THERE are one billion digital customers around the world, and how many of them our e-commerce entrepreneurs capture depends on at least two things: government incentives and companies’ aggressive adoption of digitalisation.
As for the first, Malaysians will be all eyes and ears come Oct 11 when the 2020 Budget gets tabled at Parliament. E-commerce entrepreneurs may not get all they wish, but there should be ample as we inch towards a digital world.
For the second, Malaysian companies — 98.5 per cent of them are small- and medium-sized companies (SMEs) — need to understand what digitalisation really means.
As the eminent economist Jeffrey Sachs puts it in his foreword to the digitalisation white paper titled “Accelerating Malaysian Digital SMEs: Escaping the Computerisation Trap”, our companies must go beyond thinking of it as mere technology, an application, or a device.
Digitalisation is, in his words: “A system, that integrates end-to-end digital processing from consumer interactions and consumer payments to product and process innovations to back office operations”. It is from this understanding that we must proceed.
Let’s consider government incentives. Jalbir Singh Riar, tax partner with Ernst & Young Tax Consultants Sdn Bhd, suggests the government do five things to hasten our journey to the digital destination.
One, introduce more tax incentives for ICT products and services. This will encourage growth of tech-focused business, and reflect the government’s commitment to the digital industry, he says.
Two, improve and enhance ICT equipment and communication system. Strong digital infrastructure is a must for our businesses to grow.
Three, digital initiatives under the Malaysia Digital Economy Corporation need to be expanded. Jalbir says this will help establish Malaysia as a regional e-commerce hub, helping to woo companies like Alibaba to open its national office in Malaysia at The Vertical Bangsar South, which is the first e-WTP hub outside of China.
Four, explore exemption of service tax on digital services for B2B to alleviate potential double taxation. If this is not done, Jalbir warns, businesses in Malaysia could potentially be subject to double taxation on the same service.
Finally, some “handholding” work for the Royal Malaysian Customs Department. There are many companies — local and foreign — trying to navigate through the numerous rapid changes introduced in the Sales and Services Tax since September last year.
With the digital service tax expected to go live on Jan 1, the timing is just right for the Customs to provide some clarity to both local and foreign businesses. Ambiguity is a big disincentive to foreign investments. But all incentives and no strategy will make our SMEs dull brick-and-mortar bad boys.
Like the American economist Sachs has pointed out, digitalisation is not just a device. Nor an application. Sachs has a point. SME data on technology adoption shows that while 50 per cent of Malaysian SMEs are ICT leaders, 30 per cent are followers.
More troublingly, 20 per cent of our SMEs are ICT laggards. This is no way to go digital. SMEs need to invest in hardware, software, and most importantly, mindware.
Attitude will determine the altitude our SMEs climb. Absent this mindware, our SMEs will forever be trapped in the laggard world of the brick-and-mortar business model.