Building Malaysian economy based on digital competency


New order: AI will rearrange the world’s industries, resulting in a new definition of jobs and the emergence of hybrid technologies.

THE Pakatan Harapan government has been in place for almost a year.

While it is assuring to see that the “New Malaysia” under Tun Dr Mahathir Mohamad’s leadership has shown great resolve in charting a new course, let me be blunt: I have not seen any substantial effort in leading our country towards the digital economy.

What is the digital economy? What’s the big fuss about it? What are the key ingredients? Why must Malaysia act today and not give political excuses? How do we ensure that our future generations do not become outcasts of the world?

Laying it out

During the 20th century, the prosperity of countries around the world was highly correlated to their ability to evolve from an agricultural economy to various levels of industrialisation.

Industrialisation was the inevitable blueprint for building a nation, so many policy makers channelled their national development goals toward it. Malaysia was on the right track with our very own industrialisation initiatives such as the Look East Policy, the national car initiative, and so on.

Thus, the more advanced economies were those that had attained higher levels of industrialisation, and agricultural-based economies were at a disadvantage.

The unwritten rules of international engagement favoured developed nations, under the pretext of celebrating a liberal and globalised economy.

We’re now facing the Fourth Industrial Revolution (IR4.0), where the speed, sophistication and profound impact of digital technologies are integrated into various conventional industries at a massive scale that has never been seen before in the history of humanity.

This, to me, is the single most significant turning point in the history of mankind. It has opened up a contemporary Pandora’s box. Our civilisation can make a quantum leap from the world of science fiction to one based on science fact.

According to Klause Schwab, the chairman of World Economic Forum, IR4.0 is characterised by a much more ubiquitous and mobile Internet (as seen in China); by smaller and more powerful sensors (that collect all the digital data from every user of any computer device) that are becoming cheaper and cheaper; and finally with the boom in artificial intelligence and machine learning.

(Think about why the US government is so hostile to China – it is because China is leading the world in the development of AI.)

Having lived and worked in China for the past 23 years, I believe IR4.0 is happening in China now, and it will be the incubator for the world’s science and technology development.

And I am concerned that Malaysia will be left behind if we continue to let our little politics overwhelm us.

Defining digital

So what exactly is the digital economy? I like the definition provided by consulting firm Deloitte, as this reflects what I have witnessed in China: The digital economy is the economic activity that results from billions of everyday online connections among people, businesses, devices, data, and processes.

The backbone of the digital economy is hyper-connectivity, or the growing interconnectedness of people, organisations, and machines that results from the Internet, mobile technology and the Internet of Things (IoT).

When German Chancellor Angela Merkel retained her office earlier this year, during her phone conversation with China President Xi Jinping, she is reported to have told him how she wish she had WeChat Pay in Germany as this was crucial infrastructure to further lubricate economic activity.

The digital economy is taking shape and undermining conventional notions about how businesses are structured; how firms interact; and how consumers obtain services, information, and goods.

This part is the most crucial bit, as it explains the advanced level of progress you can actually witness in some societies.

For example, in China, when a car drives into a basement of a shopping mall, there is no need for the driver to wind down the window to grab a parking ticket.

The visual recognition system of the parking lot automatically scans the car’s number plate.

(In our new Tencent office, we have taken it a step further, by having a plan that directs the automobile to an empty parking space.)

When the car leaves the parking lot, the system would automatically deduct the parking fees from WeChat Pay.

There are many other such examples.

In simple terms, the digital economy refers to the components of the economy that are transformed or empowered by digitalisation.

Diving deeper

But what do we mean by “digitalisation”?

To me, digitalisation is the single most powerful economic catalyst, resulting from billions of online connections between people, communities, businesses, devices, work processes, etc.

It is the fundamental process where data is generated, collected, analysed and eventually served as the single most valuable asset in the contemporary world.

It is said that data today is the single most valuable currency.

What would the impact of a digital economy be to the gross domestic product (GDP) of a nation?

When I was at an International Monetary Fund conference last year, central bankers and economists from 180 countries gathered to discuss this.

It was commonly accepted that the development of a nation has a strong correlation to how much a country has invested in building a digital ecosystem and infrastructure.

For example, the United Kingdom, Germany, China, South Korea and Japan are seen as leading the world in their level of digitalisation. And these countries have also attained a higher rank in the global GDP. (Strangely, the United States does not rank so high in digitalising its economy.)

Today, 32% of China’s GDP is attributed to the digital economy.

Here is the key: In China’s experience, there are two components of the digital economy that are being counted in its GDP. The first component is the direct contribution from the conventional ICT industry. This is not surprising.

The big deal is the second component, which results from the empowerment, via digitalisation, of conventional industries such as agricultural, pharmaceutical, transportation, services, etc.

This part contributed almost 75% of the digital economy components. This is the part where the rest of the world is not learning enough from China.

Also, global communities are already meeting to deliberate on the impact of artificial intelligence (AI) on our common future.

Recently, I was invited by Unesco as a keynote panellist to discuss the sustainability of AI going forward.

AI will rearrange the world’s industries, resulting in a new definition of jobs and the emergence of hybrid technologies. It would this redefine what education will be.

In short, we are now in the dawn of a digital civilisation.

The building blocks of the digital economy

Long ago, Dr Mahathir and his leadership team during his previous tenure as premier, had the vision and saw this coming.

In the mid to late 1990s, we had aspirations like the Multimedia Super Corridor (MSC), the Information Superhighway and Vision 2020.

Sadly, visionary ideas like these are now no longer seen as the priority, at least not from the perspective of the public.

Just scan through the key issues being discussed in the Parliament as well as media headlines over the past 180 days. We have become a closeted nation with a populist agenda setting the direction for our policy makers.

People elected to public office are supposed to be leading our future – instead, they are more concerned with keeping their positions, rather than in doing what’s right for our beloved nation and her people. There have been too many U-turns on public policies.

(And please, those of you from Barisan Nasional, you do not get to play the righteous role now and capitalise on this statement. We wouldn’t be where we are today if it hadn’t been for 60 years of your mismanagement).

Having said that, credit should be given where it is due. In retrospect, the MSC envisioned by Dr Mahathir was way ahead of time.

But we must also reflect upon ourselves, on what we missed in the past two decades in failing to develop and build our nation into one that should have been ready for this digital economy.

In my opinion, the digital economy is just the dawning stage of what I would call the digital civilisation. The world will soon move into an era where the free flow of talents, culture and data would determine the new definition of global dominance.

If we do not act quickly, we will lose our last chance to retain the best Malaysian-born talents, not to mention to having the ability to attract world-class talents to join us in building our industries.

Oxford University published a research report noting that by the year 2025, more than half of the jobs in the United States will potentially be replaced by machines. Think about what will happen to Malaysia in competing globally.

And AI is not new or mere tech jargon; it has been around for more than half a century. It will sweep the world into a brand new order soon.

And very sadly, I read what DAP stalwart Lim Kit Siang said during the recent 5th International Biotechnology Competition and Exhibition 2019, that an international study has concluded that Malaysia is not yet ready for AI and needs to substantially improve its preparedness.

Our next-door neighbour (Singapore) is way ahead.

Given my personal involvement, passionate observation and keen participation as a keynote speaker in all sorts of senior government-level forums over the past five years here, I am not entirely surprised.

All the ideas and dialogues have resulted in no concrete action, not to mention the lack of policies to move the needle.

I have been a keynote speaker for numerous high-profile events, attended by the previous premier and various senior ministers, such as the Malaysian Digital Economy Conference, the Malaysian Higher Education Conference for IR 4.0, the Cashless Society Conference, the FinTech for Islamic Finance event organised by Bank Negara Malaysia, just to name a few.

Lots of ideas were given and shared, but sadly, few were implemented or perhaps even noted.

So here is my stark warning:

We can continue to pretend that all government policies are made in the interest of the rakyat. But no matter how united we may be, if we do not make any progress as a nation, there will be nothing more to fight for within this nation. We shouldn’t be looking at how to redistribute wealth between different people within Malaysia.

Instead, we should be looking outside at the greater waves of globalisation and technology innovation. Progress in the future will be determined by one thing: How ready we are as a nation to embrace the building blocks of a digital economy.Not some affirmative action, to build or not to build a railway, to have a flying car, to have a third national car, or to remain or withdraw from some Roman treaty.

So please, Putrajaya, here are some of the key requirements for Malaysia to move towards a digital economy:

1) A conducive digital entrepreneurship ecosystema. We must aim to have a few large Malaysian platform companies. China is digitalised because of hundreds of digital entrepreneurs that now rival the world.

b. During a recent meeting at Palace Elysee, a representative from California mentioned that the GDP of that US state last quarter was larger than that of the United Kingdom, due to the contribution of the start-up ecosystem.

2) A high level of digital adoption culture leading to an online lifestyle societya. The government must help to inculcate a digital society by firstly making available immediately a world-class broadband infrastructure.

b. Studies must be done to determine which parts of the online lifestyle that might be suitable for the Malaysian culture and socio-economic backdrop. Without active “super communities” of digital citizens, there will be no basis for a digital economy.

c. Having companies such as Tencent and Alibaba invest heavily would not move the needle unless the people in this country are geared and cultivated for digital adoption.

3) Build a smart city infrastructurea.Start small with cities that are more ready in terms of current infrastructure.

b.Encourage the Kuala Lumpur City Council to study China’s smart city concept. The city of Brisbane in Australia, where I am honorary ambassador, is even more advanced. The smart city concept should be the single biggest KPI (key performance indicator) for all city mayors. If there are no digital services from the public sector, a city is not ready for tomorrow.

4) Encourage investment into the digitalisation of the private sectora. The digital economy is a “Capitalism 2.0” concept where companies and communities have to take a more proactive role to resolve the challenges of their societies.

b. How do we achieve this?Bolder policies to attract better investments into the ICT sector to help jumpstart our digital economy? What incentives can be provided?

5) A liberal and civil regulation not to stifle innovation

a. There should be less government in business. French President Emmanuel Macron recently told me that in order for France to be a “start-up nation”, the government must firstly become a “startup government”.

b. Less politics in business, please. Need I say more?

6) Revamp the education system and start emphasising AIa. It is crucial to produce enough talents who know how to ride the AI tiger. There is a window, because everyone is really just learning the fundamentals of AI.

b. The potential of AI lies in the area of finding the right applications within the current playing fields, such as transportation, medicine, pharmaceutics, education, biotechnology, etc. So, AI is not a single subject by itself, but it would involve learning new ways to learn, involving multiple disciplines of education.

c. Government must also pay attention to retraining our current workforce to better equip themselves for the IR4.0 future.

In closing

The ideas I have shared may sound pretty simplistic, but the effort needed to move the needle significantly under each category will take years, and it might even go beyond a few terms of governments.

The single largest obstacle we face would be a political one. But this mission has to be treated beyond any political agenda as key to the competitiveness of the nation and the welfare of our people. Our future generations depend on it.

Right now, Malaysia is in need of statesmanship that is willing to look beyond the political divide and do what is right for our country. We are very close to missing the boat entirely. We will certainly do so if nothing changes.

Malaysian-born S.Y. Lau is president of Online Media Business and senior executive vice-president at Tencent Holdings Ltd.

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