National Infostructure

Requirements for
Economic Development:
The Malaysian Experience

Nazrin Hassan
Council Member NITC

1 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

Table of Contents
vMalaysia at Crossroads
vK-Based Economy, NITA and NITC
vMultimedia Super Corridor & BioValley
vInfostructure: Current Status and Rankings
vEnablers: Issues and Challenges
vLessons from Malaysia

2 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

Malaysia at Crossroads
• Malaysia’s low-cost competitive advantage has been
eroded by lower-cost countries

• Need to push into higher value added economic

activities – where technology and productivity are the
main drivers

• Vision to transform itself into a Knowledge-Based

Economy

3 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

1
K-Malaysia: A Three Phase Migration Plan

v A socio-
economic
development
model
v ICT as
strategic
enabler
v Universal
good values
are imperative

4 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

The Leapfrogging Strategy for K-Development*

K-Development*
Agricultural – Industrial – Information Era POST-
INDUSTRIAL /
ADVANCED
INDUSTRIAL
SOCIETY
DEVELOPED
SOCIETY manipulating
*Development and progress INDUSTRIAL & control
is however non-linear SOCIETY recycling
&
knowledge
manufacturing synthesizing services
&
DEVELOPING processing information
LEAST SOCIETY services Labour +Land +
DEVELOPED utility Capital +Entrepreneur +
SOCIETY agricultural services Labour + Information + R&D +
PRIMITIVE Land + Technology + Knowledge
&
SOCIETY shifting mining Capital +
Labour +
&
hunting farming
Land + Entrepreneur +
Labour +
& Capital + Information + R&D +
Labour + Land +
gathering Entrepreneur + Technology RS
Land Capital ACTO
Labour Information E–F
LEDG
NO W
N A ND K HANG E
TIO C
RM A AND
INFO W VALUE Source: NITA, 1996
E
OF N

5 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

Facilitating the Transformation: National IT Agenda (NITA)

The working model for

NITA is the National IT
Framework (NITF),
which focuses on the
balanced development
of people, infostructure,
content and
applications to create
value, to provide equity
and access to all
Malaysians, and to
qualitatively transform
our society into a
values-based
knowledge society by
the year 2020.

6 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

2
 The Governance Agenda
Orderly Transition and Transformation - A Migration Plan

Public
Sector
Public
Public
Sector
Private Sector
Sector
Community
Community Private
Private Interest
Interest Sector
Sector Community Sector
Sector Interest
Sector

Traditional Malaysia Inc. Convergence Model

Model of Model of of Governance for
Governance Governance the Information Age

7 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

NITC Policy Intervention Framework

v National level
Policy
v Strategic function
Framework
v Policy coordination and integration
v National level
for policy review
Feedback loop

Programs v Tactical function

& Initiatives v Programme level coordination of
cross-sectoral initiatives

v Organizational level
v Facilitation of project coordination
and implementation
Projects
v Monitoring & evaluation of ICT
projects/programmes of national
import

8 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

National IT Council as Strategic Coordination Framework

Cross-Sectoral Planning & Coordination Mechanism
Cabinet
assign feedback

NITC Ministries

Federal
Community Government
Private Sector

Sector
State
Government
Private
G
Public
Sector Sector Local
Government

All Public
Sector
Agencies
Society, Non-profit Sector
NGOs and Media

9 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

3
7KLUG&RXQFLO6WUDWHJLF3ULRULW\$UHDV

Strategic Cross-cutting Areas as

Goals Improve National Enable Efficient and Development of Integrating Factors
Economic Effective Delivery of Inclusive • The Governance Agenda
Strategic Competitiveness Public Goods Community
Drivers • Bridging the Digital Divide
• Life Long Learning
5HLQWHUPHGLDWH Rapid mobilisation • Sovereignty
WRLPSURYH of pilot projects with Nurture responsible
Private Sector
ILUPOHYHO appropriate corporate citizenry
FRPSHWLWLYHQHVV technologies

Identify and Improve local

Facilitate enabling
facilitate e- governance to
Public Sector environment for e-
enablement of evolve participative
Business
Public Services communities

Enable community Enable community

organisations to to articulate Promote life-
Community migrate to a culture demands and changing ICT
Value chain integration
of life long learning complement service applications
and innovation delivery TIGeR Projects
Funding ⇒ DAGS; Platform ⇒ SJ2005; Evaluation ⇒ K-Measures

10 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

Leapfrogging Malaysia’s Development

Multimedia Super Corridor

11 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

&DVH([DPSOH7KH0XOWLPHGLD6XSHU&RUULGRU

ICT as a new sector of growth

MSC – the next engine of growth –
is a test bed for ideas and ideals; an
environment to jumpstart innovation
in ICT (multimedia)

MSC

Physically, it is an area 15 kilometres wide and 50

kilometres long, that starts from the Kuala Lumpur
City Centre (KLCC), down south to the Kuala
Lumpur International Airport (KLIA).
URL: http://www.msc.com.my

12 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

4
06&6RPH)DFWVDQG)LJXUHV

Economic Impact Growth of Sales

RM Bil
Up to May 15, 2002, the
12 7.87
MSC companies surveyed
had a total sales of 10 5.65
RM5.65 billion, of which 8
RM4.27 billion was local 6 3.41
sales while RM1.38 billion
was export sales 4
2.19
2 1.38
0.7
0
Companies Surveyed
2001 2002 2003(p)
Total Sales
Year
Export Sales

Source: MSC Impact Survey 2002

13 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

06&6RPH)DFWVDQG)LJXUHV

Technology Impact
Software development is the biggest
percentage in the breakdown of the Technology Cluster
services technology cluster, with an
Developer of
involvement of 27%, or 213 System Tools
core tech Services
& Utilities
companies, followed by systems Infrastructure 5% 5% 29%
Systems
integration at 22%, representing 169 8%
companies, web design and content Enterprise
16% or 133 companies, Internet and App
14%
others 8%. In the vertical application
technology cluster, the breakdown
according to industries are financial
and insurance at 22%,
Verticle App
telecommunications at 19%, Content
23%
16%
Government at 15%, manufacturing
at 13%, retail at 8%, healthcare at
8%, transportation at 8%, and smart Source: MSC Impact Survey 2002
card at 7%.

14 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

&DVH([DPSOH7KH%LR9DOOH\

ICT as a strategic enabler

• To be located in the Multimedia Super Corridor,
a catalyst and test bed for the development of
Malaysia’s bio-technology industry
• Three core research institutes dedicated to
genomics and molecular biology, agriculture
biotechnology and pharmaceutical and
neutraceutical to be built under the 8th
Malaysia Plan (2001-2005)
• Core institutes to be supported by existing R&D
institutions and universities, and clusters of
biotechnology industry
• A Business Development Directorate to be
created to take research findings from bench to
market

15 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

5
 INFOSTRUCTURE: CURRENT STATUS

Selected ICT Indicators for 1995 and 2000

In d ic a to r 1995 2000 % Cha ng e

Ne w s p ap e r Circu la tio n p e r 1,000 p o p u latio n 1 62.00 159* -185. 00%

Te lex s u b s crib ers 6,5 78.00 3,105* * - 52.79
Pe rs o n al C o mp u te r s ( u n its ins talle d ) 610,0 00.00 2,200,000.00 260.65
Pe rs o n al C o mp u te r s p e r 1.000 po p u la tio n 29.50 95.70 224.41
Te lep h o n e Lin es p er 1,000 p o p u la tio n 1 61.07 204,76 27.12
Te lep h o n e Su b crib ers 3,332,4 47.00 4,650,410.00 39.55
M o bile P h o n e s 700,0 00.00 2,265,000.00 223.57
Nu mb e r of In te rn e t S u b s c r ib e rs 13,06 4* ** 1,157,384.00 8759.33
Nu mb e r of In te rn e t U s ers 30,0 00.00 4,000,000.00 13233.33

Sources: Ministry of Energy, Communications and Multimedia, PIKOM, World Competitiveness

Yearbook and World Competitiveness Report 1999/2000
*1998 only
**1999 only
***JARING only

16 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

INFOSTRUCTURE: CURRENT STATUS (2)

Development Allocation for ICT-Related Programmes and Projects, 2001-2005
RM million
Programmes/Project Allocations %

Flagship Applications 1824.9 29.3

E-government 434.8
Smart Schools 401.1
Telehealth 400.0
Multi-Purpose Card 418.1
R&D Cluster 1.9
Cross Flagship 169.0

Computerisation 1641.8 26.3

Research and Development 500.0 8

Bridging the Digital Divide 1976.7 31.7

Infodesa 21.7
Internet Desa 10.0
Universal Service Provision 1000.0
Computer Infrastructure for Rural Schools 945.0

Local Content 10.0 0.2

Others 284.4 4.5

Total 6,237.80 100 Source: EPU 2002

17 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

INFRASTRUCTURE: RANKING TREND

Countries 2001 2000 1999 1998 1997 Ranking for
Technology
Infrastructure
2001
Malaysia 38 32 28 24 25 37
Singapore 5 3 3 2 2 9
Korea 34 28 39 38 32 25
Hong Kong 14 18 13 12 9 21
Taiwan 16 21 16 20 22 16
China 39 34 35 30 41 47
Japan 19 15 14 17 14 19
Finland 2 2 2 3 3 3
Ireland 15 16 20 13 10 12
New Zealand 21 19 18 18 7 17

Source: IMD’s World Competitiveness Yearbook 2001

18 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

6
 INFOSTRUCTURE: RANKING
Countries Overall Ranking Investment in Computers Connection E-commerceTelephone Mobile
2001 Telecommunications per Capita to Internet Lines Phones

Malaysia 38 7 33 35 28 38 33

Singapore 5 14 13 17 5 23 19

Korea 34 8 23 31 23 27 20

Hong Kong 14 36 14 6 14 16 4

Taiwan 16 6 22 19 18 12 2

China 39 1 46 46 39 46 44

Japan 19 25 18 21 31 14 26

Finland 2 31 3 2 1 17 1

Ireland 15 17 15 22 13 22 16

New Zealand 21 23 10 10 8 20 37

Canada 8 38 8 5 7 8 31

Source: IMD’s World Competitiveness Yearbook 2001

19 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

INDICATORS FOR KBE: RANKING

Country Innovation Technology IP Research Technology Pervasiveness
Transfer Rights Collaboration Licensing of
Clusters

Malaysia 4 30 35 59 16 25

Singapore 2 14 - 18 4 4

Korea 27 22 45 42 18 17

Hong Kong 1 27 29 49 14 11

Taiwan 5 16 22 21 10 5

China 18 34 49 14 14 11

Japan 38 5 17 29 6 8

Finland 15 2 5 1 28 1

Ireland 6 20 1 28 35 18

New Zealand 28 21 15 41 26 34

Canada 47 15 11 7 11 13

Source: Global Competitiveness Report 2000, World Economic Forum

20 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

ENABLERS: ISSUES AND CHALLENGES

• Creating Innovative Firms

• Enhancing Research and Development

• Addressing the Human Capital Dimension

• Revamping the “feeder”: the Malaysian Education

System

• Priority of Resource Allocation: Growth vs. Equity

21 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

7
 ENABLERS: ISSUES AND CHALLENGES (1)

Creating Innovative Firms

v Relative lack of success by the MSC – only RM5.7
billion in overall sales and RM1.4 billion in sales by
2002
v Venture capital funding model is not entirely
suitable for Malaysia’s current stage – mismatch of
funding
v Lack of angel investors and effective incubators in
Malaysia, to fund and assist technopreneurs in
business-building
v Need for developmental funding mechanism, to
create a critical mass of technopreneurs within the
MSC

22 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

FUNDING MISMATCH?

What we have a lot of

No. of Early Stage investment will

No. of Early Stage ICT
ICT
Companies
Companies allow increase in deal flows to
Where the focus is Start-up stage
now
Idea/Concept

Start-up
Seed

Seed
Idea/Concept
Start-up

We need to build this to get a lot of this

23 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

ENABLERS: ISSUES AND CHALLENGES (2)

Enhancing Research and Development
v Malaysia spends less on R&D expenditure
compared to developed countries – only 0.8% of its
GDP

v Severe shortage of R&D personnel in comparison

to other countries

v Lack of industrial linkage between universities and

private sector = low level of R&D commercialization

v Halt R&D talent outflow – create avenues for them

to carry out their research in Malaysia

24 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

8
 ENABLERS: ISSUES AND CHALLENGES (3)

Addressing the Human Capital Dimension

ΠMost crucial challenge for Malaysia in the transition to K-
Based Economy – needs to be tackled urgently

ΠSevere shortage of scientists, engineers and K-workers for

Malaysia’s future demand, in areas like biotechnology

ΠBrain drain must be stopped, brain gain must begin, to attract

international talent to become a human capital hub (K-
Economy Masterplan)

ΠMust be willing to pump in huge investment into R&D and pay

“top dollar” for top research talent

ΠMalaysia must evolve to become a desirable place to work

and reside for the “Creative Class”

25 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

ENABLERS: ISSUES AND CHALLENGES (4)

Revamping the “feeder” – The Malaysian

Education System
q Currently, major revamp is being undertaken to reform the education
system

q More English please!! A timely U-Turn

q Although literacy rate is high, (91%), but the reading culture still
does not firmly take root – must solve this problem for infostructure
to be effective

q Now focusing on qualitative requirements in education –

encouraging creativity, critical thinking and innovation

q Majority of graduates still in the arts fields, despite intensive

Government efforts – only less than 40% are in the science and
engineering fields

26 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

ENABLERS: ISSUES AND CHALLENGES (5)

Priority of Infrastructure and Resource Allocation
½ Less FDI to depend on in future – does Malaysia have enough
resources for all its needs?

½ BDD initiatives are resource-intensive – avoid unintended

wastage

½ BDD efforts must involve tri-partite model and “guided

collaboration” of the actors

½ BDD initiatives must show sustainability and replicability and

committed financial sustainability “buy-in” from the target
community

½ BDD priority and philosophy must be based one’s own

national circumstances

27 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

9
 LESSONS FROM MALAYSIA
q Vision must be driven by all parties
q National Strategies must be tailored to
National Conditions

q Good Basics = Education, Education,

Education

q Strive to be a Human Capital Hub

q Balance the need for Growth and
Social Equity

28 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

THANK YOU
Email:
nazrin@team.net.my

http://www.nitc.org.my

29 7XUQLQJ5LSSOHVLQWR7LGDO:DYHV

10