In Malaysia's 2010 budget, the government's push is for a nationwide agenda utilizing innovation as an overriding factor across industries in order to spur a high-income economy in Malaysia. This is a culmination of innovation, creativity, and high value-added activities that are portrayed in policies tabled in the budget for research and development (R&D), comprehensive creative industry policy, and development of human capital.
IDC believes that the investments targeted at broad-base industries such as education, finance, agriculture, and manufacturing has an indirect but critical impact on ICT spending, as any improvements on these sectors will help industry players to focus on future key ICT investment plans. However, while the 2010 budget aims to utilize innovation across industries to help spur a high-income economy in the country, the lack of more concrete endeavors on boosting ICT usage among lower income groups is still largely unaddressed. Direct and more focused plans on ICT as a key business enabler across verticals should be looked upon and examined closely.
From a consumer ICT spending perspective, we applaud the Malaysian government on some of its key initiatives pertinent to the ICT industry, including efforts to boost PC and broadband adoption through a computer loan for civil servants, the RM50/month netbook package for local university students, and the acceleration of the HSBB project. The adoption growth of broadband services in any country is highly dependent on PC penetration in the nation, and such an initiative goes hand in hand in driving the adoption of both PC and broadband in Malaysia. Vendors in the netbook market, as well as mobile broadband service providers, stand to gain the most from this initiative, especially when executed properly will have a positive impact on the country's IT and telecommunication spending, considering the fact that previous initiatives have failed due to poor execution.
Unfortunately the impending announcement of the GST tax by end of 2009, is a cause of concern for the ICT industry, especially on consumer goods, which may negate the positive impact of this initiative, as it will raise the prices of ICT goods and services, which previously enjoyed a tax-free status. Meanwhile the announcement of an increased personal tax relief and a reduced income tax ceiling will lead to an increase in disposable incomes among Malaysian consumers, although it should be cautioned that the increase in disposable income may not necessarily result in consumer IT spending boost. As a result, the net effect of the Malaysian budget to the consumer ICT market will be highly dependent on both the implementation of PC packages and the implications of GST on ICT goods and services.
Meanwhile for the commercial ICT spending markets, IDC views initiatives such as the e-Dividend, restructuring of fuel subsidy, and the creative industry funds as means to further boost the ICT industry, especially the services and software industries. Such initiatives will have direct implications to developers in these markets, especially those playing in e-Payments, database systems, and multimedia developers. Other markets such as servers, networking equipments, telecommunication, and security markets, stand to be indirect beneficiaries to these initiative. Similarly, the green technology initiative would stand to benefit the ICT industry in a similar fashion. Aside from a boost in infrastructure spending, we believe that these funding will sow the seeds in developing and supporting the development of whole new industry, which will have a direct impact on the creation of skilled knowledge–based workers in these market.
Another key aspect of the development of the ICT industry in Malaysia is the development of human capital. While the Malaysian 2010 budget does not directly address the issues of developing human capital, IDC notes a few salient areas that have a direct and an indirect impact on the development of human capital, especially in the ease of application for permanent residency (PR) status in the country for highly talented and skilled expatriates to accelerate knowledge and technology transfer, as well as implement transformation processes. The development of Cyberjaya and Putrajaya into vibrant townships is a notable progressive step in this area that will attract workers to these townships, not only to work, but also to build a vibrant wholesome community. Unfortunately, a notable concern is the capping of 15% income tax on workers living and working in Iskandar Malaysia, which at face value is a highly attractive proposition, but may result in an uneven shift of skilled workers away from other developmental corridors and Cybercities into the Iskandar region, hence creating a distribution gap of skilled knowledge workers in areas outside Iskandar Region.
As for developing key vertical sectors, the Malaysian 2010 budget has stated a significant number of funding and allocation in developing these sectors that are the cornerstones of the Malaysian economy. While these initiatives do not directly address the utilization and implication of ICT in these areas, we expect that the ICT industry will benefit from the spillover effect of these initiatives. Among the key areas that may benefit from this include the software development and ICT services industry, due to the requirements of ICT to support these initiatives, while the ICT hardware market will gain directly from increased spending in server, PC, and other peripherals. Recipients of the funding, especially from the small and medium-sized enterprise (SME), can enable SMEs to spruce up their ICT infrastructure. In addition, many ICT companies under the purview of Multimedia Development Corporation (MDeC) are SMEs that can also benefit from this resource. ICT companies can improve their competitive edge by utilizing the funds to enhance skills and capabilities through training and certifications.
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