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Measures to boost digital economy announced in Malaysia budget 2017

Malaysia’s latest budget reflects the country’s aim to boost the digital economy

Malaysia’s budget 2017 has placed a strong emphasis on the digital economy, and could be a step towards achieving Malaysia’s vision of a fully connected digital economy.

The budget was tabled by Malaysia’s prime minister, Najib Razak, on 21 October 2016, and the budget initiatives related to the digital economy includes a commitment to improve the speed of fixed line broadband services. The Malaysian Communications and Multimedia Commission (MCMC) will provide RM1bn ($223m) to ensure quality coverage and speed of up to a baseline of 20MB per second.

The initiatives also include a tax relief for the purchase of some technology products and services, as well as funding of RM162m ($36m) for Malaysian Digital Economy Corporation (MDEC) programmes focusing on the development of an e-commerce ecosystem and the introduction of Malaysia Digital Hub.

IDC said the budget has a direct and indirect impact on the Malaysian ICT sector, even though the specific financial breakdown of the budget initiatives is still unavailable.

IDC estimates that total IT spending, including infrastructure, software and services, is expected to grow by 3.3% to be worth $21.16bn in 2017.

IDC noted that an area that can receive greater future focus is in the cost of internet access for consumers and businesses. For instance, the monthly cost of internet transit traffic in Malaysia was estimated to be US$25-30, compared with under US$10 in Singapore.

“Two key areas worthy of future attention are figuring out how to retain more revenues from e-commerce sector in Malaysia, as well as encouraging global e-commerce platforms to increase investment in the country,” said Vijay Sundararaman, IDC Malaysia country manager.

“There is a growing discussion on the creation of e-hubs that can accelerate the output of SMEs [small to medium-sized enterprises], as well as interconnectivity of these hubs globally.”

The government recognises the importance of further enabling SMEs, as shown in the US$17.7m allocated to promote SMEs development.

However, there may be some challenges ahead. For instance, 73% of SMEs in Malaysia are lagging in adopting ICT in their business operations, which implies a lack of awareness about the benefits.

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