development of future proof workforce to grow the Digital Economy eco-system
  3. Creation of global champions to increase contribution from the Digital Economy to GDP

It case you missed it, Malaysia has gone #SeriouslyDigital with:

  • Cumulative Total Investment of RM472 billion from the MSC (1996 – 2018)
  • Export sales worth RM166 billion
  • More importantly, the MSC creating a total of 182,538 jobs.

We have made significant efforts to establish the right ecosystem to foster wide digital entrepreneurship.

My thoughts here will touch on just a few illustrations of recent and upcoming opportunities that have been built through collaboration; my MDEC colleagues will also be touching on many more initiatives across different parts of the digital economy as we move further into the year.

Just a few examples:

  • Ninety (90)% of future jobs will require some level of digital literacy. The MyDigitalMaker movement has so far seen 450,000 students participating in a national public-private-academia initiative to encourage Malaysian youth to become digital producers and not just digital consumers.
  • Inclusivity — inspiring everyone to take their place in the digital world – includes initiatives such as eRezeki, which empower Malaysians to start generating online income via platforms set up to match their respective skills with digital work. More than 210,000 participants have been trained with more than 110,00 of these reporting additional income amounting to a total of more than RM220 million reported.
  • An initiative to mainstream digital entrepreneurs (eUsahawan) has so far trained 65,000 participants. More than 65,000 have reported additional sales, amounting to a total of more than RM370 million sales reported. Some individual success stories can be found at the site.
  • The Digital Free Trade Zone (DFTZ) is a national initiative to drive Malaysia’s cross border eCommerce through Digitalisation, by focusing on driving SME export through various eCommerce players. Another key outcome of DFTZ is to position Malaysia as Regional efulfilment hub.

And finally, coming back to the theme of investment: Investors come from many countries to Malaysia. Just one example — the USA is one of the top investors in MSC Malaysia, accounting for 10% of total investments as 132 American companies have so far been awarded MSC status, bringing in a total cumulative investment of RM30 billion from this investment channel alone.

However, let’s not forget that investment also begins at home. Let’s invest in our digital economy — invest some of our energy, abilities and desires – to grow and enrich our families and ourselves.

While digital transformation and digital economy may appear to be high-level taglines, digital adoption simplified is about finding out the best-use of digital tools and solutions to help build your place and base in this fast-growing and evolving new world.

As an agency under the Ministry of Communications and Multimedia, MDEC remains committed to working closely with all levels of Government to speed the building and development of our digital economy as Malaysia accelerates into a leading Digital Nation.

#DigitalMalaysiaForward   #LetsBuildTogether

Dato’ Ng Wan Peng, Chief Operating Officer

Malaysia Digital Economy Corporation (MDEC)

Why investors are bullish on Malaysia’s Digital Economy

Part 1

It’s inspiring to see that the number of companies choosing to come to Malaysia is on the increase. For example, in the past few weeks alone, Malaysia Digital Economy Corporation (MDEC) welcomed:

  • Beyondsoft officially launching its first office in Malaysia to help local talent and businesses build a healthy ecosystem.
During the launch of Beyondsoft’s first office launch in Malaysia in June this year.
  • Logicalis officially launching its new headquarters based out of Sunway Velocity in Kuala Lumpur. Besides its new headquarters, Logicalis has also invested in Malaysia’s ICT industry back in 2006, establishing a Global Support Centre in Cyberjaya to provide world class managed services to customers across the globe.
During the launch of Logicalis headquarters in July this year. The launch was officiated by MDEC’s Vice President for Investment & Industry Development, Mr. Hew Wee Choong (centre).

The sustained growth of Malaysia’s digital economy over the past few years, coupled with the rise of digitalization in industry are clear indicators that Malaysia is a country with a robust Digital Economy; one that is increasingly a preferred choice for companies from all over the world.

Despite a delicate global economy, it is gratifying that Malaysia has risen up in several global investment rankings.

Malaysia has been crowned as the best country in the world to invest in or do business for 2019, according to the CEOWORLD magazine. Ranked number 1 among 67 countries, the publication confirms Malaysia continues to be the most attractive destination for investors and businesspeople.

The rankings were based on 11 different factors including corruption, freedom (personal, trade, and monetary), workforce, investor protection, infrastructure, taxes, quality of life, red tape, and technological readiness. Each category was equally weighted.

This latest distinction follows in the wake of many other encouraging plaudits.

According to Malaysia Investment Development Authority’s (MIDA’s) Malaysia Investment Report 2018, these rankings include Bloomberg’s Emerging Market Scorecard where we again clinched the top spot in a line-up of 20 other emerging market peers, ahead of prominent nations like Russia (2nd), China (3rd) and Korea (10th).

Another accolade is Malaysia’s nine-spot leap to secure a global ranking of 15 among 190 economies in the World Bank Group’s Doing Business 2019 report.

Malaysia was top five in several areas, second only to New Zealand for protecting minority investors, third for dealing with construction permits, and fourth for cost of obtaining electricity.

These significant improvements in our business environment have helped us as a nation to regain a respected position among the world’s top 20 economies.

Leading the digital economy

We know the digital economy drives dynamic growth and productivity and innovation. Other major benefits include reduced transaction costs and enhanced efficiency. Services become faster, cheaper and better.

As of 2018, Malaysia’s MSC/digital sector has attracted investments surpassing 320 billion ringgit ($78.60 billion). It has also seen the creation of 182,538 new high-value jobs and the emergence of a domestic ICT industry worth over 40 billion ringgit.

As we escalate our transition to a high-income and developed economy, incremental growth in incomes will be increasingly dependent on improvements in human capital and productivity. In turn, this will require a multi-year reform agenda to improve the quality of workforce skills and learning outcomes from the education system. (World Bank MEM June 2019)

And there are more positive indicators for 2019: Malaysia is currently leading the pack of ‘Break Out’ nations — and heading towards being a “Stand Up’ digital economy nation. The World Bank puts Malaysia in the league of high income economies where digital adoption levels are high; higher than roughly a third of OECD [Organisation for Economic Co-operation and Development] countries.

On top of this growing global recognition, our drive to digital adoption and digital transformation will crystallize many real benefits as well as more opportunities for all of us.

Attracting investment

According to the Department of Statistics Malaysia (DOSM) the contribution by our digital economy already reached the 2020 target of 18.3%, (amounting to RM247.1bil of the national economy) in 2017.

These examples all point to an encouraging scenario for us to power through to the next stage of building our digital nation; one which includes opportunities for every Malaysian willing to reach out to grasp them.

#DigitalMalaysiaForward   #LetsBuildTogether

– Dato’ Ng Wan Peng is the Chief Operating Officer, at Malaysia Digital Economy Corporation (MDEC)

DFTZ’s Second Anniversary: eCommerce Milestone

It seems just like yesterday to me – but it’s actually now the second anniversary of the launch of what is turning out to be a major stride forward in Malaysia’s eCommerce trajectory: the Digital Free Trade Zone (DFTZ).

This is just a brief note to mark the anniversary, so I will briefly run through just a few thoughts:

First of all, DFTZ was an initiative to spearhead our national eCommerce framework and it was launched to intensify Malaysia’s participation in cross border eCommerce.

The aim was to start establishing Malaysia as regional and global eCommerce fulfilment hub and to drive exports. It’s about empowering entrepreneurs and small businesses to do cross-border commerce seamlessly: The vision was to opening up the doors to global markets and to simplify eCommerce by digitalising the trade process.

The DFTZ is a milestone in the national digital economy agenda, which is providing a platform for Malaysian businesses to go online with more ease than before. A growing number of companies have already started to export via the DFTZ partners’ platform and this will only increase as more and more players become aware of and understand the value of participating in this initiative.

Onwards and upwards

I recall that when Jack Ma came to launch DFTZ in Malaysia, he said Malaysia had caught his eye a few decades ago, and that he was proud to be able to do something with the nation. He told world media: “Malaysia inspired me [back] in 1996-1997. When I was starting my Internet business in 1995, I remember that around that time, I read news in China about the Multimedia Super Corridor [MSC Malaysia] in Malaysia… it made me think: ‘Hmm! There is something there in that country! It’s a brave idea for the digital world.”

Indeed, Malaysia now has the potential to become a Stand Out country of the future. In terms of speed of digital transformation, Malaysia ranked second, just behind China and way ahead of India, Singapore and Indonesia (Global Digital Evolution Index 2017). The World Bank puts Malaysia in the league of high-income economies where digital adoption levels are high, and higher than roughly 1/3rd of OECD countries.

An important component of our digital economy is eCommerce, which is an opportunity anyone can take up. We are working in collaboration with government agencies, industry and academia to solidify and guide SMEs to adopt the opportunities in the local, regional and global markets. High inclusivity – ensuring everyone is future-ready – is one of the key building blocks of the digital economy.

Digital adoption and digital transformation are opening up the possibility of a new era of prosperity. Of course, much more needs to be done and we need to move forward wisely. We at MDEC are honoured and thrilled to play our part in forging a digital future for every Malaysian: #LetsBuildTogether!

Dato’ Ng Wan Peng is the Chief Operations Officer of Malaysia Digital Economy Corporation (MDEC)

What are the Critical Steps to Successful Digital Adoption?

This time last year, I pointed out that Malaysia and the rest of the world is rapidly making its way to the Fourth Industrial Revolution (now known as IR4.0).

Rapidly evolving technologies – such as artificial intelligence, robotics, the Internet of Things (IoT), autonomous vehicles, 3D printing, nanotechnology, and quantum computing – together with emerging new models and approaches are starting to help us unlock even more value and benefits from the digital revolution.

Leading industry players in Malaysia have started their digital adoption and transformation journey, but are yet to fully leverage digital technologies across the full breadth of their business, according to recent analysis by Accenture using its Digital Performance Index (DPI).

As an example, an Accenture analysis in Malaysia, published in ‘Faster Than Ever: Can Malaysia’s Top Companies Win in the Digital Age?’, examines 28 leading companies across more than eight industries. It found that although companies are aware of the importance of incorporating digital into business strategies, there seems to be a gap between planning and taking action. Up to 44 per cent of companies have digital strategies in place, but only 7 per cent have announced dedicated budgets to implement these strategies.

The research also revealed that most digital transformation initiatives are focused on customer-facing activities rather than internal operations and management structures. More than half (52 per cent) have launched new digital products and up to 44 per cent have digitalised current products. However, only 11 per cent use digital in their manufacturing processes or to manage the supply network.

With ASEAN’s digital economy projected to add US$1 trillion to the region’s gross domestic product during the next 10 years, Malaysian companies need to leverage digital innovation across all business activities, and they need to do this faster than ever.

In other words, it is about building upon a vibrant domestic ICT industry, transformative use of digital solutions by government, businesses and citizens, as well as the constant nurturing of robust enabling ecosystem. The vision of Digital Malaysia is aimed at enabling the country’s digital economy so that Malaysians and our country’s businesses can thrive within this new business environment.

Engine of Growth

Following the 29th Malaysia Implementation Council meeting (ICM) in October last year, Prime Minister Datuk Seri Najib Razak announced a new stream of initiatives to boost nationwide digital transformation.

“I really believe that digital economy can become the engine of growth for Malaysia,” the Prime Minister said after the meeting. “Although what we are experiencing today is amazing, I want to further challenge MDEC and all involved in driving the digital economy of the country and get it to supercharge our country’s economy. In fact, I want it to be one of the sectors that will power our growth.”

Vowing to take the government’s commitment to drive Malaysia’s Digital Economy to a higher level, Prime Minister’s wide-ranging announcements included a national artificial intelligence framework, digital accelerators, new company builder tech startup funds from Mountain Partners Europe and Bridge IP Japan, as well as new digital transformation acceleration programmes for mid-tier companies.

This stepping up of gear brings to mind the 2020 vision – which remains a major milestone of development for Malaysia – a year by which the nation is determined to achieve a digital, developed economy status.

Malaysian companies are stamping their mark globally; for example, Elsoft was recognised by Forbes Asia as ‘Best Under A Billion’ in 2015 and 2017. Among MNCs, we are already moving up the services value chain.

The Prime Minister noted that there has been a strategic shift in investments, where Malaysia used to be a base for shared services. Multinationals are now using Malaysia as a hub for catalytic digital technology and services. One such example is French company Dassault Systemes, a world leader in 3D design, who has chosen Malaysia to host their Global Development Centre for 3D Business Experience Platform.

The challenges Malaysia is addressing includes improving a structured approach, overcoming budget limitations, developing more digital workers as well as helping to clarify paths towards more efficient digital transformation.

To speed up the transformation, we are forming Digital Transformation Labs to provide consultancy and assist in prototyping new digital products and services. The labs will then match participant companies to digital companies. This programme intends to achieve three main outcomes – increased productivity, reduction in foreign labour dependency as well as a new business model or source of growth for the participant companies. This model has been tested on Top Glove and Gamuda with encouraging results.

By digitising the chemical testing line, Top Glove managed to completely remove the need to allocate labour for this task, as well as reduce unplanned downtime by 100 percent. Similarly, Gamuda’s mall management were able to reduce man-hours by 50 percent, while fully digitising their processes. The next step for Top Glove and Gamuda is to scale this approach to their other production lines and properties respectively.

Another major factor to grow the nation’s Digital Economy is building the right talent pool: our forecast reveals that Malaysia needs one million digital workers, such as coders, application developers and software engineers by 2025. We are pleased for the support for Digital Maker Movement, i.e. the initiative to identify and nurture young talents to be future digital innovators. It includes the move by Ministry of Education to incorporate computational thinking and computer science in schools, and for more collaboration with the private sector as well as support from academia to further nurture these bright young talents.

Catalysing AI

Malaysia introduced the ‘Cloud First’ Strategy to the national agenda, starting with the public sector. Cloud adoption can enable the government to rapidly deliver innovative public sector services to the Rakyat without incurring high levels of capital expenditure to invest in the IT infrastructure, such as data centres, servers and storage.

In a hyper connected world, it is becoming abundantly clear that artificial intelligence (AI) is the defining force of the fourth industrial revolution. AI is the natural progression from data analytics, and as such, Malaysia will develop a National AI Framework. This will be an expansion of the National BDA [big data analytics] Framework, and its development will be led by MDEC. AI could well be a ‘game changer’ in improving the lives of Malaysians.

In January this year, Malaysia introduced a high-impact initiative to catalyse the AI ecosystem and open up the path for collaborative innovation: The Malaysia City Brain. This is an open data-driven, artificial intelligence platform adapted from Hangzhou City Brain, which has been designed to meet local needs. It uses artificial intelligence as a platform to start to address urban challenges and offers intelligent solutions to the community in Kuala Lumpur. The platform uses Alibaba Cloud’s AI programme as well as big data analytics capabilities to produce real-time traffic predictions using its video and image recognition technologies.

The Malaysia City Brain operates as an open platform whereby it can plug in new and existing solutions from other platform by leveraging off pre-built intelligent tools, incorporating artificial intelligence and Machine Learning, and utilising existing data sets as well as additional data sets from external sources.

Global icons

On the startup side, the Malaysian tech scene is growing and vibrant. There are several Made-in-Malaysia regional champions that we see today: iflix, a three-year-old startup that managed to roll out services to 30 countries and five million customers, while having access to data analytics, artificial intelligence and machine learning. And it is intriguing that iflix does not own servers or data centres. Cloud and digital adoption allows them to be agile and scale fast to meet growing demands while keeping capital expenditure low. Presently, iflix has 179 million in the latest round of funding. We need to see more rapid growing start-ups like iflix in Malaysia.

It is increasingly important for local companies to become global icons. We do have wonderful potential here – with the likes of Silverlake, a renowned solutions provider for the global financial industry, Fusionex, a multi-award winning Analytics and Big Data company that is based in Malaysia.

In this light, the MDEC Global Acceleration Innovation Network (GAIN) initiative aims to identify companies that have the potential to be accelerated into major global icons, such as Sedania Innovator and iPay88. Through MDEC’s Silicon Valley office, we have successfully connected more than 20 of such companies to the SV ecosystem of mentors, accelerators and venture capitalists (VCs). Hence, there is a critical need to “fast track” local MSC companies to enter and compete in the global marketplace.

That said, it is also important that we help smaller local companies with technologies to scale up. Smaller-range companies can leverage the biggest by adopting eCommerce in their operations. Companies like Speedminer, a pioneering machine learning company, are amongst those that MDEC has successfully nurtured. Other numerous successful startups we have in Malaysia with the world at their feet include iMoney and ServisHero, together with companies such as KFit and iflix amongst many others.

Another initiative called the Malaysia Tech Entrepreneur Programme (M-TEP) is attracting interest from entrepreneurs from all across the world and shows that our initiatives have global appeal. It is encouraging to know we have received applications from entrepreneurs from more than 10 countries, including Germany, India, Australia, Singapore, the UK and the US.

On a wider industry-level, we hope to accelerate digital adoption by establishing the Digital Transformation Acceleration Programme (D-TAP) for large and mid-tier companies, who contribute 63.4 percent of the GDP, according to the Prime Minister at ICM.

Major eCommerce Boost

As I mentioned earlier, with a view to becoming a high-income knowledge-based society, MDEC has spearheaded high-impact government initiatives as well. One such move is the establishment of the country’s Digital Free Trade Zone (DFTZ). DFTZ is an initiative by the Malaysian Government, implemented through MDEC that aims to capitalise on the confluence and exponential growth of cross-border eCommerce activities that are happening within digital economy. First announced in March 2017, DFTZ facilitated seamless cross-border trading and eCommerce, which enabled Malaysian SMEs to export their goods internationally.

On Friday, 3 November last year, Malaysia’s Prime Minister and Jack Ma opened the first ever eWTP (electronic world trade platform) hub outside of China at a Kuala Lumpur ceremony, which also flagged off 1900 export-ready small and medium enterprises (SMEs). Malaysia marked a new milestone with the celebration of DFTZ’s one-year anniversary recently with 3,000 local SMEs now onboard onto the DFTZ programme.

On the public-sector perspective, the Malaysian Government has introduced a new category of certified locations called the Malaysia Digital Hubs for the start-up community in the digital economy. This is achieved through multiple public-private collaborations to offer unique value propositions such as ubiquitous hyper-speed broadband, hot-desking, mentoring and coaching services.

The BDA “Dance floor”

Another thing we must do from the fundamentals – human capital, investments – concerns the ecosystem. One of the most critical ecosystems that we are putting our focus on is – as I put it last year – the “dance floor”. The BDA “dance floor” is one of the most important and it’s really anchored around talent development; data scientists, data modellers, and analysts. At the end of the day, though, whatever transformation needs to happen needs to be driven by the private sector. As a government agency, we can only create the “dancing floor” – the actual dancing still remains within the grasp of the private sector.

In an ever-changing innovative world, Malaysia needs to remain steadfast on the Digital Malaysia road and to ensure we become the lead in key areas of enabling fundamentals. We are extremely inspired that we are moving in that direction with the Malaysian Government focused on accelerating growth and enhancing the wellbeing of the rakyat.

Looking ahead, Malaysia’s Digital Economy is envisioning 20 percent of GDP by 2020. With a sustained push by all stakeholders, the Digital Economy contribution has good potential to reach the targeted value of RM324.9 billion by 2020, as set out in the 11th Malaysia Plan.

An important part of MDEC’s championing of the digital economy embraces digital inclusivity across all communities. We are passionate about inspiring everyone to use of digital within our Digital Malaysia journey so that the digital economy’s success can be shared by all.

The eRezeki and eUsahawan initiatives were launched in 2016 year to target key communities such as youth, SMEs, digital entrepreneurs and the B40. These initiatives include eRezeki, which is a programme for Malaysians to earn supplementary income online, while eUsahawan is a digital entrepreneurship programme helping the general public with basic business fundamentals to enhance their online sales.

So to amplify the nationwide impact of the eRezeki and eUsahawan initiatives, we developed our #YouCanDuit multichannel campaign using carnivals, roadshows, with other musical and entertainment components. Close to 200,000 people attended the on-ground events, while our multiple channel campaign included a successful partnership with not just Astro, but with other stations as well such as TV3 and RTM, and succeeded in creating a phenomenon in building the awareness of #YouCanDuit programmes. We have consistently reached out to a 10 million viewership in the past two years.

2018 will continue to see the growth of digital economy, as indicated in the budget announced in 2017. The vision is to turn Malaysia as a regional hub for digital economy. The Government, together with MDEC, are gearing up towards turning that vision into reality as we steadfastly activate our plan.

I am delighted to reaffirm the message that these times are among the best of times for us Malaysians, to ensure we are part of the Digital Malaysia journey and so share in the success of the dawning Digital Economy!

Dato’ Ng Wan Peng is Chief Operating Officer of Malaysia Digital Economy Corporation (MDEC).

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