Malaysia Digital Economy Blueprint: MyDIGITAL: A Game Changer if well executed

This article first appeared in The Edge Malaysia Weekly, on February 22, 2021 - February 28, 2021.
Malaysia Digital Economy Blueprint: MyDIGITAL: A Game Changer if well executed
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Malaysia must digitalise quickly to secure its future prosperity, says Prime Minister Tan Sri  Muhyiddin Yassin in an email interview on the just-launched MyDigital blueprint. He explains that because there is a need to move fast, the government has decided to build the high-speed 5G connectivity network, instead of leaving it to the telcos.

 

The Edge: With the launch of the MyDIGITAL blueprint, how important is the digital economy in the overall planning of the government’s economic policy from now?

Tan Sri Muhyiddin Yassin: The short answer is that it’s absolutely fundamental.

First of all, I think one of the key learnings that the world has collectively taken from the pandemic that has gripped us for over a year is that technology has become far more essential than we ever thought it was. Prior to the pandemic, we all understood that technology is a vital sector for growth and development, but the pandemic has shown that it is not a mere tool for commerce, or lifestyle … rather, it is evidently the lifeline for communities faced with hardship and difficulty.

Technology is what facilitates governments in providing aid and assistance to those in need, as well as for planning massive public healthcare initiatives and welfare programmes. Hence, technology and the digital economy must be a pillar of any economic policy planning. The government has been very clear in its approach to economic policy during the pandemic as announced and implemented throughout 2020, in that we are fully focused on protecting both lives and livelihoods.

As you can see, we have been directly and indirectly implementing measures to boost public health spending, while at the same time protecting and uplifting the people’s welfare, save and create jobs and protect businesses. These measures are all important to safeguard the economy during the pandemic.

But we must also use this opportunity to look ahead, and start putting the building blocks to reshape the economic landscape post Covid-19. We must identify the new growth engines for the future. So the digital economy is important for the present as we deal with the fallout from the pandemic, and it is important for our future economic resilience and competitiveness.

Fortunately, Malaysia is building its digital economy from a relative position of strength, with a strong electronics manufacturing base, a multilingual and educated talent pool, low cost of living and relatively high internet penetration. To drive the national agenda further, there needs to be a clear, comprehensive and concerted strategic response to expedite the growth of digital economy. It’s not impossible for Malaysia to become a regional powerhouse for the digital economy. I strongly believe the MyDIGITAL initiative will set us on this path.

 

Tan Sri, can you share the reasons why we need the MyDIGITAL initiative and blueprint since there are various digital initiatives that have been implemented by various agencies. And why now? Any particular reasons for the timing?

There’s no doubt that there has been various digital initiatives in the past, and I think this is something that we have done well as a nation, in staying current and competitive with regards to the global technology boom.

That said, it is the very nature of the tech industry that it is constantly changing and evolving, and the ecosystem is itself in a constant state of renewal. Therefore, we too must be current in our policies, initiatives and planning. The tech sector is perhaps the one sector where blueprints cannot remain static due to the sheer speed in which things evolve and there is a great need for governments to keep up and remain ahead of the curve.

Such is the speed of progress in the tech space that if we take the foot off the proverbial pedal even for just a short time, we can easily be overtaken by other economies, racing to offer the most appealing array of options for global tech investors looking for their investment destinations.

Malaysia may have had a head start in 1996 with the launch of the Multimedia Super Corridor (MSC) concept, but we have over the years lost ground in the race for investments.

It is time for us to seek a fresh, inclusive and forward-looking strategy to deal with many of the challenges confronting our nation. For example, in businesses, productivity is stagnating, rates of return on investments have fallen over time, and we are not going up the value chain quickly enough. Consequently, investment and reinvestment have increased but at a slower pace. We have also allowed premature deindustrialisation by moving away from industries to services and consumption too early, making the economy trapped in middle income.

Moving to private domestic consumption to generate growth by increasing household debts has limited Malaysia’s potential.

The answer to redress all these constraints lies, not in going backwards for solutions, but in going forward to find the key that can overcome the challenges and allow us to turbocharge our economy in a significant way. I believe empowering our people and enabling our businesses through digital transformation is the answer. It is the key to unlocking our economy for the future.

 

How so?

By tapping into the global value chain and creating higher-skilled jobs with higher pay. To do, this we have to create a sustainable ecosystem which will spur new engines of growth. The building blocks of 5G connectivity and cloud storage will be the game changer in creating this ecosystem. It will improve productivity, provide higher profit margin to companies and, over time, reduce dependency on low-skilled foreign labour.

Our farmers, for example, will make more money selling better-quality produce at higher prices and raise their farm productivity using AI (artificial intelligence) and drones.

Our people in rural communities will have access to the best medical specialists and our kids will have access to online education by the best teachers. They will be connected with devices and learning software and be better equipped for jobs in the new economy.

Our small enterprises will have global market access with cheaper and more available banking and financing for their businesses. This is what we hope to create when we establish the right ecosystem.

 

That is a lot of promises. And Malaysians are very sceptical because we have always fallen short in executing grand plans and visions. How can this be delivered?

We know that in order to succeed, it must be led by the private sector. The government’s role is to be the catalyst through policy framework that will create the environment for the private sector to drive our digital ambitions, and that we will be doing under the MyDIGITAL initiative.

We know it is all about innovations, disruptions and plenty of risk taking. We know it needs scale to be economically feasible and, therefore, we must be part of the global supply chain and global ecosystem. We must bring in private investments quickly. Hence, the government will facilitate digital initiatives by the private sector.

That said, we know we must also ensure digital sovereignty and not allow ourselves to be digitally colonised. We must be aware of the risks in being open and connected and we must be vigilant against digital Trojan horses. The security of our digital infrastructure and databases must be protected at all costs and at all times.

 

What must be in place for us to get these private investments, whether foreign or local?

There are five key factors to attract these investments and to enable the formation of a digital ecosystem. These are:

1.     Availability of digital infrastructure such as connectivity, cloud and 5G.

2.     Market opportunities to sell their products and services, to make a profit.

3.     Availability of local talent and ability to bring in foreign talent.

4.     A supportive regulatory framework.

5.     An avenue to raise alternative financing beyond bank-backed financing such as the venture capital matching programme as per Dana Penjana initiative (under the Ministry of Finance).

First things first, let us focus on digital infrastructure. Over the next five years, a total of RM70 billion is expected to be invested into digital infrastructure. The key digital infrastructures are local and international connectivity, and cloud services and data centres.

By 2025, every Malaysian household, school and enterprise will be connected digitally via the Jendela (Jalinan Digital Negara) project, where a total of RM21 billion will be invested by the government and private sector. No Malaysians will be left behind. Foreign MNCs and local companies will invest further to expand our international connectivity, largely for submarine cables, providing business opportunities for local telecommunication companies and also reduce the cost of internet to Malaysians. 5G will be deployed and be available from the end of this year at selected localities and will be rolled out across all high-density areas by 2023. This will make Malaysia among the first countries in Asean to have 5G connectivity.

As we all are beginning to realise, the currency for digital is data. Whether it is AI, or machine learning, big data applications, driverless cars or cashless banking, we need to facilitate data collection, processing, storage, retrieval and speed, and at lower costs to the government and the private sector businesses. This will be made possible by the hyper-scale and public hybrid cloud services and data centres.

And, as you may be aware, there are only a handful of global companies with this capability and technology.

As I have announced in the launching of the MyDIGITAL initiative, Malaysia will be partnering with the world’s best and biggest technology companies such as Microsoft, Amazon, Google and our own Telekom Malaysia. Of course, we also want to make sure we build up local expertise and capabilities over time, as well as protect our data and, most importantly, digital sovereignty. Therefore, the Malaysian government has pushed as part of the conditions for these investments that the MNCs tie up with local partners, which are Malaysian-owned with the majority of the staff being Malaysians.

Last, but not least, the efforts to attract investments go beyond providing infrastructure. Hence, sound regulatory framework is required. The low hanging non-infrastructure fruit is that the government can accelerate the rollout of the key digital enablers such as Digital ID, Digital Government and Data Sharing Framework on top of an effective implementation of cyber resilience policies.

 

How soon will the likes of Google and Microsoft begin to build their cloud data facilities?

I was informed that they will build their cloud data facilities very soon, subject to the necessary regulatory approvals. However, the real question we should be asking, is when can Malaysians benefit from these investments, and the answer is ‘immediately’.

Naturally, the government will immediately benefit from cheaper data management cost through ‘pay as you go’ arrangements with such cloud service providers (CSP). Furthermore, the remote accessibility to data should translate to more collaboration intra and inter-governmental agencies.

In terms of talent, we will make provisions to allow work permits for specialised talents that we do not have yet. But the key here is to develop local talents, whether it is educating and training for the young or reskilling for the older workers.

As part of their commitment to Malaysia, these CSPs have also committed to helping Malaysians improve their digital skills. These companies, among others, will also collaborate with local universities to establish the Faculty of Artificial Intelligence, and to work with the government to carry out employees’ skills improvement programmes. They will focus on cloud, big data and AI to help build a resilient knowledge-based workforce as well as enhance the employability of our young people.

 

The idea of having a government-owned SPV to own the only 5G infrastructure seems unique and definitely a complete departure from past policies. What is the thinking behind this move? What are the benefits? What are the risks of taking this route?

To accelerate the deployment and availability of 5G, it is necessary that we introduce a shared 5G infrastructure owned by the government through a special purpose vehicle (SPV). These investments are high and the economic returns for each telecommunication company to invest may not be justifiable in the short to medium term.

Let me give you an analogy. The same is true of highways. All makes (whether Proton or Toyota or Mercedes) use the same road infrastructure. You don’t have to build duplicating highways that run parallel to each other for each of the makes.

In this instance, the telcos, without having to invest in this 5G infrastructure, can access the same network and just focus on creating better products and services. In principle, the resulting cost-saving can be transferred to the consumers.

The key takeaways that Malaysia took from various rollouts of 3G and 4G spectrums worldwide previously was that the telcos that invested in individually-owned infrastructure took a long time to recoup their investments. Speculative bidding for spectrum can also lead to excessive cost. This will delay full deployment as the telcos will then wait for commercially viable demand before rolling out full-fledged services. Comparative studies by global consultants have supported the belief that co-sharing must be the way forward to reduce costs and make 5G deployment feasible, as reflected by many countries increasingly moving towards shared 5G infrastructure arrangements.

So, that’s how we landed on the shared infrastructure route, as I announced earlier.

This will ensure that Malaysia can deploy 5G earlier than expected, due to better resource allocation. This approach should translate into lower costs for customers, which will stimulate demand and make businesses more productive and innovative. Hopefully, we will have an entire 5G ecosystem of companies, which will create high-paying jobs.

The government’s share of the infra will be indirectly recouped through higher tax revenues from future 5G users.

 

How about the risks or potential downside of taking this route?

Malaysia cannot afford to duplicate our infrastructure. The 5G infrastructure, by virtue of its very high cost, inevitably is a natural monopoly asset and, hence, best to remain in government hands.

However, there would also be questions on the need to balance the upside of cost sharing and the downside of a single network risk. The downside risk includes potential inefficiencies and potential anti-competitive behaviour.

While the upside for Malaysia is clear, the risk is mitigated by the fact that this SPV will be licensed and under the regulatory oversight of MCMC (Malaysian Communications and Multimedia Commission), which will enforce the fiscal discipline required through the service level agreement.

Unlike if the infrastructure is owned by independent private entities, MCMC and its management will be directly accountable to the minister in charge and ultimately to Parliament and the rakyat. This will maintain the check and balance in the long run.

Last, but not least, this SPV is government-owned and therefore, remedial action can be quickly taken for any concerns. And finally, it is proposed that this exclusivity can be evaluated after 10 years as a sunset clause.

 

How can we ensure execution of the blueprint and the MyDIGITAL initiative and its deliveries? There are several ministries and agencies overseeing Malaysia’s digital economy, and many of them are operating in silos.

We understand that the devil is in the details and the key is in the speed of execution. Therefore, streamlined implementation of this strategic blueprint via a project management team supported by a high-level coordination ministerial body is a must.

Hence, when the government introduced the stimulus package last year, we set up Laksana (Economic Stimulus Implementation and Coordination Unit Between National Agencies) as a delivery monitoring unit. I am happy to say that it has been effective thus far, with regards to monitoring the stimulus packages as well as Budget 2021.

Today, we are already creating a dedicated strong project management office for this MyDIGITAL initiative. The project management office will monitor the dashboards of various milestones that are owned by various ministries and government agencies diligently.

Coordination across ministry silos is also the very reason why we decided to set up the Digital Economy and Fourth Industrial Revolution (4IR) Council with its own secretariat. It has six working groups headed by ministers and the KSN (Ketua Setiausaha Negara) to look into specific issues like digital talent, infrastructure and data, emerging technologies, economy, society and government. I’ll be chairing the council and this will be the highest decision-making body for everything digital.

Our MyDIGITAL initiative and the digital blueprint will form the guiding principles to make sure we are fully coordinated, consistent and action-oriented, coupled with a whole-of-nation approach.

 

Prime Minister, you have promised a lot with your MyDIGITAL initiative and plan. You will be remembered for either delivering the promise to empower the people digitally to succeed and prosper or for failing to safeguard their future during this critical time. Any thoughts on this burden of responsibility?

Malaysia is at an important crossroads in its economic journey. We have to put together bold and forward-looking policies in order to enhance our economic competitiveness. I would like to stress that this vision and plan emphasises a whole-of-nation approach that requires all stakeholders be in tune to work together, and that means for the burden of responsibility to be shared.

The private sector and civil society must be on board. If we can work together, we will be able to create a future for our children and grandchildren that we can be proud of. It will not be easy, but that is why all hands are required to make national initiatives like MyDIGITAL successful.

As a government, we will be providing leadership and direction ahead for this country but, as clichéd as it sounds, everyone needs to work together. Top-down approaches alone will not cut it, as everyone needs to chip in. A ground-up movement must be mobilised to ensure the success of this initiative.

To me, failure is not an option. We have to grab the bull by its horns and do whatever it takes for the best long-term interests of the nation.

At the end of the day, it is all about doing what is right for Malaysia. As the leader of the government, that burden of responsibility ultimately! is mine to bear. Yet, the burden of commitment to build a better nation falls upon each and every one of us Malaysians.

 

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