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The Digital Ecosystem to be Strengthened in 2023

digital ecosystem

A statement made by Malaysia’s government, right before the dissolution of its parliament, teases efforts to develop and enhance the digital ecosystem and its activities; automation, and digital technology will be the main components of Malaysia’s Budget for 2023. 

Venture Capital To Support Tech Startups and SMEs Within The Digital Ecosystem

According to Dr Sivapalan Vivekarajah, a senior partner at ScaleUp Malaysia, the adoption of technology entrepreneurship will be a boon to Malaysia, especially if it has strong support and drive that will ensure they are made the main pillars for Malaysia’s economy in the next 10 years. Dr Sivapalan Vivekarajah added that the Malaysian government should start focusing on the venture capital industry (VC), talent development and technology development. 

The latter addition of his comment is probably due to the fact despite the tech startups and SMEs developing exponentially in Malaysia, they are lacking in terms of capital, talent and technology to properly make a breakthrough or breach into the international market.

However, if the government’s backing focuses on the aforementioned points, those points can be properly remedied, thus providing tech startups and SMEs the opportunity to experiment with the market. 

Though in 2022, the Malaysian government allocated RM600 million, enabling the formation of VCs and a venture debt fund with a size of RM1.3 billion; it should not stop there. This success must continue because the RM1.3 billion is small drop in the ocean for venture funding. 

With more budget being allocated for 2023, these are the 8 key areas that are expected to see improvement and the ones business leaders need to keep their eyes on.

Support for local goods and services

Malaysia’s local goods and services will receive an allocation of RM59 million from the government to provide step-up digitalisation and automation efforts, such as the promotion of eCommerce activities under MATRADE, MARA, and MDEC. The local goods and services will also receive an RM10 million allocation for the Buy Malaysian Made campaign; a campaign to encourage the purchase of locally made products. In addition, The government will set aside RM15 million to help empower franchise entrepreneurs under the Vendor 2.0 Capacity Development Programme and the Vendor 2.0 Research and Commercialisation Grant.

Fundings for the local creative industry

creative activities in digital ecosystem

The digital ecosystem also will be receiving an RM1 billion  Digital Content Fund to promote digital products and to encourage the production of creative and innovative new digital products or works. In addition to that, the government will be allocating RM50 million National Film Production Fund to support and drive the local film and creative industry. To further show their support to the industry players, the content creation under FINAS will be tax-deductible. Besides that, Malaysia will exempt import duty and sales for studio equipment and filming productions. The art and culture industry will receive an allocation of RM25 million in an effort of stepping up Malaysia’s art, culture and heritage programme at the grassroots level. 

Entrepreneurship and Marketability

To show support and encourage women’s participation in business, thus increasing their business capacity and improving their marketing strategies; RM235 million will be allocated to finance funds for business women under the Semarak-Nita Scheme, Tekunita TEKUN, DanaNITA MARA and Bank Rakyat’s Biz Lady. 

In addition, the Securities  Commission and Capital Market Development Fund will establish a Digital Innovation Fund involving RM30 million in an effort to produce and acquire new talent. Also, RM20 million will be provided to implement the Graduate Entrepreneur Program which will benefit 1,000 graduates, when they enter the entrepreneurial field.

Sustainability and Green Technology

digital ecosystem development

The government will allocate RM1.5 billion to support and realise 17 sustainable development and RM300 for Government Green Procurement, in addition to providing EV infrastructure. Malaysia also will provide RM70 million to improve the sustainability level of the palm oil industry, including encouraging the recycling of palm waste materials.

Malaysia’s government is also committed to achieving net-zero greenhouse gas emissions by 2050. To achieve this, the government is encouraging green investment. In order to encourage green investments, the government has proposed extending the incentive application period for Green Tax Allowance and Green Income Tax Exemption until 31st December 2025. The incentive period will be increased from 3 years to 5 years for eligible green activities.

The Green Technology Financing Scheme value will be increased to RM3 billion until the year 2025. The government will also expand the financing specifically to the EV sector with a guaranteed limit of up to 60% and the financing for the waste sector will be increased to 80%. 

In a further show of support for sustainability and green technology, Bank Malaysia will provide a soft loan of RM1 billion under the Low Carbon Transition Financing Fund to support and encourage SMEs to implement low-carbon practices. 

And to encourage the collection of plastic waste, companies that make donations or sponsor smart AI-drive reverse vending machine equipment are eligible for income tax deductions. To further support this matter, the government intends to study the feasibility of a carbon pricing mechanism. To support this effort, the government will provide RM10 million as a matching grant to assist and prepare carbon assessments for SME companies and eligible products. 

As a part of the sustainability and green technology initiatives, the government will increase the allocation of the Ecological Fiscal Transfer for biodiversity conservation to RM100 million annually. This increase is an effort to sustain and protect Malaysia’s flora and fauna. To ensure both wildlife and nature continue to be preserved and protected, the government will set aside RM36 million for a protection programme for tigers, elephants and other wildlife.

GLC and GLIC are to invest in the national economy

digital ecosystem companies

GLC and GLIC are expected to invest up to RM50 billion next year, as a show of contribution to the national economy. In addition, to support start-up companies and entrepreneurs, RM 1.3 billion will be set aside as venture capital. Also, RM1.35 billion will go to food security and safety projects to push the sustainability agenda. 

GLC and GLIC will also make direct investments worth up to RM45 billion, which are vital to Malaysia’s economic recovery; according to Tengku Zafrul. And the EPF will create more than 6,000 job opportunities with a total investment exceeding RM3 billion until the year 2025.

And next year, Khazanah National will invest RM1 billion under the Impact Fund, which will be reserved and used for investments in local tech start-up companies. This is done so that the local talent pool will have the opportunity to work and gain experience by working in multinational companies. Thus they will have the ability and experience to set up their very own multinational technology companies. Also, to encourage start-up tech companies to generate their own patents, the government plans to extend tax incentives for intellectual property development until 31st December 2025. Finally, to encourage investors to contribute to economic activities through capital funding in companies receiving investment, the tax incentives will be extended until 31st December 2026. 

Promotion of digital activities

The government intends to spearhead digital efforts in Malaysia through MDEC. The aim is to turn the Urban Transformation Centre (UTC) into a digital hub. One of the initiatives is cashless transactions at UTC, along with other digital activities such as esports and coding. 

Furthermore, to help those unemployed through job matching, the government will develop 13 MYFutureJobs Satelite Centers in UTC across Malaysia with a budget allocation of RM8 million. Also, HRD Corp and PERKESO will also establish a National Placement Center in Klang Valley to act as a one-stop centre that helps the unemployed to find employment. SOCSO also will increase the number of Employment Service Case Managers to help and support the hard-working unemployed to get a job.

Digital Connectivity

To further improve the digital ecosystem in 2023, under the second phase of the National Digital Network (JENDELA) — the government will provide full Internet coverage in populated areas and provide fibre optic coverage to nine million premises across the country by 2025. This digital connectivity initiative has a total investment of RM8 billion including contributions from the industry. The JENDELA initiative will provide RM700 million to implement and increase digital connectivity in 47 industrial areas and nearly 3,700. 

The party that will spearhead and pioneer the implementation of The Rural Internet Project will be Tenaga Nasional. The project will optimise the electrical cable network to provide high-speed broadband facilities. The project is predicted to benefit over 60,000 rural residents and is supported through a matching grant of RM25 million. Lastly, Digital Nasional (DNB) will expand the 5G network nationwide to cover 70% of highly populated areas. Also, DNB plans to implement infrastructure expenditure worth RM1.3 billion in 2023. 

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