Digital adoption among businesses

> Only 18% of local firms have some form of web presence though many have access to broadband services, says World Bank country director

KUALA LUMPUR: Digital adoption is relatively low for businesses, even though the country as a whole has a high level of digital adoption, with only a small share of businesses pursuing deep digital adoption and small firms falling especially far behind, on the backdrop of high prices and low coverage for broadband.

Challenges in the digital economy includes big firms that dominate e-commerce, leaving SMEs with a small share of the overall rewards. Moreover, lack of competition in the fixed broadband market has resulted in services being slower and more expensive.

World Bank Group country director for Brunei, Malaysia, Philippines and Thailand Mara Warwick said Malaysia’s business community continues to lag behind citizens and the government, in adopting and using digital services.

“Around 46% of Malaysian business firms have access to broadband services but only 18% of them have some form of web presence, well below averages for upper-middle income and high-income countries around the world. Malaysian digital entrepreneurs still lack the right mix of skills and access to capital that they need to thrive,” she said at the Public Policy in a Digital World Conference yesterday.

According to a new World Bank report “Malaysia’s Digital Economy: A New Driver of Development” launched yesterday, Malaysia has embraced entrepreneurship but underperforms in key foundational skills, and early-stage firms face challenges accessing capital, with intense regional competition to provide the best business environment and lagging performance with respect to open data and the use of digital payment.

Digital entrepreneurship in Malaysia is constrained by shortages of human and financial capital.

The report said Malaysia’s education system has not been successful in preparing adequate numbers of graduates for its high-tech export industries, let alone the increasing demands of the digital economy. Brain drain is a major contributor to the shortage of talent.

It is relatively easy for startups in Malaysia to access financing during the pre-seed and seed stages due to the robust government mandate to support entrepreneurship, but the shortage of financing becomes acute during firms’ early growth stage, when venture capital firms would normally become predominant. New initiatives that provide alternative forms of financing are on the rise, but supply still falls short of demand.

The report also said almost all the private sector venture capital firms operating in Malaysia have a regional or global scope, which puts Malaysia at a disadvantage to Singapore or other markets that are friendlier to investors.