National Budget 2020: 12 Reasons Why Malaysia is the Preferred Digital Investment Location

October 2019 has proved to be a most exhilarating month for us in MDEC!

Firstly, the National Budget 2020 was tabled at the Parliament on Oct 11^th, and secondly, the landmark 30^th MSC Implementation Council Meeting (ICM) was held and chaired again for the first time in 16 years by the PM of Malaysia, Tun Mahathir Mohamad on Oct 16^th.

Both momentous occasions delivered a key message from the government: Digital Economy is firmly at the forefront of the nation’s Shared Prosperity Vision 2030 (SPV2030), which is a new development blueprint to turbocharge Malaysia’s economic development.

Making Malaysia the preferred destination for investment

I wish to highlight twelve key initiatives announced in the Budget 2020 that are vital in making Malaysia the preferred investment destination for digital technology and services.

Let’s start with the incentives to attract investment:

1. The establishment of National Committee on Investment (NCI), jointly chaired by Ministry of Finance (MoF) and Ministry of International Trade and Industry (MITI), to expedite the process in approving foreign and domestic direct investments
2. To attract Fortune 500 companies and global unicorns, up to RM 1 billion (USD250 million) will be made available in customized packaged investment incentives annually over 5 years
3. Tax incentives to further promote high value-added activities in Electric & Electronics sector to transition into 5G digital economy and Industry 4.0

Going Seriously Digital in Infrastructure and Applications

With the National Fiberisation and Connectivity Plan (NFCP) as the foundation, the government has also announced major steps to propel Malaysia into the world of 5G, paving the way to higher digital adoption and fueling a robust domestic demand for digitalisation:

• Matching grant mechanism to provide comprehensive coverage of high speed and quality digital connectivity nationwide, adopting public-private partnership approach, involving total investment of RM21.6 billion (USD5.4 billion).
• 5G Ecosystem Development Grant amounting to RM50 million (USD12.5 million) to seed technological developments by Malaysian companies to ride the global 5G wave.
• A contestable matching grant fund totaling RM25 million (USD6.25 million) to spur more pilot projects on digital applications such as drone delivery, autonomous vehicles, blockchain technology, other products and services that leverage on Malaysia’s investments in fiber optics and 5G infrastructure.
• Smart Automation matching grants worth RM550 million (USD 137.5 million) for manufacturing and services companies to automate business processes.
• 14 Digital Enhancement Centers to be built to facilitate access to financing and capacity building for businesses, specifically for SMEs, in line with Industry Revolution 4.0 (IR4.0); with RM70 million (USD17.5 million) earmarked for MDEC for this purpose.

Building Digital Malaysians

Economist Alfred Marshall, once said, "the most valuable of all capital is that invested in human beings.” Echoing this sentiment, the government is steadfast in investing to build digital Malaysians:

• The introduction of Digital Social Responsibility concept as an initiative to contribute to digital economic development while improving digital skills of future workforce with initiatives such as technology scholarships, training & upskilling for digital skills for communities in need that are tax deductible.
• An allocation of RM450 million (USD112.5 million) to implement a onetime RM30 digital stimulus to qualified Malaysians to increase the number of Malaysians, merchants, and SMEs to use e-wallets.
• RM11 million allocated to inculcate Science, Technology & Innovation culture and encouraging more students in Science, Technology, Engineering and Mathematics (STEM).
• RM20 million (USD 5 million) is also apportioned to match with RM20 million from Human Resource Development Fund (HRDF) towards encouraging working adults to undertake professional certification exams in fields relating to IR4.0.

(MYR 1 = USD 0.25)

Creating a Digital Utopia

To complement the National Budget 2020, two major initiatives were announced at the 30^th MSC ICM to further boost Malaysia’s digital economy:

• A Global Testbed initiative to attract next-gen emerging technologies to innovate in Malaysia, specifically in the fintech, blockchain, and drone sectors by attracting global digital talents and interest from investors.

DroneTech has been identified to be the Global Testbed pilot. To support this initiative, the government will be easing the work visa process for key talent in emerging technologies via a green lane facility, as well as other forms of visas such as the Digital Freelancer Pass.

• A new Digital Talent Development Strategy Framework, designed to mobilise and coordinate the end-to-end nurturing of Malaysia’s tech talent both locally and on the international stage, is also proposed to address the growing demand for a digital-savvy workforce.

All the above signifies that Malaysia is investing heavily in building and enhancing the digital innovation ecosystem and adoption, a proof that we’re going seriously digital. It is small wonder that Malaysia’s digital economy’s growth has been outpacing the overall national economy’s growth in recent years, inarguably making us well poised towards the digital-first economy.

As a matter of fact, IMD favorably ranked Malaysia as number 2 in South East Asia in terms of future readiness in its World Digital Competitiveness Ranking 2019. Similarly, AT Kearney introduced digital resonance in its Global Services Location Index 2019 report, and Malaysia scored second highest among ASEAN economies in this new category.

Exciting Times Ahead

Opportunities abound as we speed towards the year 2020 and beyond.  

As the lead agency tasked in driving Malaysia’s digital economy forward, the excitement levels within MDEC are rising rapidly! And as the head of MDEC’s Investment team, entrusted to attract direct investments to Malaysia’s digital economy, I speak for all of us in the team that we are absolutely thrilled to work hand in hand with all industry stakeholders in ensuring the national digital economy agenda a continuous success.

We invite you, Mr. and Mdm. Investors, to come to Malaysia, capitalise the opportunities that we offer, and grow your digital business and operations from here, the heart of Digital ASEAN.

#SeriouslyDigital
#MalaysiaHeartofDigitalASEAN

Hew Wee Choong is the Vice President for Investment & Industry Development, at Malaysia Digital Economy Corporation (MDEC)