Malaysia’s digital economy is set to contribute 25.5 per cent to the country’s GDP and create more than 500,000 jobs by 2025
The nation’s mature digital ecosystem and infrastructure offer a comprehensive platform for tech companies looking to invest and grow in Malaysia
Since its launch 26 years ago, Multimedia Super Corridor (MSC) companies have invested 430 billion Malaysian ringgit (US$95.5 billion) into the digital economy of Malaysia, generating more than 198,000 jobs. Malaysia Digital is a refresh of the MSC programme that looks to drive the digital economy through high-impact initiatives, strategic and sustainable investments, and inclusive policies.
According to Mahadhir Aziz, chief executive officer of the Malaysia Digital Economy Corporation (MDEC), the digital economy is set to surpass the target of contributing 25.5 per cent to the nation’s GDP, set in the government’s My Digital blueprint.
“The digital economy contribution to our national GDP stood at 23.2 per cent in 2021. We are extremely positive that our goal [of the digital economy contributing 25.5 per cent to Malaysia’s GDP] can be reached well before our initial target of 2025,” Aziz says. “This is why we’re taking the opportunity this year to revisit the numbers and targets to ensure they are high enough.”
There are a number of factors behind Malaysia’s burgeoning digital economy, and why Malaysia is an increasingly attractive location for digital and tech organisations to expand their presence in the Association of Southeast Asian Nations (Asean).
The region, which has a population of 662 million with close to 70 per cent using the internet, remains an attractive investment destination, having recorded foreign direct investments (FDI) of US$174 billion in 2021, a 12 per cent share of the global FDI.
Favourable business environment
A thriving digital economy needs a stable and open business landscape. Malaysia ranked 32nd globally in the IMD World Competitiveness Ranking 2022, and this can in part be attributed to the various initiatives implemented by Malaysia Digital. Malaysia Digital status offers fiscal and non-fiscal initiatives to local and international tech companies, to encourage them to operate, grow, expand or invest anywhere in the country.
Under Malaysia Digital, there is a bill of guarantees offered to offshore companies and investors, which includes tax incentives, foreign knowledge worker quota and passes, and the flexibility to source capital and funds globally. Companies with Malaysia Digital status will also be entitled to a set of incentives, rights and privileges from the government.
Mature and innovative digital ecosystem and infrastructure
Before establishing a presence, it is important for businesses to ensure a solid foundation of seamless connectivity. This need came to the forefront during the Covid-19 lockdown period, when people were forced to work from home.
Malaysia’s well-connected digital landscape, coupled with its value-driven cost competitiveness, allowed for global corporations to continue operations while the world protected itself from the threat of the pandemic.
Sameh Abouzeid, managing director at HSBC Global Service Centre Malaysia, says: “When we went into lockdown, the operations supported out of the centre did not experience a drop in productivity, thanks to the country’s well-established telecommunications and electricity network.”
Malaysia is pressing ahead with plans to expand the country’s digital infrastructure, and there is a national push towards an inclusive ecosystem that bridges gaps in technology and access to digital advancement.
According to Abouzeid, a progressive regulatory environment enables HSBC in Malaysia the home of one of the bank’s 10 global service centres to develop its support for its retail and corporate clients in the Asia-Pacific region. “We are increasingly supporting the digital transformation drive in HSBC to better protect and serve our customers, as well as improve the digital resilience of our bank,” Abouzeid says, adding that Malaysia’s position as a regional centre for technical development and technical education came with a talent pool of future-fit individuals.
The bank’s global strategy to digitise at scale is aligned with Malaysia’s digital drive, with the Global Service Centre in Malaysia playing a prominent role in delivering transformation that serves the HSBC global network. To this end, HSBC Malaysia has launched digital services such as a two-tier customer verification system with voice identification, becoming the first bank in Malaysia and the first country in Southeast Asia – to introduce this capability. “We are leveraging this digital ecosystem to launch things here before they are seen elsewhere,” Abouzeid says. “Malaysia is conducive to the type of work we want to do, which is to develop and deploy some of the industry’s most advanced and innovative technology to make banking for our customers easier and more secure.”
While one of MDEC’s key roles is to drive digital investment into Malaysia, Aziz says the strategy lay in a spirit of collaborating rather than competing with neighbouring Asean countries. “We don’t see competition around us,” he says. “Rather, we see collaborators that we can work with and complement in order to add value to other markets.” He says examples of this were various discussions held between MDEC and similar agencies in the region that focus on exchanging solutions on digital trade, as well as improving the digital economy framework.
Digitally savvy talent pool
Another key factor that contributes to Malaysia’s attractiveness as a destination of choice for offshore tech companies is its availability of diverse skill sets. “With Malaysia being a centre for technical development and technical education in the region, there is a ready pool of talent made up of future-fit individuals,” Abouzeid says, referring to their ability to embrace new ways of thinking and working in the modern workplace.
Citing the rising popularity of the metaverse as an example, Aziz says this new iteration of the internet opens up a world of opportunities for Malaysian content creators to flex their talent and drive investment. The potential for innovations in digital content allow for new opportunities in the sector, and a way for Malaysia’s burgeoning skilled talent pool which saw 5.36 million young people graduate in 2020 – to develop their skills and new projects to drive exports.
Through Malaysia Digital, MDEC has launched a number of initiatives to equip the nation’s workforce with skills that will drive digital innovation and attract investors to set up their regional bases in Malaysia.
“While we may not have enough developers just yet, we are one of a handful of countries that has a very strong skill set in creative digital content,” Aziz says. “This allows us to contribute positively to the extended reality, augmented reality and virtual reality sectors.”
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