Written By Camilia Rezali for @Halal Magazine
When Datuk Dr Rais Hussin Mohamed Ariff was offered the chairmanship of Malaysia Digital Economy Corporation (MDEC), it took him a while to decide.
It was, after all, also the first time he would be receiving taxpayers funds as his monthly allowance. But it reminded him of the responsibility to lead MDEC was also a trust (amanah) placed upon him from God.
For Rais, the job is something right up his street. He has extensive experience in IT and communications, including co-authoring a book on AI, blockchain and fintech. And he is passionate about promoting Industry 4.0.
His enthusiasm for the job was evident. Just a day after his appointment on June 15, he issued a statement calling for the concept of Malaysia 5.0 as a new narrative for the country.
He felt it would position Malaysia as an innovation economy that could compete in a disruptive technology world and serve as a springboard into the Asean region, acting as a bridge between Asia, Middle East and Africa and interconnect with the 1.8 billion Islamic population worldwide.
He also wants to position Malaysia as an early-stage Islamic fintech start-up hub to attract local and foreign start-ups to anchor regional operations in the country.
In this wide-ranging interview with @Halal, Rais touches on several key issues, including MDEC’s role during the current economic challenges, e-commerce, the digital economy, the fintech ecosystem, Islamic finance and skills training.
Congratulations on your appointment as chairman. What were your first thoughts when offered this post?
Well, to be honest, it took a while for me before I decided to accept the offer. Thinking that for the first time, I will be receiving rakyat’s money as my monthly allowance places a heavy weight on my shoulder. It reminded me this responsibility is an “amanah” from Allah SWT (God) for me to lead the organisation in the best manner.
Nonetheless, I am thankful and honoured for this opportunity and trust to lead an organisation which has been driving an initiative that I have been pushing for and have passion for, which is the Industry 4.0. This dedication, thus, has resulted in the publication of a book entitled 4IR: Reinventing the Nation which I co-authored with one of the world’s leading blockchain experts, Dinis Guarda.
What I have in mind and hope for is for MDEC to move to the next level in playing a leading role in driving our economy and Malaysians in the transition to Malaysia 5.0 as the Covid-19 pandemic has changed the way we live our lives.
Whereas our Industry 4.0 still seems to be technology-driven, Malaysia 5.0 will be society-driven where you’ll see a lot of convergence in getting the virtual space via digitalisation going back to and fro towards the physical space. As a result, we will see a societal transformation. It makes society the master of technology rather than becoming a slave of technology.
You have vast experience in IT and communications, including co-authoring the book with DinisGuarda. How is this useful in leading MDEC?
As I have expressed before, my passion and dedication to promoting Industry 4.0 shows how driven I am to ensure the progress of Malaysia and Malaysians in the process of embracing digital transformation.
I envision Malaysia 5.0 as the new narrative for our country. With that, one of my proposals is to have a designated hub that interconnects 4IR companies in Malaysia to the rest of the world, with strong regulatory and strategic oversight and direction from MDEC, aligned with ongoing and newly-announced stimulus packages such as Prihatin and Penjana.
I also hope the existing initiatives pursued by MDEC would be monitored proactively and be of a transparent manner to ensure we via our platforms reach those who are in need. It is the right time to start and progress. If such vision and mission are missing from our National Strategy, Malaysia would be left behind and excluded from digital ecosystems and workforces.
Given the current economic challenges due to the Covid-19 pandemic, MDEC’s role and function have become more crucial. Your comments, please.
Yes, I am very well aware of this fact. Since the pandemic and then the MCO (Movement Control Order), our society has mostly adapted to the new norm by detaching ourselves from the physical infrastructure and relying on digital-based support to avoid frequent physical contact. This current reality has provided more opportunities and responsibilities for MDEC to be more engaged with society. I am quite impressed with what MDEC has done so far in terms of promoting digital initiatives amid the crisis known as #DigitalvsCovid Movement. There are e-learning platforms for students and trained professionals to access from home as educational institutions remain closed, avenues for the entrepreneurs and SMEs to register for digital jobs such as eRezeki, and a platform for businesses to shift online through eUsahawan and Go-eCommerce.
It requires constant monitoring by MDEC by conducting impact assessments to ensure these measures are the right ones and are effective. Lastly, frequent updates to ensure the relevance of each initiative to the current situation is also essential.
How significant is the contribution of e-commerce to the digital economy?
I will say without hesitation that e-commerce is very critical to the growth of the digital economy in Malaysia. In 2017, it contributed RM85.8 billion, which translates to 6.3 per cent of the entire digital economy. E-commerce recorded a 14.3 per cent year-on-year (y-o-y) growth from 2016 to 2017. From the figures, e-commerce is a crucial driver of the digital economy. With Covid-19 disrupting the supply chain as well as affecting consumer behaviour and habits, e-commerce is not only set to grow further but serve as catalyst and impetus for the digitalisation of SMEs.
MDEC is expecting a 20 per cent growth in e-commerce contribution to the digital economy this year despite the MCO. The anticipated contribution to GDP could go up to as high as RM170 billion for 2020.We forecast the projected growth could be achieved through the active intervention of various ecosystem partners via ongoing initiatives.
How can the RM500 million SME Technology Transformation Fund and RM100million Smart Automation Grant initiatives be streamlined to assist SMEs?
The concern now is the low take-up of the Fund and Grant. I don’t see bureaucracy as an issue here. Let me give you an example. On paper, the SME Digitalisation Matching Grants worth RM500 million over five years will benefit 100,000 SMEs. But we are working hard with relevant agencies to identify ways to track and measure in making sure the over 907,065 SMEs in Malaysia benefit from these incentives.
What matters is what I put down as the 3Es – education, exposure and engineering. They are inter-related. SMEs need to be educated, exposed and have their business models engineered to be digitalised. All three require sustainable and robust support from agencies like MDEC.
MDEC’s SME digitalisation initiatives have to date onboard 230 Technology Solution Providers (TSP) with 595 digital and technology solutions to support over 200 SMEs.
Meanwhile, under MDEC’s 100 Go Digital programme, we have engaged more than 100,000 SMEs nationwide with the support of 12 industry partners.
Islamic finance and the digital economy are key economic growth areas. How will MDEC help drive this growth?
The Shared Prosperity Vision (SPV) 2030 has identified Islamic finance and digital economy as Key Economic Growth Activities (KEGA). If I may quote from MDEC Islamic Fintech Report 2020: “This is a strategic move leveraging on Malaysia’s well-established global leadership in Islamic finance. It can be said to be a culmination of decades-long strong top-down approach and clear vision while taking advantage of the digital revolution in recognition of the transformative value the digital economy could play in the country’s overall economic growth”.(Note: please see sidebar).
How do you rate Malaysia’s Fintech ecosystem compared to other countries?
Malaysia is not an economy to be jealous of since its annual growth has averaged under 5 per cent for over the past five years. But the fintech adoption in the country and the interest from the local government to pursue this profitable industry might be a game-changer for Malaysia.With a population of 32.6 million and Internet penetration at a whopping 86 per cent, the country is ranked 1st in Southeast Asia when it comes to mobile penetration.
This is not surprising. The potential for innovation within fintech enhances financial services like cross-border remittance, fund management, insurance or captive insurance as well as forex and online payment processing, making it easier and faster to perform many financial tasks.
As of 2019, there are 196 key fintech players in Malaysia, and according to the Fintech Malaysia Report 2019, 38 per cent of them are in e-wallet and digital payment.Despite being new in Malaysia, the growth rate of fintech is phenomenal and is rapidly becoming a central part of the country’s financial sector, with considerable promise for expansion.
How can Malaysia, as a global leader in Islamic Finance, drive the Islamic digital economy and what is the role of MDEC in this regard?
With over 1.7 billion Muslims around the world, an influential Islamic digital economy provides a unique and competitive advantage for Malaysia to lead the regional and global Islamic digital marketplace. This possibility is heightened with the expected growth of the global Islamic economy to US$3.0 trillion by 2021. With most services in the B2C space, addressing Muslim consumer needs and pain points is critical in driving Digital Islamic Services opportunities, adoption and growth.
How do you get more industry stakeholders across different sectors to enhance the growth of Islamic finance in Malaysia?
Our Islamic finance system has been growing tremendously for the past few years, from retail to commercial Islamic banking and finance, to general and life takaful insurance and to sectors of the Islamic capital market. So, it is not difficult to continue encouraging it if the approach for Islamic finance is appropriate.
The related authorities should improve shariah governance through research and development. Besides, the infrastructure to support further development of the Islamic financial industry in addressing the institutional capacity for the national and international levels should be strengthened to avoid any complications and people’s reluctance to take part in Islamic finance.
MDEC is providing skills training designed to bring in additional income avenues for Malaysians. How has the response been?
The response has been immensely great because the skills training offered by MDEC has helped many people generate extra income through various opportunities. This is through MDEC’s collaboration with a lot of companies to help individuals, entrepreneurs and businesses mainly through digital technologies.
For example, the new skills training to overcome the challenges of Covid-19 with Digital Technology has been well-received by many individuals and businesses as the training programmes provide reliable solutions to be leveraged on such as digital income and e-learning.
Last year, participants of MDEC’s GLOW (Global Online Workforce) programme generated an income of RM70 million by performing services mainly to international clients. What are your expectations for 2020?
Although this year is challenging due to the rise of Covid-19 pandemic, there is nothing to worry about the performance of MDEC’s GLOW initiative. Instead, this comes in as an opportunity for Malaysians to be part of the online global workforce since most of them might have faced an unfortunate situation and lost their jobs during this trying time.
Moreover, with the RM25 million government allocation to MDEC in the Penjana package, this can be utilised to drive incomes further through GLOW this year. However, I don’t have a specific number for it.
How do you see the growth of digital payments and wallets in Malaysia?
The emergence of e-commerce and technology-led initiatives, mainly since the pandemic are the key factors which are driving the digital payment market trends.
In recent years, Samsung Pay, Google, Alipay and Apple have emerged as the top players in the digital payment market. But Malaysia is not too far behind as we have Grabpay, TnGEwallet, and Boost to drive the local digital payment market. These players have undertaken massive investments in advanced technologies and have expanded their businesses in digital payment services.
With the current situation, using digital payments can help you avoid physical touch, avoid wasting time from the long queues at the ATMs and some convenience stores, and of course eliminate the hassle of carrying cash.
With the cashless payment adaptation, experts claim it would add more than three percentage points to the GDP. It is due to the increasing velocity of value transfers and the growing level of spending as making expenses is now less tangible. To add on, a data research firm Statista has also projected digital payments in Malaysia to jump 19.1% to US$11,904 million (RM50,949 million) in 2020.
It shows how valuable and “current” digital economy is now, and it is the way to move forward for Malaysia. Covid-19 has accelerated the migration of society from physical infrastructures into digital infrastructures, turning into a cashless society.
Nonetheless, the built-in of excellent digital infrastructures like stable mobile applications or online banking system is vital as its absence can be a hindrance for society to adapt to the cashless payment.
When do you expect the Shop Malaysia Online campaign to take off?
I can see that it is progressing. Some of the online platforms have recently started the initiative announced in Penjana. Lazada Malaysia has teamed up with TnG digital to launch an RM6 million programme named #KitaBantuKita to accelerate spending among Malaysian consumers on local products. I am positive that this campaign will benefit our local businesses and help them to recover from this crisis.