Budget 2016: Industry largely rah-rah, some concerns remain
By Digital News Asia October 26, 2015
- All hail infrastructure and broadband allocations
- Some fundamental issues still not addressed
WHILE many industry players were largely enthusiastic about the national Budget 2016 that Malaysian Prime Minister and Finance Minister Najib Razak tabled in Parliament on Oct 23, some concerns remained.
Beyond allocations for broadband infrastructure and a host of entrepreneurship initiatives, many for rural and under-developed communities, there was not much that was directly relevant to the technology industry.
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And the proposed national budget fell short in addressing certain critical issues, according to Hitachi Sunway Information Systems group chief executive officer Cheah Kok Hoong.
Cheah praised the ‘people-centric’ focus of Budget 2016, especially against the backdrop of falling oil and commodity prices, the severe depreciation of the Malaysian ringgit, and the implementation of the Goods and Services Tax (GST).
“However, all in all, Budget 2016 still falls short in addressing the challenges faced by the enterprise ICT industry,” he said in a statement.
“The reality is that the current economic landscape has set off a series of chain reactions which is seriously affecting spending decisions,” said Cheah (pic), also the chairman of the National ICT Association (Pikom).
“In this sense, we were hopeful that immediate measures such tax allowances, zero-rated GST and even re-investment allowance incentives for companies with export capabilities would be introduced.
“These would not only encourage continuous investment in technology and increase productivity, it would also provide the opportunity for businesses to compete meaningfully in the domestic as well as international market,” he said.
Prior to the unveiling of Budget 2016, Pikom had made some recommendations that it believed would support the industry, as well as boost ICT use amongst rural and underserved communities. It had also recommended that the Government regulate broadband rates in the country.
MDeC goes wow, iMoney goes huh
In contrast, national ICT custodian Multimedia Development Corp (MDeC) had nothing but praise for Budget 2016.
“We truly believe that the power of technology can be used in our continued efforts to improve the rakyat’s (citizenry) standard of living,” said chief executive officer (CEO) Yasmin Mahmood (pic).
“With this, we are happy with the allocation of RM100 million for two initiatives under the Digital Malaysia national agenda which will benefit some 100,000 people from the Bottom 40 group (lower 40% of the income pyramid),” she added.
[RM1 = US$0.24 at current rates]
In his speech in Parliament, Najib said that the eRezeki and eUsahawan programmes “will be expanded nationwide to increase employment opportunities and raise their [B40] income.
“The Government targets 100,000 people from B40 to benefit from the programme through an allocation of RM100 million provided by the Ministry of Communications and Multimedia,” he had said.
MDeC is the lead agency for the Digital Malaysia programme that aims to transform the country into a ‘digital economy’ by 2020.
Yasmin was pleased that the eRezeki initiative, which MDeC launched in June to advance the B40 group with opportunities to earn additional income using technology, is getting a boost, as is the eUsahawan initiative.
The latter aims to expose students enrolled in technical and vocational education and training (TVET) institutions and micro-entrepreneurs to digital tools and business models, practical experiences and advanced entrepreneur development conventions in the market.
“We are keen to work closely with the Government to grow and nurture future digital entrepreneurs who can create wealth for the nation by capitalising on the continuous demand for digital products and services,” said Yasmin.
Financial services technology (fintech) startup iMoney was less convinced that Budget 2016 was truly ‘people-centric’ and whether its proposals were sufficient for the cash-strapped middle class and B40.
Budget 2016 “did not address the needs of the middle-income nor the concerns over GST,” said its group CEO and cofounder Lee Ching Wei (pic below).
“While the increase in zero-rated medications is great, the issue of GST on treatment costs still remains, along with the overall high GST rate of 6%,” he added.
Taking a broader view of aid for the B40, Lee noted that Budget 2016 did address their needs through many necessary rural development allocations, and also maintained BR1M handouts, with an increased allocation of RM5.9 billion.
“In our iMoney National Budget 2016 Sentiment Survey, we’ve seen that 95% of BR1M recipients said that it wasn’t enough, and an increase of RM50-RM100 will not be sufficient,” he however said.
“This money could have been better allocated by increasing their initiatives to aid in up-skilling Malaysians,” he added.
Lee also disagreed with the ‘people-centric’ spin on Budget 2016.
“In a budget that was supposed to be for the rakyat, it seems like it only benefits a specific group of people.
“Those who fall into the middle-income group will have to improve their own finances through smart saving and investing, and not rely too heavily on the Government for additional aid or support,” he advised.
[See iMoney infographic at the end of this article]
Najib also proposed that to improve the telecommunication infrastructure, industry regulator the Malaysian Communications and Multimedia Commission (MCMC) will provide RM1.2 billion for rural broadband projects which will see a four-fold increase in Internet speed from five megabits per second (Mbps) to 20Mbps.
This allocation will also go towards the national fibre backbone infrastructure; high-speed broadband initiatives, and undersea cable systems.
The Malaysian household broadband penetration rate currently stands at 67.2% according to a 2013 report by the MCMC, noted Malaysia Internet Exchange (MyIX) deputy chairman Lim Chee Meng (pic).
“We should see a significant increase in Internet subscription and usage within these areas, especially in East Malaysia where the infrastructure and operating cost are not comparable with [those in West Malaysia],” he said.
“Besides increasing Internet exposure, the allocation will play a part in boosting the e-commerce sector. More SMEs (small and medium enterprises) in rural areas will be able to benefit from going online,” he added.
MyIX is a non-profit organisation initiated by the MCMC in 2006, to connect and exchange local Internet traffic. It is managed by a committee that comprises representatives from Malaysian Internet service providers (ISPs).
Efforts “to improve broadband connectivity and infrastructure, particularly in rural areas, will no doubt accelerate Malaysia’s digitisation process as technology services and solutions become more accessible and democratised,” said Mano Govindaraju, area vice president for Gartner Malaysia, Research and Advisory (pic below).
“This is in line with Gartner’s prediction that, within the next 10 years, every industry and business will be transformed by digital business that will be driven by the adoption of cloud services, breakthrough innovations, and stronger economic models for services and growth,” he added.
Meanwhile, unlocking the potential of communities is highly dependent on connectivity being accessible throughout the country, said Cisco Malaysia country manager Albert Chai (pic below).
“Through the allocation to improve the telecommunications infrastructure and the rural broadband projects, Malaysia is addressing the crucial need to improve coverage, quality, and affordability of digital infrastructure for every citizen at all levels of society,” he said.
“This will help push us to become a digitally inclusive nation, connecting the expertise of our urban-developed Malaysia to the full potential of individuals, schools and businesses in rural areas,” he added.
MDeC’s Yasmin also hailed the broadband initiative, saying this would be a big boost for Digital Malaysia “and will serve as a very important catalyst to drive us towards a digital economy.”
“The more people and businesses get online, the quicker we as a country can drive our levels of production, efficiency and ultimately improve the quality of life of the rakyat,” she added.
Meanwhile, security company Symantec offered a word of caution, saying that with advanced technology and Internet adoption, a lot of security problems are starting to grow in Malaysia.
“With the influx of Malaysians coming online, increased Internet speeds and initiatives such as eRezeki and eUsahawan, there needs to be an increased awareness on cybersecurity to further protect Malaysians from the rising threats around the world,” said Symantec Asean senior director Tan Yuh Woei (pic).
“Cybersecurity should be everyone’s concern – not just government and businesses.
“By educating themselves about security risks, and following basic best practices, Malaysians can do a great deal to improve the digital threat landscape,” he added.
Infrastructure and R&D
Najib also announced a host of initiatives to improve the logistics and transport infrastructure in the country.
Also, to enhance the use of technology in the construction sector, “the Government will promote the use of the Industrialised Building System (IBS) … and will encourage more companies to adopt IBS technology,” he said.
“For this, an IBS Promotion Fund of RM500 million will be established through the SME Bank to provide soft loans to developers and contractors in category G5 and below,” he added.
Autodesk Malaysia country manager CS Tan (pic) applauded the Government’s effort to improve the logistics infrastructure in 2016, saying that a purposeful and smartly-designed infrastructure is a clear reflection of a country’s socio-economic development.
“We urge the Government to further promote a new way of working through the adoption of next-generation technology such as Building Information Modelling (BIM) to create a more effective and resilient infrastructure,” he said.
“There is crucial need to bring in new and advanced systems to support the expected population growth,” he added.
Najib also announced research and development (R&D) commercialisation initiatives to mark 2016 as ‘Malaysia Commercialisation Year,’ and also proposed allocating RM1.5 billion to the Ministry of Science, Technology and Innovation (Mosti) to boost the country’s efforts to become a competitive technology hub in the region.
The RM1.5-billion allocation “will encourage companies in Malaysia to become more relevant and effective, as they move towards the digital space,” said Gartner’s Mano.
“Gartner lauds the Government’s focus to make the nation an innovation hub, as this will be the driver of citizen-centric smart services that optimise city operations and enhance the lives of the people,” he said.
As businesses look to thrive in the ‘application economy’ – where every business is considered a software business regardless of the services or products they offer – competitive differentiation for businesses will depend on customer-pleasing technology such as intuitive and user-friendly apps as well as advanced development methods, according to Nick Lim (pic), vice president of Asia South at CA Technologies.
“We believe that Budget 2016 has put Malaysian businesses, entrepreneurs and innovators in great stead to support this ecosystem of development through the allocations to the Malaysian Innovation Agency (Agensi Inovasi Malaysia) and Mosti to make the nation a competitive technology hub in the region,” he said.
The Government is also allocating RM11 billion over a five-year period to develop a ‘Cyber City Centre’ in Cyberjaya.
With this allocation, Gartner foresees “opportunities for Malaysian innovators and technopreneurs to innovate and introduce a range of enabling technologies and solutions, such as real-time parking, the Internet of Things (IoT) and intelligent lighting, to make Cyberjaya and more cities in Malaysia even smarter,” said Mano.
Meanwhile, MDeC’s Yasmin said the Cyber City Centre allocation “will attract further investments from multinational companies and put Malaysia on the global map as a business and technology hub in the region.”
Broadcast digitalisation, education
For Budget 2016, Najib also announced that RM250 million would be allocated for the national broadcasting digitalisation project to enhance audio-visual quality and provide value-add to TV content, as well as interactive data transactions.
While welcoming the allocation, Ideate Media CEO Zainir Aminullah (pic) said he hoped the Government will continue to support the creative content industry, adding that there was a need to address fundamental challenges.
“Over the years, companies have been capitalising on Government-led initiatives with investments heavily focused on content production. The results have been phenomenal with the production of several internationally acclaimed films tapping on our local resources,” he said.
“Ideate Media believes that Malaysia is well-positioned to move from the existing production-led state towards an industry that approaches every step of creative content development in a cohesive manner – from ideation to production and commercialisation.
“We need to encourage the incubation and ownership of local intellectual property (IP), and move beyond being an outsourcing production hub.
“This will not only provide greater opportunities for local players, but also increase the ability to broaden the export of Malaysian-made content and drive a sustained funding environment,” he added.
There needs to be a closer link between development and commercialisation in the content creation process, said Zainir.
“It is one of the most overlooked areas, yet today’s content is largely created without a monetisation plan,” he said.
“Producers need to embrace a mindset where content must be produced with a buyer or a commercial interest in mind at the early stages.
“To drive this shift, industry funding programmes should measure success of the product by ROI (return on investment),” he said.
This will then “provide an assurance that every development comes with returns, which can be channelled back into the ecosystem to fuel the growth of content creation and upskill our local talents,” he added.
Meanwhile Microsoft Malaysia managing director K. Raman (pic above) praised the focus on education and human capital development, noting the RM41.3 billion allocation for this sector.
“This will see initiatives such as reinforcing the importance of higher education, empowering youth, community and non-governmental organisations (NGOs), as well as empowering human capital through a quality workforce,” he said.
“Education is the foundation of any nation. Shaping the minds of our future generation with a sound education system is vital, as the future well-being of a country lies with the younger generation,” Raman added.