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KT Corporation South Korea’s largest telecommunications company launched its first overseas virtual reality (VR) theme park, VRINITY in Johor, Malaysia, last month. VRINITY, a joint venture with Malaysian ICT company Iskandar Innovations (IISB) will provide differentiated VR experiences to Malaysian customers by using KT’s immersive media platforms and VR content.

The digital sector has been one of the fastest growing sectors in the country (USD 50 bn+ exports annually, more than 1 million people employed, 20% contribution to GDP by 2020) and a leading sector from an investment perspective. As of 2018, Malaysia’s digital sector has attracted close to USD 80 billion creating more than 182,000 high-value jobs (Source: Malaysia Digital Economy Corporation). Global digital and hi-tech companies like IBM, HP, Intel, Google, Amazon & Cisco continue to expand and invest in Malaysia. Malaysia Digital Economy Corporation (MDEC) is working closely with the Ministry of International Trade and Industry (MITI) and the Malaysian Investment Development Authority (MIDA) for attracting technology-related investments.

Recently, Prime Minister Dr. Mahathir announced a new economic model for Malaysia to achieve shared prosperity by 2030 replacing the Vision 2020 model. The new economic model focuses on Industrial Revolution 4.0, digital economy, creating high-skilled jobs, growing consumer market, improves labour market, new growth sectors, reforming human capital, inclusive territorial development, and social support mechanisms – clearly digital is one of the main pillars of the model.

Malaysia has a holistic digital ecosystem and a complete ICT support system for new market entrants. Established by the Malaysian government to accelerate the growth of the nation’s Digital Economy, the MSC Malaysia status provides eligible ICT-related businesses, both local and foreign, with a wide range of incentives, rights and privileges to promote continued growth. There are currently around 3,000 companies with MSC status. Additionally, the Malaysia Tech Entrepreneur Programme (MTEP) was introduced for tech founders who want to capture the ASEAN market from Malaysia via a 1-year stay or a 5-year stay in the country.

The Government of Malaysia has identified following key digital areas to drive the ICT sector in the country – cloud, internet of things (IoT), data analytics, cybersecurity, data center, e-commerce and artificial Intelligence (AI). We highlight below specific opportunities in the digital space:

  • Internet of Things – The Malaysian Government has taken a special interest in developing the Internet of Things (IoT) to transform the digital application and infrastructure. The smart city infrastructure and services such as smart highways, intelligent traffic management systems, and advanced energy management systems are expected to drive IoT adoption across sectors and help in creating more opportunities for foreign technology leaders.
  • e-Commerce – Malaysia’s National e-Commerce Strategic Roadmap has projected double-digit growth in the e-commerce sector. To promote e-commerce and digital infrastructure in the country, the Malaysian Government with Alibaba has launched a Digital Free Trade Zone (DFTZ) in the country, which is also the first digital FTZ in the world.
  • Datacentre & Cloud computing – The number of datacentres is expected to grow in double-digit in the coming few years. Software-as-a-service (SaaS) has the highest adoption in cloud computing; subsequently, Infrastructure-as-a-service (IaaS) and Platform-as-a-Service (PaaS) remain the dominant form of deployment by enterprises.
  • ICT adoption by SMEs – Although Malaysia has one of the highest internet penetration rates regionally, most of SMEs are in early stages of digital maturity and this presents an opportunity for ICT companies.
  • Business Process Management – Malaysia has retained the 3rd-place ranking in AT Kearney’s Global Service Location Index since the start of the Index in 2004.
  • Animation & Gaming – The new Digital Content Ecosystem (DICE) policy 2020-2030 is undergoing due processes of engagement and syndication and will be introduced shortly with the aim of strengthening the digital content industry and ultimately position Malaysia as the leader in digital content creation and production in the region. The policy will focus on attracting investments, building local talent and companies and strengthening the ecosystem through government and private sector partnership. DICE is a collaborative effort between the Ministry of Communications and Multimedia and MDEC.
  • Industry 4.0 – “Industry4WRD”, the National Policy on Industry 4.0, provides the basis and support for firms to make the leap into Industry 4.0. In line with the strategies outlined in this Policy, the Government aims to support industry transformation and develop local technologies by providing and aligning incentives with targeted outcomes to manufacturing firms and solution providers. Various initiatives supporting the implementation of this Policy were announced in Budget 2019, including tax incentives, grants, and a readiness assessment programme.

Malaysia, one of the tiger economies of Asia, is one of the best destinations for FDI in Southeast Asia. According to Department of Statistics Malaysia (DOSM), the total FDI stock rose 10.3 percent to USD 159 billion in the second-quarter (Q2) of 2019, from USD 151 billion a year ago. FDI accounts for 40% of overall investments in Malaysia. In the last five years Oracel, Capgemini, Grab, LinkedIn, DXC Technology with other international companies plays an important role in FDI inflows into Malaysia in ICT sector. The major source markets for FDI in digital sector are USA, Germany, France, Singapore, United Kingdom, India and Japan.

Select foreign investments in digital sector in Malaysia:

  • France-based Capgemini, has opened a new robotic process automation centre of excellence in Malaysia
  • Software solutions provider Oracle, has expanded operations in Kuala Lumpur, Malaysia, with the opening of a new cloud solutions hub in country.
  • Carro, a Singapore-based Southeast Asian (SEA) automotive marketplace, has invested USD 30 million into Malaysia’s myTukar to digitise the local used car dealer industry.
  • Huawei has signed an agreement for the provisioning of a 5G network in Malaysia through a government-backed partnership with Maxis.
  • US-based DXC Technology has opened a new cyber defence facility in Kuala Lumpur, Malaysia
  • Singapore-based Grab, has launched a new regional centre of excellence in Petaling Jaya, Malaysia.

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