| Malaysia | Mar 22, 2017
Malaysia is well positioned to attract FDI in the growing global services market. Its multilingual population and links with key global manufacturers make it a natural fit for the global […]
Malaysia is well positioned to attract FDI in the growing global services market. Its multilingual population and links with key global manufacturers make it a natural fit for the global services centers that international firms seek. The Malaysian government actively supports the growth of this sector with outreach from the Malaysia Digital Economy Corporation (MDEC) and policies that encourage foreign investment.
The global use of outsourcing and global services centers has accelerated in recent years, with the model shifting from simply seeking to cut costs to finding new areas of innovation across industries. With customers expecting an ever-increasing set of services from firms, corporations seek to add value across all sectors of their operations. This increased emphasis on innovation and flexibility means developing service centers that increase speed, streamline mergers and acquisitions, and shorten the time needed to go from ideas to implementation. This often means making use of technologies like cloud computing, automation, and other new and emerging technical platforms.
In the midst of this environment, Malaysia seeks to become a market leader in this service center sector. According to PublicInvest Research, it has gone from the 32nd largest outsourcing destination in 2007 to the 18th largest in 2014, and industry participants expect further growth to come as the sector continues to develop. Forecasts have projected growth of 6-9% over the next five years, with the market projected to be worth USD220 billion by 2020. Malaysia is unique in its ability to offer multilingual support in a wide range of fields as a result of its multi-ethnic population. Nearly all Malaysians are bilingual, and more than a third are trilingual, making it one of the most multilingual countries in the world. Malaysia also has an ample supply of workers from regional countries such as Thailand, Indonesia, and Vietnam, giving firms the ability to offer services in up to a dozen languages from a single location. Moreover, with more than 57,000 science and technology students graduating every year, Malaysia has the human capital needed to meet the high-tech needs in the workforce.
The government is taking active steps to encourage the growth of the global services sector. Founded in 1996, MDEC is the primary agency working to transform the Malaysian digital economy. The government-owned agency works in collaboration with firms both foreign and domestic as well as citizens groups to increase adaptation of new technologies and develop tech-based ecosystems. MDEC has been largely successful, bringing more than MYR300 billion in foreign investment over the past 10 years as the country has risen to fourth place on the World Bank’s investor protection rankings. More recently, MDEC officials have signed trade deals with UK technology firms and plan to set up a new trade office in the country in 2017 to further strengthen ties with the UK, the second-largest technology investor in Malaysia after the US. MDEC also launched a Global Acceleration and Innovation Network (GAIN) program in 2015 to assist Malaysian technology companies to expand their reach domestically and internationally. One of the goals of this initiative is to help companies avoid getting trapped in the start-up mode and scale up to meet the needs of global firms.
There are several Malaysian firms becoming leaders in the sector. One of the largest and most important is Scicom, a publicly listed firm that employs more than 2,000 people. Since its founding in 1997, it has grown to service more than 40 million customers in 90 countries from its call centers in Kuala Lumpur and Colombo. 70% of its revenue comes from non-domestic sources, a statistic that shows the degree of international integration present in the industry. Scicom is well positioned to continue expanding with the continued growth of the sector; the firm announced growth of 23.6% for the quarter ending in September 2016. Moving forward, it targets e-government programs in developing markets, seeking to become a provider of electronic and data analysis solutions for markets that have previously been unable to enjoy such services. While projects like these take time and effort to develop, they bode well for the future of the company due to their increased profitability and more stable nature.
In the near future, MDEC will continue to work to strengthen the infrastructure services needed to remain a leader in the global services sector. The government has demonstrated a willingness to provide the investment needed for these programs, increasing IT spending by 3.3% in the 2017 budget, to a total of USD21.16 billion. Lowering internet costs and increasing speeds are two specific areas that are being targeted, with the goal of improving outcomes for the global services sector. With governmental support and well-planned industry leadership, the future of Malaysia’s global services sector looks bright.