Malaysia’s digital economy transformation needs more than great headlines

This article first appeared in The Edge Malaysia Weekly, on May 3, 2021 - May 09, 2021.
Malaysia’s digital economy transformation needs more than great headlines
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UNLIKE the much-hyped visit to Kuala Lumpur in 1998 when he was named an official adviser to Malaysia’s Multimedia Super Corridor (MSC) project, Bill Gates didn’t make a virtual appearance to launch Microsoft Corp’s “Bersama Malaysia” (Together with Malaysia) initiative on April 19 that marked a significant milestone of its 28 years in the country. Yet, the commitment by the technology behemoth Gates co-founded (but is no longer chairman of) to help upskill one million Malaysians by 2023, create at least 19,000 new jobs and invest US$1 billion (RM4 billion) here over five years would prove to have more lasting benefits for Malaysians seeking greater economic opportunities in an increasingly digitised world.

Microsoft’s US$1 billion investment in Malaysia — which IDC’s research says would help generate up to US$4.6 billion in new revenues for the country’s ecosystem of local partners and cloud-consuming customers over the next four years — was already indicated by Prime Minister Tan Sri Muhyiddin Yassin when launching the MyDIGITAL initiative on Feb 19. Microsoft, Google and Amazon were named alongside Telekom Malaysia Bhd as four cloud service providers (CSPs) that would collectively invest between RM12 billion and RM15 billion over five years to build and manage hyperscale data centres and cloud services in Malaysia.

While observers reckon that investments may well be motivated by government contracts that are up for grabs, with Malaysia targeting to migrate 80% of public data to hybrid cloud systems by end-2022 to have more effective and efficient data collection and management, others say it is up to the policymakers and the people executing MyDIGITAL to ensure that the people and businesses in the country harness the benefits of having the commitment of global giants such as Microsoft, from headline investment figures to skills training for the local talent pool, both of which are necessary for the country to bolster its long-term competitiveness.

World Bank Malaysia’s lead economist Richard Record says Microsoft’s commitment attests to Malaysia’s many longstanding advantages as a destination for foreign direct investment, including location, workforce skills and an attractive business environment. “Last week’s Cabinet approval of a new set of National Investment Aspirations is an important first step towards setting Malaysia’s ambition to raise the quality of investments,” he tells The Edge in an email.

The new National Investment Aspirations and the decision to establish a National Investment Council are “an excellent starting point towards this goal and will help articulate both Malaysia’s value proposition and offering towards investors, as well as what Malaysia seeks from investors in return towards the goal of raising the quality of investments”, says Record.

“Having said that, the international environment for investment is becoming more competitive and new policies and tools will be needed to bolster Malaysia’s position,” he adds.

In its recent report, “Aiming high: Navigating the next stage of Malaysia’s development” released in March, the World Bank said Malaysian policymakers would need to establish clearer objectives to sustain its competitiveness and maximise local development benefits to maintain FDI volumes as well as attract quality investments that generate the desired spillover effects to the economy.

“Historically, Malaysia’s investment policy has been heavily focused on a set of predetermined priority sectors. However, the effectiveness of this approach is becoming increasingly questionable with the continued growth in the number of eligible sectors since the 1960s, resulting in the lack of clarity regarding the prioritisation progress,” says the report, recommending that Malaysia reform its investment promotion framework by increasing coordination between the lead investment promotion agency and subnational agencies, as well as assure investors on the objectivity and accuracy of the compliance monitoring system for tax incentives.

Researchers at the World Bank note that Malaysian firms are less likely to invest in upskilling and innovation compared with companies in countries that have successfully transitioned to high-income status. Only 18.5% of firms provide training to employees compared with an average of 40% in countries that they reckon Malaysia should benchmark against. Malaysia also needs to align incentives for researchers to collaborate with the private sector and conduct industry-relevant research to boost commercialisation of R&D outputs and process of technology transfer.

“There are concerns that some may be left behind in the digital transition, due to geography, affordability or other factors. So, it is important that the government focuses carefully on ensuring that the growth of the digital economy is an inclusive process,” says Record.

The need to bridge the gap in critical skill shortages as well as the need to get more Malaysians to be creators and innovators of technology, instead of being mere users and adopters, are also key areas that World Bank researchers noted that the country needs to do better at. Their research found most of Malaysia’s workforce to be semi-skilled and the country’s talent pool to lag behind in frontier skill areas such as robotics and artificial intelligence (AI) that are necessary to thrive in Industry 4.0.

While the level of digital adoption by Malaysian citizens is among the world’s highest and there is a thriving digital entrepreneurship scene in the country, “there is a very real need to improve workforce capabilities so that all Malaysians are able to thrive in a changing digital workplace”, says Record.

Surina Shukri, CEO of Malaysia Digital Economy Corporation (MDEC), reckons that the need to nurture more digital innovators and leaders, not just followers and users of technology, is not only crucial for Malaysia to become a globally competitive digital nation but also essential to prevent technology-induced job losses.

“We at MDEC believe that through re-training and re-skilling initiatives, we can co-opt individuals of various credentials into the digital economy and bolster nascent industries that now have growing demand for such talents. Initiatives like #SayaDigital — a movement that MDEC developed to empower Malaysians with digital skills and technologies — are crucial enablers to help introduce digital industries to those seeking out re-skilling opportunities,” she says in an emailed reply, noting that MDEC’s initiatives under the pillar of Digitally Skilled Malaysians have impacted more than two million Malaysians between 2016 and September 2020.

Under MDEC’s Malaysia 5.0 agenda to enable a nation that is deeply integrated with technology, the agency mandated to accelerate digital transformation and national investments in the area has a number of programmes underway to create industry digital leaders as well as to future-proof them, she adds.

All Malaysians, people and businesses need to be on the same page in making Malaysia a digital leader instead of just users of technology, as “creating digital leaders will prevent the displacement of the human workforce with machines”, says Surina.

“Despite the efficiencies of Industry 4.0 technologies, humans are still needed to maximise their benefit. People are to work on higher-value activities while robots and machines perform laborious and repetitive tasks. As such, there is an urgency for employees to acquire digital skills to stay relevant in the digital world.

“These joint efforts have to be prioritised by both public and private organisations. Business leaders must prioritise creating digital leaders in their organisations, leaders who are able to build teams, keep people connected and engaged, and drive a culture of innovation, risk tolerance, and continuous improvement. The new generation of leaders must be agile and digital-ready.”

She asks Malaysians to come on board and calls entrepreneurs to “think global at inception, from day one”.

As reflected by the launch of the MyDIGITAL initiative, Malaysia knows it has to digitise fast to secure the desired future prosperity for all. The hardship caused by Covid-19 will only cause digital laggards to fall further behind if policymakers are not able to rally enough support for change to build and secure the country’s future competitive edge.

In its media release, Microsoft says the “Bersama Malaysia” initiative to equip individuals with equal opportunity to thrive in a cloud and AI-based digital economy has reached “more than 110,000 Malaysians” since July 2020. That the programme is a continuation of its global skills initiative, however, means Malaysians who receive training need to build on those skills to attain real competitive advantage over others outside the country with access to the same programme. Policymakers will need to make sure the latter happens to secure more than just impressive headlines.


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