Malaysia’s Digital Economy Blueprint: More is Not Better

Malaysia’s Digital Economy Blueprint (2021-2030), unveiled on 19 February 2021, aims to accelerate the country’s digital transformation. Digital economy aspirations are not new to Malaysia. They can be traced to as far back as the 1996 launch of the Multimedia Super Corridor (MSC). 

The new Blueprint, unlike prior plans, adopts an all-encompassing approach to expediting digital transformation. Previous plans focused on a specific dimension of the digital economy as, for example, the National Internet-of Things (IoT) Strategic Roadmap (2015-2025), Indust4WRD: National Policy on Industry 4.0 (2019-2025), and the National e-Commerce Strategic Roadmap (2016-2020). The 2021-2030 Blueprint’s much broader coverage allows it to introduce numerous new elements absent in previous plans, including the “Gig-Up” program for growing the number of gig workers in a sharing economy.

The  Digital Economy Blueprint headlines three main objectives: (i) encourage industry players  to become creators, users, and adopters of innovative business models; (ii) harness human capital able to thrive in the digital economy; and (iii) nurture an integrated ecosystem that allows society to adopt a digital economy.

Then, it catalogues altogether, 6 thrusts, 22 strategies, and 48 national and 28 sectoral initiatives that strive to catapult Malaysia to become a regional digital economy leader, while cultivating an inclusive, responsible and sustainable digital realm domestically. People-private-public partnerships, outcome-oriented cohesive strategies and initiatives, and a delivery-driven governance structure are tasked in the plan to foster the desired change. 

Although the intent of this elaborate plan is laudable, it faces several challenges; namely, the credibility of the targeted key performance indicators (KPIs), the use of identical KPIs for all sectors, and a governance structure with multiple layers of bureaucracy. 

Such an important policy document issued by the Economic Planning Unit in the Prime Minister’s Department would have greater credibility if it is better informed by data rather than ambiguously formulated targets for its KPIs.  

Given its broad scope, it is not surprising that the Blueprint is laden with a plethora of  ambitious KPIs to show that it means business. For example, for the business sector, by 2025, the plan aims to increase productivity across all sectors by 30 percent; boost the digital economy’s GDP contribution to 22.6 percent; get 87,500 micro, small and medium enterprises (MSMEs) to adopt e-commerce; attract two unicorns (privately-owned tech companies valued at over $1 billion) – home-grown or foreign; attract RM70 billion of investment in digitalisation; and increase the number of start-ups to 5,000. 

It is impossible to gauge if these KPIs are realistic or achievable since baseline numbers are not provided. The National e-Commerce Strategic Roadmap (2016-2020), in contrast, provided the 2015 baseline figure before each targeted KPI for 2020. 

Even though data on the digital economy is sparse and scattered, implementing agencies of the previous initiatives, which are also part of the consultative process of this plan, should have some indicative data. For example, MDEC and Malaysian Global Innovation & Creativity Centre (MaGIC) should have indicative data on the number of start-ups they have nurtured. Such an important policy document issued by the Economic Planning Unit in the Prime Minister’s Department would have greater credibility if it is better informed by data rather than ambiguously formulated targets for its KPIs.  

At the sectoral level, similar KPIs are imposed across distinct sectors. For example, a contribution of at least 5,000 start-ups by 2025, is respectively targeted for the agricultural, construction, manufacturing, tourism, financial and insurance, wholesale and retail trade sectors. A blanket 30 per cent increase in labour productivity by 2025 is mandated respectively for agriculture, construction, manufacturing and selected services. This uniformity completely ignores sectoral differences such as sector-specific initial conditions and challenges. 

Intersectoral differences can be clearly seen by comparing financial services with the agricultural sector. In 2019, the International Monetary Fund (IMF) reported a vibrant financial technology (fintech) ecosystem in Malaysia, with 200 start-ups, in, for example, payments, lending and block-chain. Changes in consumer behaviour as well as regulatory changes have facilitated this digital evolution. 

The agricultural sector, on the other hand, is lagging behind in its use of digital technologies due to poorer internet connectivity in rural areas while farmers are not equipped to deploy these new technologies. Availability of cheap foreign labour also has delayed farming’s greater automation and use of modern technologies. These differences imply that some sectors are less likely to achieve the same targeted KPIs than others. 

To address a well-known Achilles heel in Malaysian policy-making, the Blueprint devotes a whole chapter on governance and implementation. A Council is established to provide leadership and policy direction, which, together with a steering committee, clusters, working groups and strategic management offices, are expected to ensure judicious implementation. Such a structure may lead to bureaucratic hurdles when speed is the essence for effective implementation. The private sector will have to expend more time and energy to learn to navigate this new bureaucratic maze, which may end up hindering their much needed participation.

Although the plan aspires to be comprehensive, it is important to remember that doing well is infinitely better than doing more. 

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