November 30, 2020

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Malaysia 5.0: Reinventing Malaysia’s digital economy

Malaysia’s digital economy has been on a steady rise, growing at around 21% annually. In the wake of the COVID-19 pandemic, the Malaysian government recognised this growth as a crucial driver to stimulate economic recovery. The government has been continuously promoting the nation’s digital agenda through multiple policies and initiatives.

A key investment destination

Consistent growth and uptake of digital tools in the past few years are indicative of Malaysia’s robust Digital Economy and have attracted foreign investors. The Fintech adoption rate is also increasing in Malaysia and the region with consumers, wanting more financial inclusion, better fees, and easier ways to transfer funds. With high-speed broadband facilities and better digital literacy are also driving adoption.

4IR and Malaysia’s 5.0 Digital Economy

At the cusp of the Fourth Industrial Revolution (4IR), Malaysia has the opportunity to re-engineer the human experience using technologies that could decentralised authority and de-emphasise divisions along the lines of colour, creed and country – what the Japanese have coined as “Society 5.0”. This concept is now being adopted locally as “Malaysia 5.0”.

Now, MDEC is poised to take on a leading role in catalysing the transition to Malaysia 5.0 as a new narrative for the nation. This includes introducing using emerging technologies that are now considered essential tools in the new Malaysia 5.0 digital economy.

Malaysia 5.0 directly addresses financial inclusion, access, performance and growth through the 4IR tools, such as fintech, blockchain and artificial intelligence (AI). These digital initiatives and hubs will emerge as core components for the next-gen infrastructure of every country. They will be the ones facilitating the interoperability of goods and services that are flowing through them with interconnectivity between various market sectors.

4IR tech to propel Malaysia forward

The COVID-19 pandemic has resulted in a global standstill and impacted several industries – some more than others. Industries such as Food & Beverage (F&B), Aviation, Travel, Tourism and Retail experience unprecedented disruptions in supply chains and consequently led to a surge in unemployment rates.

According to the Chairman, the COVID-19 pandemic allows for the exploration of new technologies that could lead to more sustainable, inclusive and resilient economies and societies. New technological paradigms are introduced, reflecting the greater need for collaboration across all stakeholders. Interconnectivity in this extraordinary situation is crucial for the nation to achieve shared prosperity.

The country’s digital infrastructure and readiness to embrace technology allowed people to weather the storm. Ever since the Movement Control Order (MCO) was enforced, online services and e-wallet applications saw a considerable boost in users. People are ordering food, groceries and other necessities online to avoid contact and reduce the risk of COVID-19 infection.

In addition, Malaysia’s research arms are actively deploying IR 4.0 solutions to curb the spread of the virus. Business owners and employees embraced the new normal by espousing WFH practices and utilising cloud-based video conferencing solutions to participate in online meetings.

4IR represents new ways in which technology can be embedded within societies. The integration of robotics, machine learning, AI, Internet of Things (IoT), blockchain, financial technology (fintech), data analytics and drone technology with the synergy of 5G infrastructure will displace conventional technology and significantly alter the way consumers, industries and businesses operate.

Sustainable Digital Economy & Value Creation

By embracing 4IR and “Malaysia 5.0” for the nation’s economic recovery, Malaysia has achieved a balanced and equitable growth distribution across all layers of society. The emphasis on well-being and environmental conservation has always been at the forefront of development initiatives.

In the agricultural sector, modernisation and digital transformation would guarantee food security, increased productivity, strengthen supply chains and enable digitally skilled workers. For instance, in oil palm plantations and paddy fields, drone technology and other agrotechnology has helped plants and farmers monitor and enhance crop production to generate a more sustainable and viable source of income.

The adoption of emerging technologies in traditional industries such as agriculture is aligned with Malaysia’s Sustainable Development Goals (SDG) to improve the well-being and income of farmers, fishermen, agro-based entrepreneurs and livestock breeders.

Earlier this year, the World Economic Forum (WEF) and MDEC announced a joint effort to co-design pilot policy principles and regulatory frameworks to accelerate the utilisation of drone tech for societal benefits. Aside from increasing crop yields, drones can be efficiently used to identify dangerous conditions without putting workers at risk, act as a lifeline for remote populations and reduce carbon emissions.

Thus, 4IR technologies could establish a much better living environment; create new, more purposeful employment opportunities; upskill the labour force; better health and education, and create smarter, greener cities.

Spearheading digital transformation

MDEC positions itself at the vanguard of digital transformation by focusing on stimulating inclusive, high-quality growth. Its current role is to ensure Malaysia makes the Digital Leap and embrace the era of 4IR to drive shared prosperity and to reinforce the country’s role as the Heart of Digital ASEAN, a regional digital powerhouse and industry trailblazer. These are focused on three primary focused drivers: empowering Malaysians with digital skills, enabling digitally-powered businesses, and driving digital investments.

Focusing on the long-term

Malaysia’s digital economy is forecasted to contribute 20% to the economy by 2020, a surge of 2.2% since 2015. Backed by the launch of the Digital Free Trade Zone (DFTZ) in 2017 and the current global crisis, the e-commerce sector is expected to exceed RM110 billion by 2020, comprising nearly 40% of Malaysia’s digital economy.

MDEC had the foresight to encourage the development and testing of next-generation technologies such as blockchain and fintech. This proved fundamental in attracting many start-ups and foreign investors to be based in Malaysia. Addressing the growing demand for digitally skilled Malaysians, MDEC introduced the Tech Talent Development initiative to upskill and reskill the workforce. This has further sustained the nation’s investment appeal.

The Malaysian government also incentivised its industrial sectors by offering tax breaks for the electronics sector and related intellectual property (IP); automation equipment capital allowance for services; and provision of incentives for digitalisation and innovation efforts to accelerate digital transformation.