Advancing Malaysia’s Digital Economy
Malaysia is advancing rapidly and has great potential for further expansion in its digital economy. In the World Bank’s report, “Malaysia’s Digital Economy – A New Driver of Development”, it was pointed out that businesses still need to adopt digital technologies more readily to make full use of its benefits.
Malaysia’s Ministry of International Trade and Industry recognised the need for higher digital penetration, increase in the usage of digital technologies and participation in the digital economy.
Key Barriers in Advancement
The World Bank report outlined several areas for improvement as follows:
Malaysia has high internet penetration but internet speeds remain inconsistent in various areas. There is a need for more reliable connectivity solutions, especially in rural areas, and for better national connectivity policies that provides inclusive access for all segments of society. Policy objectives should be two-fold: a) enhance the quality and affordability of broadband services, and b) improve access to ultra-fast broadband networks.
Digital entrepreneurship is on the rise as more technological start-ups challenge the market. However, there are still various obstacles such as:
- Shortages in workforce for the digital economy
- Lack of appropriate digital skills within the workforce
- Difficulty in accessing capital for early stages of a firm’s growth
- Majority still rely on cash for transactions
- Professional networks among digital entrepreneurs need to be strengthened
In order to address the skill gap, better digital training needs to be provided to members of the workforce and integrated in educational systems. Access to government support will also need to be improved in order for promising start-ups to survive the early growth phase.
With the COVID-19 pandemic boosting online delivery and shopping while discouraging physical contact, it is expected that cashless transactions will continue to increase.
Law reforms and policies are needed to fully reflect the scale of transactions and profits generated by the digital economy. However, taxation also needs to be carried out in a way that it does not interfere with the growth of the digital economy.
Three options outlined by the World Bank report for reform are:
- Expanding the tax base to enterprises outside the country
- Levelling the playing field between domestic and foreign firms
- Supporting mainstream taxation
Opportunities from COVID-19 Outbreak
The COVID-19 outbreak has brought about unprecedented changes but has also sparked immense uptake in technological tools that help to adjust to such changes. Higher levels of digitalisation have been brought about with work-from-home policies, online deliveries, and the overall need for efficiency.
Businesses and policy-makers therefore have great opportunity to further Malaysia’s digital economy even more in anticipation of the economic recovery in the post COVID-19 future.