WHEN the Institute for Democracy and Economic Affairs (Ideas) Malaysia released the first edition of Timbro Index of Sharing Economy last month, Malaysia’s ranking at 69 out of 213 countries surveyed caught many of us by surprise.
Overall, Malaysia scored below average at 4.4 out of a maximum score of 100. It was pointed out – for example – that Malaysia is doing much better than other countries on facilitating e-hailing services.
The only comfort which the government could draw was that in the Asean region, Malaysia ranked closely to Singapore, which was ranked 65th while receiving a score of 5.6, 1.2 points higher than Malaysia. How can Malaysia do better next year?
As a speaker at the Malaysian Digital Economy Corp’s (MDEC) Conference on Sharing Economy that took place this week, I am happy to say that the government is alert on this development, as shown by its invitation to Ideas to speak on the Timbro Index from Malaysian perspective.
What is a sharing economy? What is common across platforms like Airbnb, Grab and icarpool? You have an extra room in your house – book it through Airbnb and start renting the room – competing with hotels without actually incurring all the costs. You have some free time in the evening and a dependable car – without a criminal record – and you start “grabbing”. Even better – start carpooling.
Experts believe that all such platforms share three common features: use of excess capacity, large digital networks and trust between strangers. I certainly believe that the sharing economy models offer efficient solution to productively use excess capacity of our assets and it can only survive on a large digital and dependable network.
However, the trust between strangers is not a peculiar feature of sharing economy. No business has survived without basic trust! (Government businesses are exceptions, of course.)
All these business models, though not yet fully proven, present a significant challenge to both conventional brick-and-mortar businesses and let me say, for the regulators most of whom were trained for brick-and-mortar businesses.
The measure which Timbro – a Swedish think tank – chose was Internet traffic to the Sharing Economy Service Provider’s websites. This allows Timbro to get data for all services and for 213 countries, but it results in an underestimate of the size of typical app-first services. That is where, in my opinion, the secret lies for Malaysia’s relatively low ranking.
There is a positive correlation between sharing economy usage and economic freedom. It is reasonable to expect that countries with high levels of economic freedom will have better information and communication infrastructure simply because they are better able to afford it. However, despite achieving a high rank in economic freedom, Malaysia defies this generalisation.
Where do we go from here and what Malaysia needs to do?
The Timbro report has three broad policy messages for all countries to improve their ranking on the sharing economy – increase regulatory freedom, ensure higher access to high-speed Internet to the population and nurture a higher social trust among the citizens.
The low-hanging fruit here is the Internet speed and higher access. According to the State of Internet Report 2017, Malaysia’s average Internet speed is 8.9 megabits per second (Mbit/s) and the country is ranked 62nd worldwide by the Akamai State of the Internet Report 2017. The report claims that Malaysia’s Internet is one of the slowest and most expensive in the world.
One obvious reason is that the Malaysian Communications and Multimedia Commission sets a low threshold for broadband. It defines broadband as: Any service beyond the scope of existing PSTN/ISDN and 2G cellular networks; with data rates that exceed the normal voice-related speed (56 kbit/s for PSTN and 64 kbit/s for ISDN).
In this scenario, I must applaud the MDEC leadership for organising an important conference which addressed several issues critical for growth while pinning hopes of high growth from unlocking the potential of digital businesses.
In this context, an earlier statement by the Communications and Multimedia Minister Gobind Singh Deo was encouraging – when he urged to open up fibre market and fixed-line broadband for all telcos. The minister rightly believes that by using the existing space, the country can move faster and reduce cost significantly. The main challenge for him: this duct space is now divided by Telekom Malaysia Bhd (TM) and Tenaga Nasional Bhd (TNB)!
As TM and TNB are both monopolies under government control and ownership, it should be fairly easy for the government to announce a policy to open up this space. This will significantly improve the Internet speed by encouraging more players. And hopefully when Timbro and Ideas publish Sharing Economy Index next year, Malaysia will jump several ranks above its current position.
The best feature of the Sharing Economy Conference was start-up pitches, in which scores of budding and inspiring young Malaysian entrepreneurs introduced their business models and asked for funding.
These partners – as MDEC calls them – are supported under a programme called “E-Rezeki”, though this help is non-financial in nature. I met several of them during this conference – Lokallocal, bolehcompare, Lorry.com – to name a few and was inspired by their enthusiasm.
Most of them, as we know, will die in the first three years. Only a few of them will survive and thrive through the Schumpeterian creative destruction. These are, hopefully, Grab, Airbnb and icarpool of tomorrow!
Ali Salman is CEO of Institute for Democracy and Economic Affairs Malaysia.
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