Digital economy: Malaysia as a dynamic technology hub

Malaysia has emerged as a dynamic hub for technology and innovation, boasting a vibrant start-up ecosystem and an inspiring entrepreneurial spirit. Malaysia is rapidly becoming a regional data centre hub and investment destination as a result of increased spending on cable landing stations, underwater cables, 5G, and fibre connections.

With 113 megawatts (MW) of data centre utilisation in 2022, Malaysia surpassed Indonesia and Thailand as the most popular Southeast Asian data centre investment site.

Infinaxis forecasts a 7% growth rate for Malaysia's data centre industry between 2022 and 2027, reaching a worth of approximately US$2 billion. This creates job opportunities and spillover economic effects. ICT employment growth has surpassed other industries, accounting for 44% of new job creation in Malaysia in 2021.

Aside from this, the Persatuan Industri Komputer dan Multimedia Malaysia (Pikom) forecasts that Malaysia's digital economy will contribute 24.4% to the nation’s Gross Domestic Product (GDP) this year and 25.5% next year. The digital sector generated 23.2% and 23.4% of Malaysia's GDP in 2021 and 2022 respectively, and estimates show considerable growth. Digital economy endurance despite global economic turbulence has established its position as a pillar of Malaysia's economy.

Pikom further anticipates a double-digit growth of 13.9% in digital talent advertising salaries this year and a 4.1% growth next year. Increased competition for talent, the return of skilled professionals post-Covid-19, the weakening ringgit, accelerated private sector digital transformation, and forward-thinking government policies drove compensation rise.

Nonetheless, when comparing Malaysia's upper decile of income distribution to the same section in 20 other countries, Malaysia ranks 10th. In terms of average wage rates, Malaysia ranks 17th. This may explain why our country loses digital talent. Therefore, it becomes imperative to prioritise the retention of our nation's digital talents.

Artificial intelligence technology, also known as generative AI, has the potential to unlock Malaysia's economic capacity worth up to US$113.4 billion (RM536.1 billion) and create well-paying positions. CEO salaries in 22 industries varied from RM30,000 to RM65,000. IT hardware, financial services, and banking are the highest-paying industries.

Digital technology firms contribute to more than half of the global economy. In ten years, digital economic value is estimated to account for 70% of new value according to the World Economic Forum (WEF). Malaysia must provide an ecosystem and qualified science, technology, engineering, and mathematics (STEM) workforce to prepare for jobs in the digital economy and digital technologies. According to a WEF analysis, digital technology skills are required for 8 out of every 10 new occupations, and technical positions have nearly tripled.

Positive initiatives such as #Mydigitalmaker drive the Madani Economy framework.

#Mydigitalmaker is a Malaysian Digital Economy Corporation (MDEC) initiative. Since 2016, over 2.5 million children have benefited from it. Through the initiative, students study coding, drone technology, AI, game development, and other skills. It promotes awareness and engagement to transform the unhealthy lifestyles of Malaysian adolescents. In addition, Ecole 42 Kuala Lumpur (42KL), a project-based learning education approach, prepares students for a future in software engineering. Its goal is to cultivate tech talent for the digital economy.

Malaysia has developed a comprehensive strategic plan to strengthen communication infrastructure, cybersecurity, and digital economic growth in preparation for a Golden Digital Decade. Increasing financial instruments, matching grants, funding support, capability building, and mentoring are the strategies to increase digital adoption. Budget 2024 allocated RM2.84 billion to the Communications Ministry to support the digital economy and creative industries. It includes SME and micro business digitisation grants of RM100 million, SME automation and digitalisation loans of RM900 million, CyberSecurity Malaysia of RM60 million, Shop Malaysia Online of RM40 million, and so on.

MDEC has funded 372 projects and granted RM15.8 million to Digital Content Creators Challenge (DC3) winners over the years. DC3 is a competition-based platform that supports content creators in creating world-class digital content and intellectual property. The scheme is open to digital content development companies in four categories: digital comics, animation, interactive media, and digital games. This scheme fosters a thriving creator environment, which benefits Malaysia's creative industry.

Recently, Malaysia and China launched the Belt and Road Overseas Venture Incubator (BROVI) to boost economic cooperation. China and Malaysia have similar social and economic growth policies that emphasise technological innovation. Both concepts of Malaysia Madani and the Belt and Road Initiative (BRI) share common goals of achieving comprehensive and sustainable development goals for all people, regardless of race, social class or religion, which provides a clear direction for the growth of bilateral relations. Both nations have achieved remarkable outcomes, including transformative projects like the East Coast Rail Link (ECRL), the “Two Countries, Twin Parks” initiative, and Alibaba’s Digital Free Trade Zone (DFTZ), which have yielded substantial economic and societal benefits.

Last year, bilateral trade between China and Malaysia reached a record-breaking $203.6 billion, while Chinese investments in Malaysia comprised $12.5 billion, representing 33.9% of the country's total foreign direct investment. Chinese high-tech firms are increasing their investments in Malaysia, and high-tech cooperation is expanding. Geely Automobile is increasing its investment to transform Tanjung Malim into a regional auto city. China is willing to jointly carry out a series of initiatives and embark on substantive progress towards achieving a China-Malaysia shared future vision.

Next year will also mark the 50th anniversary of the establishment of diplomatic relations between China and Malaysia. China and Malaysia have a long history of affinity and are reliable partners who communicate openly. China will continue to collaborate with Malaysia to strengthen research and development and high-tech application cooperation. For example, the recent establishment of a Malaysia-China Belt and Road Institute (MCBRI) aims to promote academic collaboration between the two countries.

Malaysia and China have a digital economy and communications advantages that complement one another. We expect more Chinese companies to invest in Malaysia's digital economy and to increase collaboration on digital communications to accelerate technological transformation and improve the quality of life for both populations.

Dr. Wong Mei Foong is an Associate Professor at Tunku Abdul Rahman University of Management and Technology (TAR UMT). The views expressed here are entirely the writer’s own.

The SEARCH Scholar Series is a social responsibility programme jointly organised by the Southeast Asia Research Centre for Humanities (SEARCH) and Tunku Abdul Rahman University of Management and Technology (TAR UMT), in conjunction with the 10-year anniversary of the Belt and Road Initiative.