Booming digital economy to raise M’sia’s profile

KUALA LUMPUR: Dubbed the ‘Year of the Internet Economy’, 2017 witnesses many historical accomplishments within the information and communications technology ( ICT) arena as Malaysia boldly strides towards embracing the Fourth Industrial Revolution ( IR 4.0) along with the rest of the world.

The revolution brings changes in connecting with information and solving sophisticated problems while Big Data assists in complex decision-making.

Other notable developments widely discussed and adopted throughout the year included that of artificial intelligence, Internet of Things, blockchain technology, financial technology and automation.

With Digital Free Trade Zone ( DFTZ) being the biggest milestone for Malaysia and set to emerge as the region’s leading logistics hub, many agencies and businesses have stepped up their game to catch up with the growing electronic marketplace demand.

The first phase of DFTZ, comprising the e- Fulfilment Hub, Satellite Services Hub and e- Service Platform in Aeropolis, Sepang, will stimulate growth in e-trade and in turn transform Kuala Lumpur International Airport as the regional gateway.

The DFTZ, launched on Nov 3, 2017, is the first digital platform outside of China with an expectation to create 60,000 jobs and generate US$ 65 billion ( US$ 1 = RM4.08) in trade value by 2025.

Under Malaysia’s National e - C omme r c e St r a t e g i c Roadmap headed by Ministry of International Trade and Industry, the government aims for ecommerce to contribute 20.8 per cent to the gross domestic product (GDP) by 2020 from 18.2 per cent this year.

And the plan is to launch the National Industry 4.0 Policy Framework in the first quarter of 2018.

In 2015, the e- commerce contribution to GDP was 5.9 per cent, or RM68.3 billion, before increasing to 6.1 per cent, or RM74.6 billion, in 2016.

Malaysia Digital Economy Corporation ( MDEC), which is spearheading the government’s initiative in empowering small and medium enterprises (SMEs), the Bottom 40 ( B40) and Middle 40 ( M40) groups, has managed to get 1,972 SMEs to participate in the first phase of DFTZ.

Although the number of SMEs on board has exceeded the initial target of 1,500, the National ICT Association of Malaysia (PIKOM) ecommerce chapter chair, Ganesh Kumar Bangah, said only 15 to 20 per cent of SMEs have embraced digitalisation.

“The SMEs are still left far behind in the digital business world despite the presence of various e-commerce platforms.

“Malaysia has about 700,000 SMEs and we hope that by 2020, 50 per cent of them will make use of the platforms available, which is in line with the government’s aspiration,” he said.

To enhance the digital economy, the government, in the 2018 Budget, allocated RM22.2 billion to SMEs, with RM100 million for eRezeki, eUsahawan and eLadang programmes to enhance the capabilities and income of the B40 and M40 groups.

MDEC chief executive officer, Datuk Yasmin Mahmood, said with those programmes going into their third year, it was estimated that 150,000 people would be trained in 2018.

“This will make a total of 341,745 participating in those programmes that will generate an estimated total income and revenue of RM544 million,” she said.

Meanwhile, Prime Minister Datuk Seri Najib Tun Razak has challenged the SMEs to boost their productivity and share to the economy by at least eight per cent to achieve the target of 41 per cent contribution to the GDP by 2020.

“I want the SMEs to use it (the budget allocation of RM22.2 billion) for expansion, start- ups, exports and automation for the Industrial Revolution 4.0. I don’t want them to be caught in the old trap,” he said.

Najib also announced a matching grant of RM245 million under the Domestic Investment Strategic Fund to upgrade the Smart Manufacturing facilities, besides strengthening Cyberjaya as a one-stop centre for companies and universities to develop prototypes and elevate innovation.

On tax incentives, there would be a capital allowance for ICT equipment claimable for four years beginning the years of assessment 2018 to 2020.

According to a survey conducted by the Department of Statistics Malaysia, the number of Internet users stood at 57 per cent in 2013 and as of 2016, it rose to 76.9 per cent.

Statistics provided by the Malaysian Communication and Multimedia Commission Internet User Survey 2017 based on multiple responses, stated that as of 2016, 85.6 per cent used Internet at home while 84 per cent used Internet on the go (on mobile).

This showed that the Internet adoption through various devices has increased over the years, which directly accelerated the e-commerce sector.

This has also been proven through the #MYCYBERSALE, the biggest annual online sale event which was first held in 2014, recording a gross merchandise value (GMV) of RM67.38 million.

As for this year’s # MYCYBERSALE, the online sale event recorded a GMV of RM311 million, over four times since its inception.

“Previously, people were sceptical when it comes to the security process of the transactions and the quality of the goods.

“Now, with many aspects that have been improved especially in terms of transaction security, it has led to the increase of consumers’ confidence to online purchasing,” he said.

As technology is moving fast and Internet has become a common medium, it is vital to note that cyber threats were also becoming more aggressive as the world moves towards advanced digitalisation.

According to the report by Symantec’s Internet Security Threat Report 2017, annually, over 1.2 million threats were detected and since 2015, the cyber threats have been more hostile.

Among the top cyberattacks were targeted on online banking, automated teller machines and fraudulent interbank transactions.

“On average, 38 per cent of the financial threats were detected from large corporations that were spread via email, with no specific targets,” it said.

Bank Negara Malaysia (BNM) has taken various efforts to enhance the financial security as they introduce more regulatory measures to strengthen the banking system.

Regulations have been made under the administration of Governor Tan Sri Muhammad Ibrahim where among them was to implement a mandatory employment reference check for financial industry employees.

With security aspects in place and Malaysia heading towards a cashless society, the financial institutions have accelerated the technology adoption into their financial system.

Financial technology (fintech) companies, such as AliPay, iPay88, iMoney and JomPay, make it easier for transactions to occur at the fingertips of the consumers.

Adding to the list is GrabPay, a financial application developed by South-East Asia’s leading e-hailing service, Grab, where it can now link its service to stores and restaurants, enhancing the cashless service.

On BNM’s side, it will start abolishing the Instant Transfer fee of 50 sen for transactions of up to RM5,000 starting July 1, 2018 as one of the steps to further encourage e-payments and transfers.

“This is one of the steps taken by BNM to embrace the digital economy and moving towards being a cashless society,” said the governor.

Meanwhile, on blockchain technology, it was reported the Securities Commission (SC) Malaysia is exploring the use of distributed ledger technology for the over-thecounter market.

The pilot project, run through SC’s Alliance for Fintech programme, aims to examine how blockchain could facilitate unlisted market activity and improve transparency.

Computer manufacturing company, IBM, believes that 2018 will be the year blockchain becomes an accepted and appreciated innovation for government, according to its survey.