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KL’s tilt towards next-gen industries will spur Malaysia’s e-commerce and digital economy growth

KL’s tilt towards next-gen industries will spur Malaysia’s e-commerce and digital economy growth

19 Oct 2020

In its latest investor’s guide, Ernst & Young (EY) has highlighted that in line with its next phase of growth, Kuala Lumpur’s evolutionary pivot towards next-generation industries will accelerate Malaysia’s e-commerce growth and digital economy expansion.

It said the capital city’s Industry 4.0 transformation, well supported by Malaysia’s national policies, roadmaps and policy frameworks, government initiatives and tax incentives, also augments the city’s readiness to be a dynamic digital hub in the region.

Next-generation sectors that are drawing global investors including Industry 4.0 high-technology manufacturers and service providers include: digital e-platforms, robotics and industrial products, Internet of Things (IoT), advanced medical technologies and global business services (GBS).

In 2020, the country’s digital economy grew exponentially to nearly US$64 billion (RM268 billion), contributing about one-fifth or 18.5% of the country’s gross domestic product.

EY highlighted that the e-commerce sector is projected to generate nearly US$10 billion (RM42 billion) between 2018 and 2022, with a double-digit compound annual growth rate (CAGR) of 17%.

It identified a strong demand from young adults, aged between 20 and 39 years old, representing over a third of the country’s population, as the factor driving the e-commerce expansion.

“In KL, numerous leading regional e-commerce players, including Alibaba Group, Shopee, Zalora and Lazada, have established their regional distribution centers, e-fulfilment hubs and distribution warehouses, indicating their choice of KL as their regional e-commerce hub,” it pointed out.

The firm highlighted Malaysia’s Digital Free Trade Zone (DFTZ), developed since 2016, facilitates seamless cross-border trade and enables local businesses to export their goods with e-commerce focus.

Aside from the sector, Malaysia is at the forefront of adopting industry 4.0 technology including robots as highlighted by a report from the World Economic Forum, in which Industry analysts anticipate wider robotics adoption opportunities in Malaysia’s and KL’s small and medium-sized enterprise (SME) sector, which represents 98.5% of all establishments in Malaysia.

It also pointed out that the country has a competitive advantage in the areas of technology and innovation as well as human capital.

With the internet of things (IoT), the firm noted Kuala Lumpur has taken steps towards a smart city by leveraging on IoT-based solutions, employing AI and big data analytics to generate real time traffic predictions using video and image recognition technologies.

This is enabled by the National Fiberisation and Connectivity Plan which aims to establish a robust and affordable digital connectivity.

“In addition, supportive government policies to encourage the digital economy, including the Global Tech Fund, drives innovation and R&D in the IoT sector,” it said.

Furthermore, the country is also being increasingly recognised as the region’s medical technology hub, producing a broad range of products from medical-grade gloves, diagnostic imaging equipment to high-tech, digital medical technologies.

A key segment of Malaysia’s medical technology sector is the medical devices industry, with over 200 participating companies. The industry, estimated at over US$1.6 billion (RM6.7 billion), is expected to expand significantly at 8% CAGR into 2024.

EY pointed out that Kuala Lumpur’s conducive technology ecosystem is attracting global MNCs to establish their regional centre of excellence (CoE) and core support functions in Greater KL.

In terms of GBS, the guide noted that leading MNCs, from insurers to advanced technology innovators, have relocated their Asia-Pacific “high-value, high-impact” central operating models to KL, leveraging on Industry 4.0 technologies and the information and communications technology talent pool.

The firm related that the AT Kearney Global Services Location Index 2019 ranked Malaysia in the top 3, due to its favourable business environment, competitive labour costs and productivity of skilled professionals.

“In addition, MNCs factored Malaysia’s competitive principal hub tax incentive package and comparatively lower operating cost, for the streamlining of their regional and global business operations and business expansion in the region.”

Industry 4.0 transformation, national policies, roadmaps and policy frameworks, government initiatives and tax incentives augment Kuala Lumpur’s readiness to be a dynamic digital hub in the region.

Source: The Sun Daily Posted on : 19 October 2020