A recognised industry leader, Mahadhir Aziz, Chief Executive Officer of Malaysia Digital Economy Corporation (MDEC), has vast experience across financial services, oil and gas, IT and media, serving organisations such as Deloitte Consulting, Kodak, PETRONAS and AmInvestment Bank.
He set up Futurise, an agency under the Ministry of Finance, in 2017 to drive the National Regulatory Sandbox (NRS) in Malaysia, and was later handpicked in March 2020 to be part of the founding team at the National Economic Implementation and Strategic Coordination Agency (LAKSANA) under the Ministry of Finance. Earlier, in his role as the General Manager of Cyberview, he was instrumental in developing Cyberjaya Global Technology Hub Blueprint and its implementation and setting up the City Innovation Council to manage Smart City implementation, including the Cashless Cyberjaya programme. Mahadhir has also served on various committees such as the United Nations Technology Innovation Labs Advisory Panel and the Malaysian Industry4WRD Regulatory Panel of the Ministry of International Trade and Industry (MITI).
In an interaction with Shubhendu Parth, he talks about the initiatives taken by the Ministry of Communications and Multimedia and MDEC to make Malaysia digital-ready, the opportunities for investment in the country, Industry 4.0 initiatives and efforts towards driving the Islamic FinTech ecosystem. Excerpts:
Where does Malaysia stand vis-à-vis other Asian countries in terms of digital readiness, and how do you plan to improve it?
Malaysia’s digital readiness is at least equal to, if not better than, most of our Southeast Asian neighbours. The digital economy contributes 22.6% to the Malaysian national GDP. It is targeted to reach 25.5% by 2025, according to the Twelfth Malaysia Plan (12MP). COVID-19 has driven higher digitalisation in Malaysia. According to the e-Conomy SEA Report 2021, Malaysia has seen three Million new digital consumers since 2020. The report noted that 94% of pandemic consumers continue to use digital services, with 98% intending to continue going forward. It’s a permanent shift in digital adoption in Malaysia.
While the shift means that the digital consumers are there to stay, we need to do more work to digitalise our businesses. A July 2020 study by Workday found that only a quarter of Malaysian organisations have accelerated their digital transformation plans, while 60% have slowed down. In August 2020, the SME Association of Malaysia revealed that only 26% of local SMEs had chosen digitalisation or eCommerce platforms as their post-pandemic survival strategy. Additionally, of the 43% of respondents who reported having embarked on a digitalisation journey, about a third said their digitalisation efforts had been unsuccessful. This highlights that there is still a lack of urgency among Malaysian SMEs in terms of adopting digitalisation.
So, what are you doing to motivate businesses to adopt digital technologies?
We are hard at work to ensure businesses are ready to take advantage of the digital economy. We have several initiatives and programmes to help with that. Our Go-eCommerce Onboarding and Shop Malaysia Online initiatives aim to support Malaysian businesses from various sectors to onboard eCommerce and ePayment platforms. This features 32 eCommerce partners on the campaign, including Boost, Dropee, Lazada, Fave, PrestoMall, Shopee and Touch ‘N Go eWallet. Also, as of October 2021, we have successfully onboarded more than 500,000 businesses generating over 85 Million transactions with a Gross Merchandise Value of over RM 4.6 Billion.
We have introduced a Digital Guidebook and Quick Guide for the SMEs to help players in the retail and Food and Bevrage sectors reassess their digital opportunities and readiness. It also provides a step-by-step guide on enhancing current digital capabilities and beginning their digital transformation journey. We also have various grants and initiatives that help businesses become digital-ready.
MDEC helped facilitate the SME Digitalisation Grant, an initiative where the Malaysian Government provides a 50% matching grant of up to RM 5,000 per company for the subscription of digitalisation services. We also have the Smart Automation Grant (SAG), which provides a matching grant of up to 50% of the total project cost and a maximum of RM 200,000 to help services companies automate business processes. Besides, we have the 4IR Catalyst Grant (4ICG) designed to increase the development and use of IR4.0 technology in key business verticals.
The Ministry of Communication and the MDEC also focus on creating substantial digital economic spill-over through equitable access to digital tools, knowledge, and income opportunities. What are you doing to achieve this?
People are the principal benefactor of our initiatives. Access to digital tools, knowledge and income opportunities must help uplift them and boost Malaysia’s economy.
Our programmes and initiatives under the #SayaDigital campaign have four main aspects: skills and knowledge, business digitalisation, start-up catalysation, and digital investments. Programmes such as Let’s Learn Digital, Digital Skills Training Directory, and MyDigitalWorkforce Work-in-Tech (MYWiT) is meant to provide workers with means to reskill and upskill themselves for the digital demands of today’s workforce.
We have programmes such as the #MyDigitalMaker and Digital Innovator Programme (DIP) to teach digital skills among the youth. We have also partnered with the tertiary education institutions as part of our Premier Digital Tech Institutions (PDTI) initiative to cultivate the next generation of digital experts. Our programmes, such as eUsahawan, eRezeki, and Global Online Workforce (GLOW), aims to help people earn an additional income online and through digital means, while initiatives such as Founders Grindstone and the Global Acceleration and Innovation Network (GAIN) is helping tech startups grow.
For 25 years, MDEC has facilitated digital investments into Malaysia through MSC Malaysia. With the introduction of Malaysia Digital (MD), the successor of MSC Malaysia, we are set to expand this further. MD will introduce a new framework centred around three primary components: agility, flexibility, and relevance. One of the catalytic programmes under Malaysia Digital is DE Rantau, which is designed to support Digital Nomad hubs, Digital Nomad communities and the ecosystems. The programme has a spill-over effect across various other industries. There is an estimated RM 1.26 Billion local spending by foreign Digital Nomads, which will boost local economies such as tourism, recreation, and health and wellness. Digital Nomad hubs can encourage knowledge, experience and skills sharing, creating a more robust digital workforce.
We recently led a delegation of 20 tech companies to Expo 2020 Dubai, helping them expand their reach internationally. Our programmes helped cultivate local unicorns like Carsome and soonicorns like Fave. Their growth means more local digital solutions for the people and more jobs and income opportunities. It has also helped us develop new industries for Malaysia. The Digital Creative Content industry is a case in point, encompassing video games and animation.
How will you describe the opportunity for investors in Malaysia? What value proposition are you offering to attract new digital investments?
Investors can look forward to the new Malaysia Digital (MD) initiative. Malaysia Digital offers greater agility for local and international tech companies by providing more options and flexibility to choose from competitive fiscal and non-fiscal incentives. MD also seeks to expand beyond designated locations into a nationwide initiative, providing more flexibility and opportunity for companies to grow, expand, or reinvest from anywhere in Malaysia. Lastly, initiatives are being taken to improve governance and processes to meet the industries’ diverse needs at speed.
What about the adoption of Industry 4.0? Where does Malaysia stand on this front?
MDEC is well on track in cultivating 4IR adoption in Malaysia. We have programmes and initiatives that support the National 4IR Policy, the guiding principle for Malaysia to stay ahead of the 4IR curve. While I mentioned 4IR Catalyst Grant and Smart Automation Grant earlier, we also have the DataKITA initiative to drive data development and adoption in Malaysia. We are also pushing for digital agriculture technology (Agritech) via our eLadang programme, which has borne some fruit. Our partnership with Pertubuhan Peladang Kawasan Kuala Langat (PPKKL) to introduce Internet of Things (IoT)-enabled fertigation systems led to improved productivity and income and reduced operational costs by over 20%. It also helped increase the overall yield of Grade A chillies by up to 90%.
MDEC has also collaborated with CIMB Islamic Bank Berhad to introduce a micro-financing programme to enable farmers to adopt technologies like IoT, Big Data Analytics, and AI. We have also partnered with P2P financing platform microLEAP and Bank Pembangunan Malaysia Berhad (BPMB) to provide RM10 Million in Shariah-compliant microfinancing for Malaysia’s agriculture community to adopt Agritech at scale.
Our efforts towards expanding 4IR technology and other catalysing programmes have allowed Malaysia to become regional leaders in some areas within 4IR. Today, Malaysia is home to the world’s leading DroneTech companies such as Aerodyne and Poladrone. These companies are also producing 4IR solutions for challenges in Malaysia and the region.
An important aspect of technology development in Malaysia was its integration with Islamic Finance. How is it evolving as a framework?
We have seen a fair amount of Islamic FinTech stemming from Malaysia. According to Dinar Standards’ Global Islamic Fintech Index 2021, Malaysia ranks first in market maturity and stands among the top five Islamic FinTech markets based on transaction volume. Malaysia has a growing number of Islamic FinTech companies like microLEAP, HelloGold, Global Sadaqah, The Noor, and Wahed Technologies with unique offerings and solutions.
MDEC has several programmes and collaborations to develop Islamic FinTech in Malaysia. The Fintech Booster program is designed as an offshoot of a survey conducted by BNM from their sandbox program to address the pain points of fintech companies. It has secured 11 legal firms and Shariah advisers as partners for the program. Our FIKRA Islamic FinTech Accelerator is a joint initiative by Securities Commission Malaysia (SC) and the UN Capital Development Fund (UNCDF) to further enhance the Islamic capital market ecosystem by identifying and scaling innovative fintech solutions in Malaysia. MDEC is an Ecosystem Partner of this. We also have an industry-led collaboration network, i-Connect Fintech in Islamic Finance, that aims to create and nurture a conducive innovation ecosystem in Malaysia towards increasing disruptive innovation.