March 25, 2019
As the ASEAN region continues to boom, investment opportunities in the region have become even more alluring. What would be one of the most attractive trade and investment destinations for ICT/ e-commerce and digital economy in the ASEAN region today? Which country would best leverage your investment and deliver significant growth for you?
The cultural complexities of the countries within ASEAN add to the challenges of forming a sound investment strategy. Understanding the big picture includes taking into consideration various factors such as the economics of a country’s Gross National Income (GNI), social landscape, state of digital adoption and talent resources. Malaysia is not only one of the most visited tourist locations in the world, Malaysia also boasts an economic ecosystem offering a rich ground for trade and investment considerations. Located at the heart of ASEAN, the country is an ideal and cost-effective gateway to access the region’s population base of 640 million with a collective Gross Domestic Product (GDP) of US$2.5 trillion. With strong economic fundamentals, the World Bank anticipates Malaysia to become a high-income nation as early as the year 2020.
One of the fastest growing sectors in Malaysia is its digital economy, which consistently continues to be on upward trajectory and accelerates the country’s economic development.
Digital Economy: A Catalyst for Dynamic Growth
Malaysia’s digital economy development is impressive. In 2017, the digital economy contributed 20% to Malaysia's economy, as indicated by Department of Statistics Malaysia. The contribution to the country’s total GDP comes from the digital industry (US$36 billion) and the e-Commerce industry (US$18 billion). The digital industry continues to focus on exports (US$52.23 billion); and employs more than 1.07 million people.
This growth seen by Malaysia is a result of its forward-looking vision on driving itself into becoming a highly productive economy through digital transformation. Various government agencies and ministries work in collaboration with the industry to drive digital transformation. Under the Ministry of Communications & Multimedia, Malaysia Digital Economy Corporation (MDEC) is the lead agency responsible for helping to chart a path for the holistic development of the nation’s digital economy. MDEC’s implementation efforts are centred on four strategic pillars - driving investments, building local tech champions to regional and global markets, catalysing digital innovation ecosystems to nurture start-ups and propagating digital inclusivity among its citizens.
Industry’s Position and Progress
Malaysia has been at the forefront of foreign companies from various parts of the world such as US, UK, Netherlands, Singapore, Germany, China, India, Australia, and Japan. Global corporations and hyper-growth technology companies have been attracted to the conduciveness of setting up businesses in Malaysia. These companies have invested, and continue to invest, in technology and platform, digital and global business services as well as digital content development, to expand these services regionally and globally from Malaysia as their hub.
Malaysia's position as a favoured country for digital investment has been recognized by its consistent 3rd ranking (behind world giants India and China) in AT Kearney's Global Services Location Index since the ranking's inception in 2004.
Digital Initiatives and high impact national programmes
To ensure that Malaysia continues to promote the digital economy, various digital initiatives have been developed and implemented, including a number of high impact national programmes. For example, to keep abreast of the Fourth Industrial Revolution, new frameworks are being developed under Malaysia's Digital Economy plan focusing on Big Data Analytics, eCommerce and Internet of Things (IoT), offering massive growth potential.
In 2018, Malaysia started to promote the adoption and application of Artificial Intelligence (AI) technologies. With the objectives of maximising social and economic benefits, Malaysia is accelerating AI development across three key areas: Talent; Industry Development; and High Impact Use Cases in the areas of smart cities and smart manufacturing, resting on a foundation of progressive regulatory framework.
Digital Free Trade Zone
Another example is the Digital Free Trade Zone (DFTZ) – the world’s first outside of China that aims to capitalise on the exponential growth of the internet economy and cross-border eCommerce. Established to streamline and augment Malaysia's constantly growing eCommerce space, this platform will also boost cross-border trade and position Malaysia as a transhipment hub for eCommerce logistics.
These efforts have already seen results and international recognition. Malaysia is 2nd in ASEAN in the Digital Evolution Index 2017; 5th in Asia in the Huawei Global Connectivity Index 2018; 6th in Asia for the Networked Readiness Index 2016 and the Asian Digital Transformation Index 2018; 7th in Asia in the ICT Development Index 2017; and 8th in Asia for the Cloud Readiness Index 2018. Its tech savvy population was also recognised by a 2016 Thomson Reuters Foundation poll, which ranked Malaysia the 9th best place to be a social entrepreneur in the world.
As of now, thousands of companies from 60 nations have already cast their anchors in Malaysia.
Opportunities for Swiss companies
- Market situation in Malaysia: Malaysia is an internet-savvy country with middle-income consumers and 98% mobile phones ownership, 82% broadband penetration, and about 80% of population are social media users. In 2017, there were 15 million active users of ecommerce in Malaysia, which accounts for 48% of the country’s population.
- Malaysia is also a good base to explore the rest of the Southeast Asian market with a total population of 635 million due to its strategic location and infrastructure. In the last 5 years, the proportion of internet users in ASEAN has doubled. By 2020, the internet user base will grow to 480 mil users.
- The Digital Free Trade zone (DFTZ) is the world first special trade zone to promote e-commerce. A joint initiative between Malaysia government and Alibaba to serve as ASEAN regional fulfilment hub and to simplify customs process. This has opened up the Chinese market of 500 million consumers for Malaysia. Alibaba set up the first Logistics Hub outside of China in Malaysia last year in the DFTZ program. Malaysia is Alibaba/ Lazada biggest market in ASEAN with a large Chinese community of regular users of Tmall, Alibaba and AliExpress. The Lazada’s logistics and warehouse hub is located in Malaysia.
- Potential technology partnership since Swiss expertise is in demand.
- Prospect for tax incentives in high tech industry from Malaysian government through setting up local establishment or partnership with local companies.
- Access to cost competitive Malaysian researchers and research facilities for product development and industrialisation.
This article is brought to you by Swiss Business HUB ASEAN, Malaysia with inputs from Malaysia Digital Economy Corporation (MDEC).
Source: Switzerland Global Enterprise; https://www.s-ge.com/en/article/global-opportunities/20184-c6-malaysia-digital-industry