Malaysia's Digital Industry is the poster child for a High Income Society

Published on The Edge, @Netvalue2.0 on February 2011
Coined as Vision 2020, Malaysia's journey to become a high income, advanced nation actually started a long time ago. However we no longer have the luxury of time. If the economy does not transform by 2020, it looks like we will be winding back the clock and rely primarily on the primary sector. This is not something we will be able to survive on.

The old economic model has lost its shine as traditional industries continue to move to lower cost nations. In fact the old economic model has become dangerous. Until the recent launch of the Economic Transformation Plan, there was no clear indication of what was to take its place.

Before all this, was the heralding of the Multimedia Super Corridor, thrusted to spearhead the country into modernity and prosperity. Today is a different picture. Most Malaysians consider multimedia or digital industry as a deadwood industry, casually drifting in view but generally ignorable. I cannot blame them. The Asean financial crisis, Y2K anti-climax, and 2001 dotcom crash have combined to create an impression that the technology, media and communication sectors is a major national disappointment.

The disappointment was just not for industry players, investors and analysts. Parents and children, who were looking for technology jobs, were also disappointed.

Will the digital industry go beyond hype?

In the beginning there was a dearth of universities. Whilst building all the highways, airport, massive towers, a lot of effort and money was spent on creating institutions of higher learning. The result of this is the mass production of graduates not suitable for the industry, and the well known unemployed graduates. You can image what impact that had on general folk. This caused the general population to pull their children from the digital industry back into traditional professions or learning other new sectors.

In the last few years, new corridors and clusters have been launched - eg biotechnology, halal, Islamic finance . These are very good initiatives and deserve every bit of support because the future of Malaysia is hinged on developing a diversified portfolio of high value and highly competitive industries. But, the newer initiatives also have encountered the very same bottlenecks that the digital sectors have discovered a long time ago. And to be sure, there are many others they have not yet discovered. No doubt, they will find them.

All hype is followed by disillusionment

Let's take for instance the initial expectations set for the multimedia super corridor. Fifteen years ago, we were told we were all going to live, breath and eat information technology. Lifestyle was going to be based on multimedia. The transformation of major national institutions such as Government, education and health was going to be driven by information technology. With the MSC, our workforce will focus on high technology work. The expectations were too high.

Everything was put on fast track, every thing was important, and everything possible. We have since learnt that was not going to happen. Not everything is possible at the same time. Some important things take time, for instance developing critical mass of world-class expertise, entreprenuers and engineering.

There was certainly a lot of hype. But the hype was unceremoniously killed with the Asian financial crisis, and more pertinently the instability it brought to Malaysia. Before then, there was certainly a lot of optimism about the potential of the industry's power to generate business for Malaysia. There was a general excitement about the acceleration of the technology and internet. There was also a lot of excitement about how Malaysia is the ideal hotbed for innovation. Last but not least, there was hype and hubris about Malaysia as a home to the world's best researchers and developers. There was a lot of hype. There was a dangerous amount of overconfidence and swagger.

Do not confuse hype with BS

However, after the crisis, there was an even more dangerous and infectious amount of disbelief and diffidence. In 2001, many friends and colleagues thought I totally lost my marbles when I joined this initiative. But when you look at the facts, the strategic levers that affects Malaysia

and remove the hearsay, emotions and baggage, you will find the digital industry very compelling either as an investor, employee or future employee.

The original multimedia corridor strategy was an intelligent masterstroke. It took advantage of Malaysia's strength in the technology sector in the 1990s, the rapidly advancing talent pool whilst addressing weaknesses of small enterprises and R&D.

The interesting characteristic about hype cycles, as coined by Jackie Fenn from Gartner, is the period between the peak of inflated expectations and arriving at the expected results is a very long and painful period. This includes periods of total despair and disillusionment, followed by an increasing dose of enlightenment.

Somewhere between the hype and the dissillusionment, there is the truth. And truth for Malaysia is that digital industry will play a major role in moving this nation into an advanced economy and society. As we start ploughing through the uphill slope of the enlighment curve, this truism should be a lot clearer to all involved.

Study our digital industry, not the hype or dissillusionment

The industry has reached through the second gear and is ready to punch into the third. At least a hundred thousand jobs have been created and more are expected. The SSO cluster was started in 2003 from a standing start and has since created around forty thousand high-value jobs. The information technology cluster comprises the highest number of innovation, entreprenuers and is also a major job creator. The creative multimedia sector continues to lead the way in taking Malaysian creative industry to the global market.

We have a highly innovative industry. One thing that surprises even people in the Silicon Valley is the fact that an average of one new venture is born here every day. That is a high rate of development and innovation. These are not system integrators or resellers. We are talking about companies that ranges from new social games, mobile parking systems, integrated circuit design to GPS software.

The digital industry comprises a increasing number of exporters. In fact many our top local companies generate more business outside the country than from the domestic market. Interestingly, our companies export mainly to the Asian markets, which was once considered the pariah of international business. Asia has since become the golden market. South East Asia, once regarded as the no mans land for investors, is also starting to reemerge one of the global hotbeds.

The average salary in MSC Malaysia is fairly high. This is because companies in all clusters need high income professionals in order to survive. It is around RM5,000 per month, around twice the national average and RM2,000 higher than the designated high-income benchmark.

Finally, this global industry continues to grow. The hardware sector grew double digits last year and is forecasted to grow another 10% this year! Other sectors are growing especially cloud and mobile based software. Digital distribution is surging this year, and is expected to start supplementing the flagging home TV markets. Last but not least, the global services industry continues to hire what ever talent that we can deliver.

So there you have it. We have an industry which creates a lot of jobs. We have a high-profit, exporting industry. There is a lot of entrepreneurship and innovation. It is a high income industry, and there is a lot of global demand. To top it off, we are also considered one of the best in the world in some of the clusters, and we are starting to become a leader of the surging Asean market.

Taking off the training wheels

Some of the things which helped the fledgling industry are now getting in the way. There are things to be done. Rather, there are things to be undone. The best example is geographical separation, which was implemented to create an advanced environment for digital lifestyle. But what was the industry's lifeline is fast becoming the noose around its neck.

We cannot fully develop a land locked industry. Mohandas Pai, an acquaintance, and a board member of Infosys, insists these bottlenecks is a big problem. In fact he mentioned it is "like running 100 metre dash against Olympians with both hands, and both legs tied behind our backs". Yes, somehow we deliver. You can imagine how much more can be achieved when unleashed.

There are other measures that helped in the early phase that are now starting to get in the way of progress. There was the separation of hardware of software industry development. There was also the separation of companies that develop and deliver solutions. Visual effects and live action production. These types of separations helped spur development of digital industries. But now they have to be tightly aligned to allow Malaysia to move rapidly with the dynamic changes, ranging from social games to quantum cryptography.

Commit yourself to the digital industry

After a lot of hype and disillusionment, the hard work from over a hundred thousand people is now starting to pay off. This is now the time for the industry to surge and become a major contributor to the economy.