The Making of a Digital Hub - What it takes for Malaysia to be at the heart of digital investments in Southeast Asia

Oct 14, 2021

At the start of 2021, Singapore and Indonesia announced their plans to collaborate towards becoming a digital hub for the region. Both countries present great prospects – they each have relatively high technology adoption rates and are collectively home to 11 tech unicorns in ASEAN. Singapore currently holds the top spot in KPMG’s global ranking of leading tech innovation hubs outside of Silicon Valley, while 79% of companies surveyed in Indonesia in 2019 had begun integrating smart automation and the Internet of Things into their manufacturing processes[1]

While this is an impressive feat that many other Asian countries aspire to emulate, Malaysia is also creating its own path towards becoming a digital investment hub for Southeast Asia. In a 2019 report, Malaysia’s digital exports were anticipated to increase to RM222 billion by 2030 from its then RM31 billion[2].

While the pandemic has undoubtedly accelerated the rate of digital transformation which sets a favourable stage for external investments, what will it take for the country to be the prime destination to attract foreign direct investments (FDIs)?

Developing Malaysia’s digital talent pool

A report by the World Economic Forum[3] revealed that the skills gap in the labour market and the inability to attract the right talent were the main barriers to the adoption of new technologies. Closer to home, a survey[4] by the Strategic Change Management Office (SCMO) showed that only 4.8% of employers believed that their digital talent needs were fully met – with gaps still existing in most in-demand digital skills comprising big data analytics, digital marketing, and artificial intelligence.

While the nation re-opens its economies to resume attracting FDIs into the country, we must not disregard the most important investment of all: our people. Upskilling and reskilling of talent needs to happen in tandem with the adoption of new technologies, as the demand for workers with tech skills will only continue to grow in the post pandemic era.

Closer partnerships between companies and higher education providers are one important platform that will facilitate the move towards not only investing into talents now, but also the talents of the future. As Malaysia’s various sectors rebuild and new jobs are created to respond to the digital transformations that have accelerated over the last two years, we must ensure that we facilitate the right skills that will sustain our people and organisations in the next five to ten years down the road.

Agility in government regulations

Government bodies responsible for FDIs and investments must ensure regulatory reforms promote agility, without compromising governance and compliance. When it comes to the adoption of specific technologies, consideration and input from the industry will be valuable to allow Malaysia to be a testbed of innovation that can be exemplified by neighbouring countries and developing markets in Asia.

The National 4IR policy framework[5], in one of its four key policy thrusts states that it aims to future-proof regulations to be agile with technological changes, which is ideal in the rollout of new technologies. Regulatory sandboxes, such as the National Technology and Innovation Sandbox (NTIS) creates opportunities for innovations in a controlled environment that allows for government oversight. Currently, NTIS aims to promote the use of advanced technologies in the key sectors of healthcare, travel and tourism, manufacturing, agriculture, and education. These are key focus areas for the government’s plans to attract FDIs into the country, and by improving investor confidence in these segments, they will become ideal environments for future FDIs entering into Malaysia.

Strong policies and support from the government

As the nation’s economic recovery becomes the government’s main priority, investor-friendly policies and support from government bodies will help to attract and spur on a wider range of high-impact quality investments instead of limiting it to existing investor groups.

Responding to these needs, MDEC has introduced its Digital Investments Future5 (DIF5) Strategy to advance Malaysia’s digital economy with five targets, which includes attracting RM50 billion investments in the digital economy. Together with MIDA, they have set up a Digital Investment office to collaborate and fast track investments in the digital economy, both foreign and domestic. In 2020, InvestKL achieved its milestone of attracting and facilitating 100 MNCs to set up their regional services hubs in Greater Kuala Lumpur.

On the front of enabling infrastructure, it looks promising. MyDigital’s Cloud First Policy which is expected to impact the migration of 80% of public data onto hybrid cloud systems in the next two years and eventually impact the private sector’s adoption of cloud, and the Jalinan Digital Negara (JENDELA) plan which aims to provide wider coverage and better broadband experiences, whilst preparing the country for 5G technology – if carried out swiftly and successfully – are also policies that will positively impact Malaysia’s attractiveness to foreign players looking to set up shop in the country and region.

These policies will also serve to strengthen local companies, enabling greater adoption of digitalisation and supporting business transformation through technologies that will enhance their offerings and services. Coupled with other policies such as the National Entrepreneurship Policy that aims to facilitate Malaysia’s move towards becoming an outstanding entrepreneurial nation by 2030, growing a robust local ecosystem could potentially serve as strong partners to foreign investors and further adds to the country’s attractiveness.

Green Packet is one such success of strong private-public collaborations and continues to ensure that the country’s priorities are integrated within its business strategies. Through these partnerships and enabling policies, Green Packet has expanded its reach to more than 70 countries and more than 100 customers worldwide. Green Packet is now taking greater strides to support fellow local companies as well as underserved communities in adopting digital and financial solutions, especially in response to the challenges of the pandemic.

Capitalising on Malaysia’s potential

Malaysia has the right ingredients towards becoming an attractive digital hub for both local and international investors. We have robust digital infrastructures, strong connectivity bolstered by the emerging 5G implementation on the horizon, and strong fiscal policies that are investor friendly.

Putting these components to work in tandem will be crucial in ensuring that the digitalisation of businesses and communities can progress simultaneously and ensure no one is left behind. By continuing to focus on growing our digital infrastructures and offerings, upskilling our talents with the capabilities needed in today’s digital workplace, and improving agility in regulatory policies, we are laying solid foundations to prime Malaysia to regain its foothold as a viable market for investments. The key is to resume that journey as quickly as possible so that we continue to be a competitive option for FDIs in the region.

by Norhizam Abdul Kadir, Green Packet’s Head of Government & Regulatory Affairs