Supporting Digital Economic Activities in Malaysia

In a two part series, the Tech For Good Institute speaks with Dr. Rachel Gong on digital inclusion in Malaysia. In our second article, we examine how the Malaysian government can continue to support small businesses’ digital progress and fulfil technology’s promise.

Dr. Gong serves as Deputy Director of Research at the Khazanah Research Institute (KRI) and is the editor of KRI’s book on digital policy issues, “#NetworkedNation: Navigating Challenges, Realising Opportunities of Digital Transformation”. The KRI carries out research on the pressing needs of Malaysia, and is affiliated with Malaysia’s Khazanah Nasional Berhad sovereign wealth fund.

Malaysia ’s digital economy is expected to contribute 22.6% of the gross domestic product (GDP) by 2025 up from 17.8% of GDP in 2015.  As examined in the first part of this series, Malaysia’s digital transformation initiatives have been largely focused on infrastructure- and device-led growth. While progress has been made in terms of increasing access to digital technologies, there is still room for growth when it comes to the use of digital solutions for business activities.

Dr. Rachel Gong, who heads digital policy research at the Khazanah Research Institute (KRI), notes that micro, small, and medium enterprises (MSMEs) in Malaysia are still behind the curve when it comes to digital adoption.  According to the World Bank, much of the use of digital technologies are in large firms rather than MSMEs. The country still has fewer businesses with websites and fewer secure servers than countries with the same per capita income. Given that small businesses comprise 97.4% of all establishments and supports 47.8% of Malaysia’s total employment, digitalisation among MSMEs is vital for inclusive growth of Malaysia’s digital economy. 

Costs, Capability and Community

Of the MSMEs in the country, only 53.9% were represented online as recently as 2019, with an even tinier fraction of them (6.9%) exploring more advanced technologies such as data analytics. “One of the reasons small businesses in particular are hesitant to use digital tools is due to the startup costs of digitalising your economic activity,” Gong says.  The associated costs of digitalisation is not only limited to funds required, but MSMEs would also need to spend time and manpower to create new business solutions.  

As digitalisation is an ongoing process, rather than a one-time switch, Gong notes that going digital requires businesses to structure systems differently and ensure that their data and financial transactions are safe. 

Capacity building amongst employees is also required. In KRI’s recent publication #NetworkedNation, the report found that MSMEs saw skill upgrading as another significant barrier to digitalisation, with 65% of MSMEs indicating that their employees needed training on IT-related technical skills.  To this end, the Malaysian government has put initiatives in place such as the National Economic Recovery Plan (PENJANA), which set aside USD 157 million to support technical and digital adoption for SMEs, to help entrepreneurs with the transition.

But more than the usual support of funds and training opportunities, Gong highlights the need to also have a local support system among the MSMEs.  “Having a community of entrepreneurs who are all trying to do different things could be very helpful”.  An ecosystem for entrepreneurs can foster collaboration, sharing of best practices, and serve as a social support system.  There are also existing efforts towards this goal with Malaysian Digital Economy Corporation establishing community-level digital entrepreneurship centres to support small business owners.  Pairing financial and technical support to MSMEs with social and community-level programs would help address MSMEs’ hesitancy on digital adoption. 

Adopting Policies to Local and Regional Nuances

The platform economy reduces investment from MSMEs to begin their digitalisation journeys.  To bridge the MSME digital divide, platform companies have also been supporting digitalisation through training and facilitating access for MSME to digital options. For instance, Grab’s Grab Merchant Academy was launched in 2020 so as to help MSME partners pick up skills and know-how in areas such as digital marketing and menu optimisation. Gojek’s “So no one left behind” programme in partnership with HCMC Women’s Cultural House in Vietnam also saw it provide vocational training for the family members of Gojek’s driver partners through courses that taught them about e-commerce store management and the setting up of online businesses. In TFGI’s recent Platform Economy Report, 80% of MSMEs reported having greater reach through platforms and has helped support sales even during the pandemic.  

Governments all over the world are working to balance encouraging digitalisation, supporting MSMEs and protecting consumers. Gong believes that the EU’s Digital Markets Act and Digital Services Act will act as references for regulation on competition and consumer protection laws in the region, including Malaysia.  This is similar to how the  General Data Protection Regulation (GDPR) informed national data privacy regulations.  Gong highlights that what worked in other countries might not work in Malaysia, given the context, culture, and attributes of the Malaysian business ecosystem.  

To this end, It is vital that a diverse set of stakeholders – MSMEs included – will have a role in crafting new policies, especially if it affects their transition to and adoption of digital business activities.

Photo Ravin Rau by on Unsplash

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Mouna Aouri

Programme Fellow

Mouna Aouri is an Institute Fellow at the Tech For Good Institute. As a social entrepreneur, impact investor, and engineer, her experience spans over two decades in the MENA region, South East Asia, and Japan. She is founder of Woomentum, a Singapore-based platform dedicated to supporting women entrepreneurs in APAC through skill development and access to growth capital through strategic collaborations with corporate entities, investors and government partners.

Dr Ming Tan

Founding Executive Director

Dr Ming Tan is founding Executive Director for the Tech for Good Institute, a non-profit founded to catalyse research and collaboration on social, economic and policy trends accelerated by the digital economy in Southeast Asia. She is concurrently a Senior Fellow at the Centre for Governance and Sustainability at the National University of Singapore and Advisor to the Founder of the COMO Group, a Singaporean portfolio of lifestyle companies operating in 15 countries worldwide.  Her research interests lie at the intersection of technology, business and society, including sustainability and innovation.


Ming was previously Managing Director of IPOS International, part of the Intellectual Property Office of Singapore, which supports Singapore’s future growth as a global innovation hub for intellectual property creation, commercialisation and management. Prior to joining the public sector, she was Head of Stewardship of the COMO Group and the founding Executive Director of COMO Foundation, a grantmaker focused on gender equity that has served over 47 million women and girls since 2003.


As a company director, she lends brand and strategic guidance to several companies within the COMO Group. Ming also serves as a Council Member of the Council for Board Diversity, on the boards of COMO Foundation and Singapore Network Information Centre (SGNIC), and on the Digital and Technology Advisory Panel for Esplanade–Theatres on the Bay, Singapore’s national performing arts centre.


In the non-profit, educational and government spheres, Ming is a director of COMO Foundation and Singapore Network Information Centre (SGNIC) and chairs the Asia Advisory board for Swiss hospitality business and management school EHL. She also serves on  the Council for Board Diversity and the Digital and Technology Advisory Panel for Esplanade–Theatres on the Bay, Singapore’s national performing arts centre.


Ming was educated in Singapore, the United States, and England. She obtained her bachelor’s and master’s degrees from Stanford University and her doctorate from Oxford.