MASSA 2021 – 2022 Annual Report

Introduction and Brief History

The Regional Comprehensive Economic Partnership (RCEP) Agreement is regarded as the world’s largest free-trade-agreement (FTA) thus far, with 15 member countries consisting of 10 ASEAN Member States and 5 non-ASEAN states. RCEP, which entered into force on 1 January 2022, will potentially assist the Region’s post-pandemic recovery through trade liberalisation, digital economy, liberalisation of investments and creation of a common Rules of Origin (criteria needed to determine the national source of a product) to encourage regional and global trade, investments flow as well as services trend among its member signatories.

The negotiations on RCEP were first launched at the 21st ASEAN Summit in Phnom Penh, Cambodia in November 2012, with the objective to establish a modern, comprehensive, high-quality and mutually beneficial economic partnership that will facilitate the expansion of regional trade and investment, contribute to global economic growth and development as well as to encourage market and employment opportunities for businesses and people in the region.

Source: Ministry of International Trade and Industry (MITI).

Scope of RCEP:

1. 1. Tariff elimination for trade in goods, including the related chapters of rules or origin, customs procedures, sanitary and phytosanitary measures, standards, technical regulations and conformity assessment procedures and trade remedies; 
2. 2. Liberalisation of services sectors, including financial services, telecommunications services and movement of natural persons; 
3. 3. Promotion, facilitation, protection and liberalisation of investment; 
4. 4. Competition policy (countries are allowed to implement national laws related to state-owned enterprises), intellectual property rights, electronic commerce and government procurement (no market access, only for information exchange and promotion of transparency measures), 
5. 5. Economic and technical cooperation and SMEs; and 
6. 6. Legal and institutional issues. 
   

(Extracted from MITI’s official website at https://fta.miti.gov.my/index.php/pages/view/rcep)

Benefits to Malaysia

The RCEP streamlines existing ASEAN+1 FTAs that involves Australia, China, Japan, New Zealand and South Korea. It provides transparent, specific, rules-based multilateral framework for trade and investment. thereby enabling greater participation of businesses, especially small-and-medium enterprises (SMEs) through opportunities for expansion and diversification in the greater trade ecosystem.

The RCEP Agreement officially came into force for Malaysia on 18 March 2022. According to Ministry of International Trade and Industry (MITI)’s official press release, the establishment of RCEP positions the Asia-Pacific region as the new centre of gravity for global commerce, with total trade expected to increase nearly US$42 billion. Malaysia is expected to be the largest beneficiary in terms of gains in exports, projected up to US$200 million increase. Among the benefits that Malaysian businesses will be able to gain include:

1. 1. Increased commercial opportunities and partnerships with other signatory countries. 
2. 2. Opportunities for domestic and foreign companies to locate in Malaysia as an ASEAN production base for economic and global value chain activities in the region. 
3. 3. Malaysian manufacturers and suppliers will be able to source quality raw materials that can be competitively priced as well as getting a wider scope for accumulation under the calculation on Rules of Origin. 
4. 4. Increase of trades and services arising from digitalization and e-commerce further enhancing cooperation for service industries such as telecommunications, consultancy, banking and finance. 

Opportunities to Small-and-Medium Enterprises (SMEs) and Micro-Enterprises

The small-and-medium enterprises (SMEs), including micro-enterprises in Malaysia, will have greater opportunities for participating and contributing to economic growth, employment and innovation of the country as the free trade agreement offers:

1. 1.Large market access to a third of world’s population with nearly 30% of world’s gross domestic product 
2. 2. Lower barriers of entry for Malaysian goods and services 
3. 3. Streamlined rules of origins that encourage investments flow from more developed countries 
4. 4. Integration of supply chain that opens up opportunities for SMEs to attract foreign investors 
5. 5. Harmonisation of international standards and technical regulations including intellectual property rights / protection 
6. 6. Technology transfer / exchange with developed countries 
7. 7. Transparency, information sharing, trade facilitation, economic cooperation and standardisations of international rules relating to e-commerce 

Malaysian businesses are encouraged to respond to the opportunities and exercise due diligence that comes with the enforcement of RCEP, keep updated with the Government’s policies on technology in line with IR4.0 and digitalization as well as adapting to a greener economy to achieve ESG (Environmental, Social, and Governance) goals. Businesses are encouraged to take full advantage of the regional marketing networks, existing and new, to access into the regional and global value chains, and to continue to leverage digitalisation and its arising solutions and technologies alongside a continuous development of human resources and upskilling to maintain competitiveness. Malaysian businesses are encouraged to visit Ministry of International Trade and Industry (MITI)’s official website at https://fta.miti.gov.my/index.php/pages/view/rcep to learn more on the RCEP.

References / Further Readings

• • Regional Comprehensive Economic Partnership (RCEP) Agreement Enters into Force for Malaysia Today – 18 March 2022. Ministry of International Trade and Industry (MITI)’s press release, https://www.miti.gov.my/miti/resources/Media%20Release/Media_Release(FINAL)_-RCEP_ENTERS_INTO_FORCE_FOR_MALAYSIA_TODAY.pdf 
• • Three Areas Where RCEP May Help the Region’s Post-Pandemic Recovery by Cyn-Young Park, Sanchita Basu-Das & Pramila Crivelli – 22 November 2021. Asian Development Blog, https://blogs.adb.org/blog/three-areas-where-rcep-may-help-region-s-post-pandemic-recovery 
• • Regional Comprehensive Economic Partnership: Implications, Challenges and Future Growth of East Asia and ASEAN – 14 March 2022. Economic Research Institute for ASEAN and East Asia – ERIA, https://www.eria.org/publications/regional-comprehensive-economic-partnership-implications-challenges-and-future-growth-of-east-asia-and-asean 
• • RCEP and Intra-ASEAN Trade by Shankaran Nambiar – 23 January 2021. Malaysian Institute of Economic Research (MIER), https://www.mier.org.my/_files/ugd/c2a1aa_2e074e77cc354f998d0f44e343db0bba.pdf 
• • Insight – Ride the RCEP train or be left behind, SMEs told by Yap Leng Kuen – 14 March 2022. SME Corporation Malaysia, http://www.smecorp.gov.my/index.php/en/resources/2015-12-21-10-55-22/news/4586-insight-ride-the-rcep-train-or-be-left-behind-smes-told 
• • RCEP – The Regional Comprehensive Economic Partnership (RCEP) website by ASEAN Secretariat, https://rcepsec.org/ 
• • ACCIM Press Statement on the Ratification of Malaysia in the Regional Comprehensive Economic Partnership (RCEP) – 18 March 2022. The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM), https://www.acccim.org.my/en/rcep-ractification/ 

Greetings from MASSA!

The first quarter of 2022 had been eventful.

For this April newsletter, we bring you a feature article on Lao PDR. This land-locked country is now a land-linked country and offers many opportunities for cross-border business. We thank Malaysian Business Chamber Lao PDR (MBCL) for providing this feature and for highlighting the potential of doing business in Laos. MASSA co-organized a webinar on “Laos – Multi-Modal Transport Hub for ASEAN under RCEP & the Laos – China Railway” on 6 April 2022. This railway commenced operations in December 2021 connecting ASEAN to the land-linked region, China, its hinterland and Europe.

On 18 March 2022, the Regional Comprehensive Economic Partnership (RCEP) came into force in Malaysia. We have a report on RCEP providing members useful links for your referral.
M/S Shearn Delamore & Co. partnered with MASSA and hosted a webinar on 2 December 2021 titled “Why Doing Business in Malaysia Should Be Your Choice”. Malaysia is strategically located and has the potential to be a regional hub for an ASEAN outreach.

MASSA’s associate in Cambodia, the Malaysian Business Chamber of Cambodia (MBCC) invited MASSA members to a webinar on 17 February 2022 detailing the new Law on Investment (LOI) of the Kingdom of Cambodia effective from 1 January 2022. Cambodia is an emerging ASEAN member nation (being the current chair of ASEAN) and this new law on investment reflects the Government’s progressive, forward-looking, pro-business stance.

We thank members, our article contributors and partners for your support to date and look forward to your participation in MASSA’s coming events. Do look out from our weekly Circulars and postings in our website www.massa.net.my.

As Malaysia moves into the endemic COVID-19 phase with the opening of international borders, we wish you good health.

To those celebrating the upcoming festivities, Selamat Hari Raya 2022.

Thank you.

Ng Su Fun

Editorial MASSA

Click the link below to be able to watch the shared URL in the presentation –

https://www.canva.com/design/DAE3jdFOM2c/JFsmoqmi_jAOy026BLp2dw/view?utm_content=DAE3jdFOM2c&utm_campaign=designshare&utm_medium=link&utm_source=publishsharelink

MASSA extends its appreciation to Mr Tee Chee Seng, President of the Malaysian Business Chamber of Lao PDR (MBCL) and MBCL for this feature.

Tan Sri Azman Hashim
President
MASSA 

2022 began when most countries progressively transitioned towards endemic management of COVID-19. The global economy anticipates to continue its recovery path, albeit having to adjust and respond towards evolving uncertainties exacerbated by the global supply chain issues, and now, further compounded by geopolitical instability.

Economic recovery for Malaysia is expected to gain momentum in 2022, with the reopening of its economy and international borders. Malaysia will be a beneficiary of the expanding global demand and thus its economy is expected to grow between 5.3% and 6.3% for 2022. This growth is expected to be further supported by a recovery in the labour market, external demand and improvement in household spending.

The Regional Comprehensive Economic Partnership (RCEP) Agreement came into force for Malaysia on 18 March 2022. As an official member of the largest free-trade-agreement in the world, and being in the center of ASEAN, enables Malaysia to access a larger market (a third of the world’s population) combined with the lowered barrier of entry via tariff reduction on more than 90% of goods in trade and mutually recognising international standards, technical regulations and intellectual property rights. I encourage MASSA members and our business community, especially the SMEs, to fully utilise and position your businesses to reap the gains of this FTA, by making full use of digitalisation, harnessing the power of e-commerce, innovation and joint ventures with countries such as China and Japan.

The China-Laos Railway began its operations in December 2021. Aside from boosting tourism, this timely logistical infrastructure will enhance cross-border commerce with reduced costs and transit time. This will bode well to encourage greater trade linkages between ASEAN countries and the wider Asia-Pacific Region with China, its hinterland and Europe.

MASSA will continue its role in supporting our Government and be a platform to highlight the opportunities for businesses, especially with the developing countries. MASSA will continue its engagement and collaborative efforts with Government agencies, fellow business associations, both old and new, and keep MASSA members and stakeholders updated with the latest trends, changes or relevant events. I do encourage members to attend these events and evaluate the opportunities arising therefrom.

I would like to express my appreciation to all members for your continuous support and cooperation, especially my fellow Executive Committee members with your attendance and participation at our regular meetings as well as your generous contributions. I also wish to thank all our supporters who have contributed valuable and insightful articles.

I wish everyone good health and success this year.
Selamat Hari Raya 2022!

Tan Sri Azman Hashim
President
22 April 2022

‣ President’s Statement

‣ Editorial

‣ Business Chamber Feature: Malaysian Business Chamber Lao PDR (MBCL)

‣ Regional Comprehensive Partnership Agreement (RCEP)

‣ Diary of Events (December 2021 – April 2022)

‣ 2 December 2021
M/S Shearn Delamore & Co.’s Doing Business in ASEAN Webinar: “Why Doing Business in Malaysia Should Be Your Choice”

‣ 11 January 2022
Meeting with Malaysia Business Chamber Vietnam (MBCV) and Malaysian Business Chamber Lao PDR (MBCL)

‣ 17 February 2022
Cambodia – Malaysia Business Forum  2022 titled “Dissemination of the Law on Investment of the Kingdom of Cambodia”

‣ 25 February 2022
MATRADE Briefing Session on Empower Trade Association (ETA) Grant

‣ 6 April 2022
Webinar on Lao PDR titled “Lao – a Multi-Modal Transport Hub for ASEAN under RCEP & the Laos – China Railway”

‣ Forthcoming Events

1) M/S Shearn Delamore & Co.’s Doing Business in ASEAN Webinar: “Why Malaysia Should Be Your Choice” held on 2 December 2021 via Zoom Meeting

Malaysian South-South Association (MASSA) co-organised as webinar with M/S Shearn Delamore & Co. entitled Doing Business in ASEAN Webinar: “Why Malaysia Should Be Your Choice”. The webinar was held on 2 December 2021.

The webinar focused on the attributes of Malaysia as an attractive investment destination for foreign investors who wish to set up a base from which to do business in ASEAN. The webinar highlighted key Corporate, Intellectual Property (IP) and Tax laws for doing business in Malaysia.

The programme for this webinar is as follows:

4.00 – 4.10 pm: Welcome & Introduction to Shearn Delamore & Co.

4.10 – 4.35 pm: Corporate / M&A

4.35 – 4.55 pm: Intellectual Property

4.55 – 5.20 pm: Tax & Revenue

5.20 – 5.30 pm: Wrap-up & Thank You

The panel of speakers were as follows:

The webinar began with welcoming address from Ms Karen Abraham, Partner & Head of Intellectual Property Department, Shearn Delamore & Co. (pic below).

Following the welcome address, Ms Karen Abraham invited her partner, Ms Irene Yong, Partner, Shearn Delamore & Co., Tax & Revenue Department, (pic below) to give an introduction on Shearn Delamore & Co.’s profile and services offered.

Mr Nicholas Tan, Partner, Shearn Delamore & Co., Corporate Department, (pic below) to presented on the case for Malaysia as a well-suited choice for investments from the corporate law perspective.

Mr Nicholas Tan spoke on how foreign companies could build a business presence/entity in Malaysia, through setting up a private company limited by shares (JV or subsidiary) or setting up a branch office in Malaysia.

He also shared on sectorial approval requirements and restrictions, mainly the foreign ownership of business licenses and shareholding. Depending on the business activity or sector, certain business licenses in Malaysia can be 100% foreign-owned.

His presentation also highlighted some of the attributes of Malaysia as an attractive investment destination for foreign investors who wish to set up a base from which to do business in ASEAN, namely:

• Freedom of contract, provided that the matter contracted is not illegal and contravene the public policy.
• The use of English language. Malaysia accepts commercial documents in English and generally have no requirement to translate them into another language.
• English can be used in commercial activities, including correspondences with governmental regulators and agencies.
• Dispute resolution, court, arbitration and mediation. Malaysia has structured a court system and is a signatory of the New York Convention and is home for the Asian International Arbitration Centre.
• E-signature is allowed for most documents in Malaysia, except for certain documents that includes Power of Attorney, Wills, Trusts etc.

Following on, the remarks of the leadership of CDC and MBCC:

H.E Mr. Sok Chenda Sophea, Minister attached to the Prime Minister, Secretary General of CDC, delivering his keynote remarks.

This LOI is a new law to promote investments into Cambodia with open, transparent and attractive investment incentives to all encouraged sectors namely High-Tech industries, innovative industries with high added value, industries support production chains and agricultural, electrical, digital industries, small and medium enterprises (SMEs) etc and many more priority sectors, providing inclusive policies and incentives to all large enterprises or SMEs that invests into Cambodia.

This Law aims to establish an open, transparent, predictable and favourable legal framework to attract and promote quality, effective and efficient investments by Cambodian nationals or foreigners for socio-economic development in the Kingdom of Cambodia by:

1. Increasing Cambodia’s competitiveness so its economic structure may diversify and become resilient to regional and global crises;

2. Modernizing and increasing the productivity of local industries and strengthening connectivity with regional and global supply chains by promoting increased capital inflows, and the transfer of technology, knowledge and know-how;

3. Establishing an investment incentive regime that is transparent, predictable, non-discriminatory and competitive that supports socio-economic policies; and

4. Providing protection to investors’ rights and legitimate interests in the Kingdom of Cambodia through the establishment of a comprehensive and equitable legal framework in line with national interests.

This Law applies to all Qualified Investment Projects, Expanded Qualified Investment Projects and Guaranteed Investment Projects registered with the Council for the Development of Cambodia or Municipal-Provincial Investment Sub-Committees.

The Council for the Development of Cambodia (CDC) shall be established as an executive body acting as the “Etat-Major” and One-Stop Service of the Royal Government of Cambodia responsible for overseeing and managing development cooperation, private investment, and special economic zones.

The key highlights:

• Companies in the green sector will be eligible to get the incentives first. Companies that invest their research, development and innovations with environmental protection/conservation in mind is also eligible to get the additional incentives such as the 150% deduction of tax base. This in line with the ESG goals.

• H.E Mr Sok Chenda Sophea assured that the economic land concessions (ELC) will not be reduced further than the current 50 years tenure.

• The three years tax holiday will not be triggered on the first day investors registered at the CDC, but it will be triggered on the first day the company generate their income.

• It is emphasized that (current and future) investors to contact CDC directly regarding the laws and regulations for maximum benefits and protections, which is available 24/7 and will respond within 48 hours, at the following:

Hotline: +855 23 427 597 / +855 23 428 954
Email: info@cambodiainvestment.gov.kh
Website: http://www.cambodiainvestment.gov.kh

YM Raja Badrulnizam Raja Kamalzaman, Director, ASEAN & Oceania Section, MATRADE who delivered the opening remarks.

Ms Nyaee Ayop, Senior Manager, ASEAN & Oceania Section, MATRADE presenting her briefing.

Key features of this Grant include: –

• • Support for Trade Associations and Business Chambers to drive and intensify export promotion activities (such as international trade fairs & trade missions) undertaken from 14 March 2022 to 31 December 2022 (subject to change).
  

• • If approved, assistance is provided in the form of (matching) grants up to 70% of the total cost or a maximum of RM500,000 (whichever is lower).

• • The Grant targets:
  • – High Value products such as: chemicals & chemical products, building and construction materials, automotive, medical devices, oil & gas etc.
  • – High Tech products such as: electrical & electronics, ICT and aerospace
  • – Promoting sustainable-related products & services and those adopting a sustainability agenda
    

• • The expected KPI of the Grant is not less than RM400 per RM1 spent.

For further details you may contact: The Secretariat, Empower Trade Associations (ETA) Grant, Level 11, East Wing, Menara MATRADE, Jalan Sultan Haji Ahmad Shah, 50480 Kuala Lumpur.

Group photos of the participants:

5) Webinar on Lao PDR: “Laos – Multi-Modal Transport Hub for ASEAN under RCEP & the Laos – China Railway” held on 6 April 2022

The Webinar on Lao PDR: “Laos – Multi-Modal Transport Hub for ASEAN under RCEP & the Laos – China Railway” held on 6 April 2022 was jointly organised by Malaysian South-South Association (MASSA) with Malaysian Business Chamber Lao PDR (MBCL), the Embassy of Malaysia in Lao PDR and the Expertise Resource Association (ERA).

The Laos – China High Speed Railway is a timely logistical infrastructure that will bring improved connectivity and new trade linkages to the ASEAN trade bloc and the wider Asia-Pacific region, which is timely as the Regional Comprehensive Economic Partnership (RCEP) – the world’s largest free trade agreement is set to be ratified for most of its 15 members in 2022. All ASEAN countries are signatory to the RCEP.

This webinar was aimed at introducing the Laos – China Railway, the arising incentives from Lao PDR and the resultant business opportunities of the logistical infrastructure.

This webinar garnered 120 participants from Malaysia, Laos, Cambodia, Vietnam, Thailand, Singapore and other countries, comprising of mostly business owners and practitioners in the logistics and transportation industry.

Greetings from MASSA!

2021 had been a most eventful year.

The COVID pandemic grounded mobility on land, sea and air, shuttered businesses, disrupted supply chains that became a global issue, not forgetting lives and livelihood that were lost or destroyed. This had impacted all layers of society and businesses in a profound way.

The containment measures led to a shift towards digitalisation in all aspects of living and doing business. MASSA was not exempted from this shift. It reached out to likeminded organisations and organised webinars on latest innovations in topics such as cybersecurity, drones, robotics and AI. In this edition’s Diary of Events we have reported on four webinars that were organised. These include: (1) “How Safe Are You Online?” on 18 August 2021, (2) “Cyber-Attack Prevention for Consumers and Enterprises” on 4 October 2021, (3) “Opportunities in the Drone Industry” on 13 October 2021 and (4) “How AI & Robotics Impacts Your Life” on 25 November 2021. More than 400 members and the business community joined us for these events.

With the easing of lockdown restrictions in 2H2021, MASSA had the opportunity to engage with members of the Embassy of Chile in Malaysia, InvestPerak and the Investment Office of the Presidency of Turkey.

In this December edition of the 2021 Newsletter, we want to thank H.E. Don Diego Velasco-von Pilgrimm, Ambassador Extraordinary and Plenipotentiary of Chile to Malaysia and to Brunei Darussalam for his role to reconnect MASSA with Chile & Latin America and his message for this edition of the Newsletter. Through His Excellency Don Diego Velasco-von Pilgrimm, Ambassador Extraordinary and Plenipotentiary of Chile to Malaysia and to Brunei Darussalam we were able to connect with Don Vincente Pinto, Investment Commissioner of Chile for Asia, Chile’s Foreign Investment Promotion Agency, InvestChile, who had provided the latest updates on the economic and emerging business trends in Chile and also as a gateway to Latin America.

We are also pleased to feature an article on “Cybersecurity Challenges that Small and Medium Enterprises Faced and Its Way Forward” contributed by Dato’ Ts. Dr. Haji Amirudin bin Abdul Wahab, CEO of CyberSecurity Malaysia highlighting the instances of cyber-threats, practical measures for the implementation of cybersecurity for businesses, especially SMEs and the initiatives under CyberSecurity Malaysia to support businesses as they develop and introduce sound cybersecurity strategies and solutions.

As we come to the close of 2021, we are thankful to MASSA members, article contributors, and collaborators for their persevering support throughout this challenging year. MASSA remains committed to present to members, trade, investment and business leads from the South-South countries, especially in light of the pandemic ushering an increased need for collaborative efforts at all levels and especially on the digital platform. To this end, several events (virtual and hybrid in nature) are in the works with our partners and collaborators. We look forward to your participation in these events in the coming year.

We wish all members and readers, a happy new year 2022, stay safe and keep well in these Covid-19 days.

Ng Su Fun

Editorial MASSA

Article by:

Dato’ Ts. Dr. Haji Amirudin Abdul Wahab FASc
Chief Executive Officer
Cybersecurity Malaysia

Cybersecurity Challenges that Small and Medium Enterprises Faced and Its Way Forward

INTRODUCTION

The government has embarked on a progressive program that assists the Small and Medium Enterprises (SME) to grow and prosper in the very challenging business environment. The SMEs are normally family-run businesses or traditionally run enterprises which manage local and traditional products and sometimes these enterprises are being carried out from their family houses or abodes. As reported in the 12th Malaysia National Plan, SME has contributed 38.2 percent or RM512.8 billion to GDP and so far, the development of SMEs has grown steadily over the years. In fact, some of the SMEs had managed to expand their businesses and became successful in terms of output and profitability.

With the advent of the Digital Economy as envisaged by the government and promoted by the Malaysian Digital Economic Corporation (MDEC), the challenge faced by the government is to encourage the SMEs to embrace the digital technology as the way forward in line with the current technology brought forth by the Industrial Revolution 4.0 (IR4.0). The other challenge that the government is facing is to inform the SMEs to be aware and embrace the cybersecurity culture as a means to protect their businesses from potential cyber-threats and cyber-attacks.

THE DIGITAL WORLD

The global population currently stands at 7.77 billion people and there are currently 4.6 billion Internet users globally. That is already a healthy 59.20 percent of the total population. As of January 2021, there were already 27.43 million Internet users in Malaysia. In addition, the Internet penetration in the country has stood at 84.2 percent.

The statistics mentioned above shows that today, the world is highly connected to the Internet. Furthermore, there has been an increasing reliance on the information and communications technology (ICT) as a vital tool for nations to progress economically, socially, and politically. Increasing connectivity via the Internet facilitates the vast potential for knowledge-sharing and wealth creation, as well as providing opportunities for increasing prosperity among the citizens.

With a faster Internet connection, it enables the business organisation to intensify its business by venturing into a variety of e-activities such as e-commerce, e-training, e-procurement, e-learning, and e-tendering. In the digital economy, faster internet connection and highly reliable network connectivity augurs very well in ensuring that business transactions and trade are done seamlessly online. The Internet also improves organisational productivity, enhance efficiencies, reduces costs, enables the production of more goods and services as well as foster innovation. It also fosters economic growth for the country.

As a result of Malaysia’s Internet and mobile connectivity, Malaysia has a high rate of e-commerce usage. The e-commerce industry has grown into one of Malaysia’s most significant and competitive industries. Malaysia presents a unique opportunity for businesses as 75 percent of Internet users spend their money via e-commerce, with 58 percent spending through mobile commerce platforms. Based on a report by the Department of Statistic of Malaysia, e-commerce grew 23.3 percent year-on-year to RM267.6 million in the second quarter of 2021. Revenue is also expected to show an annual growth rate of 15.32 percent, resulting in a projected market volume of USD11.35 million by 2025.

MALAYSIA’S DIGITAL ECONOMIC INITIATIVES

The Small and Medium Enterprises (SMEs) account for about 97.2 percent of Malaysia’s total business establishments in 2020 and contribute over 38.3 percent of the nation’s Gross Domestic Product (GDP). SMEs’ shares to total employment and exports of the country are at 66.2 percent and 17.3 percent respectively. Based on the industry’s contribution to the country’s GDP and employment opportunities, it is very important to recognise the pivotal role that SMEs play in our economy.

In order to spur the digital economic growth, the government had launched several programs and initiatives with the aim of enhancing the SMEs ability in harnessing the Internet and the various online economic platforms. The Malaysia Digital Economy Corporation (MDEC) currently offer four solutions for SMEs. The solutions are SME Business Digitalisation Grant, 100 Go Digital, SMART Automation Grant (SAG) and Digital Xccelerator. Through these programs and grant, the SMEs can grow and rake the benefits by:

a. Learning new digital skills.

b. Enhancing the customer experience.

c. Increasing business efficiency.

d. Gaining new market.

e. To potentially reduce the operating cost.

f. Providing free promotion for businesses.

The Department of Statistics, Malaysia (DOSM) conducted a Special Survey Effects of COVID-19 on Economy and Companies / Businesses Firms showed 67.8 percent reported no revenue during this period, a small portion of 12.3 percent generated their sales via online, while 9.8 percent still earned their sales through physical shops. Therefore, SMEs in Malaysia must transit towards the digital era. This is to ensure most SMEs are not left behind and prepared for any potential cyber-attacks that will be coming.

SME CYBERSECURITY CHALLENGES

The global cybersecurity landscape has evolved with the emergence of Industry 4.0, Big Data, Cloud Computing, Quantum Computing, Autonomous Vehicle, Nanotechnology, Fintech, Blockchain, Artificial Intelligence (AI), Machine Learning, Deep Learning, Virtual Reality, Augmented Reality, Internet of Things (IoTs) devices, Bring Your Own Device (BYOD), etc.

The advent of digital technology offers a lot of advantages especially to businesses, SMEs included. Among the changes that occurred including the cashless transaction, the introduction of e-wallet, advanced security verification, online shopping, mobile banking and a few others. For major businesses, the gradual migration to digital technology is seen as a means for better business and seamless transaction that could make managing business reliable, convenient, and transparent.

However, for most, if not all the SMEs, the rapid changes brought by the development of technology was overwhelming, to say the least. Most of the SMEs are cottage-based industries or family-run businesses and most of the owners are not really tech-savvy. Hence, the move towards the digital technology is overwhelming and looks so insurmountable to some of the SMEs owners. Despite the convenience of doing business with the digital technology and the Internet, most of the SMEs owners believed the adoption and migration to the digital technology would cause further expenses for them.

CAUSES AND CONCERNS

The path towards full digitalization or reaching 4th Industrial Revolution era contains various degree of challenges and risks. And the most common one is cybersecurity and the threats it poses. Cybersecurity is ingrained in today’s environment but many do not know the existence and the practical uses within the organisations and nations.

Figure 1: MyCERT Cybersecurity Incident Statistics

There are challenges and downsides of the Internet toward certain individuals, groups, institutions, organisation, and nation-states as a whole. These concerns also include the SMEs, of which among the major concerns is that SMEs are perceived to be lacking in information security awareness which results in the haphazard management of their information and digital assets.

What SMEs and other businesses concern and fear the most in recent years are business disruptions that are caused by cyber incidents, threats and attacks. Thus, cybersecurity is always an issue for the business organisation. Most Malaysians still have doubts about doing business online because they have trust issues when conducting business virtually. This is one of the setbacks that hinder the implementation of digital technology especially to the SMEs.

CYBER-RELATED INCIDENCES

There were many cyber-related incidents that occurred in the past few years in Malaysia, affecting not just the citizens but also organisations that could be detrimental to their brands, reputation and trust among the customers and stakeholders.

Figure 2: SME being attacked more frequently

Emerging cyber-threats have become a lot more sophisticated, disastrous; and pose serious risks and challenges to individuals and nations. Some of the cyber-threat actors that are against SMEs are hackers, employees, compromised internal accounts, third party contractors, business partners, business competitors, organized crime groups, terrorist, foreign governments, etc. Apart from that, SMEs are concerned with personal identity theft and cyber-attacks that affect the businesses’ confidential data, privacy, and money.

Figure 3: Why SMEs are common targets for cyber-criminals

The common type of cyber-attacks against SMEs are physical theft, access abuse, phishing attacks, social engineering, data breach, supply chain attacks, insider threats, malware attacks, ransomware attacks, Distributed Denial of Service (DDoS) attacks, Internet of Things (IOTs) hacking, biometric hacking, chatbot hacking and etc.

NEW NORMAL, NEW PARADIGM

The rapid growth of e-commerce recently was due to the COVID-19 pandemic which forced most businesses to go digital and conduct businesses online using the various available platforms. Since 2020 when the first cases of COVID-19 were detected, most malls, shops and businesses were forced to close during the Movement Control Order (MCO). This had forced businesses to embrace the new normal of doing business online instead of the brick-and-mortar physical shops.

Digitisation of their organisation was not a priority before the COVID-19 crisis hit, due to cost factors and lack of immediate need. But as a result of the pandemic, some of these businesses have had to unexpectedly fast-track their digital transformation journey in order to survive. Limited experience in adopting new technology and its security, along with the massive shift to remote working due to lockdown, has made SMEs vulnerable to an increased threat of cyber-attacks.

CYBERSECURITY MEASURES FOR SMES

There are a few cybersecurity measures that can be taken into consideration to protect the SMEs. Firstly, the leaders and employers have to set an example of following an effective and standardised cybersecurity best practices. The SMEs also need to strengthen its authorization and access control of their premises and also their system network. SMEs should also control physical access to their computers and create user accounts for each employee.

The SMEs should also limit their employee access to data and information and also seek advice on the relevant software to be used into their corporate devices and systems. SMEs should also monitor their system, set up firewall, alerts or red flags for any suspicious activities. This is to protect their information, computers, and their system networks from any cyber-attacks. They also need to update and back-up their files regularly.

SMEs need to embrace and engage with cybersecurity awareness program and employees need to participate in cybersecurity awareness training that the employers conducted. Other than that, they need to create a mobile device action plan, apply strong passwords, and have an authentication policy in place and to be implemented as soon as possible.

SMEs need to adopt a more adaptive, innovative, aggressive, and proactive approaches to stay ahead of cyber-threats. SMEs are encouraged to effectively face the challenges with dynamic approaches, inter-agency cooperation, and strengthening the public-private partnerships. Besides, the need for cybersecurity encompassing people, process and technology is rather critical and such need will continue to grow in many more years to come. All in all, there is an urgent necessity to enhance domestic and international collaboration in information sharing, practical legal and technical approaches, capacity building and cybersecurity awareness and education.

ADOPTING CYBER RESILIENCE

In this complex and connected digital age, traditional cybersecurity measures are no longer enough. There is no 100 percent security for a public and private organisation, academia, and a country as a whole. It is no longer the question of how to secure oneself from being attack. It is just a matter of time or when they will suffer cyberattack. It is better to assume they will eventually break through the organisation’s defences.

More importantly, the organisation should work on a strategy to reduce the impact of cyber-attacks. This is called being cyber resilient. Therefore, Malaysia, as a nation, has successfully adopted a holistic approach to enhance the security of its cyber environment. While at the same time, as part of the global community, Malaysia also aims to strengthen its international cooperation to respond to global cyber challenges. With such an approach, we hope to be able to benefit and take the advantage of a secure, resilient, and trusted cyber environment.

Enterprises today need to adopt and implement digital environment to ensure their businesses would be able to reach the customers speedily and able to expand globally. The adoption of digital platform also comes with risks particularly related to cyber-threats. As daily operation moves towards digital, concurrently the threat will rise to where the perpetrators will take advantage of the increased number of users online.

For example, the promotion and development of technology in IOT, there will be a huge number of devices interconnected in the internet and online that will create vulnerability and loopholes that will provide advantages to the attacker. Based on a study by a research firm, HIS Markit, the IOT market will grow from 15.4 billion devices in 2015 to 30.7 billion devices in 2020 and more than 75 billion in 2025.

CYBERSECURITY MALAYSIA’S INITIATIVES

CyberSecurity Malaysia (CSM) is a technical specialized agency under the purview of the Ministry of Communication and Multimedia Malaysia. CSM has established 40 services across cybersecurity domains covering responsive, proactive, capacity building, strategic research and engagement. CyberSecurity Malaysia could provide technical advice and professional technical assistance with regard to providing a safe and secure cybersecurity ecosystem to SMEs.

Figure 4: SiberKASA Services

Among the CyberSecurity Malaysia’s initiatives was the introduction of SiberKASA which was launched by the Minister of Communication and Multimedia on 23 March 2021. This initiative is aimed at developing, empowering, sustaining and strengthening cybersecurity infrastructure and ecosystem in the country to ensure network security preparedness.

CyberSecurity Malaysia provides a holistic approach that identifies potential threats to organisations and impacts to the national security and public well-being. Secondly CyberSecurity Malaysia also assists in the development of cyber resilience by having the capability to safeguard the interests of its stakeholders, reputation, brand and activities, to create value for the nation. Some of the services available at CyberSecurity Malaysia are the Cyber Security Emergency Services which include the Cyber999 Hotline for making reports on any incidences, Security Quality Management Services, Information Security Professional Development and Outreach and the Cyber Security Strategic Engagement and Research.

CyberSecurity Malaysia has come up with some cybersecurity guidelines and it has been made available to the public. The guidelines are prepared for the purpose of maintaining ethical use of the Internet and also to safeguard the interests of certain groups such as children, youth, parents, individuals and organisations. The guidelines cover several services such as for Cloud Computing, IoT, Industrial Revolution 4.0 and a few others.

CONCLUSION

The government is working very hard to improve the standard of living of the poor people in the country. The government also ensures that those people who are involved in the SME industry are given the opportunity to be independent, to grow their business and at the same time being resilient despite the economic setback due to the COVID-19 pandemic. On the other hand, the government is also encouraging the SMEs to embrace the cybersecurity ecosystem to safeguard their SMEs from any potential cyber-threats or cyber-attacks.

One of the challenges that the government is facing is about changing the SME’s mindset to accept changes especially in the digital era. The move towards complete digitalization in the economic sector is long and hazardous but more difficult to those SMEs. The mindset is that by embracing digitalization it would cost more money to be spent on equipping their cottage industries with the Internet network, proper gadgets, and connectivity.

In the current environment, the SMEs are very vulnerable to cyber-threats and cyber-attacks. Any cyber-attack on SMEs would cause the SME to suffer losses and shut down business. An SME cannot stand alone and be independent in the digital landscape because in the cybersecurity ecosystem, the system is very much linked to other entities in the business ecosystem such as stakeholders, partners, suppliers, investors, and customers. If one link is broken anywhere in the ecosystem due to cyber-attack, the others will be weakened too, and business will suffer. It is important to adapt cybersecurity technologies that would be predictive, proactive and responsive.

THE WAY FORWARD

With the COVID-19 pandemic threat around the world, businesses with digital platform will be the best approach for organisations to reach their customers and conduct promotions regarding their products and services. Most people will assume that the function of cybersecurity is to reduce risk against cyber-attack. However, it is time for the management to look at cybersecurity as a growth enabler instead of growth constraining.

A sound and solid cybersecurity strategy must promote innovation and customer trust that are essential for continued growth. A well-developed cybersecurity strategy keeps the operational wheels of business rolling. Agile organisation will have the advantage by using cutting-edge technologies for producing better product, services, and better customer experience. This will include technologies related to cloud services, big data, IoT etc. With these technologies, security need to be embedded to ensure less vulnerability.

With the right strategy and policy, SMEs will be able to ensure resiliency if any cyber-attack were to happen. The technologies will be able to assist the business to recover and continue their businesses as usual. Effective cybersecurity is needed to enhance product integrity, customer experience, operations, regulatory compliance, brand reputation, and investor confidence.

It is no longer a question of whether SMEs will be attacked but more of a question of when it will happen, and how your organization is going to prevent it. Organisations need to implement the predictive, preventive, responsive and recovery strategy in facing cyber-threats.

Reference

1. 1. Twelfth Malaysia Plan, 2021 – 2025 (epu.gov.my)
2. 2. Department of Statistics Malaysia (DOSM), “Report of Special Survey ‘Effects of COVID-19 on the Economy and Companies/Business Firms’- Accessed: December 2020
3. 3. https://datareportal.com/reports/digital-2021-malaysia
4. 4. https://www.theedgemarkets.com/article/malaysias-ecommerce-income-233- yoy-rm2676b-2q (Department of Statistics Malaysia Official Portal (dosm.gov.my))
5. 5. https://www.statista.com/outlook/dmo/ecommerce/malaysia

Tan Sri Azman Hashim
President
MASSA

Greetings and Best Wishes for 2022!

2021 was a year of perseverance and recovery for all of us. By the month of November, we have recorded more than 95% of the adult population being fully vaccinated. Alongside this encouraging development, interstate travel restrictions have been relaxed, enabling the economic sectors to slowly begin operating in full swing.

Malaysia’s economic performance showed a slight slump by 4.5% in the third quarter; however, Bank Negara Malaysia (BNM) expects a rebound as the impact of the pandemic is slowly waning with the easing of border controls and the gradual recommencement of economic activities across all sectors. GDP growth for 2022 is projected to recover between 5.5% and 6.5% with the key support of manufacturing and construction projects, the improvement in labour market as well as a high export demands.

The headline inflation for 2021 is projected to average between 2.0% and 3.0%, while the underlying inflation, as measured by core inflation, is expected to average below 1.0%. In 2022, headline inflation is expected to remain moderate. With the normalizations of economic activities, core inflation is predicted to rise but remain subdued due to spare capacity in the economy and slack in the labour market. However, the future outlook still depends on the COVID-19 risk factors, both globally and domestically, the global financial markets stability and the disruptions of supply chain.

The Government’s National Investment Aspirations (NIA), signals the Government’s commitment towards cohesively and synergistically fostering long-term sustainable economic growth by reforming and restructuring its investments strategies and policies, cognisant of the new complex challenges and demands of the Fourth Industrial Revolution and the prevailing uncertainty and volatility of the pandemic as the global economy begins to return to form. The framework will be catered towards better attracting strategic, quality investments with high-value economic impact, with focus on development of sophisticated products and services through high local research and development and innovation alongside high skilled job creation, to ensure Malaysia remains relevant and competitive as a prime destination for trade & investment.

Going forward, I am cautiously optimistic in my outlook towards Malaysia’s economic recovery in 2022, underpinned by my expectations in the ratification of RCEP and CPTPP, the post-pandemic / endemic phase and the ever-increasing digitalisation and digital solutions across all business sectors.

I appreciate the continuing support and cooperation of all members, especially my fellow Executive Committee members, and ex-officio partners for your attendance, support and contributions at our regular meetings & events and not forgetting our sponsors of our website.

I also wish to thank all who have contributed valuable and insightful articles to our Newsletter for 2021.

I wish everyone a happy, healthy and successful 2022.

Tan Sri Azman Hashim
President
15 December 2021