2. Malaysia

2.1 A Profile of Economic Development
Malaysia has a population of 22.712 million (at end of 1999). The GDP of Malaysia totals M$207. 342 billion. The growth rate of GDP is 8.5%. The per capita income is M$ 12883 (about US$3390). The inflation rate is 1.9% and the rate of unemployment is 2.9%. Malaysia boasts abundant natural resources with the output and export of rubber, palm oil and pepper ranking in the forefront globally. Until the 1970s, agriculture had been dominant sector in the economy while the economy had been relying on export of primary products. Since the 1970, Malaysia has continuously restructured its industries and vigorously promoted the export-oriented economy, hence rapid development in the electronic, manufacturing, building and service industries. In the middle of the 1980s, affected by the global economic depression, its economy experienced a downslide. After the government had taken measures to stimulate foreign and private capitals, the economic conditions took a drastic turn for better. Malaysia witnessed a sustained a high-speed economic development since 1987, with the annual growth rate of national economy maintaining above 8% successively. During the 6th Five-Year Plan (from 1991 to 1995), Malaysia enjoyed a annual economic growth rate of 8.7% with inflation rate kept within 4%, coupled with remarkable increase in GDP, per capita income and foreign trade and significant decrease in incidence of poverty and rate of unemployment.
The Malaysian government encourages the development of domestic raw material-based processing industries, while focusing on the electronics, automobile assemblage, iron and steel, petrochemical and textile industries. In November 1996, Malaysia introduced the second blueprint for industrial development (1996-2000) in which the strategy was put forward to promote the swift shift of industry to capital and technology intensive one while increasing the added value of industrial products so that the proportion of industry in the GDP will increase to 38.4% within ten years. The output of the manufacturing sector in 2000 was estimated to reach M$ 67.551 billion (based on 1987 fixed price), an increase of 175; the employed people reached 2.455 million, accounting for 27.1% of the national total. The general output of the mining industry in 2000 was estimated to reach MM$ 14.058 billion, an increase of 0.6%.
Since the 1970s, the Malaysian government has continuously regulated the industrial structure so that the service industry has rapidly developed and risen to be one of the backbone industries of national economic development. In 1999 this industry absorbed a total of 4.127 million employees, accounting for 47.7% of total employment nationwide, and rendering it the largest industry in terms of total employment. The basic conditions of economic development in Malaysia are shown in the following table.

2.2 Status and Trend of Development of the Communication Industry
2.2.1 Construction of communication infrastructure system
The following Table shows the construction of communication infrastructures over the recent years.

2.2.2 Status and Trend of Development of the Communication Industry
In his speech, the Malaysian minister of energy, communication and multimedia mentioned that currently in Malaysia, the fixed telephone subscribers totaled 4.8 million, cellular phone users reached 7.3 million and the demand for fixed telephones had reached saturation. He also mentioned that by the end of 1999, the popularization ratio of PC in Singapore, the US, Taiwan, Japan, Hong Kong, Germany and France reached 39%, 53.9%, 26%, 32.6%, 36%, 31.7% and 31.9% respectively whereas that in Malaysia was only 9.5%. To promote IT development, an IT budget of M$ 5.2 billion was included in the 8th Malaysian Plan.
Up to now the Malaysian government has been making various preparations for the commercialization of 3G mobile telephones in 2002 and will publicize detailed information concerning the method for granting business licenses and distribution of frequencies. It is said that the minimum infrastructure investment necessary for Malaysia to introduce the 3G system is M$ 2-3 billion (Yen 65-96 billion). The 2nd generation communications service by means of GSM has just started in Malaysia, and GPRS as the next generation after GSM has not been fully popularized. That is why the Malaysian government made such a statement.
The number of mobile telephone users in Malaysia increased by 2.4 million in 2000 and reached a total of 6.17 million by the end of March of 2001.
2.2.3 Market pattern and development trend of telecommunication operation
Enterprises which hole licenses for mobile telephone services in Malaysia includes Celcomco., Digico., Maxisco., Malaysia Telecomco., and Time dot Com corpoerations. The number of subscribers for each enterprise is shown below:
Number of mobile telephone users (up to March 2001) (unit: ten thousand persons)
Celocm 170
Digi 100
Maxis 170
Malaysia Telecom 106
Time dot Com 70.5

2.3 Market Analysis of Electronic Information Products
2.3.1 Electronic product manufacturing industry
The electronic product manufacturing industry in Malaysia got off the mark in the early 1970s and after the nearly 30 years of development, had become one of the most important industrial sectors of the country, holding the balance in Malaysian economic development. In 1999 the output value of electronic products reached M$ 129.8 billion (about US$ 34.16 billion), accounting for 2.55 of the global total of electronic products.
Currently more than 900 companies and over 380,000 employees engage in the electronic product manufacturing industry in Malaysia. Although the electronic product manufacturing industry in Malaysia is still based on semiconductors and other electronic spare parts, the product mix has changed. In 1999, electronic product in the investment category accounted for 45.4% of the total output value of electronic product, electronic parts and components accounted for 42.4% and consumption electronic product accounted for 12.25.
From 1995 to 1999, the average annual growth rate of production output of electronic product reached 18.45, while the average annual growth rate of total employment in electronic product export and manufacturing was 22.6% and 6.8% respectively. Malaysia is one of the major exporting countries of electronic product globally, with its value of exports of electronic product increasing from M$ 85 billion in 1995 up to M$ 178.4 billion in 1999. The value of exports of electronic product has accounted for 58% of the total value of exports, with products mainly exported to such markets as the USA, Singapore, Japan, Hong Kong, Germany and Britain. The export-oriented electronic product manufacturing industry has driven Malaysian economy to swiftly recover during a short period.
According to analysis, the rapid development of the electronic product manufacturing industry in Malaysia has been attributable to the relatively low exchange rate which has offered the electronic product a large competitive edge, in addition to the driving effect of the global e-Commerce and Internet upsurge. On the other hand, however, the development of Malaysian electronic product manufacturing industry has been relying to a large extent on the investment by multinational enterprises from the US, Japan, Korea, Taiwan of China and Europe.
Along with the global economic slowdown in 2001, a glut in the semiconductor industry became increasingly serious and the semiconductor industry in Malaysia was largely affected. Unisem (ÓÈÄáÈüÄ·¹«Ë¾),the largest semiconductor enterprise in Malaysia, experienced a decrease in sales value in the second quarter of 2001 and was in the deficit for the first time sine listing in 1998.
2.3.2 Output value and market analysis of electronic information product
Through several years development the production and export of electronic information products in Malaysia have made tremendous progress. As shown in the following Table, both the output value and the market significantly increased in 2000 and 2001.

2.4 Malaysian Information Industry Development
2.4.1 Overview of industry development
On 12 June, 2001, the Ministry of Communications and Industry of Malaysia published 2000 Report, in which it is pointed out that the electronic-centered manufacturing sectors have contributed a lot to Malaysian economic growth rate of 8.3%. It is described that the production index of Malaysian manufacturing industry increased by 25.1% over the preceding year (the increase rate for 1999 was 12.9%), the rate of employment increased by 27.6% (that for 1999 was 27.1%), export increased by 82.6% (82.5% for 1999) and GDP increased by 33.4% (30.3% for 1999). The increase in the demand for information and communication technology (ICT) products has given an impetus to the smooth development of electrical and electronic industries, which have in turn accounted for 71.15 of the export and 36.3% of the investment of the manufacturing sector. The report points out that the government will take a long-term view in formulating policies to promote competitiveness of the manufacturing industries. On the other hand, it is also essential for nongovernmental organizations to enhance the utilization of e-Commerce and ICT to further improve productivity. Although the growth in the manufacturing sector slowed down its pace as a result of influence of economic slowdown in Japan and the US, manufacturing industries in the electrical and electronic fields became the locomotive driving the economic development in Malaysia.
2.4.2 Features and development trend of major products
The present economic depression in western countries has imposed certain influence on the Malaysian economy. However, Malaysia has taken proactive measures in recent years so that its IIT industry can still develop in spite of adversity. The IT industry in Malaysia is now reshaping the economic structure and giving impetus to the development and progress of related industries.
During the rapid development of the IT industry in Malaysia, the government's financial support has played an indispensable role. In 2001, the Malaysian government appropriate M$ 500 million (about US$ 132 million) successively to set up venture capital investment fund and technology import fund respectively while offering interest-free loan to IT based enterprises for a term as long as ten years. In the budget for 2001, the government again appropriated nearly 1 billion M$ for the development of information technology and consultancy service. During the 8 the Five-Year Plan (from 2001 to 2005), The Malaysian government will invest M$ 5.2 billion in the informatization plan of national economy to support the research and development of high-tech and information technology.
Another important supporting force for the rapid development of IT in Malaysia is the unbarred channel of financing. Domestically, the stock exchanges in Malaysia have specially set up second board markets to encourage IT companies to go public and better raise more money from the society. Internationally, foreign capitals particularly favor the IT industry of Malaysia. During the period from January to August 2001, Malaysia absorbed a total of M$ 13.8 billion foreign capitals, more than half of which was invested in the IT industry.
In addition to financial support, the Malaysian government also actively formulates relevant policies and measures to encourage the development of the IT industry. For instance, the government has taken some measures to abate and exempt taxes in order to support the IT industry. For example, high-tech enterprises are exempted from all the income tax within 5 years after their founding, companies engaging in network development will get 20% exemption of business tax each year from this year, and companies engaging in e-Commerce will have their business tax reduced from 28% to 10% within 5 years after this year. With the encouragement of favorable policies, the amount of transaction of e-Commerce will reach M$ 3 billion, up 25% over the preceding year.
The high-speed development of IT industry relies heavily on the rapid growth of human resources. The Malaysian government has noticed this and tried to train specialized talents in various disciplines on the basis of improvement in the overall national educational level. In 2001, the Malaysian government granted two additional allocations totaling M$ 5.1 billion to build computer classrooms for 2000 primary and secondary schools, establish 4 universities and 1 community technical institute, and conducted training in computer and information technology for teachers and relevant vocations. According to the plan, during the period from 2001 to 2005, the government will appropriate M$ 18 billion for the development of education and training, so as to offer adaptive talents for the development of IT industry and the transition to knowledge economy.
With vigorous support from the government and availability of convenient financing channels, the IT industry of Malaysia has been keeping a good development trend. It is certain that such a trend will continue and the IT industry will hopefully become the new stimuli for economic growth.

2.5 An Analysis on IT Application
2.5.1 Construction of information infrastructure
The Malaysian government is implementing a series of key projects to enhance the infrastructure and push forward the informatization progress so as to promote the development of IT industry. Among all the projects, the Multimedia Super Corridor (MSC) is worth mentioning, which began its construction in 1993. This corridor is 50km long and 15km wide, connecting the urban area of Kuala Lumpur to the international airport. The Malaysian government has invested M$ 14 billion in the infrastructure construction, focusing on the development of electronic products, multimedia components, computer software and communications facilities industries. Currently there are 563 high-tech enterprises, 48 of which are internationally famous transnational ones. The total investment of these enterprises has reached M$ 6 billion and their export value has reached M$ 1 billion for the year 2001.
2.5.2 E-Government
The Ministry of Railways and Communications and Perodua Corporation have together initiated the program of networked registration of automobiles. After the automobile leaves the production line, Perodua Corporation will transmit the year of manufacturing, serial number of the vehicle body and the engine to the Ministry of Railways and Communications, hence no need to input any data. This method will be extended to other companies in succession.
Currently 512 enterprises have been centralized in the MSC and 88 more enterprises are expected to join the MSC by the end of February next year. This figure has exceeded the government's anticipated target to get 400 enterprises into the MSC by the years 2003, an indication that the slowdown in the US economy has not affected the MSC programs. Major programs such as e-Government, Smart School and Master Card have attracted the attention of the developing countries.
The Trenggann State government authorities will be able to acquire public opinions and information through the Internet. The IT system developed by the State's Information Development Department (UPMN) connects 90% of the state's government institutions together. Each piece of information will be sent to relevant departments for their reply respectively.
The Kedah State government announced that the e-Government system had been applied to all administrative affairs by the end of 2001, earlier than the anticipated 2002.
2.5.3 Application in enterprises
The Malaysian Small and Medium-Size Enterprises Institute (SMI) stated that because of their inability to skillfully apply information technology, small and medium-size enterprises can not access the international market; even the efficiency of their routine work is quite limited. Compared with Europe and the USA in which 80% of the small and medium-size enterprises have applied information technology with ingenuity, the same ratio in Malaysia is only 305.
The e-Commerce transaction volume in Malaysia has enjoyed a rapid growth over the recent years. The e-Commerce transaction value was only US$ 4 million in 1997 whereas that increased to about US$ 20 million in 1998 and further increased to about US$ 95 million in 1999.
The rapid growth of e-Government in Malaysia has been heavily relying on the vigorous government support. To promote the development of e-Commerce, the Malaysia government founded the National E-Commerce Committee to formulate policies for regulating the development of e-Commerce. The said committee consists of two sub-committees. One is set at the Ministry of Foreign Trade and the Ministry of Industry, which is wholly responsible for determining policies, rules and regulations, or any other mechanism to facilitate the development of e-Commerce. The other is set at the Ministry of Energy, Communications and Multimedia, which is responsible for studying the issue of perfection and development of e-Commerce infrastructure.
The Malaysian government is drafting the National E-Commerce Blueprint which aims at providing guidance and instructions for e-Commerce, pushing forward strategic planning, enhancing the construction of infrastructure and promoting domestic e-Commerce activities more effectively. To keep in line with the government planning, Malaysian Multimedia Development Corporation officially introduced the Electronic Malaysia website in 2000. This website incorporates a variety of e-Commerce activities such as the electronic trade center that handles the online transaction, and the financial center that handles bank affairs and stock transactions. This website has become known as the cardiac to drive the e-Commerce in Malaysia.
Furthermore, to protect the interests of consumers and to ensure that the e-Commerce is operate on a healthy track, the Malaysian government has issued a complete series of electronic ordinances including the Copy Right Amendment Act, Electronic Medical Ordinance, Digital Signature Ordinance, Ordinance of Punishment on Computer Crimes and Ordinance of Communications and Multimedia.
To assist Malaysian companies in conducting secure e-Commerce activities, the Malaysian Electronic Settlement System Private Co., Ltd., which was established in 1997, introduced the Secure Electronic Transaction Settlement System in March 2000, and many business firms and banks inside Malaysia also joined relevant systems of it. The Malaysian government hopes that by means of this system, it can link to the secure electronic settlement systems used by 99% of global Internet users so that both local and international Internet users are able to use the Malaysian Secure Electronic Transaction Settlement System to promote the development of e-Commerce in Malaysia.
Some associations in Malaysia also actively keep in line with the government policies to promote the development of e-Commerce. With the cooperation of the Asian Electronic Publishing Industry Co., Ltd., the Malaysian Chinese Trade Association offered 10,000 free homepages to Malaysian Chinese business-men so that they can sell their products on the Internet. Malaysia also holds series of lectures nationally to introduce and popularize e-Commerce to the people all over the country.
Computer and the Internet are indispensable for the development of e-Commerce. The PC sales increase rapidly in the two digit percentage points in recent years. By the end of 1998, the number of PCs in Malaysia reached over 1.3 million. Although the Internet was just introduced into Malaysia in 1994, the number of Internet users increased from 440,000 in 1997 to 770,000 in 1999.
According to the market forecast made by the Malaysian people during this period, the local e-Commerce transaction value will enjoy a growth by a factor of more than 10 in the coming three years. The transaction value will increase to US$ 1.1 billion and US$ 3 billion in the year 2002 and 2003 respectively.