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CEO of MDEC: Malaysia Digital to offer digital businesses increased flexibility in fiscal and non-fiscal incentives

MDEC CEO Mahadhir Aziz
In an email interview with e27, Mahadhir Aziz, CEO of Malaysia Digital Economy Corporation (MDEC), acknowledges that the country may see slower growth during this period. However, he states that there is still some optimism in the market as Malaysia has continuously undertaken “aggressive efforts” to elevate the startup ecosystem in the country. “Access to financing continues to be a challenge for startups. However, the government has devised a few developmental roadmaps … that emphasize the greater use of alternative forms of financing, such as VC and digital platform-based models, including peer-to-peer financing (P2P) and equity crowdfunding (ECF). These strategies are an integral part of the government’s strategies for maintaining growth as Malaysia achieves high-income nation status,” he writes. “Another challenge for startups in Malaysia is a lack of connections to a worldwide network of people who can serve as mentors and advisors. Global connectivity is crucial for startups since it influences their access to markets and their ability to obtain knowledge and insight. A startup’s introduction into the market can be enabled and facilitated by getting to know the right people.”

Ever since the pandemic in 2020, three million new digital consumers have arisen in Malaysia, providing an exciting opportunity for startups and investors to seize. Apart from that, today is considered a crucial time for the digital economy in Malaysia as businesses are pushed to digitalise as soon as possible. There are also plenty of other opportunities in the market. “In terms of the overall cross-border market, Malaysia is home to vast resources making us one of the main exporters of electrical and electronic products, chemicals, machinery, appliances, and manufactured metals to the world. This has helped us build our ties with countries like Singapore, China, the US, and Japan, making us and one of the world’s major trading nations. We have also continuously pursued our bilateral ties to ensure Malaysian companies can easily trade with competitive rates. This includes our involvement in ASEAN Free Trade Area (AFTA), Organisation of Islamic Cooperation (OIC) as well as the Regional Comprehensive Economic Partnership,” Aziz says.

To maximise these potentials and tackle the existing challenges, Malaysia has prepared plans to support startups. In this interview, Aziz speaks about the Malaysia Digital initiative and the various programmes that it is running to expand the country’s digital economy capabilities and capacities. The following is an edited excerpt of the interview.

Now that we know the challenges that the Malaysian startup ecosystem are facing in the post-pandemic era, what kind of support will MDEC provide in this situation? One of the key targets of the government is to achieve 25.5 per cent of digital economy contribution to Malaysia GDP and MYR70 billion worth of investment in digitalisation by 2025. MDEC is working closely with other ministries, agencies and partners to achieve these targets. Malaysia is on track to achieve MYR1.65 billion worth of e-commerce revenue by 2025. This achievement is supported by the National E-Commerce Strategy Roadmap (NESR), which is a stepping stone for the nation toward digital trade. Collaboration is key and we have maintained an open-door policy when cooperation with other government agencies and the private sector to enhance Malaysia’s digital economy sector. In mobilising the nation towards the Digital Trade initiative, MDEC will intensify partnership and collaboration between the government and industry through the NESR to drive growth of businesses in Malaysia through e-commerce. Last year, MDEC allocated MYR10.5 million worth of grants benefiting 50 small and medium-sized enterprises (SMEs) and startups. Through MDEC, the government has been actively offering grants to spur innovation, support creation of new intellectual property, and increase adoption of business automation to positively contribute towards growing Malaysia’s digital economy.

Can you tell us more about the Malaysia Digital initiative? What are your targets for this programme? What is your plan to build the ecosystem to be more globally competitive? Malaysia Digital (MD) is an initiative driven by the Ministry of Communications and Multimedia (K-KOMM) through MDEC, to encourage and attract companies, talents, and investments to accelerate the nation’s digital economy. The initiative aims to enable Malaysian businesses and the Rakyat to play a leading role in the robust global digital economy through access to digital tools, knowledge, and income opportunities. With a new and enhanced framework, MD seeks to transform the nation’s digital capabilities and boost the digital economy via the introduction and execution of various MD Catalytic Programmes, also known as PEMANGKIN. These projects are set to evolve Malaysia’s digital economy capabilities and capacities, raise Malaysia’s value proposition for digital investments and nurture technology sectors with significant commercial and economic potential. MD is built to address three strategic priorities, which consist of: – Driving digital adoption among aspiring young entrepreneurs, companies and the rakyat; – Supporting local tech companies to become ‘Malaysian Champions’ and successful international players; and – Attracting high-value digital investments into the country

What is MDEC’s strategy to build the ecosystem to be more globally competitive? As the lead digital economy agency, we recognised that the existing MSC programmes formed 26 years ago were due for a refresher to adapt and support the current digital economy landscape. Under the new framework, the new MD Status offers greater agility for local and international digital companies by providing flexibility for the companies to choose from competitive fiscal and/or non-fiscal incentives. MD Status companies also have more flexibilities and opportunities to operate, grow, expand, or invest anywhere in Malaysia. With the enhanced framework, Malaysia can offer more options for investors or companies and provide non-fiscal facilitations to companies that do not require fiscal or tax exemption. In addition, the government, through MDEC, will be introducing two initial Malaysia Digital Catalytic Programmes (PEMANGKIN), which are DE Rantau and Digital Trade. DE Rantau is a programme to boost digital adoption and promote professional mobility as well as drive tourism across the country, intending to establish Malaysia as the preferred Digital Nomad Hub. Digital Trade aims to drive interoperability and greater harmonisation of standards and regulatory approaches and facilitate trade within and across borders. MD will assist Malaysia in better preparing for today’s ever-changing landscape and set the groundwork for a digital nation, benefiting the rakyat, businesses, and foreign investors.

The COVID-19 pandemic has provided plenty of opportunities for digital transformation. How does the Malaysian digital ecosystem fare? How do you plan to sustain any progress made during this period? The pandemic has catalyzed entrepreneurs and businesses of all sizes to incorporate digitalisation into their business operations and work processes. Malaysia has seen an accelerated increase in online sales, with e-commerce GDP contribution growing almost twice since 2015 to reach MYR163.3 billion in 2020. As digital technology develops further, the dynamic interaction between demand, supply, and enablers serves as a metaphor for a thriving digital economy ecosystem. Malaysia Digital’s inclusive approach aims to synchronise these elements to ensure a thriving and sustainable digital economy ecosystem, starting with the growing demand for digital solutions, steady supply of goods and services, and support from enablers like talents, infrastructure, and regulations. Malaysia Digital is designed to be the engine that accelerates the growth of our ecosystem within the nine focus areas and drives digital adoption and opportunities in the digital economy via the Malaysia Digital Catalytic Programmes (PEMANGKIN) and other competitive offerings. MDEC will continue to focus on the areas we have been focusing on in the past, such as digital education, the sharing economy and big data analytics, among others. In meeting the demand to upskill the existing workforce, MDEC’s #MyDigitalWorkforce Movement aims to re-skill and up-skill Malaysians for digital economy jobs. In 2021, the programme trained over 1,569 workforces. Over 283 job placements have been made through the MyDigitalWorkForce Work In Tech (MYWiT) initiative, training and hiring incentive programme aimed at boosting the digital business services sector and developing quality tech talents in Malaysia. Those from the informal workforce are also included in our outreach campaigns such as the Global Online Workforce (GLOW) programme, eRezeki and eUsahawan. Over MYR1.49 billion worth of income was generated from the three programmes mentioned and has benefitted over 330,877 informal workers. — Fundraising…

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