Malaysia, the next Regional Internet-of-Things (IoT) Development Hub?

At a glance

Malaysia is in South East Asia, and it is the third largest economy in the region. Previously, the country relied greatly on agriculture and mining to boost its economy. However, there was a sharp shift in focus to manufacturing in the 70s, as the government realized the potential of manufacturing and industrialization through the accomplishments of the 4 Asian Tiger economies. Through investments, industries started to flourish and by the late 20th century, Malaysia achieved an economic boom and was considered as an industrialized country. The government did not just stop there, however. They have a vision that Information and Communications Technology (ICT) will be the next big thing, and they will be at the forefront of that movement.

In the ICT landscape, Malaysia is at an advantage compared to its counterparts in the region, partly due to its massive investment in infrastructures earlier to drive the industrialization. With the establishment of National Information Technology Council of Malaysia (NITC), the government has gone through various projects such as the flagship Multimedia Super Corridor (MSC), the digitalization of ministries and agencies, as well as the frequent upgrade of telecommunication infrastructures to stay relevant to future developments. For the next Malaysian Plan (2016-2020), the government looks forward to seeing an increase in ICT contribution to GDP from 13.1% from the previous plan to 17%.

Currently, in term of economy, Malaysia enjoys one of the strongest quarterly GDP growths in the past few years, at 6.2%. This could be contributed to higher private consumption, government spending, investment and exports. Overall, Malaysia is a good environment for business opportunities, and investors are more likely to invest in the country.

The current IoT landscape in Malaysia

Strong support from the government

Let’s talk about the development of the IoT scene in Malaysia. Prior to 2015, the Internet of Things, or IoT, is still a relatively a new concept in Malaysia. However, in 2015, the government realized the potential of IoT in transforming the nation, and decided to encourage the adoption of IoT technologies across different industries.

In the same year, MIMOS Berhad, an R&D centre under the purview of the Ministry of Science, Technology and Innovation (MOSTI), issued the National IoT Strategic Roadmap to the public. The Roadmap acts as the guiding document to steer Malaysia towards becoming a premier regional IoT hub. In addition, it is expected that mobile device penetration will hit 280% by 2025 and mobile services will reach US$16 billion in 2025. Moreover, IoT implementation is projected to contribute RM9.5 billion to Malaysia’s GDP in 2020, and RM42.5 billion in 2025. Separately, the Ministry of Science, Technology and Innovation added that IoT is likely to create over 14270 high-skilled employment opportunities by 2020.

This movement is also strongly supported by other government bodies as well. For example, even though Foreign Direct Investment (FDI) to Malaysia has been flat in previous quarters, investors and partners in the country are confident that there will be a surge in FDI with Industry 4.0. Therefore, relevant government bodies such as Ministry of International Trade and Industry (MITI) and Malaysian Investment Development Authority (MIDA) have been paying attention to the development of electrical and electronics (E&E) industry, as well as IoT implementation in manufacturing and automation. This could be seen through the approval of RM5.8 billion through 47 E&E projects under MIDA in 2017.

Another government agency that plays a major role in advocating the adoption of IoT across industries is Malaysia Digital Economy Corporation (MDEC). In 2016, it joined the LoRa Alliance together with Telekom Malaysia to promote National IoT adoption. By building a local IoT ecosystem, it allows local startups and tech companies to tap onto the vast potential globally, which is estimated to be valued from US$1.9 trillion to US$7.1 trillion by 2020.

Drivers for the IoT implementation

With strong supports from the government, locally based enterprises would find it easier to adopt and develop IoT technologies in their productions and daily operations.

Moreover, Malaysia’s demographics will further empower the implementation of IoT in the country as well. It has a fairly large and young population, with 65.95% in the age group from 15 to 64. This is an advantage, as more people in this age group have access to IoT devices like smart wearables or smartphones. In addition, the people in this age group are more receptive to new technologies and can integrate them into their daily life, compared to those at an older age. This is in line with the research carried out by Pew Research Center, as they point out that older adults face a number of challenges in adopting new technologies, such as the physical challenges from old age or difficulties in learning to use new technologies on their own.

As mentioned earlier, Malaysia’s GDP growth rates in recent quarters have managed to surpass the predicted growths and remain as a few of the best figures in the past years. This translates into a stronger economy, with better standard of living among the population. More people will be interested in better services and products, and IoT implementation will help to further improve the current services offered to the general population.

Last but not least, Malaysia is one of the few countries in the region that have sufficient infrastructures to support the movement towards IoT technologies. In April this year, Atilze and edotco announced the rollout of the first Low-Power, Long-Range wireless protocol network in Malaysia. The network will cover Klang Valley area, and it will encourage enterprises and service providers to bring commercial IoT services to users easier.

Opportunities for enterprises in 2018

2018 will be the year for some sectors to flourish, as the nation moves on to the second phase of mid-term initiatives in their IoT strategic roadmap.

Firstly, as Malaysia is preparing to join the wave of countries currently immersed in Industry 4.0, especially in its manufacturing and heavy industry sector, the government is pushing for more budget allocation for Industry 4.0 in Budget 2018. Moreover, with the current strong support from the government, more enterprises, especially SMEs, will be encouraged to adopt IoT technologies in their production, such as remote monitoring or automation.

Another sector that will see great potential for IoT will be the banking and retail sector. More Takaful insurance companies are looking to bring telematics insurance into their selection of products, especially in car insurance. eWallet has been on the rise as well, as more banks and retailers are adopting eWallet as a new form of payment.

The public sector will be on the rise as well, as the government is gearing up towards its goal of being a digitalized nation with IoT applications across different sector. Education will be paid attention to, as educators and enterprises are trying to create a future ready workforce to embrace IoT. The same can be said about the healthcare segment, as the government is trying to standardize the system so that patients can get access to virtue diagnosis and real-time queue or bed vacancy update.

Last but not least, smart city’s applications have been introduced in different areas such as Cyberjaya, Melaka and Greater Kuala Lumpur in 2017, and in 2018, there will be a surge in demands for it. Stakeholders are looking to create smart homes, so that users can control their utility consumption, as well as a smart transport system that allows citizens in those cities can get real-time update for the traffic situations, together with the arrival time for public transport.

Challenges and looking forward to 2018

With all the conditions, support from the government, as well as potential sectors for enterprises to venture in or develop further, however, Malaysia still face many challenges in its journey to digitalizing the nation and becoming the Regional Hub for IoT Development.

As a relatively young economy, SMEs still account for most of business establishments (97.3%). Ideally, as progresses are being made, a big proportion of new technology adoption will come from SMEs. However, the reality is different. According to Malaysia Productivity Corporation, ICT adoption by SMEs in Malaysia is merely at 10%. This is still a long way compared to other developed countries, where the rate stays at 50%. Therefore, what are some of the reasons that prevent SMEs from adopting ICT, and ultimately, IoT technologies? This could be attributed to high barrier to entry, anxiety about benefits brought about by IoT technologies, or the lack of awareness of about the potentials of IoT, government pilot projects, or good services provided by local and international solution provider. A good solution to this would be creating more opportunities and industry gatherings for the government, IoT solution providers and enterprises to meet up and discuss about their experiences in the IoT journey, and work out possible partnerships so that all can benefit from IoT implementation.

Another major challenge that would be present when Malaysia moves towards the IoT movement is cyber security. In October this year, perhaps one of the biggest cyber security breaches was exposed to the public in Malaysia. Personal information of more than 46 million accounts from various local telcos were sold on the Internet, as well as 80000 medical records and information from and government agencies. From this incident, it is clear to see that as Malaysia is getting more technologically advanced, the complexity of cyber crimes also increases as well, and criminals are looking to exploit the “connected” society. The government, as well as enterprises, will need to step up their game in creating an IoT ecosystem that is not only open for the public to access, but also secured and anonymous to counter cyber crimes and possible attacks from terrorists.

2017 is coming to an end, and Malaysia is currently on the right track to digitalizing the nation. A lot of progresses in IoT implementation nationwide have been made, and new challenges emerge as the government agencies and enterprises start to go in-depth into the movement. This could be the game changer for Malaysia, as it can become a pioneer in the IoT scene and service provider in the region, instead of looking from outside as a consumer in the 3 previous industrial revolutions.

Looking forward, 2018 will be a promising year for Malaysia. As enterprises focus more on IoT, as they can benefit from the infrastructures built to support IoT technologies, as well as more funding from relevant government bodies. Activities done in this year could be the game changers for Malaysia, as they can help Malaysia to become a pioneer in the IoT scene and service provider in the region, instead of looking from outside as a great consumer in the 3 previous industrial revolutions.

Do check out our site frequently, so you can get updated with the newest trends and information about IoT development in Malaysia, as well as other countries in the region. However, if you want to obtain first hand insights and establish strategic relationships with key IoT stakeholders in Malaysia, join us at the 21st edition of Asia IoT Business Platform in Kuala Lumpur this coming April.


Kiet Pham

27 December 2017

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