Outlining an innovative path to economic growth in Malaysia

Ongoing economic uncertainties and worsening geopolitical tensions on the global stage should not distract or dishearten Malaysia from executing a growth agenda underpinned by technological innovation.

While the challenges playing out in front of the world – coupled with supply chain disruptions and climate change concerns – will naturally impact local markets, the nation must remain resolute in forging its path towards prosperity.

“There is an imperative need for Malaysia’s public and private sectors to realign their goals towards strengthening organisational resilience and achieving long-term sustainable growth,” advised Boon Yow Tan, Technology Consulting Leader across ASEAN at EY.

According to Boon Yow, COVID-19 paved the way for more innovative organisations to step-up transformation across company operations, including the adoption of a wider usage of digital marketing tools and hybrid working arrangements, alongside diversifying supply chain sources.

Consequently, Malaysian businesses have now commenced integrating automation with artificial intelligence (AI) in operations and supply chain logistics to increase productivity and efficiency through machine learning (ML) algorithms and streamlined processes.

“While the ongoing challenges may have impacted some industries, there is still a strong appetite for innovation in Malaysia, to grow and develop the economy,” Boon Yow observed.

Such appetite for innovation can be translated into accelerated digital transformation projects across the country, motivated by a desire to “stay competitive” in challenging trading conditions.

To build a sustainable digital foundation, Boon Yow identified four leading technologies that organisations are prioritising irrespective of company size or industry sector:

• Data and analytics
• Cloud
• Internet of Things (IoT)
• AI and ML

Specifically, data and analytics is gaining traction as a tool to generate actionable insights. According EY findings – published via 2022 Tech Horizon – 57% of businesses now cite data and analytics as a top investment priority, representing an increase from 34% in 2020.

This is primarily due to rising roadblocks when managing the increasing amount of data generated by organisations. Data security and compliance also continue to be “major concerns” nationwide.

“Companies are now focussing on data and analytics to drive decision-making through data quality and good data management,” Boon Yow said. “Organisations are now taking precautionary measures by upgrading their cyber security tools, data encryption and compliance management systems to protect sensitive data.”

Meanwhile, cloud continues to be a top priority as more companies leverage native platform-as-a-service (PaaS) capabilities – including speed and agility – to innovate at speed.

“With its scalability, flexibility and cost-saving benefits, cloud-based solutions enable rapid access and cost-effective storage of data and applications remotely,” Boon Yow added.

Delving deeper, IoT is fast emerging as a “key mechanism” for gaining insights into operational behaviour patterns, of which companies can now leverage.

“By capturing and analysing IoT data, organisations can drive profitability, create new forms of value and achieve operational break-throughs,” Boon Yow noted.

In addition, AI and ML are becoming “increasingly important” for local organisations seeking to make data-driven decisions, automate routine tasks and improve customer experience. This comes in response to rising productivity and efficiency challenges in organisations, triggering demand for automation, AI and ML to streamline operations and eliminate manual tasks.

“With AI and ML, businesses can take advantage of powerful tools to enhance their operations, promote growth and stay ahead of competitors,” Boon Yow advised.

“Improving customer experience is also key. Chatbots, customer relationship management [CRM] systems and other digital tools can help organisations provide personalised interactions and enhance the customer experience.”

Can tech overcome rising talent barriers?

Despite heightened interest in established and emerging technologies, Boon Yow cautioned that accelerated adoption comes amid the backdrop of rising a rising skills crisis in Malaysia.

“Attracting and retaining top talent is a challenge that organisations are addressing with technology,” he noted. “By leveraging technology for employee engagement platforms, talent management systems and remote working tools, organisations can create a positive work environment and improve employee satisfaction.”

As a result, the rapid onset of new emerging technologies, demand “competent professionals” to drive industry transformations.

“Organisations now more than ever, need to step-up their investment in education and training programmes to build skilled and future-ready talent, and offer new ways of working to attract and retain professionals with the necessary skills,” advised Shankar Kanabiran, Financial Services Consulting Leader across Malaysia at EY.

According to EY findings, 59% of global companies acknowledge an industry-wide skills shortage, an issue that is now of equal concern in Malaysia.

As an executive leader, Kanabiran said it’s imperative to take “bold and active steps” to nurture great technology talent.

“One approach is to increase the investment in technology education and training,” he shared. “Companies can collaborate with educational institutions to provide funding and support in technology programmes.”

Investing in education and training – such as employee learning opportunities and scholarships for technology-related degrees – will help nurture skilled professionals and create a competitive advantage for the local industry. Also, mentorship and coaching programmes can help foster talent within organisations.

“Encouraging senior employees to mentor and coach junior staff members can cultivate a culture of continuous learning and development within the organisation,” Kanabiran noted.

“At the same time, this helps build trust and relationship among employees. This approach will also empower younger employees to excel in today’s industry. By prioritising its people, companies can attract and retain top talent, thus building a competitive advantage for their organisations.”

Malaysia unveiled Budget 2024 in mid-October, the largest ever budget at RM393.8 billion, made up of operating expenditure of RM303.8 billion and development expenditure of RM90 billion.

This was formulated based on the Madani economic framework. With the theme of ”Economic Reforms, Empowering the Rakyat”, the Budget is focused on spurring economic activity as well as increasing foreign direct investments and domestic direct investments.

“Recognising the need for a talent pool that is highly skilled and adaptable to industry needs, Budget 2024 proposes various measures aimed at up-skilling and training,” noted Farah Rosley, Tax Leader in Malaysia at EY.

Notably, this includes an overall allocation of RM6.8 billion for technical and vocational education and training (TVET), alongside retraining and skill improvement programs for micro, small and medium enterprise (MSME) entrepreneurs and vulnerable groups.

This is in addition to a RM100 million allocation for the certification of TVET graduates and the MyFutureJobs initiative which offers job opportunities in public sector, government-linked companies (GLCs) and government-linked investment companies (GLICs).

“By facilitating ongoing skills development and learning opportunities, Budget 2024 will up-skill the Rakyat and strengthen the nation’s long-term competitiveness in a rapidly changing and increasingly digitalised global economy,” Rosley added.

As well as talent shortages, Kanabiran said the speed of adopting new technology is also challenging for organisations responding to “ever-evolving” market trends.

“COVID-19 proved that new, digital approaches to service delivery can dramatically enhance the user experience,” Kanabiran added.

“Hence, companies must be nimble and be able to adapt to new and emerging technological trends quickly, to gain competitive edge. The lack of access to funding for start-ups also impacts the technology industry today.”

In response, Kanabiran recommended that government and industry players “work collaboratively” to develop financing and delivery models for start-ups, to help them flourish and grow in the industry.

Creating a global tech powerhouse in Malaysia

Despite current market conditions, Boon Yow said Malaysia has the potential to become a global technology powerhouse and attract technology investments from around the world.

“In realising this potential, Malaysia needs to build the right ecosystem to enhance the country’s technological capabilities,” he added.

For Boon Yow, the driving factors include:

• The upgrade of Malaysia’s digital infrastructure in the areas of high-speed internet and mobile networks, to support the rapid expansion of the technology industry.
• The development of the nation’s talent pipeline through continued investment in education and skills development to create a talent pool, who are competent and equipped with the latest technology skills. This includes “dynamic collaborations” between the government, academia and industry to tailor education and training programmes to meet industry needs.
• Facilitative research and development (R&D) incentives to encourage technology investments by companies, which includes the allocation of funds for innovative R&D product research and the establishment of strategic partnerships between the industry and academia.
• Further, Malaysia must continue to enable a “user-friendly” regulatory environment for technology companies. Simplifying regulations, reducing bureaucratic barriers and providing incentives for investment can help Malaysia become a hub for technological innovations, attracting both local and foreign businesses.

“A conducive ecosystem is pivotal in supporting the growth and expansion of the technology industry in Malaysia,” Boon Yow added. “This will require public-private partnerships and collaborations to ensure that the appropriate infrastructure and capabilities are established.”

To further drive economic growth, Boon Yow said private-public sector collaborations can establish industry sandboxes to steer focus on developing agile innovations, by leveraging current and emerging technology solutions with dedicated teams.

In parallel, the government and policymakers can develop industry-specific policies – including those related to R&D, financing and delivery models – to catalyse innovation in the industry.

“Cohesive partnerships between the government and the private sector can create a supportive ecosystem that spurs and facilitates innovation and technology adoption, to drive socioeconomic growth for Malaysia,” Boon Yow advised.

From a go-to-market perspective, the consultancy giant recently launched EY wavespace to drive innovation and assist customers in meeting challenging business demands. This primarily runs as a global network of highly connected growth and innovation experience centres.

Each centre houses a “state-of-the-art” collaboration space and a dedicated team who bring business, design and technology together to fast-track transformation projects.

“We work with clients, in collaboration with technologists, business strategists, data scientists and experience designers to address industry-specific and cross-sector opportunities and co-build experience,” Boon Yow added.