POV from Silicon Valley: Malayan Trading History’s Influence on the Rise of the Malaysian Digital Economy

Today, as it has been for centuries past, the Straits of Melaka is one of the world’s most important trade routes. Malaysia’s prime location on the commercial artery that connects the Pacific and Indian Oceans and the major economic centers of Asia has been a major factor not only in the growth of the Malaysian economy but also in the development of trading and commerce as a key dimension of Malaysian rich history and culture.

The United Nations Conference on Trade and Development (UNCTAD) estimates that roughly 80 percent of global trade by volume is enabled by shipping. A relatively narrow channel, the Straits of Melaka is relied upon by a third of total global shipping. In dollar terms, an estimated US$5.3 trillion worth of goods transits through the South China Sea annually.

As early as the first few centuries A.D., trade on the Straits of Melaka helped to create economic and cultural links among China, India, and the Middle East.  Europeans also plied the Straits during this time.  By the middle ages, it had become the hub for trade and commerce that it is today, with ships using points along the coast of the Malayan Peninsula to dock and conduct commerce.  It is said that the Chinese, Indians, Omanis, Yemenis, Persians, and Africans exchanged goods and established trade agreements with traders from Sumatra, Java, Bali, and Canton. Silk, brocades, porcelain, and perfumes from the Middle Kingdom were traded with hardwoods, carvings, precious stones, cotton, sugar, livestock and even weapons from India. From the interior of Malaya came tin, camphor, ebony, and gold. Surrounding traders brought spices, perfume, rice, gold, black pepper and sandalwood.

The regional prosperity that came from being the hub of activity for traders of all ilk (and silk) led to a self-reinforcing loop that perpetuated an affinity for the virtues of commerce. The strategic location of the Straits at the heart of the Eastern trade routes, coupled with favourable seasonal winds, were critical natural factors that encapsulated the trade-hub potential of Penang and Melaka. But it still took the inspired decision of the then administrators to build the infrastructure, establish the network and train the local population to turn Penang and Melaka into major entrepots of their time.

While the world and its modes of commerce and trade have evolved greatly over the past several hundred years, the Straits of Melaka has sustained its position as a preeminent trade route.  Today, Malaysia is the gateway to the 630 million consumers of the ASEAN region – collectively the world’s sixth largest economy at over US$2.4 trillion annually.

Malaysians’ commercial sensibility is a key underlying factor in the growth of Malaysia’s digital economy. Entrepreneurship and understanding, producing and trading the goods markets want are deeply ingrained among Malaysians. As Datuk Yasmin observed, “we are traders – locally, nationally, and internationally, giving the various programs undertaken by MDEC and others access to a deep talent pool that is readily adapting to the possibilities and opportunities of digital.”

This dimension of our culture also affords Malaysia the ability to have a highly inclusive agenda for building its digital economy, one that touches a large proportion of our people, extending their outlook and what they already know into exciting new digital endeavors. Datuk Yasmin outlined the scale at which this was being undertaken: “on a national level, we are doing things to expose our entrepreneurially-inclined population to digital entrepreneurship.  Digital marketing and digital e-commerce instruction is now a formal curriculum in our vocational schools.  We will have over 400,000 vocational school graduates each year who have had in-depth exposure to digital marketing and e-commerce.” This program is now being expanded to the university level.

After only two years, the transformative impact has been phenomenal.  We already see cases of successful young e-commerce entrepreneurs going from renting a small house to being to buy a house for their family, and then having sufficient demand for their product to warrant moving production from their backyard into a brand-new factory. International expansion of the markets where these small and medium-sized enterprises (SME’s) do business is the next step, and one, given our trading culture and heritage, that is coming naturally, and now more easily, leveraging the partnership between Alibaba and the Malaysian government and the capabilities of Malaysia’s recently launched Digital Free Trade Zone.

Datuk Dan E Khoo is the President of MDEC Americas Inc; a Silicon Valley organization established to drive the global expansion of Malaysia’s digital economy.

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