"MALAYSIA'S ICT INDUSTRY OUTLOOK FOR THE YEAR 2003" - An Overview by YB Datuk Amar Leo Moggie in response to a written interview with Businesss Computing, New Straits Times.
Based on the economic scenario of the last three quarters of this year (2002), most research organizations are positive on the growth prospects for the ICT industry in the coming years. This year, the ICT industry is expected to be able to maintain a positive annual growth, despite the contraction in global ICT spending on hardware (PCs, mainframes, printers, etc), software, systems and equipment which is expected to record a slower growth rate of 2.5% with a market worth of USD 900 billion. The key factor behind this slump is the slower growth registered in IT spending on systems, PCs, peripherals, workstations and software due to the uncertainty regarding recovery prospects for the US economy.
Against this backdrop, the growth of ICT spending is poised to rebound by the first quarter of 2003, with growth in global ICT spending projected to touch 7.9% by the year 2003. This is due to renewed interests in ICT spending that is expected to emerge in the US, Europe and Japan next year.
Growth of ICT Industry in 2003
ICT spending in Malaysia is influenced by developments in the global market. As we have placed a premium on ICT, the development of the ICT industry in the country has thus been kept in tandem with global trends.
On the back of a proactive private sector role, better economic performance and external environment, the outlook for overall ICT growth in the country in the year 2003 is expected to further improve during the first quarter of the year. According to PIKOM, the IT industry is projected to record an annual growth rate of 10.3% next year, while IDC projected IT spending in Malaysia to register a record new growth rate of 14% next year.
Based on the above projections, IT spending for the country is expected to register an increase of between RM 0.7 billion and RM 1.0 billion which is equivalent to an annual growth rate of approximately 10 per cent. Overall IT spending next year is expected to register a value of more than RM 8.0 billion next year from the approximate value of RM 7.1 billion this year. In terms of expenditure components, investments in hardware and equipment are expected to account for more than half, while investments in software will remain as the second largest component of IT spending in the country, with IT training making up the third component. The higher proportion of expenditure on IT hardware and equipment is mainly due to the building up and upgrading of IT infrastructure by both the public and private sectors.
Internet Customer/User
For the year 2003, the number of Internet customers is projected to record a growth rate of approximately 25% to surpass the 3.0 million customers mark at the penetration rate of 14 for every 100 population. Also, by next year, Internet users in the country is expected to represent more than 40% of the country’s total population.
Telecommunications Sector
The telecommunications sector is expected to register an average growth rate of approximately 10% in revenue, with both the cellular and fixed line sectors expected to maintain the momentum of growth of 12.5% and 8.3% respectively over the next year. The local telecommunications market (cellular and fixed line) should be able to surpass this year's revenue and touch the RM 17.5 billion mark in the year 2003.
The number of cellular users is expected to reach 9.0 million in 2003, and out of this figure, approximately 6.0 million will constitute prepaid users. By the end of 2003, the penetration rate for the cellular service is expected to exceed 40 for every 100 population. The fixed line sector is not expected to record a major increase in terms of the number of users next year.
Furthermore, in 2003, the cellular sector is forecasted to overtake fixed line in terms of annual revenue, which will represent 52% or RM9.1 billion of the total telecommunications revenue.
Focus Areas in 2003
The key challenge for the ICT sector in the year 2003 is in ensuring success in the rollout and implementation of the following focus areas:-
· MSC Flagship Applications Rollout
A full-scale rollout of several public sector-led programs under the MSC flagship applications is expected to be implemented next year. These include the Mycard, Online Procurement System and the Smart School solution. This is in view of the fact that some of these applications have started to benefit the people. As of end of last September, more that 2 million smartcards (Mycard) have been issued to Klang Valley residents. The implementation of the smartcard will see Malaysia as the first country in the region to have adopted the chip technology for various identification and authentication purposes of its citizens. Meanwhile, the rollout of the electronic procurement system is expected to boost electronic business, as it will facilitate transactions between the Government and businesses in the country.
Many countries are actually watching how Malaysia handles this transition. The key challenge is to ensure that the implementation of the programs is successful, thus proving that Malaysia has the necessary capabilities in this area.
Meanwhile, the Ministry of Energy, Communications and Multimedia will continue to co-ordinate and facilitate efforts and initiatives to be taken by the Multimedia Development Corporation (MDC) to promote the development of ICT in the country, including in the implementation of Venture and Debt Capital programs for the creation of local technopreneurs in the country.
· Cyberlaw
The Government also recognizes the importance of legislations in ensuring an orderly development of the ICT industry and will embark on the formulation of another legislation next year to complement the existing cyberlaws such as the Communications And Multimedia Act, Computer Crime Act, Copyrights Act (Amendment) and Digital Signature Act. The new cyberlaw which will become the mechanism which facilitates all electronic transactions between the Government and the people is expected to provide new impetus in spurring the adoption and application of e-commerce and in enhancing public trust and confidence in electronic transactions. In addition, efforts to adapt and undertake the necessary changes to the existing legal framework will be on-going in order to facilitate the uptake of e-commerce and other electronic transactions in the country. The challenge is to ensure that electronic transactions are accorded legal status that is similar to that of conventional transactions.
· Infrastructure Accessibility
The year 2003 will see efforts being taken to further enhance accessibility to high-speed Internet facilities in the country. A broadband-based infrastructure will be implemented on a nation-wide basis. Towards this end, the Ministry has already commissioned a study to determine the appropriate strategies and programs the need to be put in place to widen the availability of higher bandwidth services. The potential for growth in the area of broadband services is higher as there is potential for greater growth in the PC and Internet penetration rates in the country. The study is expected to be completed by February next year.
· Addressing the Digital Divide
Addressing the digital divide will continue to be given priority in 2003. In this regard, programs to connect all rural schools, libraries and clinics will be further expanded. The Ministry plans to spend an additional RM150 million in 2003 to provide connectivity infrastructure to schools and government agencies in rural areas. To date, 220 schools have already benefited from the programs implemented this year. All schools throughout the country are expected have the necessary communications infrastructure by the year 2005.
· Internet Access
For next year, Internet take-up will be further promoted through programs aimed at improving the overall environment required to promote usage and free-flow exchange of information through the Internet. This involves aspects such as connectivity (peering) and hubbing facilities, effective management of electronic addresses and better consumer choices in terms of accessibility and affordable prices. From the service quality perspective, the focus is to ensure that consumers in the country enjoy zero congestion, higher transmission accuracy and competitive yet affordable price for Internet services.
· Security and Privacy
In enhancing greater consumer confidence in the usage of electronic transactions, the Government will focus greater attention on aspects of security and privacy next year. Security is crucial to the progress of e-commerce in the country. This is due to the fact that crimes in cyberspace can propagate faster and distance insensitive due to the borderless and open nature of the Internet platform.
· Consolidation and Infrastructure Sharing
Efforts to encourage infrastructure sharing through the sharing of towers and other infrastructure will be further promoted in 2003 to ensure that consumers in the country continue to enjoy quality communications services, in terms of better coverage and choices. At the same time, we will also encourage service providers to continue expanding their services and coverage by implementing domestic roaming. The Government is quite encouraged with the efforts that have been taken by industry players recently to establish alliances among themselves so as to ensure that the potential values of the existing infrastructures are fully optimized for the benefit of the consumers. However, ensuring nationwide infrastructure sharing to further enhance coverage and accessibility to services, as well as maintaining an effective and healthy competitive environment are not ends by themselves. The vital challenge remains that of ensuring increased values and benefits in all aspects of service to the consumers.
· Regional Center Of Excellence
For the year 2003, the Government will continue with initiatives to promote the country as the operational office or center of excellence among multinational corporations (MNC). We will need to consider initiatives to further strengthen the country’s ICT industry. This includes creating a hubbing or redundancy environment that will promote the exchange of the domestic Internet traffic within the country and also by working closely with the industry to ensure that the necessary infrastructures such as high-speed leased lines are abundantly available at competitive prices. To date, the MSC is host to 11 multinational companies that have data/call center operations in the area, among them DHL, Alcatel Networks, Acterna, Shell IT, British American Tobacco, Scope International (Standard Chartered) and CMG IT. Some of the data centers function as global or regional hubs, which provide communications, and network support center services such as cross border banking transactions, IT services, SAP services, systems integration, technical support and research and development.
· Tariff Structure for the Industry
Efforts will also be undertaken to ensure that the tariff structures for the industry will remain competitive and affordable to consumers and able to provide reasonable economic returns to industry players. The increase in the number of mobile users from less than 4 million in 1999 to more than 8.3 million by October this year is testimony of success of the move taken by the Government to liberalize the tariffs for mobile services in the country in the year 2000. The newly introduced fixed-line tariffs which have resulted in substantial reductions in both national and international call charges are also expected to give a significant boost to the development of voiced-based contact center facilities in the country. With more competitive national and international call rates in place, service providers will have a bigger clout to reach out to their markets, through the expansion of coverage of their respective services. The new tariffs are also expected to enhance the country’s competitive advantage, besides the promotion of creativity and innovation among service providers in terms of providing new services.
Incentives To Spur The Growth of ICT
Throughout 2003, the Government will continue to work more closely with industry players to identify suitable incentives (both fiscal and non-fiscal), which can be considered for implementation. The Ministry will continue to monitor and assess existing incentive structures, which have been introduced over the last five years and determine whether they are still relevant and effective in promoting the development of the ICT industry in the country. One of the major focus areas will be the provisioning of incentives to promote greater utilization of ICT by SMEs as tools for enhancing their efficiency and competitiveness.
Institutional Improvements
There is also a need to further improve the present institutional set-up by undertaking initiatives to further coordinate and streamline the roles and functions of agencies involved in ICT functions and activities. This step is crucial to ensure that potential duplications of functions among the relevant agencies can be eliminated, thus optimizing the utilization of resources. Towards this end, measures have already been taken to readjust and separate the roles and functions of MIMOS as an ICT service provider, a policy making body and an R&D institution.
International Fora
Meanwhile, it is important that Malaysia continue to play a prominent role in the international fora in order to promote ICT development in the country. This includes promoting the country as the hub for domestic, regional and international ICT events. Also, with Malaysia having been elected as council member of the International Telecommunications Union (ITU) for a second time last October, we will leverage on this opportunity to further promote and position the country in the area of ICT at the international level in the year 2003.
Conclusion
Overall, worldwide growth of the service sector is going to be the key differentiator for our national competitiveness. Traditional manufacturing will be less dominant as the country becomes more and more developed. The growth, spread and effectiveness of the ICT industry’s infrastructure and services will thus be increasingly critical. This requires an effective partnership between the Government and industry players. The role of the Ministry of Energy, Communications and Multimedia will continue to be that of facilitating, encouraging and supporting the growth and development of the communications and multimedia industry in the country. Thus, partnership and collaboration between the Government, the industry and consumers will be significant to face the new challenges in the year 2003.
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