Malaysia takes step toward digital economy goal

The 2017 Malaysia Budget announced by Prime Minister Datuk Seri Najib Razak is an incremental step in realizing Malaysia’s vision of a fully connected digital economy, according to IDC.

Although the specific financial breakdown of the budget initiatives is not yet available, IDC Malaysia said the direct and indirect impact on the Malaysian ICT sector is apparent.

Data from IDC suggests that total IT spending that includes infrastructure, software and services will grow by 3.3% to be worth $21.16 billion in 2017.

The research firm noted that it will be interesting to see if the recent budget initiatives will help Malaysia in achieving its vision of a digital economy given that key budget items are directly related to technology, such as improving the speed of fixed line broadband services, tax relief for purchase of select technology products and services, funding for specific MDEC programs focusing on specific initiatives, and launching a digital free zone.

It likewise mentioned that the Malaysian government has placed a high emphasis on high-speed internet connectivity in previous budgets and continues to make it a priority in the 2017 edition, by mandating fixed line internet services to be increased to a baseline of 20Mbps.

Currently, the average fixed line internet speed in Malaysia is at 6.8 Mbps, up 36% compared to the previous year. The proportion of internet users with access speeds greater than 10 Mbps and 4 Mbps has increased to 16% and 66% respectively.

The government has also recognized the importance of further enabling SMEs in increasing macroeconomic indicators. SMEs’ contribution to the overall GDP for Malaysia was estimated to be 36.3% in 2015, whereas it tends to be about 50% and above in high-income nations.

The $17.7 million allocated to promote SMEs development, as well as the funding for MDEC programs such as the e-commerce ecosystem and Digital Maker Movement, is a very positive step in this direction, IDC said.

“The e-commerce ecosystem will continue to evolve in the future with the maturity of services, and the consumption patterns of the citizens. Two key areas worthy of future attention are figuring out how to retain more revenues from e-commerce sector within Malaysia, as well as encouraging global e-commerce platforms to increase investment in the country,” said Vijay Sundararaman, IDC Malaysia Country Manager.

“There is a growing discussion on the creation of e-hubs that can accelerate SMEs output, as well as interconnectivity of these hubs globally to create a worldwide ‘Mega Trading Platform’.”