Building The Foundation For Digital Economy Growth

Malaysia announced its Budget 2020 on 11th October 2019, focusing more on the digital economy growth compared to previous budgets in recent years. In the Budget, there are three key initiatives that stand out according to IDC; attracting foreign investment in the digital industry, increasing digital connectivity within the country and bridging the talent gap that exist in Science, Technology, Engineering and Mathematics (STEM) fields.

“It is heartening to know that the Government is taking these concepts seriously, as IDC anticipates that 66% of Malaysia’s GDP will be digitalised by 2022. IT Spending in Malaysia is anticipated to achieve USD82 billion from 2019 to 2022 – a far cry from where Malaysia was 15 years ago where the country could barely muster USD4 billion of spending from both enterprises and consumers (sans communications spending),” says Sudev Bangah, Managing Director for IDC ASEAN.

As Malaysia focusses on growing its Digital Economy, IT spending on 3rd platform technologies (Cloud, Big Data/Analytics, Mobility and Social) along with innovation accelerators such as Cognitive Systems, Internet of Things, Robotics and Next-Gen Security will grow to have an overall positive impact on the economy as their adoption and utilisation will create new business models and revenue streams.

While these discussions have become dominant, it is worthy to note that the intent is stronger than its actions. Only one in two CEOs in Malaysia are under pressure to successfully execute its Digital Transformation (DX) strategy in the face of Industry 4.0, and those who are pressured, are doing so for customer services and operational excellence.

The Budget 2020 had several interesting initiatives; three that caught the eye of IDC were;

  1. The availability of up to RM1 billion worth of customised packaged investment incentives annually over 5 years, as part of the strategic push to attract targeted Fortune 500 companies and global unicorns to Malaysia.

  1. The creation of the necessary infrastructure to construct a Digital Malaysia by implementing the National Ferberisation and Connectivity Plan (NFCP) over the next 5 years which will provide comprehensive coverage of high speed and quality digital connectivity nationwide, including rural areas.

  1. The allocation of RM11 million towards initiatives by the Ministry of Education in collaboration with Ministry of Environment, Science, Technology and Climate Change to inculcate the Science, Technology and Innovation (STI) culture, encouraging more students into the fields of Science, Technology, Engineering and Mathematics

IDC specifically applauds the three initiatives listed above as it directly resonates with the needs of the industry. With the budget allocation for each of this initiative, it will enhance investment in Artificial Intelligence, Smart Cities, Automation and Talent as businesses move towards hyper personalisation and customer centricity, which would ultimately create an innovative and sustainable digital economy.

While most of the initiatives were encouraging, there were also a few that left more challenges than solutions. For example, the announcement to build 14 one-stop Digital Enhancement Centres in all states was rather ambiguous, and the notion that a provision of a “digital stimulus” will encourage and heighten the use of eWallets. What would be interesting to see as a follow up is how the government will address core issues on adoption and utilisation at large.

“While it is encouraging to see the attention and emphasis placed on driving towards the Digital Economy, it does seem that we are only thinking a year at a time – and many of these initiatives will most likely lose momentum going into 2020,” says Sudev Bangah, Managing Director of IDC ASEAN.

He continues “With more than 87% of organisations in Malaysia lamenting the lack of “ready talent” to face the digital economy, and only half of these organisations are pressured to digitally transform – the fundamental issues go beyond funding, incentives or allocations. What it truly boils down to, is the need for re-invigoration, innovation and follow-through to take us to the next level”.

Nonetheless, overall it is an impressive budget given the circumstances with much needed attention and stimulus for talent development and adoption of emerging technologies by the enterprises. IDC predicts that by 2022, 70% of all IT spending will be on 3rd Platform technologies, as over 50% of all enterprises build ‘digital-native’ IT environments to thrive in the digital economy. Government has shown its intent and announced what best they could now it’s upon other stakeholders to up their game and leverage on the initiatives to propel Malaysian economy to reach greater heights with shared prosperity.


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