The future is Digital, let’s not risk being left further behind

  • Malaysia needs stronger initiatives & better policies to increase digital adoption
  • Bank Negara says digital transformation can boost GDP up to US$136bil by 2025

A McKinsey & Google outlook of Malaysia's digital ecosystem in Jan 2016 showed good progress on many fronts but DNA columnist, Dr V. Sivapalan is urging for a Grand Plan to accelerate Malaysia's Digital Economy.

The world is getting more digital everyday. The world’s biggest companies are digital companies from Amazon to Alibaba to Google and Facebook. Gone are the oil majors like Exxon and Shell that used to be the largest in the world.

Digital is all-pervasive and impacts every part of society and business. We chat on social media channels all day, watch streaming movies on TV and buy stuff on e-commerce sites. In business, banking has been transformed by fintech, autonomous and smart cars use hundreds of digital gadgets and software, we use digital technology in agriculture, construction, robotics and really all aspects of business. The transformation that’s taking place in society and business is phenomenal and at a speed never imagined before.

While the opportunity for a nation to progress by being more digital is tremendous, it also creates challenges when competitors, both nations and businesses, do things better and out compete us thus leaving us scrambling to grow our economies or businesses and to help the people to increase their incomes.

We started with a bang with the creation of the Multimedia Super Corridor (MSC) in 1996, but our neighbours have since made greater advances than us as we slipped up in many ways from a very poor education system, to badly structured funding agencies to poor policies and weak digital adoption.

Yes we missed the boat and for the last 10 years we have been meandering along while our neighbours especially Singapore and Indonesia and others like South Korea made great leaps forward towards being more advanced nations economically and technologically.

We are in desperate need of a “reboot” and this now falls on the shoulders of the Minister of the Communications and Multimedia Ministry (CMM), Gobind Singh Deo and Malaysia Digital Economy Corporation’s (MDEC) new CEO, Surina Shukri. With new leadership at the helm it’s time we jumpstarted the digital ecosystem to drive Malaysian society and business to a whole new level of technology prowess and growth while we still have time.

But before we do this let’s explore what the problems are and what we need to do to take this big leap forward.

A September 2018 report by the World Bank entitled Malaysia’s Digital Economy: A New Driver of Development reported the following and I quote,

  • “Rapid growth in basic digital adoption has contributed to a new digital divide where Malaysia lags behind international peers in digital adoption by businesses.
  • Only 62% of businesses are connected to the Internet, 46% has fixed broadband (often of low quality) and 18% have a web presence of some kind.
  • Large export-oriented firms dominate the digital economy as they adopt e-commerce at higher rates than SMEs.
  • Most of the digital economy’s measurable growth has been concentrated in the manufacturing sector of urbanised states.”

Bank Negara’s Annual Report 2017 states that digital transformation could provide a boost of between US$100 to US$136 billion (RM412 billion to RM561 billion) to our GDP by 2025. For this to happen, three key fundamentals need to be addressed: fast affordable broadband, talent tailored for digital progress and high digital adoption. While Gobind is addressing the broadband issue, the talent and digital adoption issues still need to be addressed.

Clearly, our peers are striding ahead while we are being left behind in the digital revolution. So what can we do about this sad state of affairs?

To ensure that we achieve the objectives of digital transformation and GDP growth we need digital policies and initiatives that will drive economic growth as measured by contribution to GDP and will also drive income growth as measured by per capita incomes of the people.

Malaysia is a highly diversified economy from manufacturing to mining, plantations, tourism and services. Many of these sectors can contribute much more to the economy with greater digital adoption and this will trickle down and provide benefits to the people in the form of higher salaries or taxes that the Government can use to benefit the people. If companies do better, then the nation will do better.

Currently, 98.5% of businesses in Malaysia are SMEs, with almost a million SMEs registered in Malaysia. However, they contribute only 37.1% of GDP but employ about 66% of the working population, so they provide a lot of jobs for the people but contribute only one third to GDP.

For the longest time our administrators have been trying to increase the SME contribution to economic growth but this has been slow and challenging.  And its not just about digital adoption per se but what form of adoption and how do we measure the success of adoption? For businesses, adoption needs to result in increasing productivity and efficiency and increasing revenues while lowering costs. If digital adoption can deliver the above four elements then SMEs will adopt technology.

The Communications and Multimedia Ministry and MDEC need stronger initiatives and better policies to increase digital adoption. What has been done in the past has not worked; adoption is far too slow and in some cases almost non-existent. As our neighbours are speeding up digital adoption, the same slow pace of the past decade will leave us trailing in their dust and this is simply not acceptable. Something needs to be done and it has to be done differently. The policies and initiatives of the past are insufficient. We need to take a big leap and make some significant changes to what we are doing.

If the Minister is willing to look at the digital potential on a grand scale, and implements the right policies and supports the execution of those policies, then this can lift the economy in a big way both for the business sector as well as our B40 (bottom 40% of households as measured by household income) and M40s (middle 40% of households). So if we assume that the Communication and Multimedia Ministry and MDEC, as the custodian of digital initiatives, accept this Grand Plan to lift the whole economy how will they do this and what can and needs to be done?

Tomorrow, I will offer 10 suggestions that are not just my ideas but have been collectively formed through my many discussions with a wide cross section of ecosystem leaders.

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