Malaysia Policy Report

Malaysia's Digital Transformation
As a regional leader in digital development, Malaysia has invested substantial resources in transforming its low-cost manufacturing industries towards a digital economy. The World Bank examined Malaysia's transformational pathway towards a broad-based digital economy in 2018.[1] Three key areas were identified as pivotal to Malaysia's successful implementation of its strategies: digital connectivity, digital entrepreneurship, and a thorough regulatory framework.

Challenges and Opportunities
Despite having low-quality internet infrastructure and a low adoption rate of digital solutions by businesses, Malaysia attracted numerous firms related to e-commerce and general export by implementing new policies and economic incentives. This development led to a shift in demand for a higher qualified workforce with basic to moderate ICT skills.

Digital Free Trade Zone (DFTZ)
Malaysia’s Digital Free Trade Zone was launched at the end of 2017 in cooperation with the Alibaba Group,[2] targeting small- and medium-sized enterprises (SMEs). The DFTZ was created to cater to the specific needs of digitizing trade-related economic activities of SMEs within international markets. This initiative includes various satellite infrastructure projects, such as e-fulfillment hubs organized and constructed by Cainiao Network near Kuala Lumpur International Airport. Cainiao, a logistics company under the Alibaba Group, provides smart solutions for all aspects of international trade and related infrastructure.[3] Other satellite projects consist of e-service platforms for the DFTZ, a core business of the Alibaba Group.

Smart City Initiative
Malaysia Digital Economy Corporation, a public agency related to digital development, launched a smart city initiative for the country’s capital in 2018 in cooperation with the Alibaba Group and its smart city solution City Brain.[4] City Brain provides an all-in-one solution for smart cities, offering necessary hardware (e.g., server centers, network infrastructure) and software (e.g., backend data collection and processing, frontend user interface) combined with advanced technologies such as multi-modal Big Data analysis and advanced computing through smart network infrastructure. Remote support for operation and maintenance is part of the appeal for city governments, which can substantially lower costs on all operational levels with a smaller workforce. City Brain was first implemented in multiple T-1 and T-2 cities across China in 2016, with Kuala Lumpur being the first non-Chinese city to adopt the technology.

Research and Development Collaborations
Malaysia planned and built various other digital development projects across the country in 2018 and 2019, ranging from fiber optics construction to multiple research joint ventures between Malaysian and Chinese universities.[5]

Summary of Digital Advancements
In summary, Malaysia has substantially advanced and expanded its digital infrastructure through novel technologies during the measurement period. Similar to other analyzed countries, Malaysia adopted a combination of national policy development and expanded bilateral ties with China through private companies and investments in digital infrastructure. These projects were planned, organized, built, and operated by or in cooperation with Chinese entities. Additionally, research joint ventures in digital fields and policy formulation by public agencies were partly supported by Chinese entities. Consequently, dependencies on Chinese entities were newly created and expanded.