Digitalisation is one of the major keys to productivity and unlocking Malaysia’s aspiration of becoming an innovation-driven economy. Although the COVID-19 pandemic has exposed the vast potential of digital technologies in boosting growth and productivity at the national, sectoral, and enterprise levels, major issues still need to be addressed for industry players to fully embrace digitalisation in Malaysia.
According to the Director General of Malaysia Productivity Corporation (MPC), Dato’ Abdul Latif bin Haji Abu Seman, technological innovation proves to be the primary source of high productivity growth. “OECD Economic Survey Malaysia 2021 reported that the use of technology among businesses needs a further boost and urges us to double their efforts to achieve a greater level of digitalisation towards productivity enhancement,” he adds.
Despite various initiatives and investments by the Government to push for digital transformation in the country, the rate of digital technology adoption remains low. In its efforts to encourage the adoption of digital technology for productivity growth, the Digital Productivity Nexus (DPN) under MPC has unearthed several factors that are causing this lag of adoption among industry players.
Many organisations still prefer traditional business methods, as reflected by the low take-up of digital programmes and the lack of digital tools, talents, and processes which hinder productivity and performance within workplaces. Others show a lack of commitment to remain persistent in digitalising their business, which is a stark contrast to the aggressive approach of those in neighboring countries like Singapore and Vietnam.
DPN’s engagements with industry players have also indicated that the perception of the high cost of technology adoption, complexity in incorporating technology in daily operations, as well as a lack of focus on technology incorporation from their management have attributed to this low rate of adoption. The shortage of inspiring success stories among local SMEs may also be a reason for the lack of interest and motivation in adopting digital technology.
While these challenges are prevalent, there are signs that Malaysia’s path to digitalisation is well within reach. Before COVID-19, there was a growth in digital uptake of businesses in Malaysia, although the use of the technology remained limited. The share of e-commerce income in total business sales of 16% was comparable to that of OECD countries in 2015 but participation in e-commerce was much lower than in some OECD countries. Moreover, there were large differences in digital uptake among a large number of SMEs in Malaysia.
According to MPC’s analysis in the Industry4wd Readiness Assessment report, as of 2021, 83% of Malaysian companies are in the infancy stage of technology adoption, reflecting the infancy of technology uptake within business organisations. While this calls for better participation of the companies, the IMD World Competitiveness Yearbook 2021 indicates that digital transformation in Malaysian companies has improved in value, from 5.97 in 2020 to 6.43 in 2021. This marks positive progress towards Malaysia’s aim of being in the top 10 of all technology indicators and to have 50% of Malaysian companies at levels three to five of technology adoption by the year 2025.
To realise these goals, MPC has reached out to 15,000 firms in 2021 as part of its initiatives to promote digital technology adoption through advisory programmes, experiential learning, and leadership encouragement. One of its main initiatives championed by DPN called “Go B.I.G with Digital” aims to achieve breakthrough productivity for huge and drastic impacts in businesses through digital and technology adoption and the 4th Industrial Revolution (4IR) by implementing the initiative’s 6-P framework: Promotion, Pilot, Proliferation, Protect, Prosper and Partnership.
Champion of DPN, Dato’ Wei Chuan Beng, points out that the development Digital Solution Directory (DSD) is a significant part of the “Go B.I.G with Digital” movement. The directory lists technology solution providers to match and meet the business needs of companies, SMEs, entrepreneurs, start-ups, and businesses going through digitalisation. For its first publication, the directory focuses on three services sectors, namely professional services, retail and F&B, and tourism. “This directory will accelerate business recovery and technology adoption among the industry players, especially in these three sectors. I am confident that the DSD will be a prime catalyst for digital transformation and adoption among the industry players in Malaysia and a motivation for them to Go B.I.G with Digital,” he states.
To guide industry players in their digital transformation journey, DPN has also rolled out the Digital Pledge which creates a serious commitment among business leaders to take charge and risks towards productivity enhancement through digital adoption, while the Digital Transformation Guide serves as a survival kit for micro, small, and medium businesses to transform from the traditional ways of doing business to digital transformation as the way forward. The Roadmap on Digital Transformation also provides a step-by-step guide on what smaller business owners must do to transform, survive, and thrive in the new digital age.
Even with these initiatives in place, SMEs, particularly micro-sized firms require further support for their digitalisation efforts, while SME workers could benefit from opportunities to upgrade their digital skills for higher productivity in the workplace. Leaders of these organisations should play a prominent role in this matter by renewing mindsets, setting lofty targets, and leveraging the digitalisation opportunities not just to survive the pandemic but to come out of it stronger. Furthermore, concerted efforts are needed to boost digitalisation and advance technology adoption to boost the productivity and economic competitiveness of the country. Such actions can awaken Malaysia from its long digitalisation slumber and complete its transformation into a high technology-based economy, one that is powered by higher productivity growth, greater innovations, and increased efficiency.