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How technology is shaping Malaysia’s economy

Malaysia has one of the most digitally connected societies in the world, but more work is needed to bridge the digital divide

Technology may be transforming Malaysia into a digital economy, but the country needs to overcome several key challenges to rise above the pack, a top government official noted at a conference on 16 April.

Speaking at the Asian Innovators’ Summit organised by SAP in Kuala Lumpur, Norhizam Kadir, vice-president for growth ecosystem development at Malaysia Digital Economy Corporation (MDEC), outlined changes generated by emerging technologies such as artificial intelligence (AI) and the internet of things (IoT) across industry sectors.

“People have played a major role in helping machines become smarter,” Norhizam said. “The devices you are using have fuelled the tremendous rate of globalisation and this will only become stronger as one billion devices are expected to get connected by 2025. What is also interesting is the speed of adoption by humans.”

“The telephone took 75 years to reach 50 million users,” he said. “Radio took 38 years to reach the same number; television just 13 years – and now the speed really multiplies: Four years for the World Wide Web; Facebook 3.5 years; Google 88 days. And Angry Birds reached 50 million in a mere 35 days.”

Against this backdrop, the Malaysian government has embarked on a slew of initiatives to spur the digital economy, such as promoting technology adoption among businesses and encouraging digital entrepreneurship.

These efforts are starting to pay off. According to Malaysia’s Department of Statistics, the digital economy contributed 18.3% to the nation’s GDP in 2017 and is slated to reach a stretched target of 20% by 2020.

“We have made some encouraging headway,” Norhizam said, adding that Malaysia is currently leading the pack of ‘break out’ nations and heading towards achieving a ‘stand up’ digital economy.

This is according to The World Bank, which put Malaysia in the league of high income economies with high adoption of digital technology. The country also ranks higher than roughly a third of Organisation for Economic Co-operation and Development (OECD) countries.

“Malaysians are already one of the most digitally connected societies in the world, with roughly 80% of the people having access to the internet, mainly through mobile networks, which is just another sign that Malaysia is well positioned for digital products and services,” Norhizam added.

Middle child syndrome

In spite of its successes, Malaysia has what Norhizam quipped as the middle child syndrome in the region.

“We keep on developing, but comparison with our neighbours is inevitable. We lack the sheer population size of Indonesia, for instance, and need to address talent development, digitalisation of traditional industry sectors, and other challenges,” he said.

However, Norhizam noted that Malaysia, which has about 25 million internet users, has been able to attract investors and foreign companies, thanks to its cost efficiency, culturally diverse workforce, and central location in the region.

“The Malaysia Baru [New Malaysia] drive by the government from last year includes holding to the position that access to the internet is the right of every citizen,” he added.

In addition to building high-quality infrastructure at affordable prices, he said technology is inspiring the focus on four additional building blocks – boosting tech talent development, increasing cyber security vigilance, developing platforms and enablers, and to put in place upgraded legislation and policies to speed up the growth of Malaysia’s digital economy.

We lack the sheer population size of Indonesia, for instance, and need to address talent development, digitalisation of traditional industry sectors, and other challenges
Norhizam Kadir, Malaysia Digital Economy Corporation

“It’s a bit of a challenge,” Norhizam said. “For instance, our manufacturing and agricultural sectors, which form our traditional base, are ripe for digitalisation. We have no choice but to compete in a regional market that is cheap. Hence, in a bid to drive further innovation and efficiency, the government launched its national policy on Industry 4.0 known as IndustryFWRD in October last year.

“The main objective of this policy is lies in tapping the application of available new technologies. The fourth industrial revolution can address many issues concerning businesses, including the environment, health and safety of workforce, waste management, efficiency in managing supply chains, resources and delivery systems,” he added.

Bridging the digital divide

While Malaysians are well connected, Norhizam admitted the business community has some way to go.

To bridge the digital divide, MDEC, through a strategic partnership with Malaysian Investment Development Authority (MIDA), is helping companies in traditional sectors transform digitally with programmes such as Digital Transformation Acceleration Programme (DTAP).

Part of the programme is driven by a partnership with the Federation of Malaysian Manufacturers and international industry experts to operate Digital Transformation Labs, which Norhizam said is an ideal way to galvanise entrepreneurship in key areas, such as Islamic finance which Malaysia has “world-leading potential”.

“In Malaysia, we have had early unicorns such as MOL Berhad, and we have a crop of what we call micro MNCS such as iflix and Grab,” Norhizam added. “There will be new initiatives aimed at furthering innovation and connecting to market opportunities and capital.”

Norhizam noted that because the efficiencies and economic advantages of code-based machine intelligence will affect many aspects of human work, technology adoption must also reach the grassroots.

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“Instilling our younger generation with computational skills and hybrid skills [soft skills such as communication and problem solving], together with upskilling programmes, is helping to build a future-proof workforce,” he said.

In January 2017, computational thinking was integrated into the curricula for primary and secondary schools as a part of the #mydigitalmaker movement spearheaded by the Ministry of Education Malaysia and supported by MDEC.

“I always have goosebumps every time I take part in #mydigitalmaker initiatives because you’re dealing with children who have shifted from being content consumers to content and solution creators,” Norhizam said.

But technology is not the sole answer, Norhizam said. “Governments cannot do it alone. Public-private partnerships have shown success and are ideal platforms to ramp up and scale up the projects that are proving fruitful. Another real key is that every Malaysian has to be included when a nation embarks on real digital transformation,” he added.

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