Big money in M'sian hardware sector

Hardware makers are tipped to be biggest beneficiaries of the Ninth Malaysian Plan, which will see some US$3.5 billion being pumped into ICT-related initiatives across the country.

MALAYSIA--Hardware providers are expected to be the biggest beneficiaries of the 12.9 billion ringgit (US$3.5 billion) budget allocated for information communications technology-related programs under Malaysia's new development plan.

The Ninth Malaysian Plan (9MP), the government's five-year blueprint to drive economic development in the country, covers a range of ICT (information communications technology) initiatives such as the computerization of government agencies, bridging the digital divide, research and development, Multimedia Super Corridor (MSC) multimedia applications and MSC development.

Funding for the ICT sector under the 9MP is 64 percent more than the 7.9 billion ringgit (US$2.1 billion) allocated in the Eight Malaysian Plan. The larger budget augurs well for the sector, and industry players are hoping to grab a share of the pie.

The Association of the Computer and Multimedia Association of Malaysia (Pikom) foresees the bulk of ICT expenditure will go to hardware, followed by software during the plan's duration from 2006 to 2010.

Pikom Chairman Lee Boon Kok said: "Hardware will remain the biggest component of the Malaysian ICT market over the next few years.

"In terms of growth, however, the services sector is growing fastest, followed by software," he said, in an e-mail interview.

Citing the World IT and Services Alliance's Digital Planet 2006 report, Lee said the compound annual growth rate, stretching from 2004 to 2009, for Malaysia's hardware sector was 9.6 percent, software at 19.4 percent and services leading the way at 24.2 percent.

The report also projects Malaysia's total ICT market value to reach US$14.1 billion by 2009, with hardware making up US$2.8 billion, services US$2.1 billion and software US$1.3 billion.

In the 9MP, focus will be placed on the development of existing MSC cyber cities and newly identified MSC cyber centers in Perak, Melaka, Johor and Sarawak. This is expected to bring in 250 additional multinational companies. The number of MSC-status companies is also projected to grow from 1,421 last year to about 4,000 by 2010, creating some 100,000 new jobs.

The government is optimistic that Malaysia's PC penetration rate will rise to 40 percent from 21.8 percent by the end of the 9MP timeline. Another thrust of the Plan is the accelerated implementation of the National Broadband Plan to ensure rapid expansion of broadband service to reach 13 percent of the population by 2010, from the current 1.9 percent.

Execution is key to success
According to Pikom, the success of these ICT programs will depend on the implementation process.

Lee said: "The 9MP encompasses many areas but the actual execution will be the key success factor that will determine the outcome."

He warned that the Malaysian government must also reduce "ICT wastage", a bane which had resulted in previous projects failing or not achieving their set objectives.

"We hope the government's ICT projects will be more than just [about] upgrading existing systems," Lee noted. "Emphasis should be on increasing the level of ICT usage within government agencies which must be complemented by procedural changes, where necessary.

"Efforts must also be made to enhance interoperability between government agencies. This is crucial for an effective implementation of e-government," he said.

In terms of attracting ICT investments, he pointed out that Malaysia should expect stiff competition from neighboring countries. "Malaysia must be able react fast and make the necessary adjustments to its game plan to counter moves from its competitors," he said.

IT giant IBM concurred, noting that Malaysia has to differentiate itself from regional competition to achieve its goal of becoming the preferred shared-services hub in Asia.

Voon Seng Chuan, IBM Malaysia's managing director, said: "Highly-skilled talents in Malaysia have placed us on the map as a viable choice for companies setting up their outsourcing and shared services centers here.

"Malaysia needs to continue to focus on human capital development in terms of technology and soft skills that set us apart from the competition and address market needs," Voon said, in an e-mail interview.

"There is a need to build a national innovation education strategy for a diverse, innovative and technically trained workforce," he said.

The Malaysian government projects that the country's total ICT workforce will increase at a rate of 10.4 percent per year to hit 300,000 by 2010, from 183,204 last year.

According to Voon, IBM is keen to support Malaysia's development as an international shared-services hub by continuing to invest in its regional operations, based in the country.

"IBM's decision to set up regional shared-services centers in Malaysia is aligned to the 9MP's continuing focus to market the country as a regional hub for shared services and outsourcing," he said.

Lee Min Keong is a freelance IT writer based in Malaysia.