This will enable the nation to create both job and investment opportunities 

by AZALEA AZUAR 

MALAYSIA should cultivate local mega e-commerce platforms with solid support from domestic companies to develop a robust digital ecosystem, bringing in employment and investment opportunities. 

While e-commerce giants like Lazada, Shopee, Amazon and Alibaba facilitate Malaysia’s digital economic growth, Malaysia can no longer rely on them alone, Universiti Kuala Lumpur Business School economic analyst Assoc Prof Dr Aimi Zulhazmi Abdul Rashid said. 

He said although the international players possess unique supply chains which increase profit margins, it would jeopardise the domestic economy if Malaysia were solely reliant on them. 

“Among significant trouble (if overly reliant) is if their financial problem will severely impact the Malaysia supply chain which supports them. 

“Thus, it is important for Malaysia to develop our major e-commerce platforms, which would need a well-supported eco-system by the local companies, especially the micro, small and medium enterprises (MSMEs),” he told The Malaysian Reserve (TMR). 

Aimi Zulhazmi believes the government, through the Malaysian Digital Economy Corp (MDEC), can lead the Malaysian e-commerce platform creation competition. 

He said MSMEs have a high potential for digital benefits, with e-commerce platforms like Lazada, Shopee and Alibaba supporting the marketing of products and services. 

Malaysia’s e-commerce is maturing with over 40 popular e-wallets, including GrabPay, Touch n’ Go (TnG), Razer and Boost. However, he added that their overall rate for digital adoption could have been more encouraging. 

About 77% of Malaysian SMEs are at the primary digitalisation stage. According to World Bank data, Malaysian businesses lagged behind regional peers in digitalisation pre-pandemic. 

One of the reasons is a digital divide between firms and regions, high financing for digital costs, lack of digitalisation awareness, shortage of digital talents and infrastructure gaps. 

“The longer we wait to address these stumbling blocks, the more Malaysian SMEs will be held back from reaping the benefits of digital technologies. 

“Besides, many of our businesses will continue to lack wider and quicker access to market information and resources as well as integration into regional and global markets,” said Aimi Zulhazmi. 

Digitalisation Is to Stay, Prosper

The Department of Statistics Malaysia (DoSM) revealed that the digital economy contributed 22.6% to the national economy in 2020, an increase of 3.4% from 2019. 

Aimi Zulhazmi said the Covid- 19 pandemic accelerated Malaysia’s digital economy growth, pushing public and private sectors to adapt to new ecosystems. 

“Many businesses have pivoted to online sales channels to survive the pandemic and customers have quickly embraced digital payment methods. 

“Even the public services have been transformed as many ministries are reporting that 70% to 90% of their services are online or fully digitalised in 2022,” he added. 

MDEC has set a target for Malaysia’s digital economy to rise to 25.5% in economic contribution by 2025. 

This brings explosive growth in e-commerce and rising digital adoption rates, where 14.2% from ICT and 8.4% from e-commerce. 

“According to MDEC, financial technology (fintech) adoption has enabled financial service providers to explore new markets and provide consum- ers in underserved or unserved areas access to previously unavailable services using mobile devices,” said Aimi Zulhazmi. 

“Malaysia has seen an increase in the number of fintech companies by 26%, from 233 companies in 2021 to 294 in 2022,” he said. Aimi Zulhazmi said the digital economy is the future of our nation’s growth where it can boost productivity, innovation and livelihoods.One of the ways on the digital economy’s ability to boost the country is by promoting inclusion by serving underserved markets. 

“Second, they can lower costs and increase efficiency for existing firms and entrepreneurs to make them more competitive. 

“And third, they can encourage innovation and scale economies, allowing entirely new forms of business and entrepreneurship to emerge,” he said. 

One of the options towards reforms is to improve digital ecosystem infrastructure, regulations, skills and public finance. 

Challenges In the Digital Economy

According to Communications and Digital Minister Ahmad Fahmi Fadzil, Malaysia’s digital economy made up 23% of Malaysia’s GDP last year and he was hopeful of increasing it to 25%. 

However, the minister said the challenges for Malaysia to reach the target include a need for gapless connectivity. 

“In Malaysia, we face a problem where 3% of the populated areas still do not have any kind of connectivity, although on average, our entire country has 97% connectivity in populated areas,” he said during a town hall session with MDEC. 

Another issue the minister highlighted was data security issues. 

“This is important because when we understand that data is an almost indestructible national treasure and asset. 

“When we understand that aspect of data is very important, then the security of data includes the user, including the aspect of maintaining the infrastructure,” Ahmad Fahmi explained. 

This also includes protecting and guarding our valuable personal data against hackers, as the minister believed the digital economy would heavily rely on cloud computing technology. 

Ahmad Fahmi shared that he expects more investments to be announced in the digital economy space, topping up the existing RM100 billion worth of investment committed thus far. 

“I feel that one of the things we need to see is more venture capital and angel investors,” he said. 

“We need more private sector involvement because for the government, one of the key things is the regulatory and policy space in ensuring a conducive environment,” he added. 

However, some industry players, especially smaller businesses, have voiced concerns over foreign investors as local talents prefer to take up employment with them due to attractive salary packages. 

Ahmad Fahmi felt that the government could no longer be protectionist and stop labour transfer, but they could bring in the proper and fitting investments. 

“Some of those companies didn’t come back. But there were new companies that came in, but those who participated, they remained in the ecosystem. 

“And when those new companies came, they served a higher role,” Ahmad Fahmi said. 

Therefore, he agrees there should be a specific policy to bring in investments as it could lessen Malaysia’s brain drain issue and can retain local talents domestically. 

One of the initiatives that MDEC has done is the DE Rantau programme, where both locals and foreign workers can apply for a digital nomad pass. There are currently a total of 446 digital nomads under the programme. 

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• This article first appeared in The Malaysian Reserve weekly print edition