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Malaysia is on its way to accelerate digitalization in the aftermath of the Covid-19 pandemic that has compelled countries to increase adaptability and expedite the transition towards digital technologies such as e-commerce, online learning, and remote working.
Malaysia’s digital economy is expected to contribute 25.5% to the gross domestic product (GDP) by 2025, according to Datuk Seri Mustapa Mohamed, Minister in the Prime Minister’s Department of Economic Affairs. The contribution stood at 22.6% in 2020.
According to the minister, the country must seize digital transformation prospects, which are critical to the country’s economic recovery efforts and can help the country’s future economic resilience.
Malaysia’s widening digital ecosystem
According to the e-Conomy SEA Report, Malaysia’s whole internet economy is predicted to reach $21 bn in Gross Merchandise Value (GMV) this year and hit $35 bn by 2025. According to the December study, the pandemic has resulted in a permanent shift in Malaysia’s digital adoption, with 81% of all internet users now consuming digital services.
Mustapa stated that e-commerce in particular recorded robust growth of 26.5%, with e-commerce income of businesses rising 17.1% year-on-year during the third quarter of 2021, totalling $66.3 bn.
Digitalization efforts have been transforming Malaysia’s economy, which has been placed 24th in the Online Service Index (OSI) for 2020, up from 27th in 2018 and 40th in 2016. The aim is to increase the country’s OSI ranking to 12th by 2025. The OSI is part of the UN E-Government Development Index that ranks the UN Member States in terms of digital government.
As per Mustapa, the expansion of the country’s digital economy is enabled by Malaysia’s improving internet connectivity, which now stands at 93.5% in urban families and 83.9% in rural households in 2020.
Furthermore, the country has made significant progress in digital banking, transitioning from a cash-dominated economy to widespread integration of online payments, aided mostly by an increased banked population and rising merchant acceptance.
In 2020, population coverage for 4G mobile services was at 95% and over 170 e-payment transactions per capita were being made, according to Mustapa.
Initiatives by Malaysia to spearhead digital development
The government has taken several initiatives that can drive the adoption of digitalization and new technologies. To strengthen the country’s digital infrastructure, Prime Minister Muhyiddin Yassin had launched the MyDIGITAL initiative on February 19, 2021. Marking the one-year anniversary of the project, Mustapa said the project aims to “transform Malaysia into a digitally-enabled and technology-driven high-income nation and emerge as a regional leader in the digital economy by 2030.”
The plan is expected to attract $16.8 bn in investments to accelerate digitalization efforts and to create 500,000 new job opportunities in the digital economy by 2025. By then, the government also intends to have 875,000 micro, small, and medium-sized businesses embrace digital e-commerce.
In February, the Prime Minister launched the nation’s 10-year plan through the Malaysia Digital Economy Blueprint, that aims to ensure a smooth transition towards the Fourth Industrial Revolution (4IR) that involves key technologies like artificial intelligence (AI), the Internet of Things (IoT)/5G, automation, and blockchain. Accelerating the roll-out of crucial ecosystem enablers, digitalizing existing industries and developing new digital industries as future economic growth drivers are among the measures implemented through the initiative. Moreover, the New Industrial Master Plan 2022-2033 was also launched to push local industries to boost digitalization efforts and fully realise the benefits of the 4IR transformation.
To step up productivity, authorities in February said they plan to develop a National Robotics Roadmap (NRR) aimed to push the country’s robot density from only 55 robots for every 10,000 workers in 2019 to 195 robots for every 10,000 workers by 2030. The government has also decided to form a MyDigital Catalytic Projects Task Force to identify and manage relevant public-private partnership projects.
Policy changes ushering a digital age
Malaysia intends to modernise major economic sectors such as manufacturing to be competitive in the larger global ecosystem through initiatives such as the National 4IR Policy and Industry4WRD. The goal is to increase productivity by 30% across all economic sectors by 2030.
For a smooth public administration, the government’s National Digital Economy and Fourth Industrial Revolution Council (MED4IR) are collaborating to strategize digital economy initiatives at the state and federal levels, in accordance with the Malaysia Digital Economy Blueprint (MyDIGITAL) and the National 4IR Policy.
The government also said it plans to migrate 80% of public data to a hybrid cloud system by the end of 2022 as part of a ‘Cloud First’ strategy.
The key to digital development is a strong connectivity base, and Malaysia has launched a national digital infrastructure plan called the Jalinan Digital Negara (JENDELA) that will explore an investment of $5.2 bn over five years to improve internet coverage and broadband quality in Malaysia, and prepare the country for the deployment of 5G. This optical fibre network is anticipated to cover about 100% of populated areas in stages, starting with 7.5 million premises by the end of 2022 and progressing to 9 million premises by the end of 2025.
As per the Malaysian Institute of Economic Research, 5G would contribute $2 bn to Malaysia’s GDP by 2025.
