20th June, 2019

Reaping the digital dividends:Key issues, challenges and potential for

the Malaysian economy

Yeah Kim Leng

Professor of EconomicsSunway University Business School

INTERNATIONAL SEMINAR ON UNITED NATIONS GLOBAL GEOSPATIAL INFORMATION

MANAGEMENT

“Integrated Geospatial Information Framework”

Hotel Istana, Kuala Lumpur, Malaysia

2

Outline

Malaysia’s digital economy

Digital dividends, issues and challenges

Potential of geospatial information or digital maps

Concluding observations

3

Malaysia’s digital economy

4

Key milestones1972

•Establishment of electronics FTZ in Penang transformed the country into a global electronics manufacturing hub

1996

•Creation of Multimedia Super Corridor (MSC)

2017 & 2018

• 2017: First in the world to establish a Digital Free Trade Zone (DFTZ)

• 2018: Launch of Industry4WRD: National Policy on Industry 4.0

Ranked 6th in electronic integrated circuits exports valued at USD45.8 bnor 6,4% share in world exports in 2018

National initiative to accelerate ICT and shift to a knowledge-driven economy; 3,241 active MSC-status companies at Feb-2018

Collaboration with Alibaba to create eFulfillment hub, Satellite services hub for e-Commerce and eServices hub. Launch of Industry 4.0

5

Size & growth rate

40.3 55.2 78.9 114.4 13.2

20.7 32.6

52.0

39.9 61.5

94.4

145.8

7.6%

8.2%8.5%

0

100

200

300

400

2010 2015 2020f 2025f

RM

bn

, c

urr

en

t p

ric

es

Other industries* Content and media

ICT services ICT trade

ICT manufacturing Average annual growth

RM106 bn

RM152 bn

RM226 bn

RM340 bn

4.9 4.8 5.0 5.8

1.6 1.8 2.12.6

4.9 5.36.0

7.40.8 0.80.9

1.1

0.7 0.40.4

0.3

12.9 13.114.3

17.3

2010 2015 2020f 2025f

ICT manufacturing ICT trade

ICT services Content and media

Other industries*

ICT GDP (value added) is forecast to rise by 8.2% annually from RM106 bn in 2015 to RM226% in 2020 and by 8.5%

per annum to RM340 bn in 2025

Its share to GDP is projected to rise from 13.1% in 2015 to 14.3%

in 2020 and 17.3% in 2025

Source: Department of Statistics Malaysia, “Economic Census 2016 Usage of ICT by Businesses and e-Commerce”;

own forecasts

Note: Malaysia’s Department of Statistics uses a broader definition of ICT particularly the inclusion of ICT

manufacturing and wholesale and retail trade compared to OECD definition. According to the World Bank,

Malaysia’s ICT share to GDP would be reduced from 13.1% to 9.7% in 2015 based on OECD classification

Share of GDP (%)

Digital (ICT) jobs

ICT

manufac

turing ,

411 ,

37.7%

ICT

trade,

224 ,

20.5%

ICT

services,

301 ,

27.6%

Content

and

media,

155 ,

14.2%

Source: Department of Statistics Malaysia, ICT Satellite Account 2017

1,8411,309

79

9,185

3,498

1,092 1,066

How does total ICT employment

compare with other sectors?

What is the total ICT employment

& breakdown by ICT segments?

(‘000)

Total employed in ICT sector: 1.092 million; Share of total employment: 7.6%

7

ConnectivityMalaysia is among the most connected upper middle income countries

0

10

20

30

40

50

60

70

80

90

100

Malaysia (80.1%)

Vietnam (49.6%)Thailand (52.9%)

Singapore

(84.5%)Philippines (60.1%)

Indonesia (32.3%)

Low Lower middle Upper middle High

995 3,895 12,055

GNI per capita, USD in current prices

80.1% of individuals using internet in 2017

0

50

100

150

200

250

300

350

Malaysia (134)Vietnam (126)

Thailand (176)Singapore (147)

Philippines

(110)

Indonesia (165)

Low Lower middle Upper middle High

995 3,895 12,055

GNI per capita, USD in current prices

134 cellular subs per 100 people

in 2017

Source: International Telecommunications Union, 2019; World Bank’s World Development Indicators database

8

Digital adoptionMalaysia ranks highly among ASEAN ex-Singapore and upper middle income nations

0.00

0.20

0.40

0.60

0.80

1.00

GNI per capita (USD in current prices)

Digital Adoption Index, 2016

High incomeUpper middleLower middleLow income

Malaysia

Vietnam

Thailand

Philippines

Singapore

12,2353,9551,005

Indonesia

Source: Digital Adoption Index (DAI) developed by The World Bank as part of the World Development

Report 2016: Digital Dividends

Highest

Lowest

9

However, Malaysia’s DAI business sub-index is below peers & global average

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

GNI per capita (USD)

Business Sub-index

High incomeUpper middleLower middleLow income

MalaysiaVietnam

Thailand

Philippines

Singapore

12,2353,9551,005

-0.10

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

GNI per capita (USD)

People Sub-index

High incomeUpper middleLower middleLow income

Malaysia

Vietnam

Thailand

Philippines

Singapore

12,2353,9551,005

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

GNI per capita (USD)

Government Sub-index

High incomeUpper middleLower middleLow income

Malaysia

Vietnam

Thailand

Philippines

Singapore

12,2353,9551,005

Source: Digital

Adoption Index (DAI)

developed by The

World Bank as part of

the World

Development Report

2016: Digital Dividends

10

Digital dividends, issues & challenges

11

How digital technologies promote development

3 key areas of development

impact

Mechanisms and markets

12

Uneven ICT adoption in Malaysia particularly low web presence of firms in most sectors

81.1

89.4

46.4

94.0

44.9

100.0 100.0 99.9 99.0

90.4

78.977.9

82.2

51.0

88.2

37.4

100.0 100.0 99.9 98.3

84.6

73.3

19.1

50.2

24.6

62.0

12.5

91.2

30.0

17.5

48.7 45.9

37.8

0

20

40

60

80

100

ICT usage in selected sectors, 2017

Computer usage Internet usage Web presence usage

Source: Usage of ICT and e-Commerce by Establishment 2018, Department of Statistics Malaysia

Survey covered 1,081 industries & 57,194 establishments

13

State of internet usage in selected sectors

Source: Usage of ICT and e-Commerce by Establishment 2018, Department of Statistics Malaysia

92.1

25.8

65.6

67.3

40.5

32.5

70.9

14.6

29.6

13.5

22.1

8.9

19.0

93.0

16.4

66.3

59.5

52.5

46.0

98.9

11.7

17.4

5.0

32.9

2.6

15.8

89.3

30.0

77.7

70.5

65.3

56.7

65.4

10.0

43.2

21.0

12.1

15.3

17.0

Sending or receiving e-mail

Telephoning over the internet

Posting information or instant messaging

Getting information about goods or…

Getting information from government…

Interacting with government…

Internet banking

Accessing other financial services

Providing customer services

Delivering products online

Internal or external recruitment

Staff training (e-learning application)

Others

% of establishmentsProfessional, scientific & technical Real Estate All sectors

Areas where

e-commerce

and

digitalisation

can raise

productivity

and service

quality of

real estate

and

professional

services

providers

14

Key issues and challenges

Digital divide

Cyber security

Privacy & openness

Business disruption & job displacement

Low innovation capacity

Low digital readiness of SMEs

Small talent pool & digital eco-system

Affordability & cost competitiveness of broadband

Global - general Malaysia - specific

15

Digital risks

Digital threats

Unequal access & sharing

Market disruptions

Natural monopolies

Cyber security, social ills & state/corporate control

Job displacements and

high social costs for workers

& entrepreneurs who lack

digital know-how

Widen inequality of

income, employment

and education

Concentration of

market power in big

firms; inhibit future

innovations

Rising cyber crimes,

censorship and invasion

of privacy

Negative outcomes

16

Necessary conditions to reap digital dividends

Analog foundation

Conducive business climate

Investment in health & education

Good governance

Digital foundation

Infrastructure &

technological investment

Public private partnerships

Effective regulations

Inclusion

Efficiency

Higher income

More jobs

Better services

Sustainable national growth

Individual well-being

Innovation

17

Unlocking the potential of digital technologies

More inclusive growth through

wider market access for

entrepreneurs

• Climbing the digital role ladder

Lower business cost and improve

efficiency

• Use of sophisticated technologies such as secure servers, enterprise network, inventory management, big data, analytics and e-commerce

Encourage innovation and

scale economies

• New digital products & services, eg. geospatial information

Enabling environment:•appropriate licensing mechanisms to conduct pilot projects,

•clarity of rules & regulations

•awareness about the potential of these technologies

Computer, internet & mobile users

Digital producers, creators & innovators

Digital entrepreneurs & business owners

18

Potential of geospatial information or digital maps

Value of geospatial services

19

Consumer benefits

• Commuting efficiency

• Fuel efficiency

• Personal safety

• Purchasing efficiency

Business benefits

• New products and

services

• Productivity benefits

for other sectors

• Sales growth

• Tourist spending

Societal benefits

• Job creation

• Traffic congestion

• Civic engagement

• Urban planning

• Public health

• Safety & emergency response

• Disaster preparation

• Environmental and wildlife preservation

• Knowledge creation and human capital development

Include tangible and hard-to-measure intangible benefits

13%

20%

26%

34%

35%

37%

40%

40%

46%

54%

62%

MobilityPurchasing Education

Navigation while/before driving

Discover businesses, places or services heard about in an unfamiliar area

Discover businesses, places or service in local area

Discover businesses, places or services in an unfamiliar area

Navigation while/before walking

Navigation while/before getting on public transportFind additional information about businesses, services or places

Discover new businesses, places or services in local area

Educate about geography, architecture, and other topics

Engage with a business (eg. book a class, call a business, order food, etc)

Book and use a ridesharing service

20

Consumer usage of digital maps

Source: Survey of Digital Map users; AlphaBeta analysis

Estimated benefits for Malaysia

amounted to RM4.4 bn or about 0.3% of

GDP per year

21

Geo-spatial educational tools & social networks

Source: Survey of Digital Map users; AlphaBeta analysis

17%

19%

21%

21%

23%

24%

24%

29%

32%Education (eg. Google Earth)

Social networking (eg. Foursquare)

Transport (eg. Grab)

Travel & hospitality (eg. Airbnb, Expedia)

Entertainment & games (eg. Pokeman Go)

Delivery (eg. Food Panda, Deliveroo)

Fitness (eg. Runtastic, Strava)

Real estate services (eg. property listings)

Online dating (eg. Tinder)

22

Geospatial benefits to business

New business models

Customer analytics

LogisticsCommercial

location planning

Environmental planning &

management

Network design &

management

Production efficiency

Global geo-spatial businesses generated business income estimated at USD400 bn; if Malaysia captures a share similar to E&E, it amounts to RM45.4 bn or 3.3% if 2017 GDP

23

Developing geo-spatial potential

Academia and social groups can

enhance efficiency of

education, health and social services

Firms can increase value and efficiency,

attract customers and

boost sales

Government can support the

development, sharing and use of geospatial data

• Increase academic programmes to produce more graduates trained in geo-spatial data sciences

• Encourage industry-university collaboration in applied geo-spatial research

• Raise awareness among firms and encourage investment in digital technologies

• Employ innovative schemes to accelerate digital adoption such as innovation vouchers

• Implement a national Spatial Data Infrastructure initiative to coordinate and spur geospatial industry

• Provide enabling framework to make geospatial content readily available

24

Concluding observations

25

▪ Untapped digital potential: Given its high digital adoption

ranking, there is tremendous scope and opportunities for Malaysia to

harness its digital potential to accelerate economic growth.

▪ Digital infrastructure and data: Policymakers and businesses

need to recognise that infrastructure in the digital economy includes

not only broadband networks but also data, including geo-spatial

data.

▪ Data sharing framework: We need to encourage investments in

data, data-sharing, and remove barriers to data flows that impede

innovation, integration and value chain creation.

▪ Focus on SMEs: Provide support for SMEs which face barriers to

adoption of digital technology and data-driven innovations.

▪ Digital HR development: Address inadequate capabilities and

competencies and skills shortages particularly data, ICT and e-commerce specialists, scientists, researchers and technologists.

Concluding observations

26

Thank you

Sunway University Business School

Tel : +603 7491 8622Fax : +603 5635 8633H/P : +6012 3787866Email : klyeah@sunway.edu.myWebsite : www.sunway.edu.my/university