The Digital Landscape in Malaysia

March 2021

  • Since 2015, Malaysia’s Internet economy has continued to rise at a steady 21% annualized rate despite economic headwinds. The sector reached an estimated value of USD 11 billion in 2019, and is projected to grow to USD 26 billion by 2025.
  • As of January 2020, Malaysia counted 26.7 million internet users with an internet penetration rate of 83%, 26 million social media users, and 40.7 million mobile connections, equal to 127% of the total population. Smartphones are ubiquitous in the country, with an estimated 97% of the population possessing such devices.
  • The commercial deployment of 5G is expected to begin by the third quarter of 2020. In January 2020, the Malaysian Communications and Multimedia Commission (MCMC) identified the 700 MHz, 3.5 GHz and 26/28 GHz as the pioneer spectrum bands for the roll-out of 5G. In line with Malaysia’s goal to implement 5G infrastructure nationwide by 2023, telecommunication providers such as Nokia and U Mobile are undertaking 5G demonstration projects in the country.
  • Malaysia is a popular destination for US ICT companies for their global market expansion. Some leading US players include IBM, HP, Intel, Google, Amazon, Cisco, Microsoft and Oracle. In 2019, Oracle launched a Cloud Solution Hub in Kuala Lumpur to help firms integrating solutions such as Blockchain, Machine Learning, Artificial Intelligence (AI), and Data Analytics.
  • However, more recently Chinese companies have made significant inroads. For example, in 2019 Huawei signed an agreement with Malaysian telco, Maxis, to accelerate 5G technology in the country; while China Harbour Engineering Company and SenseTime announced to set up the first artificial intelligence AI park in Malaysia, with a total investment of more than USD 1 billion over the next five years. Alibaba in turn has partnered with the Malaysian government for the development of the Malaysian Digital Free Trade Zone, the world’s first outside of China.
  • The datacenter industry has grown rapidly to support around 30 datacenter service companies and nearly 200 specialized firms capable of providing affordable, scalable and high-quality remote data storage and retrieval services. An important development took place in 2019, when NTT decided to construct its fifth data center at the NTT Cyberjaya Campus in Malaysia.
  • e-Commerce is a bright spot of the local internet economy, and has tripled in size since 2015, exceeding USD 3 billion in 2019. The sizable online travel sector, spearheaded by budget airlines and budget hotel chains, reached close to USD 5 billion in the same year, representing the most important segment for the country’s internet economy.
  • Malaysia is a leader in the region for corporate digitalization, and nearly all SMEs in the country have computing capabilities and internet connectivity, in which they use either a smart device or a personal computer. However, SMEs often end up getting trapped with limited business usage of these tools, only using them for social media and personal consumption of digital content.
  • Because of the relatively high levels of adoption of digitalization in the country, international analysts such as CPA Australia assess that Malaysian SMEs are well placed to recover quickly from the impact of the COVID-19 pandemic. Moreover, the government is taking some important steps, such as allocating grants of up to USD 2,330 to local entrepreneurs to promote their products on e-commerce platforms as well as USD 4.7 million to Malaysian Digital Economy Corporation (MDEC) for the creation of e-commerce hubs in rural areas.

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