Malaysia, a country celebrated for its abundant cultural legacy and varied economic landscape, is currently actively pursuing technological advancement.
The country has set a goal to become a high-technology nation by 2030 under the New Industrial Master Plan 2030 (NIMP 2030). Its objective is to establish itself as a dynamic center for information and communication technology (ICT) in Southeast Asia.
Malaysia’s ICT Sector
According to the International Trade Administration, the ICT sector plays an essential role in driving Malaysia's economic expansion, accounting for 23.2% of the nation's gross domestic product (GDP) in 2021. Having maintained an exceptional average annual growth rate of 9% over the past seven years, the industry is expected to contribute 25.5% of the country’s GDP by 2025 as a result of Malaysia's dedication to digital transformation and innovation.
The ICT sector in Malaysia has demonstrated resilience and adaptation, successfully managing the fluctuations of global economic trends. Reports by the International Data Corporation (IDC) show that the Malaysian IT services market was valued at USD 2.64 billion in 2023, demonstrating a year-over-year (YoY) growth of 4.1%. Although there has been a decrease in growth compared to the 5.5% in 2022, the market is still expected to show significant progress, with compound annual growth rate (CAGR) predictions estimated to fluctuate around 5.9% between 2023 and 2028. By 2028, the IT services market is expected to reach USD 3.51 billion.
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The IT services industry in Malaysia covers a wide range of operations, including software development, IT consulting, cloud services, and cybersecurity. The country's diverse range of industries, such as finance, healthcare, manufacturing, and retail, have allowed it to effectively serve many sectors.
One notable example of the ICT sector’s success is Fusionex, a Malaysian-based firm that focuses on providing IT services in big data analytics and AI. The company has been globally recognized for its collaborations with industry leaders, such as Alibaba Cloud. This highlights Malaysia's ability to generate top-tier IT service providers and equip them with the capacity to compete internationally.
Malaysia's sophisticated IT infrastructure and services make it an appealing choice for regional enterprises seeking to grow their operations. Due to its capacity to provide superior IT solutions at relatively more affordable prices, the country has become a favored outsourcing location for corporations throughout ASEAN. Many Singaporean companies opt to delegate their IT requirements to Malaysian service providers, capitalizing on the geographical proximity and cultural affinities shared by the two countries.
In addition, Malaysia's IT services sector plays a significant role in global supply chains, particularly within the manufacturing and electronics sectors. Malaysia's IT capabilities facilitate the functioning of international firms such as Intel and Samsung, both of which have manufacturing facilities in the country. The integration of IT services into manufacturing processes improves productivity, quality control, and supply chain management, strengthening Malaysia's position in the global economy.
According to the IDC, the IT services market in Malaysia is divided into three main segments: Project-Oriented Services, Managed Services, and Support Services. Project-oriented services experienced the highest growth rate in 2023, with a 4.5% increase. Managed services followed closely behind with a growth rate of 4.4%, while support services displayed a growth rate of 2.9%. This varied expansion highlights the complex and diverse IT requirements in the country, encompassing both massive infrastructure initiatives and routine operating assistance.
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Building Locally, Growing Regionally
Malaysia is leveraging ICT to expand its regional presence in multiple ways. Huawei's announcement of OpenLab in Malaysia aims to drive digital transformation in the Asia Pacific (APAC). This initiative enhances Malaysia's regional influence by fostering innovation and collaboration among local and regional businesses, thus positioning Malaysia as a critical hub for digital advancements in the APAC region.
Submarine cables have promoted regional collaboration and accelerated economic progress within the Association of Southeast Asian Nations (ASEAN) and globally. The Asia-Africa-Europe-1 (AAE-1) undersea cable, which connects Southeast Asian nations like Singapore, Hong Kong, Malaysia, Thailand, Cambodia, and Vietnam to the Middle East and Europe, is a prime example. This connectivity has presented new opportunities for businesses, enabling them to engage in global trade and commerce seamlessly, thereby boosting Malaysia's regional trade connectivity and economic growth.
The collaboration between Malaysia’s major telecom provider, Celcom, and Allo, a wholly owned subsidiary of Tenaga Nasional Berhad (TNB), aims to enhance connectivity solutions and accelerate the development of smart cities through digital connectivity. This partnership underscores Malaysia's commitment to improving regional infrastructure and smart city initiatives, further solidifying its regional leadership in digital transformation.
Telekom Malaysia has inked a deal for a new NG999 emergency system, reflecting the country's efforts to upgrade its emergency response capabilities with advanced ICT solutions. Similarly, the launch of Malaysia's first SRv6 network by Time dotCom and Huawei represents a significant step in enhancing the country's network infrastructure, ensuring robust and efficient connectivity that supports regional expansion and collaboration.
In April 2024, Malaysia's Communications Minister announced significant progress in the National Digital Network (JENDELA) program, which aims to upgrade the country's broadband infrastructure. This initiative enhances Malaysia's digital capabilities, enabling it to serve as a regional digital hub. Additionally, the collaboration between AWS and CelcomDigi to develop GenAI solutions in Malaysia highlights the country's focus on advancing artificial intelligence technologies to drive regional innovation and economic growth.
ZTE and CelcomDigi's efforts to revolutionize Malaysia’s manufacturing industry with cutting-edge ICT solutions underscores the nation's commitment to integrating advanced technologies into traditional industries, thereby enhancing regional competitiveness. Huawei and Maxis' 5G-Advanced trial in Malaysia showcases the country's leadership in next-generation connectivity, positioning it as a pioneer in the regional communications technology landscape.
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Future Plans for Development
Malaysia is actively developing smart cities, where it is integrating Internet of Things (IoT) technologies to improve efficiency and sustainability. The nation's Smart City Framework focuses on critical policy domains including 5G, cybersecurity, and renewable energy. Smart cities also play a vital role in Malaysia's digital transformation. The industry was valued at USD 480 million in 2022 and is expected to reach USD 1 billion by 2028.
Malaysia participates in the ASEAN Smart Cities Network (ASCN) to engage in cooperative efforts with other ASEAN member states when it comes to intelligent and environmentally friendly urban development. Metropolises such as Kuala Lumpur, Kota Kinabalu, Kuching, and Johor Bahru are leading in development, providing abundant prospects for enterprises specializing in smart city solutions.
Additionally, Telekom Malaysia's plans to establish a 40 MW hyperscale data center, reflecting the country's ambition to become a major data center hub in the region. This development not only supports local digital infrastructure but also attracts regional and global businesses, further reinforcing Malaysia's regional ICT leadership and economic expansion.
Malaysia's ongoing digitalization and innovation presents a lot of potential for the country’s future. Its dedication to transforming into a high-technology country by 2030 demonstrates its proactive stance towards growth and development. Malaysia is set to serve as a pivotal hub in Southeast Asia's digital future.
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