Digital Innovation and Malaysia’s Place Within the 4IR

Malaysia’s very own Datuk Yasmin Mahmood is listed as among the world’s 100 most influential people in digital government by Apolitical, a UK-based global network for government which focuses on helping public servants find the ideas, people and partners they need to solve the hardest challenges facing the societies.

She is indeed a professional which needs little introduction, having been Microsoft Malaysia’s Managing Director a decade ago during the company’s “golden era” when she then aligned the business strategy of what was then the world’s most powerful software company with Malaysia’s national and development agenda (something which became popularly known by the ICT industry as “Malaysianising Microsoft”) for the benefit of country.

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In September 2014, she accepted the national calling to be the CEO of Malaysia Digital Economy Corporation (MDEC). MDEC, an agency under the Ministry of Communications and Multimedia Malaysia, which is entrusted to develop, coordinate and promote the nation’s digital economy sector. Throughout her tenure in MDEC, she had flown the Malaysian flag high by speaking at major events such as the World Economic Forum (WEF), World Islamic Economic Forum (WIEF) and International Telecommunication Union (ITU), as well as having indepth interviews with Forbes, The Economist, CNBC, and Bloomberg.

We managed to catch up with Datuk Yasmin on her return to Malaysia earlier this month. Prime Minister Tun Mahathir Mohamad had led a delegation to Japan to explore Japan-Malaysia investment collaborations, and Datuk Yasmin was part of the delegation.

The purpose of the interview was to gather insights from Datuk Yasmin on the Fourth Industrial Revolution sweeping the world today, and on “MSC 2.0: Transformation of the Digital Economy”, a presentation she had delivered recently at Affin Hwang Capital Conference Series 2018 –

What is the relevance of the Fourth Industrial Revolution today? 

Our whole world needs to be re-thought because of innovation. The first Industrial Revolution was driven by steam; the second by electricity; the third by computers. This last wave of innovation is, I daresay, the most disruptive that we will ever come across, where the innovation that is happening in the cyber-world is going to match the innovation that is happening in the physical world. If you combine things like data analytics and robotics and artificial intelligence with what’s happening in the world of material sciences, the miniaturisation of materials, the robots of the future are going to be able to crawl into your body and collect data that is in your body.

You also have to look at the power of the Internet; it’s so potent that in 5 seconds, which is a very short time, 12.2 million emails were sent, and 3.7 million WhatsApp messages were being exchanged, for example. It’s not only the volume, it’s also the pace, and to me, it’s a scary one. It took the telephone 75 years to get to 50 million users, whereas it took Google only 88 days. The power of the Internet brings innovation to the mainstream; whenever there is inefficiency, there is an opportunity for a platform to come in and eliminate intermediaries. It is no longer a world of assets; it is a world of technology and platforms. Economic value creation from digital innovation is something that every country has to do, and driven by the young.

What has been Malaysia’s experience vis-à-vis this new world of digital innovation?

Datuk Yasmin: Our journey with information and communications technology (ICT) started with the Multimedia Super Corridor (MSC), and the MSC started with Cyberjaya in 1996. From the onset, MSC was supposed to bring in investments, and to attract large global IT companies to come and operate in Malaysia based on the 10 years of tax exemption as part of the MSC Malaysia Bill of Guarantees. The MSC has since attracted more than 3,000 companies from across the world, and created close to 180,000 high-paying jobs.

For example, Standard Chartered Bank (SCB) has got a very big global operation in the Technology Park; they have this command and control centre here that takes care of all of SCB’s assets; all their digital operations across the world. What’s more interesting is that this system was developed and maintained by their local operation here end-to-end. 75% are Malaysians, and 25% are expatriates from more than 20 countries. And that is the policy that MSC had created until today; that is, we attract the best of talent. We need to attract the most talented people.

Apart from those big companies, the ones making a difference are also smaller companies, and we are trying to attract that kind of investment with the same tenacity as the big companies. One reason is because they bring in cutting-edge technology in AI (CXS from Norway), in cyber-surveillance (Trovicor from Germany), and in 3D printing and design (Dassault Systemes from France).

The other component of the MSC is looking into growing local companies, because no digital economy is going to be complete if you don’t have the local companies. Just looking at IPOs around the region, Malaysia actually produced 7 of the 14 tech IPOs. JobStreet (which has since been sold to a HK company) was one of the first to be listed. We also have Silverlake, MOL Money Online, iCarAsia, iProperty Group, MyEG, and REVAsia.

What are some of the more notable Malaysian companies in digital innovation, and what kind of challenges does this industry face?

Datuk Yasmin: If we look at the new companies coming up, first of all, they have got to be global. Malaysia has only 30-odd million people, so expansion requires them to go really quickly into multiple countries. Greenpacket, which is into FinTech and IoT, is currently in 70 countries. Tranglo (an airtime and money transfer operator) has offices in London, Dubai, Jakarta, and so on.

The start-up ecosystem is a big bet that every country is putting up. Where there is a lot of risk, a lot of uncertainty, you have to really drive it through sheer passion. It is the young people with nothing to lose, with a dream to make a difference, who will make this bet. In Malaysia, we have such people. For example, runs a very simple platform conceptually; when lorries go out and deliver goods, they’re usually empty coming back. So the platform seeks to reduce inefficiencies, lower cost and increase income for lorry operators. Carsome was started up by two people – bankers, in fact – who left their jobs to create this platform where you can do anything to do with cars, including trading and ancillary services. Within 3 years, they had gone from 4 people to 180 people.

Venture capital (VC) funding is currently the weakest point for the start-up ecosystem, which is why we lost Grab to Singapore. For start-ups, you first have incubation, then you have pre-seed, then you have the seed level, then you commercialise it. We have ample money in the pre-seed and incubation – Grab was funded by Cradle Fund Sdn. Bhd. (Cradle). But when they wanted to grow, there weren’t enough VCs in Malaysia. 77% of the VC money is by the government. In Singapore, VC funding is 30 times that of Malaysia, and mostly from the private sector.

How is Malaysia moving forward from here?

Datuk Yasmin: It’s very encouraging to see that in the recent budget, RM2 billion of government funding has been set aside to match VC funds. In terms of MSC 2.0, now we have YB Gobind Singh (as Communications and Multimedia Minister). The two outcomes required, as stated by the Minister, is to firstly accelerate the growth of digital tech entrepreneurship, and secondly ensure widespread digital adoption.

In Malaysia, 98% of companies are SMEs, but they only contribute 39% of GDP. In Singapore, it’s 50%. In China and USA, it’s closer to 60%-70%. Tech is really driven by entrepreneurship. This has to be driven by the private sector. I am happy that the recent Budget has made it clear that the economy has to be driven by the private sector in general. YB Gobind has pointed out that there is a lot of work to be done; we need to play a lot of catch-up. We’re making a lot of bold moves around liberalisation of broadband – making sure there are a lot more players in fixed broadband, and the National Fiberisation Plan has been announced with very clear milestones.

Not only in Malaysia, but everywhere in the world, tech talent development is a real challenge. How we’re approaching it is in three ways. The first way is through re-skilling. Secondly, there is a mismatch between what the universities are churning out and what the industry wants. To address this, we have this thing called Premier Digital Tech Universities. These are universities that have been complete aligned with the industry – all their courses have to be approved by real industry experts that MDEC put together. If graduates come from these universities, they will have 100% employability.

Thirdly, it’s about the children in schools. 65% of our children, when they come out of school, will go into jobs that don’t even exist yet. What we’re doing now is to ensure that they uncover these sorts of talents. Policy-wise, we have embedded computational thinking and computer science into the school curriculum. This takes time; it’s not an easy task. Simultaneously, we are floating up kids who win competitions, through various programmes in schools; via the #mydigitalmaker co-curricular activities. The idea is that by the time they leave school, they not only have their SPM certs, they also have a portfolio of their innovation projects. And that’s what the industry is looking for.