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Adoption & challenges of digital technology in Malaysia


There is a drastic change in consumer approach worldwide out of a sudden post pandemic. Malaysia as an emerging economy is no different or non-insulated from the catastrophe. Market was witnessing a slow transition in digital transformation pre Covid without disturbing its comfort level. Eventually, when the situation demands isolation or forceful shutdown of offices and business establishment there is a need evolved to continue with supply chain, demand generation, retailing, shopping without physical involvement. Digital adoption is no more a choice, but, a compulsion for businesses.

Industry Insights:

According to the Department of Statistics, Malaysia’s e-commerce revenue increased by 33% in 2020 to RM896 billion, up from RM675 billion in the previous financial year.

According to the World Bank data, Malaysian firms were underperforming in their digitalization efforts before the pandemic as compared to their regional peers in Thailand, the Philippines, Vietnam, and Singapore. According to estimates from consultancy firms, almost 77 percent of SMEs in Malaysia are still in the early stages of digitalization.

Small and medium businesses account for 98.5 percent of Malaysia’s 920,624 commercial establishments (SMEs). According to the World Bank Malaysia, despite being the backbone of the country’s economic climate, digital adoption among SMEs lags behind that of larger firms.

The contribution of SMEs to the country’s overall GDP was 38.9% in 2019. In the same year, SMEs employed 7.3 million individuals, accounting for nearly half (48.4%) of all jobs in the country. Malaysian SMEs are divided into three groups: micro, small, and medium. Microbusinesses account for 76.5 percent of Malaysia’s SMEs. Small and medium-sized enterprises (SMEs) account for only 2.3 percent of the total.

Malaysia’s e-commerce revenue reached $4 billion by 2020. Malaysia’s e-commerce market grew by 37 percent in 2020, contributing to the global growth rate of 26 percent. Malaysia’s e-commerce market increased by 24.7 percent in 2021, according to Global Data’s eCommerce Analytics. Between 2020 and 2024, the market is estimated to grow at a CAGR of 14.3%, reaching $12.6 billion.

In 2021, 80 percent of Malaysia’s population (27.4 million) were active internet users, and mobile phone penetration would be high (84.2 percent). Malaysia has 28 million social media users and 39.99 million mobile connections as of 2021.

Challenges in Digital adoption:

It is becoming increasingly important to solve the multiple roadblocks in order to ensure the long-term viability of Malaysia’s enterprises in the post-pandemic world and beyond.

One of the most significant difficulties is the cost of financing or digitization. Internet access, digital hardware, and software subscription fees are among these expenses.

Low awareness and knowledge of financing and technologies also play a significant part in business digital transformation decisions. According to the findings of a survey conducted by SME Corp and Huawei, 60% of business owners are unaware of financing possibilities, and 34% believe cloud computing is expensive.

Another stumbling block is the scarcity of digital skills, which is a critical factor in the adoption of cutting-edge technologies. According to the country’s digital literacy rate, only 15% of Malaysians have advanced ICT abilities.

Gaps in the digital infrastructure must be addressed as well. According to a study conducted by Siemens Malaysia last year, 50 percent of SMEs are not ready to accept new remote working norms due to infrastructure and system issues, including Internet access.

All the stumbling blocks to adopting digital technologies should be taken care of cohesively by corporate and government establishments. Digital consultants like Quocent can play a lead role by accelerating the implementation of digital tech and thereby optimizing business processes to monitor, control, and enhance productivity. The government can always gear up to build digital infrastructure and formulate policies to make it cost-effective for businesses to adopt quickly and regulate data security to avoid misuse of digitalization.