Malaysia’s digital economy is experiencing rapid growth, contributing 23% to the country’s GDP in 2022 and is expected to exceed 25% of GDP by 2025. This ambitious growth is guided by the Malaysia Digital Economy Blueprint (MyDIGITAL), launched in 2021, which aims to transform Malaysia into a digitally-driven, high-income nation and a regional leader in the digital economy by 2030. To sustain this growth, the New Industrial Master Plan (NIMP) 2030 was also unveiled in 2023. It complements the digital agenda by aiming to contribute USD 141 billion (RM 587.5 billion) from the manufacturing sector to Malaysia’s total GDP by 2030 through technology-driven initiatives.

Malaysia’s ambitions are underpinned by strong digital readiness. With internet penetration exceeding 97% and mobile penetration reaching nearly 130%, the country’s digital adoption is evident. Malaysia is also emerging as a data centre powerhouse, attracting major investments from global tech giants like Google, Microsoft, and Nvidia. The government has set ambitious targets, such as enabling 875,000 MSMEs to adopt e-commerce channels by 2025 and creating 500,000 new digital economy jobs by 2030. In addition, Malaysia’s thriving e-commerce sector and growing digital platforms ecosystem play a crucial role in achieving these targets, with the market valued at approximately USD 12.26 billion in 2025.

Against this backdrop of rapid digital transformation and ambitious economic targets, the challenge of developing governance frameworks that can effectively balance innovation with protection has become increasingly critical.

The Tech for Good Institute, with support from the Malaysia Digital Economy Corporation (MDEC), conducted a public seminar entitled “The Evolution of Tech Governance in Southeast Asia: Spotlight on Malaysia”, with the aim of bringing together distinguished policymakers, industry leaders, and academic experts to explore governance challenges and regulatory developments essential for Malaysia’s digital transformation. The event also served to launch the second edition of “The Evolution of Tech Governance in Southeast Asia-6”, sharing major policy developments across Indonesia, Malaysia, Singapore, the Philippines, Thailand, and Vietnam.

Speakers:

• YM Ts Tengku Azrul Tengku Azhar, Director, Digital Regulatory & Sustainability, Malaysia Digital Economy Corporation (MDEC)
• Noor Hasliza binti Mohd Hassan, Senior Principal Assistant Director, Jabatan Digital Negara (JDN), Ministry of Digital
• Safuan Zairi, Chief Ecosystem Officer, Malaysian Research Accelerator for Technology & Innovation (MRANTI)
• Hafidzi Razali, Spokesperson, E-Commerce Chapter of the Malaysian International Chamber of Commerce & Industry (MICCI)
• Kanmani A/P Munusamy, Director of Digital Infrastructure Centre at University Malaya
• Arifah Sharifuddin, Operations Director, Tech for Good Institute
• Keith Detros, Programme Manager, Tech for Good Institute

Key Takeaways

1. Adopting a multi-stakeholder approach is essential to ensure fit-for-purpose governance that reflects Malaysia’s unique characteristics.

Malaysia’s distinct innovation landscape demands tailored and fit-for-purpose governance frameworks. Experts emphasised its multi-sectoral nature of Malaysia’s digital economy, which spans across urban and rural communities, covering various industries, and is composed of startups and established companies. To ensure responsive policies, they recommended multi-agency coordination and broad-based collaboration as essential principles for policymakers.

Key examples were shared to further illustrate how responsive governance can be built through a multi-stakeholder approach. Strategic national frameworks such as the National Fourth Industrial Revolution (4IR) Policy were highlighted as a model of having broad-based collaboration, particularly through the People-Private-Public Partnerships (4Ps) frameworks, which aim to drive socio-economic development. In addition, the Malaysia Digital Economy Blueprint (MyDIGITAL) also exemplifies this approach by fostering partnerships between citizens, public sector agencies, and private sector entities. Despite this clear vision, experts recognise the critical challenge of the digital divide that Malaysia must address. Computer usage is significantly higher among individuals in u  compared to those in rural areas (64.3%).   A similar, though smaller, divide can be observed in terms of Internet usage, with 98.8.9% of urban households having access, whereas only around 90.3% of those in rural areas do. This gap reflects differences in infrastructure, access to technology, and digital opportunities that Malaysia’s multi-stakeholder approach can address.  This is also to ensure no community is left behind in the country’s digital transformation journey.

2. Enhanced government coordination mechanisms are needed to complement the multi-stakeholder approach in tech governance.

Malaysia’s approach to emerging technology governance should emphasise a whole-of-government approach. This speaks to how technology does not only concern one agency, but also requires commitment from various government offices.

Speakers noted that there is a need to share best practices and innovative solutions from one agency to another. For example, Jabatan Digital Negara (JDN), which is a government agency under the Ministry of Digital, can serve as a catalyst that promotes digital tools across the entire government ecosystem. The JDN is currently piloting AI solutions through proof-of-concept initiatives, with broader implementation anticipated throughout 2025, ensuring that technological advancement reaches all government agencies in a coordinated manner.

In addition, shared services platforms like the Malaysian Government Central Data Exchange (MyGDX) can serve as a comprehensive data-sharing platform. It provides data integration services across agencies to facilitate the provision of End-to-End (E2E) online services. The implementation of MyGDX allows information to be coordinated and shared more efficiently across government departments, creating a unified digital ecosystem that supports coordinated policy implementation and service delivery.

3. Shifting to principle-based frameworks allows greater regulatory flexibility while safeguarding the digital society.

The panel discussed the critical challenge of designing governance frameworks that simultaneously protect users, workers, and businesses while fostering innovation and economic growth. Experts identified key challenges in protecting Malaysia’s digital society, including involving different socioeconomic groups in the digital transformation process, ensuring affordable and reliable digital infrastructure reaches all communities, and improving digital literacy across all segments of society. It is important to address these challenges given Malaysia’s diverse population and varying levels of economic development across different regions.

Recent regulatory challenges illustrate these complexities and the need for more nuanced approaches. The Consumer Protection Regulations 2024, which require disclosure of sensitive user information, prompted industry consultation and resulted in an 18-month implementation extension. This demonstrates the government’s commitment to stakeholder engagement, while ongoing considerations around user protection frameworks continue to evolve.

Similarly, amendments to the Postal Services Act establishing minimum pricing for logistics services present challenges regarding competitive dynamics, while proposals to decouple logistics from e-commerce platforms raise questions about operational efficiency and rural delivery accessibility. For instance, users would select products on one platform, then choose logistics partners through a separate interface. While intended to encourage competition, industry stakeholders suggest this approach may not adequately account for logistical realities, as some providers may not service rural areas, potentially affecting delivery efficiency to underserved communities.

A particular focus was placed on the E-Commerce Act and digital platform governance, as Malaysia continues to advance its digital economy ambitions. The panel discussed Malaysia’s upcoming e-commerce legislation that aims to strike a delicate balance by providing regulatory clarity which supports business confidence and digital trade expansion while ensuring robust consumer protection and fair competition. The industry has expressed concerns that a “one-size-fits-all” regulatory approach may not adequately accommodate diverse business needs and operating models. As the review of e-commerce regulations is expected to be completed by August, comprehensive consideration of both industry and consumer requirements is informing policy recommendations to ensure the most effective approach to Malaysia’s e-commerce landscape.

Given these complexities, the discussion highlighted the industry’s preference for “leashes over guardrails”, establishing clear endpoints and principles while allowing operational flexibility. Hence, it is recommended to shift from Malaysia’s historically prescriptive regulatory framework towards more adaptive, principle-based approaches that can accommodate rapid technological change and ensure adequate protection for digital society. This approach recognises that effective governance requires balancing innovation with protection through collaborative policy development.

4. Beyond sandboxes, mechanisms that bridge policy innovation and commercialisation are crucial for sustainable impact.

The panel explored how Malaysia can strengthen multi-stakeholder partnerships and maintain governance agility amid rapidly evolving technologies through innovative policy mechanisms.

Malaysia’s sandbox approach was highlighted as an effective and successful policy innovation framework, demonstrating the country’s commitment to evidence-based, adaptive governance. Malaysia’s National Technology Innovation Sandbox (NTIS) exemplifies successful policy innovation, covering 15 different types of sandboxes including agriculture, smart cities, smart highways, drones, robotics, and health technology. The sandbox concept provides safe experimental spaces where innovations can be tested without widespread negative impact if unsuccessful. This approach allows regulators to experience technologies firsthand rather than relying solely on theoretical understanding, enabling more informed and practical policy development. Another example is Bank Negara Malaysia’s pioneering FinTech sandbox that established Malaysia as a regional FinTech leader, with 132 applicants from insurance, money services, banking and lending, and payment sectors demonstrating the strong industry response to innovative regulatory approaches.

However, a critical challenge identified involves ensuring innovations successfully transition from proof-of-concept to commercial adoption. This requires comprehensive support mechanisms beyond the initial testing phase.

Suggested policy innovation initiatives include co-creating policies with industry experts, implementing collaborative governance approaches, and developing outcome-based regulations that focus on achievements rather than compliance. Experts emphasised that regulations should involve all parties (public sector, private sector, and academia) from initial conception to foster ownership and facilitate adoption, ensuring that diverse perspectives shape policy development from the outset rather than during implementation phases.