Over the recent years, the Malaysian economy has progressively moved up the value chain, becoming more closely integrated into regionally distributed production networks. The country has also increasingly specialized in more complex tasks, while shedding simpler and more labor-intensive activities to other countries. One of the major turning points in its development journey was in 2016, when it became the first country across the globe to establish a Digital Free Trade Zone (DFTZ), a special trade zone that promotes the growth of e-commerce by providing a platform for Small and Medium and other Enterprises (SMEs). Pre-pandemic times saw Malaysia undergoing massive business transformation exemplified by the success of Super App or the internet businesses.
Impact of COVID-19 on Malaysia’s Digital Economic Development
Digitalization is not only the backbone of the economy but it is fast becoming the backbone of the society. Technology is now being used at every juncture in our everyday lives, from communications to decision making; the government is struggling to keep up with the fast pace of digitalization whilst maintaining, guiding and providing support for the economy and society to flourish with the technologies. The need of the hour is to accelerate this pace of digitalization, by supporting the private sector and especially the early adopters such as the FinTech companies.
Like in most countries, the pandemic acted as a reality check for businesses that were earlier reluctant to embrace digital transformation and, therefore, found themselves ill-equipped to deal with the sudden need for digitalization to keep their operations running when the pandemic swept in. Add to that, the challenges of dealing with the potentially health compromised employees, a sudden and dramatic drop-off in demand and total economic uncertainty saw these digital fence sitters struggle to migrate their operations and workforce to a virtual environment.
Challenges in Establishing a Strong Foundation for a Digital Economy
Infrastructure, Inclusion & Interoperability are the 3 key pillars for laying a strong digitalization foundation in #Malaysia. Read more about how digitalization is becoming the backbone of the country here.
Infrastructure, Inclusion and Interoperability are considered to be the three key aspects for laying a strong digitalization foundation in the country. However, while infrastructure is at a good level, with 4G available to many, it still requires improvement to be truly reliable and accessible to all.
Further, it is imperative that rural areas and small enterprises without the necessary skills or knowledge to utilize digitalization must be provided with training programs to help them shift to the digital environment. Also, technologies developed for digitalization must also be designed to be easily consumed by everyone. In addition to that, digitalization and the technologies created must be interoperable, that is, they must be backwards and forward compatible and can work with past technologies and future designs.
Another important element here to consider is that though digital governance plays an important role, the mindset that influences the environment for the private sector to flourish is equally important. Soft skills behind the new demand of digital workers can support the digitalization process.
Steps taken within Malaysia’s Digital transformation Journey
The Malaysian government has undertaken various incentives to enhance and accelerate the implementation of digitalization within the business ecosystem. From an allocation of RM1 billion under the digital transformation scheme for industry to an additional fund of RM150 million for digitalization and automation grants for SMEs and allocating RM7.4 billion in Budget 2021 to improve Malaysia’s broadband service in the coming years to reduce the digital divide in Malaysia have been some of the major steps taken by the government towards creating a sustainable, resilient digital economy. The rate of digitalization in Malaysia is becoming faster; there is a growing number of unicorns, singular companies involved in digitalization, and the rate of integration of the technology into the Malaysian economy is expanding to becoming a blanket usage of digital technologies in all sectors. From micro-credentials programs to current education syllabuses, there is a growing emphasis on such programs and other similar ones to fuel the digitalization progress.
Education policies are integral to digitalization, the private sector has to recognize the importance of these education policies, the micro credentials or the soft skills involved in digitalization to fully integrate digitalization into Malaysia.
Interestingly, Malaysia is not a country of innovation but adaptation and that can be seen in the way it has taken foreign technology, localized them and made these technologies integrate within the Malaysian economy. Organizations such as HCLTech are aiding in Malaysia's digital growth through various initiatives. HCLTech was one of the first IT and software companies in Malaysia to achieve the coveted MSC status, a designation awarded by the Malaysia Digital Economy Corporation Sdn. Bhd. (MDEC) to participants in the country's ICT initiatives. Also, the company offers top-notch services and technologies to businesses in Malaysia since 1985, propelling innovation and a competitive advantage. Offering global expertise with local experience, underscoring its core value of empathy towards users under going transformation, HCLTech works closely with global customers which includes Malaysian companies as well. Its customers in the region include over 60 companies, covering Fortune 500 majors in the banking and financial services, insurance, telecommunications, semiconductor, oil and gas, hi-tech, retail, manufacturing, logistics, travel, and automobile segments. Furthermore, HCLTech has also collaborated with a large corporation offering financial advisory services to businesses, transforming several of its self-service portals. This significantly improved operational flexibility and enabled the company to optimize costs and boost revenue growth.
The Malaysian economy is at the brink of a digital evolution. While the requisite measures and policies are being laid down to accelerate the growth of digitalization, it is vital that all the parties involved – the government, players within the business ecosystem including the public sector enterprises, private organizations and fintech companies, and most importantly, the society as a whole –should not fear the change but embrace it. Fresh problems and opportunities would arise and for some businesses, the forces of disruption may be so great that the long-term strategic vision will need to be overhauled. The key is continuing to experiment and innovate with digital solutions. With the right approach, the businesses can come out of the crisis stronger, more agile, and more customer-centric than before, leading towards a more robust, effective digital economic development in the country in the post pandemic era.