Digital Economy

For emerging markets, success in the 21^st century hinges sufficiently on the ability to generate digital prowess. In this regard, Malaysia holds a distinct advantage over many of its regional peers, boasting an internet ecosystem that trumps those in other ASEAN emerging markets. With rapid innovation taking place in competing economies like Indonesia and Singapore, Malaysia must capitalise on its strong foundation to establish itself as a leading digital economy.

Internet Penetration Rate – As showcased in the figure below, Malaysia’s internet penetration rate of 83% is far higher than the rates prevailing in other Southeast Asian developing nations. This puts Malaysia in a position to launch innovation-backed growth that capitalizes on the country’s 25.6 million internet users. It is also important to note that Malaysia, though a developing economy, is almost at par with Singapore and Hong Kong in its internet penetration rate, and this is a testament of the progress that Malaysia has made as a country.

Internet Economy size – The year 2020 saw Malaysia’s internet economy accumulate a Gross Market Value (GMV) of US$ 11.4 billion. There are four segments to the internet economy:

– E-Commerce
– Online Travel
– Online Media
– Ride Hailing

The figure below provides the internet economy size in each of six major ASEAN markets, as well as the projected internet economy GMV for each country in the year 2025. In spite of its considerable size, the Malaysian digital economy is smaller than those of its regional peers – barring Philippines. However, the country’s internet economy is expected to grow by over 140% in the next five years, offering a potential vault of opportunity to foreign investors.

Growth over time –The Malaysian internet economy has evolved into a heavy-weight growth generator, more than doubling in size since 2015. As showcased in chart 1 below, the digital economy’s Gross Market Value has increased by nearly US$ 6 billion in a period of just four years. But which segments of the economy have driven this tremendous growth?

Data reflected in chart 2 tells a story of E-commerce supremacy. Though the E-commerce sector is currently the second largest segment in the digital economy – behind Online Travel – it has exhibited the most explosive growth, having increased in size by 230%. Furthermore, it is expected to become the largest individual segment of Malaysia’s internet economy by 2025, thus, making it a key sector of interest for foreign investors.

Chart 1

Chart 2

Major players – The start-up environment in Malaysia is bustling with potential and, despite the absence of a home-grown Malaysian unicorn, there are several companies that are catching the eyes of investors. Some promising stars of the country’s digital ecosystem are as follows: