ㄑ Belt and Road ㄑ Opinion

Malaysia gateway to a digital silk road

Belt & Road
Chinese companies are increasingly leveraging the ASEAN opportunities for win-win cooperation.

By Hew Wee Choong

China Daily GlobalUpdated: October 18, 2019

Malaysia is strategically poised to play a crucial role in the upcoming new Silk Road, a digital one at that.

After all the 21st Century Maritime Silk Road sees the Association of Southeast Asian Nations as a key starting point under China's Belt and Road Initiative. By various estimates, this is one of the largest infrastructure and investment mega-projects in history, covering more than 68 countries and equivalent to 65 percent of the world's population and 40 percent of the global GDP as of 2017.

The opportunities are staggering.

According to A.T. Kearney, a global consulting firm, if the ASEAN were a single country, it would rank No 3 in population and No 7 in GDP globally. The Association has the potential to be among the world's top five digital economies by 2025. And with strong growth of the digital economy and digital innovation ecosystem, Malaysia can collaborate with Chinese tech companies to build a digital silk road for win-win cooperation.

What gives Malaysia an incomparable advantage is its location at the center of Southeast Asia, particularly its positioning along the Straits of Malacca, one of the busiest trade routes in the world.

China has historically positioned Malaysia as a gateway to the ASEAN, India and the Middle East. But Malaysia is itself emerging as a destination for business opportunities and growth potential. From being a base for shared services, multinationals now see Malaysia as a hub for catalytic digital technology and services. And venture capitalists see it both as a gateway to the ASEAN and as a digital growth hub.

Even the Belt and Road Initiative has highlighted Malaysia's forte as a digital destination and China has put many investments and incentives in place to ensure Malaysia wins a good slice of the new global economy. Malaysia's digital economy contributed 18.3 percent to the nation's GDP in 2017 and analyst firm International Data Corporation says it will touch 21 percent by 2022. Since China's digital economy contribution reached 34.8 percent in 2018, this signals much more capacity for digital industry growth in Malaysia.

It is important now, more than ever, to build on collaboration between countries, companies and peoples. The National Regulatory Sandbox is a safe test bed to pilot solutions across different areas such as drone tech, smart cities and autonomous vehicles. Malaysia is rapidly being recognized as an ASEAN test bed with a well-developed and varied infrastructure.

Also, new avenues of industry are being developed under Malaysia's Digital Economy Plan - focusing on big data analytics, e-commerce, and the internet of things (IoTs). Providing a digital hard and soft infrastructure, comprising high speed internet, world class physical infrastructure, business friendly policies and innovative talent ecosystems remain priorities for Malaysia, as evidenced by the Malaysian Cabinet's recent approval of the National Fiberization and Connectivity Plan.

The marriage of IoT and big data analytics is feeding artificial intelligence (AI), which many see as the defining force of the fourth Industrial Revolution. These are stepping stones to even greater things. As a trading nation, Malaysia is now moving up the value chain and trading in ideas, innovation and new technologies in a spirit of collaboration.

The Digital Silk Road is bringing new waves of tech opportunities to ASEAN - expansion of Chinese tech companies into this region, particularly in e-commerce, smart cities and Industry 4.0, automation and AI.

The increasing tide of collaboration between Chinese and Malaysian enterprises including Alibaba, Tencent, Huawei, are the latest testament to the growing strength of Malaysia's digital economy ecosystem.

For example, China's Alibaba set up its first overseas electronic World Trade Platform hub in Malaysia to accelerate e-commerce opportunities and growth. A collaboration between Malaysia's G3 Global, China Harbour Engineering Company and China-based Sense Time Group is being touted as the most valuable AI startup to set up Malaysia's first AI park, which is likely to see more than $1 billion in investments over the next five years.

The ASEAN's combination of a strong and vibrant economy, youthful demographic, rapid urbanization and ongoing economic integration make it a very attractive market for business expansion. There are other factors: the region's combined GDP of $2.5 trillion; 628 million people (10 percent of world population), with about 40 percent of them under 30 and digital natives; and a literacy rate of 94 percent.

At the heart of the ASEAN is Malaysia, with a population of 31 million, 68 percent of which uses the internet, 65 percent are smartphone users; it has 82 percent broadband penetration and 31 percent of internet users use mobiles to purchase. From Greater Kuala Lumpur, major cities in the region can be reached within eight hours by flights.

Malaysia is also a hub for Asian languages, a rich culturally diverse workforce, which is buoyed by a highly skilled and growing talent pipeline, strengthened by business-friendly government policies.

Malaysia was the first country in the region to establish diplomatic ties with China when its second prime minister Tun Abdul Razak Hussein visited China in 1974. On the 45th anniversary of diplomatic relations between Malaysia and China, it is interesting to note that Malaysia's role, both as a hub and gateway to the ASEAN, has become even more significant.

The author is the vice-president of Investment and Industry Development at Malaysia Digital Economy Corporation.