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Malaysia 2013 Budget takes analogue approach to digital economy: IDC

AvantiKumar | Oct. 9, 2012
The approach seems to be an 'analogue' one towards achieving an innovative digital economy by the year 2020, says IDC.

Sudev Bangah, IDC Asia/Pacific

PHOTO - Sudev Bangah, senior research manager, IDC Asia/Pacific.


Malaysia's 2013 Budget proposals appear to be an 'analogue' approach to achieving a developed digital economy by the year 2020 though some of the initiatives should have an impact on Malaysia's ICT future, according to analyst firm IDC.

IDC Asia/Pacific senior research manager, Sudev Bangah, said: "The absence of significant ICT specific initiatives within this budget has made it difficult to infer any largescale shifts in IT spending in the near future."

"At present, IDC anticipates Malaysian IT spending to achieve US$11.4 billion by 2016, with an 8.7 percent compound annual growth rate (CAGR), with a large part of this driven by two Economic Transformation Programme (ETP) initiatives in Outsourcing and Data Centre," he said.

"While pockets of innovation and technology based initiatives were announced, there was little to cause an inflection point for the IT industry," said Bangah, who said IDC selected the five following important initiatives within the budget proposals that should have an impact on the country's IT sector:

1. Outsourcing and leveraging on technology

"While details remain vague, the announcement remains a positive one in the face of stiffening competition from neighbouring outsourcing countries," said Bangah. "In a direct link to Entry Point Project (EPP) 2 - Building globally competitive outsourcers; it is envisioned that the Domestic Investment Strategic Fund of RM1 billion [more than US$327 million] will contribute towards creating globally competitive local outsourcing companies by creating well rounded and industry specific talent. IDC expects this initiative to further drive the local outsourcing companies to up-their-game in the face of global delivery."

2. Technology and agriculture

"The budget announcement made two specific mentions of technology and innovation for the Agriculture industry," he said. An often overlooked industry when it comes to ICT, IDC expects these announcements involving agriculture based applications and management systems to cause some interest within IT vendors in the country. While Agriculture spending in IT remains small, the interest in this sector will cause a slight shift away from the over-saturated ICT-enabled verticals such as FSI and Resources."

3. Subsidised mobile phone packages for youths

"This initiative will have a limited impact on the acceleration of smartphone adoption in the country, as well as for mobile phone vendors," said Bangah. "While the initiative remains positive, there are many aspects such as the duration of subsidy, number of brands covered, authorised dealers and method of disbursement which will impact the planned initiative. A definition of a 'smartphone' will be required and IDC does not expect a deluge of smartphone purchasing to occur simply because of a RM200 [US$65] rebate. In a conservative scenario, dealership may be restricted to larger chain stores which would alienate smaller urban and rural areas of the country."

4. Broadband programme for urban poor

"At this juncture, there are a lot more questions than answers for this specific initiative, however, it is seen as a positive one as the government attempts to boost IT literacy across the urban population to better equip itself for the impending digital economy," he said. "A large budget of RM150 million [US$49 million] has been set aside although it is yet to be seen how these funds will be used on infrastructure, facilities, broadband and hardware [PCs/laptops/devices]. This initiative will have a positive impact in creating an ICT literate society and may increase the interest from youth in working within this sector in the future."

5. SME enablement via IT

"This initiative ties in quite neatly with specific goals within the Digital Malaysia framework to enable traditional sectors in expanding geographically and increasing market access via digital commerce offerings," said Bangah.

"The consumerisation of IT has caused many organisations to consider alternative methods of sales and penetration strategies," he said. "With the increasing smartphone and tablet PC scene across all countries in ASEAN, this method of sales enablement is seen as an inevitable paradigm shift within markets both domestically and globally. IDC expect this shift and 'modernisation' of micro to small SMEs to force the hand of infrastructure providers to ensure connectivity and network availability across the country. Additionally, this will also encourage basic adoption of basic IT usage, increasing their confidence in ICT spending - which has traditionally been a flat year-on-year performance due to the conservative nature of this segment."


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