The digital economy is one of Malaysia’s key economic pillars, currently contributing 22.6% to the country’s gross domestic product (GDP). The number is set to rise to 25.5% by 2025, says Malaysia Digital Economy Corporation (MDEC) CEO Mahadhir Aziz, predicated on an explosive growth in e- commerce and rising rates of digital adoption.

The fast-evolving landscape of today’s digital economy warrants a new strategy to remain relevant, resilient and continuously ready to bolster the country’s economic growth, he says.

At the same time, it is prudent to be cognisant of the fact that the Covid-19 pandemic has permanently altered socio-economic norms around the world, which requires new solutions to new problems, Mahadhir tells DigitalEdge.

MDEC, together with the Ministry of Communications and Multimedia, launched Malaysia Digital — the national strategic initiative to encourage and attract companies, talents and investments, while enabling Malaysians to play a leading role in the global digital revolution.

Besides serving as the engine to accelerate the growth of the nation’s digital ecosystem, Malaysia Digital seeks to drive adoption and opportunities in the digital economy to support the national recovery plan, especially through the Malaysia Digital Catalytic Programmes (Pemangkin).

With these programmes and initiatives, Mahadhir says MDEC’s wish list for Budget 2023 is to focus on catalysing the growth of Malaysia Digital’s focus sectors, enabling more holistic digital financial inclusion, driving the expansion of the Islamic digital economy and accelerating the adoption of environment, social and governance (ESG) among small and medium enterprises (SMEs).

Catalysing the growth of Malaysia Digital’s focus sectors

Under Malaysia Digital, nine focus sectors have been identified as presenting high-growth potential, opportunity and importance in driving Malaysia’s next transformation in the digital economy. The nine are: trade, agriculture, services, cities, health, finance, content, tourism and Islamic digital economy.

Mahadhir says MDEC welcomes policies and resources to drive the development of these focus sectors.

“The growth of these sectors does more than just open avenues for economic growth and future innovations; they also improve, enrich and empower the rakyat in many ways,” he says.

“For instance, the development of digital tourism will help boost the local tourism industry, which has been hit the hardest by the Covid-19 pandemic, while more resources to further elevate the thriving local digital creative content industry (worth more than RM7 billion) will lead to more original IPs (intellectual properties) to accompany the likes of Ejen Ali, Boboiboy, and Upin & Ipin.”

For digital content, MDEC hopes to further develop and innovate upon augmented and virtual reality technologies, subsequently delving into the metaverse.

Meanwhile, for the further development of digital agriculture, Mahadhir says, it will have an effect on boosting the nation’s food security, bring sustainability farming and improve the lives of local farmers.

“We already see these positive effects through MDEC’s eLadang programme. For example, our partnership with the Kuala Langat Area Farmers Organisation, where we introduced Internet of Things-enabled fertigation systems to farmers, saw productivity and income improve by over 20%, and reduction of operation cost by 30%,” he says.

As at 2021, Mahadhir says more than 1,500 farmers across the country had been trained on the agritech solutions at the eLadang Digital Labs/Satellite Farms in collaboration with ecosystem partners, and he looks forward to expanding this initiative to more farming communities nationwide.

There is also great need for resources and policies towards the development of digital cities, says Mahadhir, which can lead to improvements in city-community interaction, innovating digital mobility and digital infrastructure, and promoting digital green cities.

In line with Malaysia Digital’s aspirations, Mahadhir says MDEC is nurturing potential tech unicorns through a series of custom advisory, mentoring and visibility initiatives designed to catapult them into the global marketplace. The corporation is also working closely with key stakeholders such as Bursa Malaysia and Securities Commission Malaysia to improve the attractiveness of capital markets for high-growth tech companies.

Enabling more holistic digital financial inclusion

The proliferation and accelerated momentum of financial technology (fintech) adoption has enabled financial service providers to explore new markets and provide consumers in underserved or unserved areas access to services that were previously unavailable using mobile devices. Malaysia has seen an increase in the number of fintech companies by 26%, from 233 companies in 2021 to 294 in 2022, says Mahadhir, indicating a strong growth in market demand.

Digital payments have seen continuous growth in terms of transactions, whereby more than 7.2 billion transactions were made via electronic payment channels in Malaysia, growing 30% year-on-year.

Moreover, MDEC is dedicated to supporting Bank Negara Malaysia’s Financial Sector Blueprint 2022–2026, which is to encourage Malaysia’s economic transformation; elevate the financial well-being of households and businesses; advance digitalisation of the financial sector; position the financial system to validate an orderly transition to greener technology; and advance value-based finance through Islamic finance leadership, he adds.

“MDEC has supported the development of fintech in Malaysia via the Fintech Booster programme, which was developed in collaboration with Bank Negara to provide capacity-building programmes for fintech companies in Malaysia to develop meaningful innovative products and services by enhancing their understanding of legal, compliance and regulation requirements.

“MDEC aims to create, nurture and scale more fintech companies via collaboration with key partners across the ecosystem to provide additional resources and opportunities for the creation of more innovative financial products and services that would elevate the financial well-being and ease of accessibility to the underserved. We would welcome more resources and support in this area,” he says.

Driving the expansion of the Islamic digital economy

Malaysia continues to chart a progressive landscape in the realm of Islamic finance, Islamic fintech and Islamic digital economy, developing both the demand and supply-side of the ecosystem.

Malaysia is uniquely positioned as a leading country for Islamic digital economy, says Mahadhir.

According to the State of the Global Islamic Economy Report 2022, many of the 81 countries covered in this year’s updated Global Islamic Economy Indicator continue to develop more robust Islamic economy ecosystems.

“The top four positions remained unchanged from last year, with Malaysia retaining the top spot for the ninth consecutive year,” he says.

“With more resources directed towards expanding Malaysia’s Islamic digital economy, MDEC will be able to drive more capacity building, which includes promoting sustainability of quality Islamic digital economy companies that can be groomed into becoming global champions, particularly on Islamic fintech, halal and lifestyle start-ups.

“We will also want to drive more incentives to defray costs for shariah certification, as well as spark more innovation and collaboration by bringing in the best global minds in Islamic digital economy and promoting industry dialogues, fireside chats, thought leadership research, and forum discussions.”

Accelerate the adoption of ESG among Malaysian SMEs

The Malaysian government is committed to becoming carbon neutral as early as 2050 and considering ESG principles in government decision-making. This requires a concerted, whole-of-nation effort, says Mahadhir, as well as a high level of green commitment and investment to ensure that we achieve our climate change goals and step up the country’s competitiveness.

Driving ESG adoption among SMEs is important not just for sustainability, he adds, but also competitiveness. At the same time, climate change poses a significant risk as Malaysia has been listed among several nations that will experience economic growth 20% below expectations by 2050 if global temperatures increase by 2°C.

“The digital economy plays an important role in addressing climate change, as digital tech solutions have the potential to reduce greenhouse gas emissions by up to 15% by 2030,” Mahadhir notes.

“MDEC is striving to enhance the future readiness of digital SMEs and address major challenges of going green, such as cost, complexity and competing priorities. We also seek to create a sustainable digital economy ecosystem and to strengthen Malaysia’s position as an ESG-friendly business location.

“We hope that ESG will be one of the priorities of Budget 2023, which will allow us to better address the key challenges of going green among SMEs through the provision of grants and other forms of support in areas like obtaining sustainability certification and adopting digital tools and technologies that can help to improve energy efficiency, reduce carbon emissions and reduce waste.”

Hopes for more digital investment

Digital investments are one of the primary pillars of Malaysia’s digital economy as they bring economic growth and have a spillover effect of nurturing a high-knowledge and digitally-skilled workforce, as well as fostering digital innovations across the nation.

Malaysia is a strong digital investments hub in Asean, says Mahadhir. Since 1996, the MSC Malaysia initiative has driven RM384 billion worth of digital investments, creating over 180,000 high-value jobs, and totalling RM588 billion in revenue.

Additionally, the country has been in the top three of Kearney’s Global Services Location Index since 2004, making Malaysia a global leader in the global business services sector. Total investments in this sector are estimated to reach RM89 billion in 2025, he says.

On top of that, he adds that catalysing a thriving digital ecosystem will also accelerate the growth of domestic technology champions, which will lead to the development of corporate innovations that seek to solve national and regional problems.

“MDEC’s efforts to boost our local tech champions have seen some innovative solutions that solve local issues. For instance, by accelerating the country’s drone tech industry and supporting the growth of local drone tech players such as Aerodyne, we have seen the development of agritech drone solutions for the palm oil industry,” adds Mahadhir.

“Creating a holistic digital economy is not the work of one agency, one ministry or one government. It takes a whole-of-nation approach, combining the best minds, ideas and efforts in both the public and private sectors.”

Source: https://www.theedgemarkets.com/article/catalysing-malaysias-digital-economy