Malaysia: Rolling out plans for ICT

The government is moving forward with one of its flagship projects, an initiative that aims to make the information and communications technology (ICT) sector – already a major contributor to the Malaysian economy – one of its largest components. However, if the state is to achieve its goals there are several issues to be addressed.

Currently, the industry represents around 10% of GDP, a figure the government is keen to increase as it pushes to achieve developed nation status by 2020. That plan was given a boost in early July, when one of the government’s lead agencies in its drive to develop the sector unveiled the first major projects in the Digital Malaysia programme, which was initiated by the prime minister, Najib Razak, last October.

According to Badlisham Ghazali, CEO of Multimedia Development Corporation (MDeC), eight of the scheme’s projects have already been approved and will be rolled out in stages. These and other initiatives will generate $10bn in investment value based on a public-private partnership model and will increase ICT’s input to GDP to 17% – $94bn – by 2020, Badlisham announced on July 5. “The investments will be used to create 160,000 jobs, besides providing an additional $2300 in annual income for 350,000 citizens via digital income by 2020,” he added.

Among the projects that have cleared the approval stage are an “Asian e-fulfilment hub”, which seeks to develop Malaysia into a regional centre for servicing cross-border e-commerce shipments and e-payment services for micro-, small and medium-sized enterprises.

At the core of Digital Malaysia is the aim of moving the industry from a supply-focused approach to a demand-focused one; shifting behaviour from being centred on consumption to production; and helping local talent form a high-knowledge, innovative workforce.

According to Fadillah Yusof, the deputy minister at the Ministry of Science, Technology and Innovation, Digital Malaysia will help develop a cohesive digital ecosystem. “These thrusts include initiating more demand-focused activities to leverage on the supply, encouraging internet users to come up with products or services while they consume from digital technologies, and increasing the development of local talent in key industries,” he said. “Previously, our focus was just to drive the industry. Today, our role has evolved to empowering citizens and businesses to use digital technology to enhance their lives and businesses.”

Though the government and its agencies will need to provide more detail on many of the programmes that are in the pipeline, and on how it intends to attract private investment to those initiatives, moving to flesh out Digital Malaysia should encourage the ICT sector.

According to a statement issued by MDeC on July 2, the outlook for that industry should remain positive for the rest of the year, driven by strong domestic demand and higher consumer spending. This prognosis was supported by a recent forecast by the National ICT Association of Malaysia, which predicted growth of 8-10% for the sector in 2012.

One cloud on the horizon is the weakening health of the global economy, exacerbated by the ongoing crisis in the eurozone and the slowdown in China. While domestic demand is expected to remain strong in the near term, Malaysia’s overseas markets for ICT goods and services could experience a contraction in the latter half of this year and into 2013. Depending on how severe this reduction in demand is, the ICT sector’s growth rate may slow, perhaps significantly.

Another possible pothole is the shortage of skilled engineers and entrepreneurs, many of whom chose to live and work overseas, according to Pua Khein Seng, the chairman and CEO of Taiwan-based Phison Electronics. “There is potential in the IT industry in Malaysia; we have talents but many of them are overseas,” Pua said in an interview with the Borneo Post in July. “In Taiwan, we often hear stories of our seniors becoming successful entrepreneurs after graduating, and these instil the belief that ‘I might stand a chance to succeed if I choose to be an entrepreneur.’ In Malaysia, we don’t have these kinds of success stories.”

If the government can attract the sort of investment it is expecting and is able to do more to facilitate entrepreneurial endeavours, the ICT sector may yet be able to write a few stories of its own in the years ahead.

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Malaysia: Rolling out plans for ICT

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Malaysia: Technology to the fore

With data use growing strongly and existing capacity under pressure, Malaysia’s broadband network is undergoing necessary expansion to keep up with demand. Indeed, as penetration growth slows, improving speeds and service quality have become a priority.

The Malaysian Communications and Multimedia Commission (MCMC), the industry regulator, expects household broadband penetration to rise to 65% by the end of 2012, up from 62.9% in 2011, the local press reported on April 16.

Mohamed Sharil Tarmizi, the chairman of the MCMC, stated that broadband growth would be driven by demand for higher internet speed in both the fixed-line and mobile segments. According to Sharil, the market may be nearing saturation, but there remains substantial scope for improving capacity.

Sharil cited the largely state-owned Telekom Malaysia’s UniFi high-speed broadband services as a market leader in strengthening broadband infrastructure. He said that lowering costs and broadening awareness would also support further penetration growth.

Malaysia’s new 2.6-gigahertz (GHz) spectrum for long-term evolution wireless communication (LTE), expected to be introduced in 2013, will be central to efforts to increase capacity. Sharil asserted that the new spectrum would complement those in the lower band, particularly those of 1 GHz and below.

In December 2011, the MCMC allocated spectrum in the 2.6-GHz band to nine companies, including the country’s four GSM operators. The development is expected to help support the expansion of mobile broadband services and ease existing bottlenecks in the system, as well as provide faster connectivity.

LTE comes none too soon, as current networks may be finding it harder to cope with the rapid expansion of data traffic driven by the increasing use of smartphones, tablets and other internet-reliant devices. According to Nitin Bhat, a partner and the head of consulting at Frost & Sullivan, data volumes are doubling every 12 to 15 months.

Sharil has said he expects the rollout of LTE to increase cooperation between operators on sharing infrastructure. He anticipates that some firms will opt to use mobile virtual network operator (MVNO) technology on existing infrastructure, rather than building extensive new network equipment, which is capital-intensive. This would be particularly useful to newcomers to the segment, who lack infrastructure of their own.

By sharing transmission networks, base stations and towers, operators can potentially lower capital and fixed costs, which will allow them to bring down prices to the consumer, strengthen services, or both. Joint investments could also reduce capital risk.

“Infrastructure rationalisation” is a relatively new trend in the competitive Malaysian information and communications technology (ICT) market, but one that could bear fruit.

In 2011, mobile firms Maxis and U Mobile agreed to share the former’s 3G radio access network (RAN), following an announcement in 2011 that Celcom Axiata and DiGi, the country’s other mobile operators, would look to collaborate on networks and infrastructure.

Some analysts have been critical of the decision to award so many players access to the 2.6-GHz spectrum, arguing that it could lead to a fragmented market, with some players under-utilising their allotted capacity, and the more successful finding their limited bandwidth pressured.

However, it is still unclear how many of the operators will actually commence operations in the near future. Overall, the introduction of LTE, with its capabilities for speed and volumes, is an important step forward for the sector.

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Malaysia: Technology to the fore

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