The next step in Malaysia’s digital transformation

This article first appeared in The Edge Malaysia Weekly, on November 2, 2020 - November 08, 2020.
The next step in Malaysia’s digital transformation
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Inclusive planning and careful execution are needed for the country to thrive in a global digital economy

The digital transformation of a nation can be described as a journey. There is a path to take, a destination to reach and unique needs to be met along the way.

Malaysia has started the process of integrating digital technologies into all areas of its economy, and the next step is to carve its position as the “Heart of Digital Asean”.

“This is our aspiration for the country. As the Heart of Digital Asean, Malaysia will serve as a regional digital powerhouse launching global champions to lead the Fourth Industrial Revolution (Industry 4.0),” says Datuk Wira Dr. Hj. Rais Hussin Mohamed Ariff, chairman of Malaysia Digital Economy Corporation (MDEC).

“We are committed to leading the country’s digital economy by creating inclusive, high-quality growth through nationwide digitalisation initiatives that are aligned with the Shared Prosperity Vision 2030.”

Rais and Chow Sang Hoe, consulting leader for Ernst & Young Asean and consulting managing partner for Ernst & Young Advisory Services Sdn Bhd, discuss the next step in the country’s digital transformation journey, critical success factors and main challenges to overcome. They emphasise the importance of technology and how it benefits society as well as the digital divide that must be avoided as industries, including education and healthcare, continue to transform digitally.

“The next step in Malaysia’s digital transformation journey should pivot on a people-focused, value-based Industry 4.0. I envision a higher purpose in driving the country’s digital transformation by ensuring an equitable outcome through rakyat inclusiveness and economic resilience,” says Chow.

“The digital transformation of Malaysia will be an exciting journey with smart adopters who can thrive and reinvent their business models with the right set of technologies.”

Here are Rais and Chow’s views on how to future-proof the country while establishing its role in a global digital economy.

What is your vision of success for Malaysia’s digital transformation? Can you include goals and specific outcomes, if any?

A successful digital culture requires attitudes, values and behaviours to change and reflect the digital transformation agenda. This is where the plans for Malaysia 5.0 come in.” - Rais

Rais: Success can be defined as the creation of a human-centred society, aka ‘Malaysia 5.0’, which is a new narrative for the nation. MDEC is poised to play a leading role in catalysing the transition to Malaysia 5.0.

Malaysia 5.0 addresses digital accessibility, financial Inclusion, productivity and growth through the tools of Industry 4.0 such as fintech, blockchain and artificial intelligence (AI). This is when the digital economy contributes towards a more sustainable and circular economy. This will ensure greater well-being for all citizens, regardless of age, ethnicity and class.

With Industry 4.0 technology, we can establish a better living environment which includes more purposeful employment, an upskilled labour force, better healthcare and education as well as smarter and greener cities. MDEC’s role is to introduce new technology, the critical tool in Malaysia 5.0’s digital economy.

Chow: My vision of success for Malaysia’s digital transformation is that the growth generated by national digitalisation initiatives leads to fair and equitable distribution across income groups, ethnicities, regions and supply chains. We should place people at the centre of digital technology and ensure that technology serves the rakyat, and not the other way around.

Specific outcomes include new jobs from new industries, the transformation of existing jobs, an improved standard of living and lifelong learning opportunities to build knowledge and skills for the new economy. For business, there should be growth in higher value-added activities, the emergence of digital champions to drive new businesses and revenue streams as well as scale, consolidation and aggregation to compete efficiently across borders. A successful digital transformation can steer and support the transformation of Malaysian businesses and the overall economy to play a part in an increasingly competitive global business ecosystem.

What are some digital enablers that can scale across different sectors — for example, world-class infrastructure — and support the country’s digitalisation journey?

Rais: The National 4IR (Industry 4.0) and Digital Economy Council and the National Digital Infrastructure Plan (Jendela) will accelerate the growth of our digital economy. This includes the formation of the National Technology and Innovation Sandbox, which aims to produce digitally skilled local talent by providing opportunities for R&D, innovation and high-tech entrepreneurship capabilities.

The implementation of 5G infrastructure and Industry 4.0 practices will push the adoption of technology and digital transformation. This is necessary for the country’s economic trajectory.

We are fortunate that MDEC is backed by the Prihatin Stimulus package and the Penjana National Economic Recovery Plan, where the government has made an allocation to develop and revive the economy via digitalisation efforts.

Given the diversity of Malaysia’s industries, we can start with key sectors with competitive strengths as well as high- value and high-impact segments.” - Chow

Chow: Continuous improvements to Malaysia’s hard and soft infrastructure will maximise the opportunities of digitalisation to benefit the economy and society. Hard infrastructure refers to affordable and leading-edge telecommunications infrastructure that can provide efficient internet accessibility nationwide, including rural areas.

Soft infrastructure refers to essential institutions in an economy and a high standard of living. These are government agencies and private organisations in sectors that can collaborate and corroborate to develop national policies to power the country’s digitalisation journey. These sectors include healthcare, education, financial, accounting, tax and the legal system.

Furthermore, training and education policies to grow new talent and upskill or reskill current talent are needed to nurture and develop a strong talent base for Industry 4.0. This talent is also essential to prevent technology-induced job losses.

To summarise, future-proof enablers in the country’s digitalisation journey are digital infrastructure, digital talent, digital ecosystems and digital security. Digital infrastructure and digital talent are described above. Digital ecosystems refer to cohesive or integrated digital value chains that cultivate collaborations and infuse or create market competitiveness. Meanwhile, digital security includes robust policies, governance models and risk management that strengthens and secures cybersecurity systems and defences.

What are the industries or sectors in the country with the greatest potential to unlock value through digitalisation?

Rais: There is a tremendous focus on e-commerce now. We expect a growth of 20% in e-commerce contribution to the digital economy despite the Movement Control Order (MCO) implemented earlier this year.

Financial support from the SME Digitalisation Matching Grant and the SME Technology Transformation Fund has enabled the digitalisation of bricks-and-mortar SMEs. This has made the e-commerce space much more vibrant. Now, e-commerce activities are anticipated to contribute about RM170 billion to the economy in 2020.

Digital content creation is another up-and-coming industry that has unlocked its value as a result of digitalisation. Malaysia’s rapidly maturing digital creative industry, which includes animations, movies and video games, is proving to be a significant growth driver for the nation. We have the right mix of talent for the animation and creative content industry and they have access to enablers that can help our local creators market their content to a global audience.

Chow: Given the diversity of Malaysia’s industries, we can start with key sectors with competitive strengths as well as high-value and high-impact segments. These include finance, digital halal products and services, digital healthcare, digital education and digital government facilitation services. Now is the right time for business enterprises and entrepreneurs to unleash their creativity and innovation to mitigate the severe effects of the Covid-19 pandemic and fast-forward the country on its digitalisation journey.

Describe the multiplier effects of a national digitalisation strategy.

Rais: By enhancing digital talent, businesses and investments, the national digitalisation strategy will serve as a growth multiplier for the economy in the future. The transformation of businesses through digital tools and platforms is a critical step towards improving their sustainability and operational efficiency as well as to tap new growth opportunities. Under its digital adoption pillar, MDEC has successfully targeted start-ups and SMEs to serve as starting points for industry-wide disruption. This way, we can inject our digitalisation initiatives and nurture emerging industries.

Malaysia aspires to be a hub of digital creation and innovation by attracting investment to niche areas. Meanwhile, MDEC is actively cultivating e-commerce, big data analytics, AI, blockchain, automation and the Internet of Things (IoT) to serve as drivers of economic growth. There will be positive knock-on effects in niche areas such as animation, games development and eSports as our capacities grow. Malaysia will also further develop as a regional hub for data centres and as a test bed for emerging technologies.

Chow: The continuous digitalisation of businesses operating in various sectors can create high multiplier effects for the economy and the rakyat. Multiplier effects are projected between 12 and 20 times, depending on the market potential of a sector’s products and services. For example, digital e-platforms have significant multiplier effects due to their e-reach and capacity to serve multiple sectors.

An inspiring example of exponential growth is Amazon, which evolved from an e-commerce platform into a multinational technology company that focuses on cloud computing, digital streaming and AI. The advancement of 5G, AI and robotics as well as the greater digitalisation of Malaysia’s in-demand sectors have the potential to unlock value in traditional industries.

What are the plans for SMEs that face difficulty in leveraging digitalisation and/or technology?

Rais: Given that more than 90% of Malaysian businesses can be categorised as SMEs, it is imperative that smaller businesses are digitally empowered. Many schemes promoted and operated by MDEC support digitisation and digitalisation of mom-and-pop enterprises.

MDEC is encouraging digital adoption among SMEs in a wide array of sectors. Examples of our initiatives include Digital Xccelerator (DX) Virtual Platform, 100GoDigital, SME Digital Accelerator, Smart Automation Grant, SME Digital Quickwins and eUsahawan.

Chow: SMEs that have not ventured into digitalisation should look at the basics such as a tech infrastructure or the use of digital applications — including social media, e-commerce and talent requirements — and consider a revamped operating model, but avoid incurring a heavy investment up front to ease into the new norm. They can apply a two-pronged approach where the existing business model continues as they gradually digitalise their operations.

The degree of digitalisation and the intensity of the process will vary according to the nature of the business. Once an organisation has successfully adopted a new digital model as part of its core business, a natural progression would be to unlock further value by applying enterprise analytics for better process optimisation, customer insights and market penetration. Although the immediate focus is on growing sales, SMEs can reap bigger benefits if they integrate front-office activities with operational processes.

What are some ways to foster a digital culture across government agencies, business sectors and the general public?

Rais: A successful digital culture requires attitudes, values and behaviours to change and reflect the digital transformation agenda. This is where the plans for Malaysia 5.0 come in. Malaysia 5.0 is inspired by Japan’s Society 5.0, where the goal is to implement Industry 4.0 evenly across society so the benefits accrue to all, not just a chosen few.

At MDEC, we believe that if everyone gains equal access to digital technology, we will be able to foster a digital culture that is more accepting of technological advancement and disruption. One way to achieve this is to emphasise the value of digitalisation within our day-to-day life. This involves inculcating and nurturing the use of digital tools, digital methodologies and machine learning approaches to problem-solving.

Chow: To foster a digital culture among Malaysians, effective public communication of digital experiences, tools and technologies involved in digital transformation is integral. Public awareness should be omni-channels such as traditional channels, social media, training programmes and initiatives, and digital demonstration centres. The government can also facilitate awareness and access among Malaysians to help them keep up with trending technologies by joining innovation networks and building data-exchange platforms.

What are some challenges or roadblocks that can complicate the country’s digital transformation?

Rais: The biggest roadblock to our digital transformation agenda is the fear of all things digital. Digital transformation means disruption and many companies find this to be too difficult or time-consuming. There are also risks involved and this makes them resistant to change. However, risks exist in all facets of business. MDEC plays a role in mitigating these risks and driving transformation through our various capacity-building programmes.

For Malaysia to be at the Heart of Digital Asean and to develop into Malaysia 5.0, we must consistently address this fear. We are actively taking measures to ensure that Malaysians can make the digital leap and elevate their Industry 4.0 readiness; that businesses can embrace a phenomenal spurt in digitalisation and become global tech champs and that the country becomes a fertile ground for investments and the epitome of a digital home.

Chow: The broad challenges that may complicate or hinder a country’s digital transformation include the price of technology, availability of the right talent and speed of implementation. Both private and public organisations need high-speed connectivity for industry digitalisation.

Jendela has identified fixed wireless access (FWA) as a potential solution for sparsely populated areas. Accelerating fibre connection and FWA deployment is critical to realise the full value of digitalisation.

The cost of technology is a key consideration in digital transformation. Economies with currency depreciation may deter procuring the ‘best-in-class’ technologies because of the cost.

Finally, talent upskilling or reskilling is critical to prevent the displacement of the human workforce with machines. 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.

How do you ensure that the nation’s digital strategy will be evenly implemented across the country?

Rais: We are aware that some initiatives may focus on cities, where infrastructure and resources are readily available. It is our task to ensure a wide dispersion and early adoption of Industry 4.0 tools so that marginal elements of society can keep up with the widespread displacement that is bound to take place locally and regionally.

The overriding philosophy governing Industry 4.0 centres on shared prosperity for all, regardless of class, colour or creed. The global crisis caused by Covid-19 presents an opportunity to reinvent ourselves for a better future and there are more possibilities for everyone. For this to happen, society must be placed at the centre of Industry 4.0, instead of the other way around.

Chow: For an effective nationwide digital strategy, the basic infrastructure necessary for digitalisation must be present. The rollout and implementation of the National Fiberisation and Connectivity Plan 2019-2023 is critical to address the inadequacies of internet coverage throughout the country.

In addition, the design and implementation of a national digital strategy can benefit from engaging with the rakyat to co-design policies and services. Citizens can play a major role as a source of fresh ideas.

Some governments have created digital platforms for public consultation on policies and budget priorities, thus giving citizens more of a say in the day-to-day decisions that affect their lives. Other countries are experimenting with various instruments to tap their citizens’ input and experience. Policy labs are springing up everywhere, to capture citizens’ contributions to policymaking in areas as diverse as education, health and justice.

Malaysia Digital Economy Corporation (MDEC) will launch the Malaysia Tech Month 2020 (MTM 2020) in November 2020, a month-long curation of the nation’s best digital and technology content and virtual experiences enabled by visionary leaders and courageous investors showcasing Malaysia’s world-class tech and digital innovation to local and global investors.

MTM 2020 connects the brightest minds in digital and tech, facilitating high-value networking opportunities between investors, corporates and entrepreneurs to exchange innovative ideas, new solutions and game changing technologies in the region’s fast growing digital economy.

MTM 2020 will drive MDEC’s aspiration to firmly establish Malaysia as the Heart of Digital ASEAN. It will reinforce Malaysia’s ambitions to be the regional digital powerhouse by nurturing emerging global champions to thrive in the Fourth Industrial Revolution (4IR) with the aim of delivering shared prosperity for all Malaysians.

The three core themes in focus will be matching digital talents to industry demand, business digitalisation and securing new digital investments. The key objectives are to strengthen confidence in the country as a compelling digital and tech investment location and catalyse increased cross-border trade opportunities in the region.

MDEC will also be  organising the sixth edition of Level Up KL, Southeast Asia’s games festival designed to connect, learn, inspire and celebrate video game-related cultures. One of the main highlights of Level up KL is the Level Up Play Day from Nov 16-29, which is a virtual game expo dedicated to recognize games as a cultural phenomenon that can bring positive impact through social, economic, political, environmental and technological aspects to the world.

Come and join the first virtual game expo experience with a lot of exciting activities, stage performance, cosplay shows, and freebie giveaways!

MDEC’s MTM 2020 is a considered curation of high-impact technology events and content, organised by MDEC in collaboration with industry partners and independent organisers.

Visit mdec.my for more info.