Cover Story: Taking MDEC to the next level

This article first appeared in Digital Edge, The Edge Malaysia Weekly, on January 10, 2022 - January 16, 2022.
“The local universities are producing talent for the future. If you go on to study artificial intelligence or even robotics, what can you do in Malaysia at the moment? The jobs are not here. The projects are not here.”  - Mahadhir

“The local universities are producing talent for the future. If you go on to study artificial intelligence or even robotics, what can you do in Malaysia at the moment? The jobs are not here. The projects are not here.” - Mahadhir

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The task before Mahadhir Aziz is daunting. His appointment as the CEO of Malaysia Digital Economy Corporation (MDEC) comes at a time when the nation is betting heavily on the digital economy to improve its position in the global value chain and strengthen its economic growth.

Mahadhir has set himself the task of bringing MDEC back to its glory days in the 1990s when, as the Multimedia Development Corporation (MDC), it was the sole agency overseeing the rollout of the Multimedia Super Corridor (MSC).

“The ongoing pandemic has posed a great challenge to us all but I believe that in every challenge lies an opportunity. We have witnessed the resilience of our businesses,” he points out, adding that this is especially true of those that have undergone digital transformation, which have demonstrated not only resilience but high growth, in some cases.

The digital economy is fast becoming one of the biggest contributors to the country’s GDP, already making up 22.6% of the nation’s economy. By 2025, it is expected to contribute as much as 25.5%, outperforming the traditional largest contributor to GDP — oil and gas.

The outbreak of Covid-19 saw the accelerated adoption of digital technologies to ensure business continuity and overcome productivity restrictions. In fact, e-commerce income rose almost US$190 billion in the first nine months of 2021, up 23% from the same period in 2020.

The impact of the sector has been such that the government, under its MyDIGITAL initiative, rolled out the Malaysia Digital Economy Blueprint in February last year to cement its position as a regional leader.

With the digital economy fundamentally reshaping industries and driving the Fourth Industrial Revolution, the country’s response and plans have to be comprehensive and integrated, says Mahadhir. Sustaining the momentum, however, requires extensive innovation, supportive government policies, stimulating incentives and a conducive ecosystem for digital entrepreneurship, he notes.

And as if establishing these conditions aren’t difficult enough, the country also has to grapple with the intense brain drain, digital divide and political uncertainties that could derail the nation’s aspirations to become a high-value-added economy and a net exporter of homegrown technologies.

Having been part of the technology scene for more than two decades, Mahadhir has seen it all. He witnessed how MSC Malaysia served as a catalyst for the growth of the country’s technology space when he started as an analyst programmer at Arab-Malaysian Merchant Bank Bhd, now known as AmInvest, some 20 years ago.

Following the dotcom boom, which led to the mushrooming of numerous internet-related firms, Mahadhir joined Islamic lifestyle start-up Mukmin.com in 1999. He moved on to become a senior applications developer at Utusan Melayu (M) Bhd a year later.

Over the course of a decade, he also worked as a project manager overseeing the implementation of IT projects at Petronas Digital Sdn Bhd and dabbled in consulting when he joined Deloitte and Eastman Kodak. These forays led him to co-found HeiTech Global Services, an information and communications technology (ICT) company under HeiTech Padu Bhd, in 2013, where he served as its chief operating officer. 

Wanting to be a part of the national development network, Mahadhir joined Cyberview Sdn Bhd — a Ministry of Finance (MoF) company — to develop Cyberjaya into a global technology hub. This led to his co-founding Futurise, a subsidiary of Cyberview, in 2017.

At Futurise, Mahadhir was instrumental in driving national programmes such as the National Regulatory Sandbox (NRS) and Robotics Malaysia.

“I have witnessed the changes Malaysia has gone through all these years [with regards to technological development], which is why I think I can do something to refresh the ecosystem,” he tells Digital Edge.

Mahadhir seeks to re-establish MDEC, whose role has been much diminished from when it was MDC, as the premier driver of the country’s digital economy. “There are a lot of agencies today focused on the different aspects of developing the digital economy in Malaysia compared with 25 years ago, when it was just MDC overseeing the rollout of MSC Malaysia,” he says.

In the case of MyDIGITAL, for example, several agencies — including the Malaysian Communications and Multimedia Commission (MCMC) and the Malaysian Investment Development Authority (Mida) — are involved in executing the goals set out in the road map.

“If you look at digital investment, there is Mida and also MDEC. We look at it purely from the digital investment aspect, while Mida looks at this as a part of the whole investment landscape,” says Mahadhir.

In fact, these divisions exist because different regulatory approvals are needed in some verticals of the digital agenda even though it sometimes complicates the process, he points out.

“There are multiple agencies governing or having jurisdiction over a particular technology or innovation. Drones, for example, fall under the jurisdiction of MCMC because the frequencies that drones use to communicate have to be regulated.

“They also require the oversight of the civil aviation authority to ascertain their safety and fitness. And then, there is a concern of national security because there are areas where drones cannot operate. The same goes for autonomous vehicles or even flying taxis.

“Maybe what we need to create is a one-stop centre according to each technology. Bank Negara Malaysia, for instance, has a regulatory sandbox to help financial technology (fintech) start-ups through their innovation development and regulatory approval stages.”

Likewise, the National Technology and Innovation Sandbox (NTIS) and NRS serve as a comprehensive innovation platform to help start-ups and small and medium enterprises (SMEs) test their innovations for effectiveness in a controlled environment, says Mahadhir. “But as with any improvements or initiatives, we need political will to actually get things done.”

Catalyst needed

This is one reason Malaysia needs flagship projects. National initiatives at scale would not just act as an impetus for the many agencies to work together but also help drive investment and retain talent, says Mahadhir.

“MSC Malaysia, for example, was instrumental as a catalyst for the growth of the country’s technological capability. We were among the first in the region to offer locational incentives and flagship national projects,” he adds. 

“The Government Multipurpose Smart Card Project or MyKad, for example, was part of the MSC Malaysia initiative. There were also initiatives to set up telehealth, the precursor to healthtech as we know it today, and even the setting up of smart schools, now known as edtech (educational technology), started then.

“These highly ambitious national projects invited all these multinational corporations to Malaysia because the country was bold enough to really push technology, especially ICT — we didn’t call it digital technology then. But now, they [the big tech companies] are thinking of leaving or have left the country [to set up operations elsewhere].

“This is also the reason we have lost so many of our talents to other countries. We have been sitting on our laurels for too long because we had initiatives like MSC, which we thought would be good enough [to sustain our technology ecosystem and talent pool]. So, countries such as Vietnam and Indonesia, and obviously Singapore and Thailand, have shot ahead.

“Vietnam, for example, has a National Innovation Centre to boost the tech start-up ecosystem. Thailand is looking at innovation a bit more traditionally but offering locational incentives first. Indonesia is home to many Asean unicorns and Singapore has cemented itself as the financial centre for all the funds to operate.

“So, where does Malaysia fit into this picture? We need to figure that out.”

Seeing that MSC Malaysia was instrumental in nurturing local ICT champions, attracting RM384 billion in global investments, RM588 billion in revenue and creating almost 185,000 jobs in the 25 years since it was established, MDEC sought to push for a rejuvenation of the initiative in November last year. MSC 2.0, as it is now dubbed, is the impetus needed to catalyse Malaysia’s digital economy, says Mahadhir.

He points out that MDEC, through MSC, has attracted 2,794 active MSC-status companies, 40 of which are part of the Forbes 100.

The new and improved MSC will seek to accelerate participation in the digital economy and address concerns about the widening digital divide by providing equitable access to digital tools, knowledge and income opportunities, as well as enhancing Malaysia’s value proposition to attract more digital investments, says Mahadhir.

“The incentives that we have today are outdated. The companies that we are [attracting] are the same kind of companies that we have been looking for all these years,” he points out.

“When MSC was first rolled out, the first wave of companies that we drew were the likes of IBM, Microsoft and Dell. And then, we had the second wave with Google and Facebook. These companies have either set up small offices in Malaysia, or have big operational setups somewhere else while Malaysia serves as their business process outsourcing centre.

“The good thing was this created 5,000 to 7,000 jobs. But the jobs were slightly lower skilled. We failed to create high-quality and high-income jobs.”

This is to be blamed for the dearth of talent, says Mahadhir. “The local universities are producing talent for the future. If you go on to study artificial intelligence or even robotics, what can you do in Malaysia at the moment? The jobs are not here. The projects are not here.

“But what if Malaysia looks at this problem and creates a particular project like building a robotic city, for example, where everything from manufacturing, assembly and township management uses robots?”

This is the first aspect he wants to address with MSC 2.0 — establishing scalable catalytic projects.

“We were consumers of technology 25 years ago but today, we want to be creators of technology. Incentives available to innovators may not be attractive to foreign companies as much anymore, so we make it attractive to local companies,” says Mahadhir.

“The idea is to not just stop at providing start-ups with funding but also create the opportunity to partake in national projects to establish their companies, skills and talents. Rather than giving them funds to start their business, after which they migrate their companies elsewhere, we should change the equation and retain our talents.”

Many of the locally founded companies go through coaching or training, or have received grants from agencies like MDEC, the Malaysian Global Innovation and Creativity Centre (MaGIC), Malaysia Venture Capital Management Bhd (Mavcap) and Cradle Fund Sdn Bhd.

“These companies are the products of Malaysia. They should be given jobs in Malaysia for Malaysian projects. This is how I think we should be refreshing the offering to keep our start-ups here,” says Mahadhir.

He adds that the government can come up with a series of moonshot projects for multinational corporations and private equity and venture capital funds to invest in, and invite Malaysian companies to participate. “The only way to get traction is to give them projects and jobs on top of the funding.”

Mahadhir points out that as it stands today, more funds are invested at the early stages of a start-up’s development, after which it is left to fend for itself. “This is the reason they leave for overseas, when they are headhunted.”

Creating catalytic projects would also reinvigorate the ecosystem and attract foreign funds, he says. “We still want to get investors, but again we have to be a bit more selective about the kind of investors and investments.

“Right now, many of these funders, venture capitalists for example, aren’t coming here because to them, there’s nothing to invest in Malaysia. There is this perception that Malaysian start-ups are not attractive enough. I think they are just not looking hard enough.

“There are many companies in Malaysia that require funding. That is why we are holding a joint industry dialogue to find out the things that are missing from the ecosystem. The infrastructure is there and so is the connectivity. So, what’s missing?”

Narrow focus

The problem could be that the focus of the government and its agencies are on one kind of innovation or sector, says Mahadhir. “Everyone wants to have touch points with the rakyat, which is why all efforts are focused on digitalisation, digital adoption or e-commerce. There is nothing wrong with that. 

“All this means is that we’re buying more online. But what systems are we using? Probably Shopee or Lazada. What about the Malaysian companies or start-ups that have created local shopping platforms? They should be given opportunities as well.

“So, when we issue e-vouchers, for example, for people to spend, we should be channelling people to buy from certain platforms or local sellers. Buying local doesn’t mean that we should ban foreign products or services. It means you’re helping the economy recover, by creating new jobs.”

The digital landscape, however, is bigger than just e-commerce. There are companies developing technology for food security, healthcare and climate change that need highlighting, he says.

“For a while, drones and fintech, especially e-wallets, were a big thing, everyone wanted to invest to develop them. But who is looking at solving other issues? 

“We have capable companies developing solutions for the circular economy. But because Malaysia doesn’t look at the circular economy in a big way, these companies aren’t deemed sexy enough. It is the same with other verticals such as agritech (agriculture technology) and edtech.”

Mahadhir hopes that initiatives planned under MSC 2.0 will address these issues. “We must move on from being digital consumers to being digital producers and then, on to being digital leaders,” he says.

The national agenda aside, MDEC is looking at rationalising the 100-plus initiatives that the agency is running at the moment. Mahadhir admits that it has been an uphill task keeping so many schemes going with the agency’s 500 employees.

“Over the years, MDEC has become a programme-centric organisation. That was how we ended up with more than 100 programmes today, some of which have different names but are meant for the same target groups, only with different partners. We are working on collapsing and streamlining the initiatives,” he says.

Mahadhir asserts that MDEC will continue to lead Malaysia to become a globally competitive digital nation. “The digital economy, which is based on the Fourth Industrial Revolution, is probably the most challenging and dynamic of all the industrial revolutions that mankind has experienced — in scale, scope, complexity and transformation. I simply cannot tell you how it will unfold but what we can do is to ensure our response and plans are as comprehensive as possible and integrated.

“As the lead digital economy agency of the nation, we are constantly devising and strategising our approaches. A solid digital economy will, however, require an established digital society, digital industry, digital transformation and attractive digital investments while advocating digital sovereignty. They say digital is the future, but I believe digital is both the present and the future.”