The Digital Silk Road Series: How Chinese Companies are Leveraging on ASEAN Opportunities

Pt 1: The Next Century Silk Road

Asia's history includes the colourful story of the Silk Road, which was made up of a crisscrossing in trade and communications routes, covering lands and seas. What I find specially fascinating about this story – where the East is linked to the West – is how Malaysia played the part of a strategic node through the centuries.

When Jack Ma visited Malaysia during the initial announcement of the Digital Free Trade Zone (DFTZ) in 2017, he said: "China is famous for the Silk Road – but without Malaysia, the Silk Road would not have been that successful. The Silk Road, at that time, forced businesses to make products – like tea leaves. These items were so expensive back then and very difficult to preserve. Malaysia provided the solution: tin. By mining tin in Malaysia, it allowed tea to be stored safely and ensure the that it can be sold on the Silk Road. This was what made the Silk Road so powerful."

Today, a new chapter has opened in the story of the Silk Road. The 21st Century Maritime Silk Road sees ASEAN as a key starting point under China's ‘Belt & Road Initiative  (BRI)’. By various estimates, this is one of the largest infrastructure and investment mega-projects in history. In relative terms, it covers more than 68 countries, an equivalent tally that represents 65% of the world's population and 40% of the global GDP as of 2017.

The opportunities are staggering. According to AT Kearney, if the Southeast Asia region was a single country, it would rank #3 in population and #7 in GDP globally. The grouping of these nations, Association of Southeast Asian Nations (ASEAN) as it is called, has the potential to enter the Top 5 digital economies in the world by 2025.

With its strong digital economy growth and digital innovation ecosystem, Malaysia is powerfully poised to collaborate with Chinese tech companies in building a digital silk road that offers both a win-win cooperation. This was echoed in 2017 by President Xi: “We should pursue innovation-driven development and intensify cooperation in frontier areas, such as the digital economy, artificial intelligence, nanotechnology, and quantum computing. The world must also look at advancing the development of Big Data, Cloud Computing, and creating smart cities. These will all pave the way to establish the Digital Silk Road of the 21st century.”

Malaysia is an important strategic country along the 21st Century Maritime Silk Road. Situated in the centre of Southeast Asia and positioned along the Straits of Malacca, one of the busiest trade routes in the world, gives Malaysia an incomparable advantage in the forging of the 21st Century Digital Silk Road.

Malaysia's Digital Landscape

In addition to being widely recognised as the ideal gateway to ASEAN, Malaysia is rapidly becoming a destination in itself for business opportunities and growth potential. The BRI has again highlighted Malaysia's forte as a premier digital destination.

China has historically positioned Malaysia as a gateway to ASEAN, India, and the Middle East.  While the traditional maritime silk road also embraced India and the Middle East routes, Malaysia also enjoys a highly respected position. Besides being recognized as a moderate Muslim country, it also has a multicultural and multilingual heritage that ties back to centuries past. Digital talent in Malaysia is also highly sought after by India and the Middle East.

Where Malaysia used to be a base for shared services, multinationals are now using Malaysia as a hub for catalysing the development of new digital technology and services. As is, venture capitalists have eyed Malaysia both as  the de facto gateway to ASEAN and a fast accelerating digital growth hub.

I see these advances as additional testimonies to Malaysia's economic transformation. In fact, these are all apparent in how the country is building the new economy. We have put many investments and incentives in place to make sure that Malaysia wins a good slice of the new global marketplace.

Our digital economy contributed 18.3% to the nation’s GDP in 2017, and this figure is expected to reach 21% by 2022, according to analyst firm IDC. Since China's digital economy contribution reached 34.8% in 2018, this signals much more capacity for digital industry growth in Malaysia!

In these days of digital transformation and rapid disruption, it is more vital than ever to encourage collaboration between countries, companies, and its citizens. It’s a global community now, after all. Since the tabling of Budget 2020, new initiatives are now added onto the ongoing digital transformation agenda. This includes a National Regulatory Sandbox, which is a safe testbed for pilot solutions across different industry vectors. For the moment, this applies to anything related to dronetech, smart cities, and autonomous vehicles.

If anything, with all its new policies in place, Malaysia is rapidly being recognised as an ASEAN testbed and a digital society fuelled by many races and nationalities. These, along with a well-developed and varied infrastructure and solutions, are key to the acceleration and expansion of the digital economy.

(In the next part, this article series will explore what Malaysia had done to carve its place in developing the digital economy for the region)