Digital economy: Half full, going on empty

March 21, 2012

KUALA LUMPUR, March 21 — If you're like me, you have probably heard and made your share of complaints about the state of the Internet in Malaysia – it’s slow, expensive when you compare the megabits per second cost with that of similar countries, and simply not pervasive enough.

In its annual “state of the Internet” report, Cambridge, Massachusetts-based Akamai has Malaysia lagging behind countries like Vietnam and just edging Peru. Internet speeds are the butt of many a joke when Malaysians get together, whether in real life or online.

So, I was quite pleasantly surprised when a joint research by McKinsey and Google, whose findings were released at the World Economic Forum in Davos, Switzerland in late January, gave Malaysia a pretty good report card.

The results were unveiled in Malaysia at a media conference, whose participants included executives of the two companies, officers from relevant government agencies, and some local Internet entrepreneurs. Facing a sea of scepticism from some members of the media, Malaysian Communications and Multimedia Commission (MCMC) chairman Datuk Mohamed Sharil Tarmizi shrugged sportingly and said, “We Malaysians tend to be a glass-half-empty sort of people.”

Among the pleasant but hard-to-credit high points of the Google-McKinsey study, Online and Upcoming: The Internet’s Impact on Aspiring Countries, was that the Internet contributed 4.1 per cent of Malaysia’s Gross Domestic Product (GDP), a rate outstripping even those of many of the world’s most developed economies.

McKinsey defines “aspiring” nations as developing countries that “are on the cusp of becoming developed,” said Nimal Manuel, principal at the research firm, which may be a generous view of Malaysia given its stuttering economic reforms.

The 18-month study looked at 30 “aspiring”  countries with a particular focus on nine: Malaysia, Argentina, Hungary, Mexico, Morocco, Nigeria, Taiwan, Turkey, and Vietnam. The digital economy of these 30 countries was also compared to that in developed countries. A total of 57 countries were studied.

According to the study, the Internet contributed US$9.75 billion (RM29.9 billion) of Malaysia’s 2010 GDP of US$238 billion – a 4.1 per cent contribution slightly edging the United States’ 3.8 per cent and Japan’s 4 per cent, but far outpacing the average 1.9 per cent of the 30 countries in the “aspiring” sector.

Other indicators also put Malaysia on a promising footing: Broadband penetration doubled between 2008 and 2010; we have a voracious appetite for social networking, spending one out of three minutes online on such sites; we have six times as many secure servers as the average for the aspiring cluster; and Malaysian business sell more things online than many other countries with similar wealth.

But don’t break out the champagne yet: The Internet contributed only 2.3 per cent to Malaysia’s GDP growth in 2010, right smack on the average mark for aspiring countries and far below the 21 per cent of developed countries. To put it succinctly: We are in a great position, but not for long unless something is done.

“It is worrying,” Manuel admitted.

The fact that Malaysian businesses only allocate 1 per cent of their advertising budgets to online media could mean there is so much room for growth, or that we have been very slow off the mark. The current figure puts Malaysia at the bottom 10 per cent of the 57 countries ranked for the study.

Domestic online consumption is also below average: Average private consumption comprises 70 per cent of the Internet’s impact in the nine focus countries; in Malaysia, it comprises only 40 per cent.

In terms of powering the digital economy, Malaysia ranked respectably in terms of business environment and infrastructure (no, don’t scoff!), but had a dismal showing in terms of financial and human capital. (And no, I am not going to bring up the ill-conceived Computing Professionals Bill!)

At the above conference, the Multimedia Development Corporation (MDeC) came out in full force – the results of the study, after all, provided much more grist for its Multimedia Super Corridor (MSC) mill.

MDeC was appointed the lead agency for the “Digital Malaysia” masterplan, which Prime Minister Datuk Seri Najib Tun Razak announced in New York last May, the details of which the technology industry and consumers have been waiting for with bated breath. This might happen as early as next month, according to some sources.

Based on what little information the government has provided, it seems an updated version of the original MSC vision, or as I like to tease MDeC people, “MSC Rebooted.” To be fair, from all indications, it is going to be a massively detailed plan that takes into account technology developments, especially on the Internet, over the nearly two decades since the MSC was first announced by Tun Dr Mahathir Mohamad.

We also know that some non-techies in government circles want to name it the Digital Transformation Programme in keeping with all the other “TPs” the government has regurgitated from the alphabet soup that has produced the GTP, ETP, NKEA, NKRA and whatever.

Never mind that the term “DTP” would be scoffed at by technologists, who will probably come up with jokes about PageMaker, Aldus, Adobe and other desktop publishing tools from the PC era.

What matters is that, while the Google-McKinsey report has Malaysia on a solid footing (the sceptic in me still raises his eyebrows), if the Digital Malaysia masterplan is going to take us forward, it better be able to address all the vulnerabilities unearthed by said report.

Yes, we still await this with bated breath.

* A. Asohan is co-founder and executive editor of Digital News Asia, a digital publication covering the ICT ecosystem that will go "live" in April. For more click here.