What does Malaysia need to do to establish itself as the tech hub of Asia?

In the last few months, Malaysia has seen major growth and developments in its tech industry. Recently, its local telco Telekom Malaysia and Singapore telco Singtel partnered up to develop data centres in Johor. 

Meanwhile, tech giants such as ByteDance and Microsoft have also invested RM10 billion and RM10.5 billion respectively into artificial intelligence (AI) infrastructure in the country. 

It is no secret that Malaysia is in the running to be the region's next tech hub, and in Raymond Siva's, head of digital investment office of MDEC, expert opinion, Malaysia is well on track. 

Don't miss: Malaysia could soon have its own 'Silicon Valley' with this partnership

"Malaysia’s tech hub ambitions are well on track, driven by aspects including investment success, data centre aspirations, our role in critical supply chains, and the country’s current position as a high-value digital global business services (GBS) hub," said Siva in a conversation with A+M.

According to Siva, Malaysia’s digital investment soared to RM46.22 billion in 2023, as contributed by 256 companies, with 53% in the information technology cluster. This in turn created 22,258 high-value jobs.

In addition, Malaysia has been attracting billions in investments for data centres as demand for cloud and AI services increases, and has been a global semiconductor powerhouse, added Siva. 

Serm Teck Choon, co-founder and CEO of Antsomi agrees, adding that AI-driven centres will play a prominent role in the future development of the digital economy. 

“Malaysia offers more affordable lands and energy as key elements to build such data centres," said Serm, adding that Penang has also played an important role in the global chip manufacturing supply chain too. 

"While the new government was formed in November 2022 and the politics have since stabilised, the restart of this ambition is inevitable while the digital economy is becoming increasingly important for national development globally," said Serm. 

Malaysia's unique propositions 

That said, Singapore has long been seen as a business hub and Indonesia too have attracted investors due to its current volume and growing population. 

Just as Google invested US$2 billion in Malaysia to develop a data centre and cloud region, the tech giant too invested US$5 billion into Singapore to bolster the country's position as a data center hub for the region. 

Similarly, tech giant Microsoft is also investing US$1.7 billion over the next four years in new cloud and AI infrastructure in Indonesia, as well as AI skilling opportunities for 840,000 people as it supports the nation's growing developer community. 

Saying that, according to Serm, Malaysia still has an edge over its competitors in the region. Notably, Malaysia has versatile talents and can offer a centralised location in the region with a relatively lower cost. 

"Malaysia’s tech talents are versatile; some are multi-lingual and offer the market a great supply of tech resources, whether in application development, cybersecurity, digital media and marketing, and offshore services," said Serm.

"Meanwhile, while the Southeast Asia region is one of the fastest growing digital economies, Malaysia offers a centralised location in SEA with relatively lower cost, be it human capital or energy, if compared to other countries such as Singapore."

At the same time, the current government has been stabilised after its formation for more than one and a half years, explained Serm.

"All these advantages attract the big tech companies to decide to invest in Malaysia, positioning it as their regional tech hub for their operations," he added.

Meanwhile, Ambrish Chaudhry, head of strategy of Design Bridge and Partners said Malaysia's distinct propositions are its strong tech infrastructure and its home-grown conglomerates.

"It's relatively well-off population of 33 million, strong tech infrastructure including high speed broadband coverage and relatively modest cost of living, offers a strong testbed for new technologies, functionalities and adoption trends for the region," said Chaudhry. 

"Home grown conglomerates such as YTL have also stepped into the digital space and that can only augur well for the market," he added. 

While Malaysia has plenty to offer, it is not lacking pitfalls that could stand in the way of its ambitions to be the region's tech hub. 

Global implications to geopolitical situations can play a part in Malaysia's ambitions, said Siva. In tandem, investment in education, vocational training and upskilling programs to bridge the skills gap is crucial since a shortage of skilled labour can impede tech sector growth. 

What Siva and Serm both agree on is that regulations need to be as straightforward as possible, with Siva saying that:

Streamlining processes, ensuring transparency, and providing a business-friendly regulatory environment are essential.

Serm added: "Malaysia must reduce bureaucracy and unnecessary processes to create more friendly environments for foreign investors to come and invest in the country."

Branding itself as a tech hub

To better brand itself, Malaysia can present itself as a country with diversity, explained Serm. 

"Malaysia’s uniqueness is its multiethnicity and culture, which make it a very special country. Malaysia can brand itself as a melting pot that offers a more innovative and creative environment, which is important in the digital economy," said Serm.

In addition, the population of Malaysia makes the country an ideal test bed for a new idea and product to be tested since it offers such a diverse environment in terms of culture, said Serm. 

Meanwhile, Siva is of the opinion that Malaysia should leverage existing success stories and showcase cities in Malaysia such as Cyberjaya, Penang and Iskandar Puteri.

This is especially since the cities not only serve as Malaysia's centres of innovation, but are hosts to some multinational technology companies, forming a vital part of Malaysia's digital economy ecosystem. 

Another way Malaysia can brand itself is to position itself as an ideal place to work for global tech entrepreneurs, added Siva. 

Finally, Siva said that Malaysia needs to continue to participate in international tech events, conferences and trade shows.

"These spaces allow us to engage with foreign investors, media and influencers to amplify Malaysia's tech narrative," said Siva. 

With all these in place, and effort by the authorities to nurture the sector, Malaysia can very well achieve its ambitions. 

"What it needs is a concerted effort by the authorities to nurture the sector, invest in helping upgrade tech skills and attract the right businesses. Much of this seems to be underway as we see with a swath of digital-first bank licenses being issued," said Chaudhry.

He added:

Malaysia could well be the country to watch, as its tech sector picks up speed.

Related articles:  
YTL Power partners Nvidia in AI development push in MY  
Malaysia needs to prioritise investments in the silver economy, says PM Anwar 
Foreign investments will go smoothly with govt support, says PM Anwar