KUALA LUMPUR: Research firm International Data Corporation (IDC) believes that that 2017 Malaysia Budget recently announced by Prime Minister Datuk Seri Najib Razak was an incremental step in achieving Malaysia’s vision of a fully connected digital economy.
Although the specific financial breakdown of the budget initiatives is not yet available, IDC Malaysia said the direct and indirect impact on the Malaysian ICT sector is apparent.
Data from IDC research shows that total IT spending, which includes infrastructure, software, and services, is expected to grow by 3.3 percent to be worth $21.16 billion in 2017.
The research firm noted that it will be interesting to see if the recent budget initiatives will help Malaysia in achieving its vision of a digital economy given that key budget items are directly related to technology, such as improving the speed of fixed line broadband services, tax relief for purchase of select technology products and services, funding for specific MDEC programs focusing on specific initiatives, and launching a digital free zone.
It likewise mentioned that the Malaysian government has placed a high emphasis on high-speed internet connectivity in previous budgets and continues to make it a priority in the 2017 edition, by mandating fixed line internet services to be increased to a baseline of 20Mbps.
Currently, the average fixed line internet speed in Malaysia is at 6.8 Mbps, up 36 percent compared to the previous year. The proportion of internet users with access speeds greater than 10 Mbps and 4 Mbps has increased to 16 percent and 66 percent.
The government has also recognized the importance of further enabling SMEs in increasing macroeconomic indicators. Small and medium-sized enterprises (SMEs) contribution to the overall GDP for Malaysia was estimated to be 36.3 percent in 2015, whereas it tends to be about 50 percent and above in high-income nations.
The $17.7 million allocated to promote SMEs development, as well as the funding for MDEC programs such as the e-commerce ecosystem and Digital Maker Movement, is a very positive step in this direction.
“The e-commerce ecosystem will continue to evolve in the future with the maturity of services, and the consumption patterns of the citizens. Two key areas worthy of future attention are figuring out how to retain more revenues from e-commerce sector within Malaysia, as well as encouraging global e-commerce platforms to increase investment in the country,” said Vijay Sundararaman, IDC Malaysia Country Manager.
“There is a growing discussion on the creation of e-hubs that can accelerate SMEs output, as well as interconnectivity of these hubs globally to create a worldwide “Mega Trading Platform”, he added.
Meanwhile, the Digital Free Zone (DFZ) concept in the Malaysia 2017 budget neatly ties into this initiative. The concept seeks to enable Malaysia-based small to mid-sized businesses to sell their products additionally through an e-platform. Such an initiative can increase SME sectorcontribution to the overall GDP, while also placing Malaysia in a leadership position in the development of e-hubs globally.
IDC, however, sees some challenges ahead. For instance, 73 percent of SMEs in Malaysia are lagging in adopting ICT in their business operations, which implies a lack of awareness to the benefits of digital platforms in enhancing their business and elevating them from competitors.
