BMCC - ICT Sector Report 2018/2019

BRITISH MALAYSIAN CHAMBER OF COMMERCE Malaysian Industry Report 2018 / 2019

INFORMATION & COMMUNICATION TECHNOLOGIES

ABOUT THE BRITISH MALAYSIAN CHAMBER OF COMMERCE

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stablished in 1963, the British Malaysian Chamber of Commerce (BMCC) has been driven by the sole ordinance of advancing bilateral trade relations between the United Kingdom and Malaysia. Over the past five decades, the BMCC has been a catalyst in providing Malaysian-based businesses with networking and exposure, knowledge exchange and bilateral trading support services. Today, the BMCC has firmly rooted itself as one of Southeast Asia’s most prolific Chambers.

The BMCC is appointed by the UK’s Department for International Trade (DIT) to become their service delivery partner for British SME’s seeking to export or establish a presence in Malaysia. Embodied by dedicated sector specialists, the BMCC TRADE TEAM provide a range of customised services from market intelligence, business matching and event management to sourcing assistance of UK goods and services.

The BMCC TRADE TEAM works with UK exporters focusing primarily on SMEs in offering bilateral trade assistance, serving principally as a one-stop platform providing a soft landing for UK firms in Malaysia through market research and knowledge exchange, legal and regulatory systems guidance, connecting clients or distributors, and risk management.

In Partnership With

This report serves as a preliminary introduction that highlights key features and factors relevant to the Professional Services sector in Malaysia.

Information included in this report is the original work and property of the British Malaysian Chamber of Commerce (BMCC) and its department the Trade Team and is subject to copyright. No illustrations, photographs, graphics or text included in this report should be copied, reproduced or shared without prior written consent of its owner.

Whereas every effort has been made to ensure that the information given in this document is accurate, the British Malaysian Chamber of Commerce nor its Departments (Trade Team) accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned. © British Malaysian Chamber of Commerce Berhad 2018

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UNDERSTANDING MALAYSIA’S ICT SECTOR

Located in Southeast Asia, Malaysia is a federal constitutional monarchy consisting of two regions, Peninsular and East (Borneo) Malaysia, seperated by the South China Sea. Malaysia is known to be one of the most diversely congenial polyethnic and mutlti-cultural countries in the world.

Population: 32 Million Ethnicities: Malay, Chinese, Indian Currency: Malaysian Ringgit (MYR) Ease of Doing Business: Rank 24 Average GDP Growth: 5 - 5.5% Malaysia ICT Export Worth (2016): MYR 3.7 billion

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igital Economy remains one of the nation’s key driver of growth, contributing 18.2% to Malaysia’s GDP in 2017 and it is anticipated that it will be an upward trend in which there is a high possibility of the contribution to GDP shall exceed the estimated target of 20% sooner than 2020. To date, ICT accounted for 30% and 23.7% of the goods export and service export, respectively.

ICT is also going to be continuously leveraged as part of the Malaysian Education Blueprint (2013-2025) where it is one of the components to shift the national education system to a world-class standard.

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INTRODUCTION

Since 1994, Malaysia have begun to actively develop and improve the ICT sector. One of the first move was the formation of The National Information Technology Council of Malaysia (NITC) as the primary advisor to the government on ICT matters. Ever since, Malaysia has announced to the world their full commitment in making the country a global ICT hub.

Some of the key initiatives was the establishment of the Multimedia Super Corridor (MSC) flagship project, the digitisation of several ministries and agencies, the on-going upgrade of Malaysia’s telecommunications and IT infrastructure. The most recent announcement of Digital Free Trade Zone (DFTZ) among many other upcoming initiatives the path Malaysia is treading towards becoming a nation that leverages on ICT as a key economy contributor.

As part of the new Economic Model aimed to propel Malaysia towards becoming a high income nation based factors of innovation, creativity and high value source of growth, ICT is seen to be one of the targeted industries to achieve this. The continuous emphasis on ICT for the past several years has spurred Malaysia to perform outstandingly in many aspects of the sector in terms of economic and socio-economic aspects.

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In the recent ICT competitive index among developing ASEAN countries, Malaysia has come up top in the areas of Internet users, computer per capita, mobile broadband subscribers, information technology skills, broadband subscribers, cyber security and investment in telecommunication.

In line with the 11th Malaysia Plan – the government’s strategic 5 year plan for 2016 to 2020, emphasis continues to be given to the importance of digitisation in enhancing the public services. This push has shown that 77% of government services are made available online, making all public related information or application more easily accessed and convenient. This positive move also reflects the government’s effort to provide greener services with less need for print and paper.

ICT BUDGET 2018 The 2018 Budget announced by the Prime Minister of Malaysia in October 2017 denotes several allocations in the sector of ICT

Digital Free Trade Zone (DFTZ) RM83.5 million allocated for the construction of the DFTZ in Aeropolis, KLIA and focus on 1500 SMEs. Increase in the value of imports which are exempt from GST and import duties, from RM 500 to RM 800, where such imports are connected with the DFTZ

Smart Manufacturing Facility RM 245 million of matching grants under the Domestic Investment Strategic Fund (DISF) to enhance smart manufacturing facilities

Futuristic Centre Strengthening of Futuristic Centre in Cyberjaya: a one stop centre for corporates and universities to develop prototype products and enhance innovation

Capital Allowance To assist companies to remain competitive in the digital era, it is proposed that companies would be allowed to claim capital allowances on qualifying expenditure.

Accelerated Capital Allowance (ACA) Extension of incentive period from YA 2018 to 2020 for ACA of 200% for automation equipment for the labour intensive industry

Tax Incentive for Transformation to Industry 4.0 To encourage companies in moving up the value chain and to increase productivity, they have been, they have been urged to adopt advanced technology (also known as Industry 4.0) which includes, among others, the following technology drivers: • Big data analytics • Autonomous robots • Simulation • Industrial Internet of Things (IoT) • Cybersecurity

• Horizontal and vertical integration • Cloud computing • Additives manufacturing • Augmented reality • Artificial intelligence

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SECTOR SEGMENTS MDEC has set niche focus areas that positively benefits Malaysia in the economic sense over the next few years. This includes e-Commerce, Internet of Things (IoT), Cloud & Data Centre, Big Data Analytics (BDA) and Cybersecurity.

These focus areas have contributed RM 3.7 billion to the total export sales in 2016, a 38% growth from 2015. Despite the uncertain economic conditions, it has been a steady growth in the investment of ICT in Malaysia where 2016 has witnessed a tenfold increase since 2014. According to IDC Malaysia, below are some of the analysis and predictions to each of the niche focus areas and important components of ICT in Malaysia:

Big Data

Datacentre Vision

With tremendous global increase of data generation due to digitization, Big Data Analytics (BDA) is undoubtedly an important tool crucial for both public and private sectors to create value for effective decision – making, productivity growth and innovation.

By 2018, 25% of companies in data-intensive industries will adopt formal datacentre planning, sourcing, and governance processes to speed DX efforts. DX has virtually impacted every industry. A key sign of the maturity of this transformation is the degree by which the industry has become information-focused. For enterprises in information-intensive industries, datacentre decisions must be based on the ability to quickly deliver and scale highly secure and resilient pools of transaction, content, and analytic resources worldwide.

By 2018, new cloud pricing models will emerge for specific analytic workloads, where the growth for cloud analytics solutions will be three times more than on-premise analytics solutions.

According to IDC Asia Pacific’s Software Study 2016, a total of 42% respondents from Malaysian organisations are planning to deploy cloud-based analytics software in the next one to two years while some have already deployed analytics solutions.

It is estimated that Malaysian organisations will continue to shift more critical applications into the cloud platform, the demand for cloud analytics will grow exponentially,” says IDC Malaysia Associate Market Analyst Quan Xiong Ng.

In 2017, Oracle Corporation opened a digital hub in Malaysia set to leverage on Asia Pacific (APAC)’s small and medium enterprises (SMEs) immense growth through providing our Oracle Cloud solutions to streamline operations, boost innovation and build a platform for growth.

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Cognitive Cybersecurity Internet of Things (IoT) It is estimated by 2018, connected vehicles, insurance telematics, personal wellness, and smart buildings will be the main use case of the Internet of Things (IoT) across Malaysia, accounting for US$700 million in forecast spending.

IoT investment trends, attitudes, and use cases vary across regions, strongly driven by different business structures and scenarios, regulations, and innovation levels.

It is projected by 2018, 30% of cybersecurity environments will incorporate cognitive or AI technologies to assist humans in dealing with the increasing scale and complexity of cyberthreats.

Based on IDC’s Asia Pacific (excluding Japan) Business and IT Services 2017 Survey, 24% of organisations in Malaysia plan to adopt or transform their cybersecurity solutions in response to the changes brought about by digital technology such as cloud, mobility, and IoT.

Nevertheless, the four use cases that will be among the fastest growing worldwide in 2017/2018 are connected vehicles, insurance telematics, personal wellness, and smart buildings.

These use cases show rosy expectations in Malaysian markets, accounting for US$700 million in forecast spending in 2018.

Enterprise Mobility & Device Deployment Models It is predicted by 2019, 30% of unregulated enterprise organisations will offer a choose-your-own-device (CYOD) programme for eligible employees as their default device policy.

According to IDC Asia/Pacific’s Enterprise Mobility Survey, bring your own device (BYOD) has become the primary choice in organisations, with 31% preferring this approach - a stark contrast from 2015 at 19%.

Interestingly, 19% pointed to a CYOD model already in place, compared with just 14% when the same survey conducted in 2015, indicating a growing interest among organisations to strike a balance between employee choice and IT manageability.

Fintech Incubation will visibly be a ‘cost-first’ directive for Malaysian FSIs. Pressures on profitability brought by declining investor confidence, political risk, and the weakening Malaysian Ringgit have substantially impaired the businesses of Malaysian banks. Through 2017, the pursuit of innovation will be couched by mandates on cost optimisation.

Service Provider Strategy By 2020, 60% of enterprises will reconsider their current service providers, causing a shift in the systems integrator’s function from traditional to digital and the emergence of new services roles.

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REGULATORY ENVIRONMENT In Malaysia, regulation of ICT related matters falls under the purview of the Malaysian Communications & Multimedia Communications (MCMC). Regarding incentives for ICT qualified players however, the Malaysia Digital Economy Corporation (MDEC) representes the leading government agency responsible for assisting the application process.

Malaysian Communications & Multimedia Commissions (MCMC) At the time it was created, the Malaysian Communications and Multimedia Commission’s key role was the regulation of the communications and multimedia industry based on the powers provided for in the Malaysian Communications and Multimedia Commission Act (1998) and the Communications and Multimedia Act (1998).

Pursuant to these Acts, its role is also to implement and promote the Government’s national policy objectives for the communications and multimedia sector.

The Commission is also charged with overseeing the new regulatory framework for the convergence of telecommunications, broadcasting industries and on-line activities. In 2001, the Commission’s role was expanded to include overseeing the postal services sector pursuant to the Postal Services Act 1991 and licensing of the Certification Authorities under the Digital Signature Act 1997. The Commission’s primary functions includes: Advising the Minister on all matters concerning national policy objectives for communications and multimedia activities Implement and enforce the provisions of the communications and multimedia law Regulate all matters relating to communications and multimedia activities not provided for in the communications and multimedia law Consider and recommend reforms to the communications and multimedia law Supervise and monitor communications and multimedia activities Encourage and promote the development of the communications and multimedia industry Promote and maintain the integrity of all persons licenced or otherwise authorised under the communications and multimedia industry Render assistance in any form to, and to promote coorperation and coordination amongst persons engaged in communications and multimedia activities Carry out any function under any written law as may be prescribed by the Minister by notification published in the Gazette

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Malaysia Digital Economy Corporation Sdn Bhd (MDEC) Under the purview of Ministry of Communication and Multimedia, Malaysian Digital Economy Corporation (MDEC) has been tasked to be the lead agency in driving the digital economy in Malaysia. MDEC is responsible to build a vibrant digital economy and ensuring that Malaysia plays a leading part in the global digital revolution.

One of many roles that MDEC carries in championing Digital Economy is to facilitate the application for companies (both local and foreign involved in developing or utilising multimedia technologies to produce or enhance their products and services and for process development) applying for the MSC Status and the benefits from the incentives have attracted many local and foreign ICT players which have brought in RM billions worth of investment to the nation.

REGULATORY BODIES Organisation

Overview

Contact

Ministry of Communications and Multimedia Established to provide comprehensive & inclusive communication infrastructures, develop a digital economy & strengthen the creative industry & strategically expand and broaden the delivery and dissemination of information throughout the nation

+603 8000 8000 www.kkmm.gov.my

Malaysian Communications & Multimedia Commission (MCMC) Implements and promote governmental national policies for the communications & multimedia sector and oversees the new regulatory framework for the converging telecommunications, broadcasting and on-line activities

+60 3 8688 8000 www.mcmc.gov.my

Malaysia Digital Corporation (MDEC) A government sponsored initiative to create a hi-tech business corridor in Malaysia Malaysian Global Innovation & Creativity Centre (MaGIC) Catalyses the entrepreneurial ecosystem in Malaysia, bringing together the abundant resources from partners and communities alike

1-800-88-8338 (within Malaysia)

+603 8315 3000 (International)

www.mdec.my +603 8324 4800 mymagic.my

Malaysia Investment Development Authority (MIDA) Government’s principal agency for the promotion of the manufacturing and services sectors in Malaysia including ICT

+603 2267 3633 www.mida.gov.my

National ICT Association of Malaysia (PIKOM) Represents the Malaysian ICT industry. Its membership currently stands at 800+ comprising companies involved in a whole spectrum of ICT products and services

+603 40650078 www.pikom.org.my

CONTACT US For any inquiries please contact the BMCC Trade Team: Tel: +60(0)3 2163 1784 / 1786 Email: info@bmcc.org.my Web: www.bmcc.org.my

E04C0, 4th Floor East Block Wisma Selangor Dredging 142-B Jalan Ampang 50450 Kuala Lumpur

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