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The industry reacts: How will Budget 2018 change Malaysia’s IT industry?

AvantiKumar | Nov. 2, 2017
Budget 2018 Special includes leaders from MDEC, IDC, PIKOM, MaGIC, Gartner, Accenture, DHL Express, AJ Pharma, OutSystems, Trend Micro, 3M, iMoney, Cisco, CA Technologies, Microsoft, Lazada, 11Street, and Canvas Instructure.

Budget 2018 (Storyblocks)

Credit: Storyblocks


  Local ICT industry leaders have generally welcomed Budget 2018 proposals by Malaysia's Prime Minister Datuk Seri Najib Razak on Friday 27 October 2017.

The Budget 2018 allocation of RM280.25 billion is an increase of RM19.45 billion over the 2017 budget allocation of RM260.8 billion, said the prime minister who is also the finance minister.

Najib said the Budget has eight core thrusts with one of the objectives being to increase Malaysia's income per capita to RM42,777 by 2018. "During the first half of 2017, the economy recorded a sterling growth of 5.7 percent. The World Bank has revised upwards Malaysia's GDP forecast from 4.9 to 5.2 percent for 2017 and commended the country's economic performance for its laudable policies."

"In addition, the Government forecasts the Malaysian economy to record an annual growth between 5.2 and 5.7 percent in 2017, higher than the March estimates ranging between 4.3 and 4.8 percent," he added.

Just recently, the prime minister announced a slew of new initiatives to boost nationwide digital transformation following the 29th Malaysia Implementation Council meeting (ICM) and confirmed ICT increasing importance as an engine of growth for Malaysia's economy.

Several proposals in Budget 2018 continue to move the digitisation agenda up to an even higher gear as the nation makes strides towards becoming a digital, developed economy status by the year 2020.

Compared with last year's proposals, some early analyst comments see Budget 2018 as expansionary but one still underpinned with financial rigour.
Computerworld Malaysia asked industry leaders to share their views on the digital aspects of the proposals and what these mean for Digital Malaysia.

Industry reactions

Here are some edited digital industry leadership insights offered to Computerworld Malaysia. These comments in the current version of this article, presented in random order, come from MDEC, IDC, PIKOM, MaGIC, Gartner, Accenture, DHL Express, AJ Pharma, Trend Micro,3M, iMoney, Cisco, Microsoft, CA Technologies, Microsoft, Lazada, 11Street, OutSystems, and Canvas Instructure. This article was updated 2 November 2017.

Datuk Yasmin Mahmood - MDEC CEO

In the vanguard of driving Digital Malaysia is national ICT agency Malaysia Digital Economy Corporation (MDEC). Datuk Yasmin Mahmood (pic above), who is MDEC's Chief Executive Officer, sounded the industry's welcome note:  "We are delighted that Budget 2018 is focused on accelerating growth and enhancing the wellbeing of the rakyat [people] as well as in further enhancing Digital Malaysia. The Digital Economy continues to be a key driver of growth, contributing some 18.2 percent of Malaysia's GDP [Gross Domestic Product] this year, and expected to exceed the projected target of 20 percent earlier than 2020."

Speaking of the digital inclusivity measures, Yasmin said, "The RM100 million allocation for the eRezeki and eUsahawan programmes will ensure that the Digital Economy continues to be inclusive for the well-being of the rakyat, and in particular the B40 and M40 groups."

"With both programmes going into their third year, we estimate that 150,000 rakyat would be trained in 2018; resulting in 341,745 rakyat participating in both programmes with an estimated total income and revenue of RM544 million according to calculations," she said, adding that digital inclusivity has also been extended to a new flagship initiative called eLadang to encourage farmers to leverage the latest smart farming technologies - such as IoT (Internet-of-Things) and BDA (Big Data Analytics) - to improve yield and pendapatan [income].  

The critical challenge of develop the right talent to underpin digitisation also received support, Yasmin said, pointing out that: "A total of RM250 million has been allocated for future education of the National Transformation 2050 (TN50) generation, and would be used to develop Science, Technology, Engineering and Mathematics (STEM) centres and improve Computer Science modules, including for Coding programmes. 

"From the RM250 million, RM190 million is allocated for two thousand classes to be transformed into Smart Classrooms for 21st Century learning to increase creative and innovative learning," she said.

"Our forecast reveals that we need one million digital workers, such as coders, application developers and software engineers, by 2025," Yasmin explained. The strategy of joint public-private-academia collaboration is continuing to encourage the youth community from being users of digital innovation to producers or digital innovators.

Malaysia's startup ecosystem has also been boosted with a stream of incentives, Yasmin said.

"Investors from major institutions will allocate RM1 billion for venture capital investments in selected sectors," she said.  "These initiatives include income tax exemption being widened to include management fees and performance fees, as well as a reduction in minimum investment limit in a venture company from 70 percent to 50 percent from 2018 to 2022."

Companies or individuals investing in venture capital companies will be given a tax deduction equivalent to the amount of their investments, which will be limited to a maximum of RM20 million ringgit per year, just as income tax exemptions equivalent to the amount of investments by angel investors in venture companies will be extended until 31 December 2020.

"This is a visionary stance by the Malaysian Government as the startup ecosystem is the job creators of the future," she said.

"We introduced two highly successful initiatives last year, the first being the Malaysia Digital Hub initiative that supports start-ups and communities while creating greater opportunities for them to connect to the ASEAN and global digital ecosystem; and secondly, the Malaysia Tech Entrepreneur Programme (MTEP) - an initiative by the Malaysian Government that aims to attract global technopreneurs and help them to realise their fullest potential out of Malaysia and to scale their businesses regionally and globally," Yasmin said.

To further boost research agency MIMOS' Industry 4.0 moves earlier, the government will also be providing grants worth RM245 million under the Domestic Investment Strategic Fund to upgrade Smart Manufacturing services. "This move is aimed at supporting investment and business activities under the Industrial Revolution 4.0," she explained.

"In addition, the Futurise Centre in Cyberjaya will be upgraded as a one-stop centre for corporate companies and universities to develop product prototypes as well as to boost innovation," Yasmin announced. 

"The government will also extend incentive periods for Fast Capital Allowance by 200 per cent on automation appliances for assessment year of 2018 until 2020, while incentives for the manufacturing and services sector for Fast Capital Allowance by 200 per cent will also be given. For information communication technology appliances, capital allowances - including computer software expenditure - can be claimed from assessment year of 2018 until 2020," she said.

"These moves stem from the reality today that, in a hyper-connected world, it is becoming abundantly clear that artificial intelligence (AI) is the defining force of the Fourth Industrial Revolution," she said.

"AI is the natural progression from data analytics, and as such, Malaysia should start looking at developing a National AI Framework," Yasmin continued. "This will then be an expansion of the National BDA (Big Data Analytics) Framework. AI is the 'game changer' for the Fourth Industrial Revolution."

Speaking of the Digital Free Trade Zone (DFTZ), Yasmin revealed that "DFTZ is proving to be a massive game changer for Malaysia, which will see Malaysia's SMEs doubling exports, and establish Malaysia as a regional trans-shipment hub for e-commerce logistics while creating 60,000 jobs by 2025." [Also see -Malaysia's DFTZ wins international award, 25 government agencies boost eCommerce 'explosion']

"I am happy to say that the DFTZ will "Go Live" on 3 November and 1,900 export-ready SMEs will be flagged off to begin their export journey. This is an encouraging number of SMEs as our previous target was 1,500 SMEs," she added. (See -Malaysia’s IT sector pushes global envelope, wins WCIT awards)

"For the first time, the world will see a physical and virtual zones with additional online and digital services to facilitate cross border eCommerce and invigorate internet based-innovation," Yasmin said.


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