Malaysia 2.0 Moving On To The Next Level

April 19th 2017 - Wednesday

To help Malaysia down the road towards becoming a high-income country, the Malaysia Digital Economy Corporation (MDEC) is leading from the front with many initiatives and programmes to further spur the Global Business Services (GBS) sector to greater heights.

Naturally, competent talent pool is the cornerstone of any successful industry. MDEC’s Investment and Industry Development Vice-President, Hew Wee Choong said that the agency is collaborating with various stakeholders in order to cater for both the demands of the industry as well as the talent supply to fuel industry growth. Some of these demands include attracting more foreign investments, globalising local GBS champions and collaborating with federal and state agencies.

MDEC was previously known as the Multimedia Development Corporation and was rebranded in early 2016. The name change coincides with the national agency’s 20th year anniversary and drew inspiration from its increasing focus on growing the national digital economy contribution to the country’s total gross domestic product (GDP).

“In terms of talent supply, it is essential to ensure Malaysia not only has a robust talent pool in catering to the needs of the industry but also a strong partnership with various stakeholders such as TalentCorp Malaysia, universities and accounting professional bodies,” Hew added.

In 2016, MDEC, together with TalentCorp, the go-to agency for Malaysian employers to solve their critical talent needs, and the Malaysian Ministry of Higher Education, launched the GBS Industry-Academia Collaboration (IAC) – a formal platform to encourage industry and academia partnership. One of its key functions is mapping the talent needs of the industry, and designing and executing necessary interventions involving both the academia and the industry.

The platform comprises of various collaboration models such as awareness programmes, internship and certification, university curriculum embedment, competition and upskilling.

As a result of the initiative, National University of Malaysia (UKM) became one of the first universities in Asia to offer GBS course as part of its academic offering. Since its pilot in late 2015, the course now boasts about 200 alumni from three universities (UKM, Universiti Pendidikan Sultan Idris, and University of Nottingham). MDEC plans to roll out the course to more universities, involving more industry players as their partners.

Hew said: “It’s a good thing that Malaysia has a diverse talent pool to support new investment and growth – multicultural, multilingual talent. With an increase in value jobs being brought into the country, the GBS industry needs active participation from Malaysians to feed the rapid growth of demand for talent in the country.”

Malaysia’s finance and accounting sector comes second only to Information Technology(IT), positioning itself as a sweet spot for the mid-sized (200-300 pax) GBS setup. This is why besides Malaysia’s initiatives to embed GBS curriculum in universities, many major professional bodies, such as Chartered Institute of Management Accountants (CIMA), Association of Chartered Certified Accountants (ACCA) and Institute of Chartered Accountants in England and Wales (ICAEW) have also recognised the growing importance of GBS skills, hence the development of GBS professional certifications being offered as an upskilling tool for GBS companies.

“Some of the primary reasons we have established a partnership with these professional bodies include talent upskilling, business intelligence surrounding finance transformation and talent strategy, promoting Malaysia as a GBS investment hub using their existing platforms, as well as promoting GBS as a career of choice among their membership base.”

“These professional GBS qualifications mentioned are also a tool to attract fresh graduates and young professionals to make GBS as their industry of choice for their career, thus further expanding the size of available talent pool for this industry in Malaysia.”

MDEC also recognises that there are specific skillsets that are not prevalent in Malaysia, hence, via the MSC incentives, the government allows MSC-status companies to have unlimited number of foreign knowledge workers that meet the requirements/criteria.


Moving Up the Value Chain

MDEC has a solid plan in place when it comes to moving up the value chain in the Knowledge Process Outsourcing (KPO) space, stresses Hew. He said: “For the past few years, we have been actively promoting new verticals, such as engineering services, legal and telemedicine.”

 The agency have now started to examine existing verticals and how to utilise the Third Platform, so that to encourage existing clients to move up the value chain and go beyond transactional activities.

“This is how it works … a company in the Banking, Financial Services, Insurance (BFSI) vertical who have already established a captive GBS hub for its activities in Finance & Accounting, Human Resources (HR), and Procurement in capital Kuala Lumpur – now adopts Big Data Analytics (BDA). By doing so, the company can now expand their activities to include regional actuaries, consumer behavior analytics, regional product development and others. This results in increased investment and creation of more high value jobs in Malaysia.”

MDEC is playing a major role in ensuring that the necessary digital innovation ecosystem to support the growth of these activities is put in place, thereby future proofing the robustness of Malaysia’s digital economy. The ASEAN Data Analytics Exchange (ADAX) acts as the catalyst for BDA adoption among business with the aim of making Malaysia a regional BDA hub. ADAX was set up as a regional platform that brings together innovative talent development models and showcases the latest BDA technologies with the goal of creating 16,000 data professionals and 2,000 data scientists by 2020.

Hew added: “A scenario related to this can be explained by looking at a major global BPO player with core competencies in back office services in HR, accounting, supply chain management and logistics. Riding on the wave of the region’s high internet and mobile penetration, the company expanded their portfolio of services to ecommerce services, offering services such as digital marketing support and e-commerce one-stop services.”

Disruptive technologies such as BDA, Internet of Things (IoT) and Robotic Process Automation (RPA) are important catalysts that help GBS companies move up the value chain. An example of IoT adoption is that a managed services company can transform the way they deliver services to their clients by utilising smart sensors and IoT for data collection and monitoring efforts. Henceforth, MDEC is committed to drive the adoption of IoT as a new source of growth for Malaysia’s digital economy by creating a conducive IoT industry ecosystem and an enabling environment.

Talent shortage for GBS companies in Malaysia is concerning, but a viable solution has been identified through the usage of RPA. By automating transactional processes, companies are able to move up the value chain, thereby releasing human resources to focus more on higher value activities. MDEC views this as a way to harness Malaysia’s competitive advantage as a GBS hub where companies can locate end-to-end services – from transactional activities to higher value ones – in a single location in Malaysia.

“Initiatives on disruptive technologies have become the focus of MDEC, signifying the government’s commitment to building the right and sustainable ecosystem to increase the adoption of these digital innovations in Malaysia.”


Location Credentials to the Fore

One of the most important aspects to consider when setting up GBS centres would be the location, says Hew. “Historically, the decision on offshoring locations was primarily driven by favourable labour cost arbitrage, infrastructure and telecommunications. However, these should not be the only considerations when setting up a GBS centre.

“Newcomers to offshoring typically prefer a low risk environment where businesses can not only thrive, but sustain comfortably, which is exactly what Malaysia excels compared to other competitor locations.”

Although Malaysia may not be the cheapest option, it has the right ecosystem that enables global businesses to further grow, he argues. The quality of its talent pool, multilingual and multicultural people, government transparency, political stability, stability of resources, absence of natural disasters, are all pull factors for MNCs to set up their GBS centre in the country at a very competitive cost. All in all, Malaysia is forecasted to become one of the fastest growing markets in the next five years, with GBS demand growing at a Compound Anual Growth Rate (CAGR) between 10-15%.

There are a number of strategic reasons why Malaysia would be a good choice for GBS centres, he says. “Firstly, there is attractive government support and incentives already in place, as well as a low risk profile for setting up. Aside from a multicultural and multilingual workforce, Malaysia has a solid talent infrastructure, with over 200,000 graduates being produced a year. The country has good connectivity and infrastructure with the added bonus of being both stable and affordable.”

Not only does Malaysia act as a bridge between East and West and the Islamic World, its strategic location also presents a nearshore solution for leading MNCs with regional headquarters in this region.

In terms of being a matured location for GBS, Kuala Lumpur and Selangor certainly fits the bill, but for companies opting for Tier 2 or Tier 3 cities, Malaysia is also promoting two other emerging locations. One of which is Penang, focusing on MNCs with established manufacturing presence to embark on GBS, as well as Iskandar Malaysia, a nearshore location especially for Singapore-based MNCs. MDEC works closely with InvestPenang and Iskandar-based outfit i2M to promote these locations, giving potential investors location options based on their risk appetite.

Malaysia’s competitive advantage as a top location for GBS activities is indeed acknowledged by various global consulting houses, as reflected in their global rankings. He says: “AT Kearney has been ranking Malaysia at No 3, against 54 other countries, in its Global Services Location Index, since its inception in 2004. To top it off, Malaysia also emerged as a clear winner in the recent 2017 survey on best countries to invest in by US-based BAV Consulting and Wharton School of University of Pennsylvania.”