World Bank: Amend Malaysia’s Competition Act 2010 To Meet Digital Economy Challenges

The World Bank has recommended for Malaysia to amend the Competition Act 2010 to include a mandate to control the anti-competitive effects of mergers and acquisitions.

This is to ensure that the digital competition framework is sufficiently dynamic to meet the challenges of the rapidly evolving digital economy.

In its Malaysia Economic Monitor February 2023 edition titled “Expanding Malaysia’s Digital Frontier”, the World Bank said adding merger control powers in digital market controls would enable authorities to identify and address potential threats pre-merger, rather than trying to respond to anti-competitive outcomes afterwards.

“The emergence of digital platforms can support business models that can incentivise aggressive expansion, vertical integration and the exploitation of network effects.

“These changes mean that traditional competition frameworks may no longer adequately tackle competition risks, so traditional anti-trust tools need to be adapted to the specific features of digital markets,’’ it said.

For consumers, the World Bank said increased access to digital infrastructure can lead to welfare gains, whereas for firms, it can boost competitiveness and lead to job creation.

“Effective competition can help drive higher investment in networks for critical infrastructure and expands coverage that maximises profits,’’ it noted.

The World Bank also suggested that Malaysia ease its foreign entry restrictions to help boost investments in modern, high-quality and affordable telecommunication services.

It believes that the move could improve the quality and speed of its telecommunications services, especially through fixed fibre broadband and in the next generation of communication networks to keep up with advancements in digital technology.

According to the report, the relatively high access costs and slow connection speeds hinder the deeper digitalisation of the Malaysian economy, despite the country having high internet penetration rates compared to regional peers.

Additionally, limited financial resources was the top constraint cited by small and medium enterprises, hampering greater adoption of digital technologies, both before and during the pandemic.

“Limited financial resources were also cited as a key reason for individuals being unbanked in Malaysia, along with the ability to share the account of a family member.

“The Findex 2021 survey shows that lack of funds or challenges in access to finance is a key barrier to having an account in financial institutions,’’ it said.

Other frequently cited reasons were the ability to use the account of a family member (cited by almost 70% of the unbanked adults) and the lack of necessary documentation (21%).

“Unbanked individuals arguably face greater constraints in the usage of digital financial services.

“For instance, most users of mobile money accounts have an associated bank account. Hence, the lack of account ownership could in turn hinder the participation of the unbanked in the digital economy,’’ said World Bank.

Meanwhile, speaking at the launch of the report here on Thursday (Feb 9), Bank Negara Malaysia’s Deputy Governor Datuk Shaik Abdul Rasheed Abdul Ghaffour said Malaysia’s success in the digital future will depend on how the country realises digital development’s potential upsides and manage the emerging risks.

Aside from the rise in online fraud, Malaysia also continues to face inequalities and an uneven pace of digital development across segments due to low-speed broadband and expensive high-speed internet, he said.

“If Malaysia can harness the vast possibilities that the digital revolution has to offer, we can leverage technology to address many issues faced by the society,’’ he said, adding that digitalisation can help manage cost issues; drive innovation such as in agriculture; improve food yield, as well as increase efficiency, among others.

Shaik Abdul Rasheed said Malaysia has seen a strong shift in digital payments over the last decade, noting that digital transactions per capita have more than quadrupled, increasing from 49 to 221 transactions per capita between 2011 and 2021.

“By 2026, we expect this to rise to over 400 transactions. The World Bank’s Global Findex showed that about five million Malaysian made their first digital merchant payment after the Covid-19 pandemic began.

“The rapid growth of digital finance and mobile payment platforms has made financial services much more accessible and usable almost anywhere,’’ he added.

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