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OPENING REMARKS
BY
YB TUAN LIM GUAN ENG
MINISTER OF FINANCE

 

2019 FOCUS GROUP MEETING: EMBRACING DIGITAL ECONOMY

 


9 AUGUST 2019

 

Yang Berhormat Gobind Singh Deo
Minister of Communications and Multimedia

Yang Berbahagia Dato’ Suriani Binti Ahmad
Secretary General
Ministry of Communications and Multimedia

Yang Berusaha Puan Surina Binti Shukri
Chief Executive Officer
Malaysia Digital Economy Corporation

Ladies and gentlemen,

Good afternoon and Salam Harapan

INTRODUCTION

1. The Government is currently organising a series of focus group discussions to obtain views and recommendations for the 2020 Budget, which will be tabled on 11 October 2019. Today is the first of such focus groups where we will discuss about the digital economy and ways the Government could catalyse the growth of the digital economy to raise the well-being of the rakyat, and fulfil the Shared Prosperity agenda espoused by the YAB Prime Minister Tun Dr Mahathir Mohamad.

2. I would like to extend my utmost appreciation to YB Minister of Communications and Multimedia for hosting today’s focus group discussion. I would also like to thank all of you for taking the time off to be with us today.

GROWING THE DIGITAL ECONOMY

3. Between 2010 and 2016, the Malaysian digital economy grew by 9% and this is faster than GDP growth. The digital economy is expected to form 20% of the economy by 2020 from about 18% in 2017.

4. We are on track to meet the 20% target. According to an estimate by the International Data Corporation (IDC), over 21% of Malaysia's GDP will be digitalised by 2021.

E-COMMERCE AND DTFZ

5. Apart from traditional areas of growth, we are focusing on e- commerce. The Government is encouraging e-commerce expansion through the Digital Free Trade Zone (DFTZ). Participants of DFTZ enjoy MSC status, where they would get a 10-year corporate income tax holiday under pioneer status, and a 5-year investment tax allowance. So far, approximately 5,000 SMEs are on board and we would like more to come in to enrich Malaysia’s e-commerce ecosystem.

6. The DFTZ functions as a one-stop service centre that includes an e- fulfilment hub to help with exporting, a satellite service hub that offers services relevant to cross-border trade like financing, as well as an eService platform to smooth cross-border cargo clearance.

DIGITAL PAYMENTS

7. In the same vein, the Government is promoting the spread of digital payments and this is partly because it is very effective at curbing corruption.

8. We are cognisant that several companies are already well invested into digital payments and among them are Grab, Boost and BigPay, along with various local banks.

9. Both e-commerce and digital payments are easing the digitalisation of the economy. If the consumers are comfortable with the technology, they will adopt it widely and then demand for it. Companies that fail to meet that demand will find it difficult to survive .

10. But digitalisation is not just about company-level competitiveness. It is also about national competitiveness. Malaysia is in a race to digitalize our economy. We are acutely aware that our neighbours are moving up the value chains and competing with us for the new investment in industries we are interested in. To come on top, we need to an ecosystem that is ready to support high-tech investment, especially when it involves Industry 4.0 technology.

INDUSTRY 4.0 AS THE NEW GROWTH ENGINE

11. Industry 4.0 is the new engine of economic growth. The Government has launched a RM2 billion guarantee scheme under Syarikat Jaminan Pembiayaan Perniagaan Berhad (SJPP) to ease up access to financing for SMEs interested in applying Industry 4.0 technology in their business. We have also provided RM3 billion via 4 the Industry Digitalisation Transformation Fund managed by Bank Pembangunan Malaysia Berhad to accelerate adoption of new technology including artificial intelligence, automation, big data analytics, and robotics among Malaysian companies.

12. There are other measures with respect to Industry 4.0. Under Budget 2019, the Government provides up to RM27,000 Income Tax Incentive to assess Malaysian companies’ readiness to adopt Industry 4.0 and various tax deductions to develop the necessary human capital.

PUBLIC DIGITAL INFRASTRUCTURE TO SUPPORT 5G

13. To support the digitalization of the economy and wider adoption of Industry 4.0 technology in our society, the Government is providing the necessary digital infrastructure by preparing to spend RM4.2 billion to provide high-speed fibre optics to schools and selected industrial zones.

14. This is part of the National Fiberisation and Connectivity Plan (NFCP) that is designed to improve broadband quality and coverage, reduce broadband prices and increase high-quality internet penetration throughout Malaysia. The NFCP, led by my colleague the Minister of Communications and Multimedia, will require RM21.6 billion worth of investment from 2019 to 2023.

15. A large portion of the NFCP investment will be funded by the Universal Service Provider (USP) Fund managed by the Malaysian Communications and Multimedia Commission (MCMC), as well as funded by the private sector.

16. This plan will further improve internet speed in Malaysia, and make our economy ready for the implementation of 5G.

MAKING BROADBAND INTERNET AFFORDABLE FOR THE RAKYAT

17. We are working to improve affordability of broadband and the Government has achieved some successes in this respect.

18. The World Bank recently highlighted our success by pointing to the fact that average prices for basic Malaysian broadband services with the speed of 30Mbps fell by about 30% in 2018. In the same year, the average prices of 1Gbps plan fell by 40% all because of Mandatory Standard on Access Pricing (MSAP). With more affordable broadband, the World Bank states that the number of fixed broadband subscription with 100Mbps speed in Malaysia has grown by a factor of 8, to 1.2 million subscribers by end of 2018.

19. Having said that, penetration rate is still low in rural areas and there is still some way to go in making broadband services accessible to all Malaysians.

TALENT FOR THE NEW ECONOMY

20. We need all the talents we can get to develop our digital economy. The problem is that these talents are located overseas. We are working to bring them home as well as retain the talent we have in the country.

21. Meanwhile, we need to upskill our workers and equip them with new skills like coding to keep them relevant in the labour force, especially when jobs are at risk of being eliminated through automation. In schools, colleges and universities, we have to keep the syllabus relevant to the world outside of classrooms so that our young graduates are ready for the job market.

CHALLENGES IN THE MALAYSIAN DIGITAL ECONOMY

22. While we have achieved some successes, there are still many challenges to bring Malaysia completely into the digital age. Our digital economy has to open up so that we can have a level-playing field where the big players are not the only one reaping the benefits of digital economy. We need to find a happy medium to allow both big foreign firms and smaller domestic companies to co-exist, collaborate and thrive.

23. At the same time, there is a danger of digital inequality among Malaysians. There are those who are too poor to even own a smartphone, and they lack access to digital services or digital payment methods.

24. Finally, some government regulations, I admit, might be behind times. We need to restructure some regulations, abolish the outdated ones and liberalise others to improve competition and raise our potentials.

25. To grow the digital economy further, I, together with the Minister of Communication and Multimedia, will form a joint-ministerial committee to address problems faced by companies working in the digitalisation space at the highest level. This will allow the Government, among other things, to expedite applications for investment while solving any issues raised by the private sector faster. This demonstrates the seriousness the Government places in the digitalisation of the Malaysian economy.

CLOSING

26. In this session, I hope we can find these gaps and work together to hasten the digitalisation of the economy, and increase our competitiveness and productivity. I look forward to our discussion.

Thank You

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