Malaysia is making significant strides in transforming its economy by focusing on the technology sector. Young entrepreneurs like Natalie Loi, who founded her first tech startup, UnBound, at the age of 19, are leading this charge. Established in 2017 while she was a business student at Victoria University, UnBound started as an educational tool that employed augmented reality to enhance learning experiences. Today, the company has expanded into artificial intelligence (AI) and collaborates with over 100 institutions across Southeast Asia, Australia, and the UK.
Loi credits the Malaysian government for its support of startups and programs aimed at enhancing the skills of young graduates. She remarked, “As a developing country, we have so much more potential to grow than a developed country,” highlighting Malaysia’s opportunity to leapfrog outdated infrastructure and embrace innovative technologies.
Digital Transformation in Malaysia
Historically reliant on mining and agriculture, Malaysia’s economy began to shift in the 1980s under former Prime Minister Mahathir Mohamad. The nation’s digital journey commenced in 1996 with the ambitious plan to create a “Multimedia Super Corridor” similar to Silicon Valley. Although this initial vision was not fully realized, the groundwork for a second economic transformation is currently in place.
The COVID-19 pandemic accelerated the growth of Malaysia’s digital sector, according to trade economist Juita Mohamad. She observed that the surge in e-commerce and digital services has affected both the private and public sectors. In 2021, the Malaysian government unveiled the Digital Economy Blueprint, aiming for the country to become a “regional leader in the digital economy” by 2030. The blueprint projects that digital industries will contribute 25 percent to Malaysia’s GDP by the end of 2025, up from approximately 17 percent a decade earlier.
A crucial aspect of this digital roadmap is addressing disparities in digital access to ensure that Malaysia’s workforce can engage fully in the digital economy. The government is placing a strong emphasis on AI, launching the National Artificial Intelligence Office (NAIO) in December 2024. According to NAIO’s chief executive, Sam Majid, the office will oversee “policymaking, partnerships, and programs that foster AI adoption across public and private sectors.”
Loi’s company, UnBound, is involved in the government’s implementation of the “smart cities” concept, which aims to enhance municipal planning and services through digital solutions. She explained that smart cities require interconnected systems, and UnBound is utilizing AI to assist authorities in disaster response and planning.
Data Centre Development and Investment
One of the most visible indicators of Malaysia’s digital transformation is the rapid development of large data centres. These facilities, which manage and store vast amounts of digital data, are essential for powering social media, search engines, and AI applications. Malaysia’s strategic location, moderate seismic activity, affordable land, and low electricity costs have made it an attractive destination for this crucial infrastructure.
The YTL Green Data Center Park in Johor is one of Malaysia’s largest, spanning 275 hectares. Major tech companies are investing heavily in the country; in mid-2024, Google announced a $2 billion investment for its first data centre in Malaysia, while Microsoft plans to invest $2.2 billion over the next four years to establish its first “cloud region” data-centre infrastructure. Additionally, Alibaba Cloud is set to open its third data centre in Malaysia this month.
While these foreign investments are vital for boosting Malaysia’s digital economy, analysts express concerns about the complexities of balancing relationships with other nations. Mark Manantan, director of cybersecurity and critical technologies at the Pacific Forum, noted that the influx of foreign capital could complicate Malaysia’s diplomatic stance amid U.S.-China tensions.
Despite ambitions for growth, experts caution that Malaysia’s digital transformation faces significant challenges. The environmental impact of data centres is a growing concern, with academic studies highlighting the substantial water and energy demands of these facilities. Nuarrual Hilal Dahlan, a law professor at Universiti Utara Malaysia, pointed out that the government’s efforts to implement stricter guidelines on water usage for data centres may not fully address the issue.
The National Water Services Commission is exploring alternative water sources for data centres, such as rainwater and recycled water, to alleviate potential strains on potable water supplies.
Additionally, there are questions about whether the jobs created through these investments will foster substantial local digital talent. While the government anticipates generating 50,000 new jobs, concerns remain about the availability of a skilled workforce. Azran Osman-Rani, co-founder of the digital health startup Naluri, emphasized that many data-centre jobs involve maintenance rather than developing critical skills such as software engineering and data science.
Addressing the Digital Divide
The digital transformation is not uniformly benefiting all regions of Malaysia. Although the government is rolling out 5G technology across the nation, the focus has primarily been on urban areas, leaving some communities, particularly in the East Coast and eastern regions, underserved. Currently, only 90 percent of Malaysian households have internet access, and disparities persist.
Despite these challenges, young innovators like Natalie Loi remain optimistic about Malaysia’s digital future. She believes AI is creating numerous career opportunities and stresses the importance of cultivating new skills to thrive in the evolving economy. “There’s a lot of space for growth and a lot of potential for new skills,” she stated, reflecting the hope for a vibrant digital landscape in Malaysia.
