Malaysia to play a pivotal role in multi-media

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Malaysia is liberalizing its telecoms sector and has passed one of the first pieces of legislation to address the issue of convergence. It is also spearheading a multi-media project that has been compared with America's Silicon Valley. Malaysia's minister for energy, communications and multi-media, Dato Leo Moggie, talks to Global Telecoms Business about developments.

In 1998 the Malaysian government introduced the Communications and Multi-media Act. The act has been acknowledged as one of the first pieces of legislation to address the issue of convergence and heralds the potential introduction of so-called cyberlaws. The act also represents a step forward in the country's plans to achieve its "Vision 2020": 2020 is the year when Malaysia aims to become an industrially developed nation.

The act provides a legal backing for Malaysia's multi-media project, the Multi-media Super Corridor. The greenfield site for the corridor, 15km x 50km in size, runs from Malaysia's capital, Kuala Lumpur, to Sepang International Airport. This project is intended to be a test-bed, enabling the world's most advanced technological companies to join forces and develop new multi-media products and services. It has been described as Asia's version of America's Silicon Valley.

The country's focus on new technologies and the convergence of telecoms, IT and other sectors, is also reflected in the recent change in the name of the ministry responsible for this sector: the ministry of energy, telecommunications and posts has been renamed the ministry of energy, communications and multi-media. In an interview with Global Telecoms Business, the minister for energy, communications and multi-media, Dato Leo Moggie, talks about the Multi-media Super Corridor, regulatory changes, competition in the fixed market, fixed and cellular penetration in Malaysia.

Dato Moggie explains the government's views on the role of information technology: "The government has earmarked information technology as the catalyst that will spur the development of the country as a developed nation and the establishment of an informed and progressive Malaysian society by the year 2020. This is being developed under the National Information Technology Agenda (NITA), which emphasizes three important components - in other words people, infrastructure and applications. These entail the acculturation of the Malaysian population in IT through education and skills development; the availability, accessibility and affordability of networks and appliances; and the development of IT applications with a focus on indigenous content and community development.

"The benefits will be ours with the realization of the objectives of the country's Vision 2020 and NITA - with the Multi-media Super Corridor (MSC) constituting an integral part or the nucleus. Malaysians are a resilient lot and have always been receptive to change. For example, initially there were apprehensions among the people as to how Malaysians would benefit from the MSC project. Today local companies account for 46% of the MSC status companies."

Multi-media Super Corridor

Dato Moggie explains how the MSC project will enable Malaysia to reach the government's main objectives: "In speeding up the attainment of these objectives, five thrust areas were identified, namely the electronic economy (E-economy), electronic community (E-community), electronic public services (E-public services), electronic learning (E-learning) and electronic sovereignty (E-sovereignty). Special task groups responsible for these five areas and a high-powered strategic thrust implementation committee have been set up to ensure the smooth implementation and realization of these objectives.

"All these strategies will enhance the development of the MSC project. The MSC is a test-bed green area where the very best in world-class telecoms infrastructure and incentives are located, so that the benefits of IT can be fully utilized and eventually spread out to the rest of the country. This represents a natural progression, as the development of IT growth areas takes place in other states within the country, and efficient and equitable development of communications infrastructure occurs under the country's development programmes."

Dato Moggie provides more details on the scale of the MSC project and the resources that have been made available: "The MSC is a15km x 50km greenfield site designed to realize the full potential of multi-media. It runs from the Kuala Lumpur city centre southwards to Sepang International Airport. Within this corridor, we have put in place a package with four key elements:- an attractive physical infrastructure, new sets of a soft infrastructure of supporting laws, policies and practices, world-class information infrastructures with a 2.5-10 gigabit open multi-media network, using the latest ATM switches and a fully empowered one-stop shop called the Multi-media Development Corporation to manage and market the project. In the MSC, we offer to the world not a replica of the Silicon Valley, but a global test-bed designed to enable companies to collaborate in new ways and reap the rewards of the information age. The MSC offers genuine mutual enrichment for our partners with the vision to participate. We see the MSC as a multi-cultural web of mutually-dependent international and Malaysian companies collaborating to deliver new products and services to customers across the region and the world."

Dato Moggie explains that the project has been split into a number of stages: "Phase one involves making the MSC a success by learning from our partners and the experience that we gain. Phase two will see the link-up with other islands of excellence within Malaysia, while phase three involves making all of Malaysia a Multi-media Super Corridor, which is connected to other smart regions around the world. In the final phase, that is by the year 2020, we expect Malaysia to be a fully developed nation. as envisioned in our Vision 2020."

The government has established seven goals that it expects to achieve through the MSC by the year 2000: "to make Malaysia a pioneer in electronic commerce; provide the world's first national multi-purpose smart card; introduce a comprehensive programme for smart schools; create a regional centre for tele-medicine; boost Malaysia's presence as a marketing and multi-media customer service hub and transform Malaysia into a remote manufacturing, coordination and engineering support web."

Dato Moggie emphasizes that companies participating in the project are entitled to a number of benefits and guarantees: "To meet the needs of MSC-status companies within the corridor, Malaysia offers a 10-point Multi-media Bill of Guarantees: a world-class physical and information infrastructure; unrestricted hiring and entry of foreign specialists with no employment restrictions; freedom of ownership of IT companies located in the MSC; freedom of sourcing capital globally for MSC infrastructure; competitive financial incentives, including exemption from income tax or investment tax for up to 10 years; no duties on the import of multi-media equipment; intellectual property protection and cyberlaws; no censorship of the Internet; globally competitive telecoms tariffs; key MSC infrastructure contracts to leading companies willing to use the MSC as their regional hub; and a high-powered implementation agency as a one-stop shop to meet company needs."

According to Data Moggie, the project is on schedule: "Overall we are happy to say that the development of the MSC has proceeded as planned. Since its introduction in 1986, the initiative has seen reasonable success. As of April 12 1999, there were 275 applications for MSC status. In all 212 were approved, including 31 world class companies. Our target is to have 50 such companies by the year 2002. Meanwhile Cyberjaya, the intelligent city within the MSC, will officially open in June this year. Since the introduction of the MSC initiative, the local IT industry has undergone rapid transformation. A number of new multimedia-based industries have emerged. The MSC has also led to the creation of some 9,000 new jobs as of January 1999. Although the recent economic downturn posed some additional challenges to the MSC initiative, the project is still accorded the highest priority by the government. As the nation's engine of growth for the future, we will make sure that there are no major delays in the implementation of its flagship applications. The various incentives enjoyed by companies within the MSC are still intact."

The MSC project involves companies from different industries: "This is a break-down of the companies involved in the MSC project as of the middle of April this year: software companies (37%), content (19%), systems integration (15%), telecommunications (10%), post-production/animation and film (8%), training and education (3%), and heavy users of multi-media (3%). Out of the total 212 MSC status companies, 27% are foreign-owned, 27% are joint ventures, while 46% are local companies."

International projects

Dato Moggie describes Malaysia's involvement in other international projects: "The government has been cooperating with neighbouring countries within the region in development projects, such as in the growth triangles (Indonesia/Malaysia/Thailand, Indonesia/Malaysia/Singapore), apart from the bilateral agreements that we have with other Asia Pacific countries (for example the Malaysia-Japan submarine cable project). The projects include the use of technologies to urban/remote areas, namely with technology such as MARS, RILL, & WILL. In line with our national policy, these projects are undertaken with the involvement of the private sector."

Impact of the MSC on regulation

Dato Moggie describes how the MSC project is affecting legislation in Malaysia: "As far as we know, the Communications and Multi-media Act (CMA) is in fact the first cyberlaw of its kind in the world to be formulated to address the issue of the convergence of technologies. We embarked on this bold move to facilitate the future development of the MSC project in particular and the information technology and multimedia sector in general. We have also introduced several other high-impact cyberlaws such as the Digital Signature Act, Computer Crimes Act and Tele-medicine Act in 1997 to support the growth of the MSC. The CMA, which was enforced last April, is an all-encompassing law which provides the foundation that will integrate the activities of all the other cyberlaws that have been put in place."

Moggie outlines the benefits of the CMA: "The new policy framework established under the CMA was designed to ensure healthy competition and the transparent, consistent and systematic growth of the new sector. To support the policy framework objectives, a new regulatory system, which includes the creation of a single regulatory agency, was established to fulfil the structural requirements of the new converged industry. It was specifically designed to allow for the growth of the communications and multimedia industry that is incentive-based and self-regulated."

Moggie stresses that the act does not impose rigid requirements owing to the pace of change: "One of the interesting aspects of the CMA is that it is generic in nature, taking into consideration the rapid changes in technology. This is to widen its scope and extend its application, thereby avoiding the necessity of having to make amendments every time there is a change in technology. Consequently the new licensing regime established under the CMA is technology-neutral, flexible and facilitative."

Industry convergence and subsequent restructuring

The act represents one of the biggest changes to legislation since the 1950 Telecommunications Act. As Dato Moggie notes, the act underlines a belief in the inevitable convergence of multi-media and communications: "The rationale for this act is that whereas we previously based policies on the different sectors of communications, computing and broadcasting, we now realize that these technologies are converging so much that soon we will no longer be able to distinguish between voice, data, image, etc. For this reason, the government has decided that Malaysia has to be prepared to usher in this new sector."

Dato Moggie indicates that these developments have led to significant restructuring: "The establishment of the CMA necessitated the restructuring of all existing policy, institutional, regulatory and legal structures and instruments pertaining to the telecommunications, broadcasting and computing sectors in the country. We are putting in place an integrated policy and regulatory framework that facilitates the growth of a new communications and multi-media industry. The CMA abolished the gap between the separate policies which governed the sectors previously - namely the 1950 Telecommunications Act and the 1988 Broadcasting Act. Subsequent to the enforcement of the CMA last April, both acts were repealed."

According to Dato Moggie, the government is seeking to make legislation more transparent: "The regulatory situation in Malaysia is on the threshold of vital changes that will make it markedly different from the past. By committing to convergence regulations rather than the traditional technology-based approach, Malaysia has boldly adopted a new regulatory stance that is committed to the following: transparency and clarity in decision-making; less rather than more regulation in line with liberalization of the sector; flexibility to ensure the longevity of decisions in a rapidly changing environment; a focus on generic rules with widespread application."

Dato Moggie explains that a new Malaysian Communications and Multi-media Commission was set up in 1998 to enforce these changes: "The Commission was set up under the Malaysian Communications and Multimedia Commission Act (MCMCA) of 1998 and is responsible for the regulation of the converging telecoms, broadcasting and information technology industries." A single regulator now oversees the telecoms, broadcasting and computing industries.

Universal service obligations

Dato Moggie adds that the new legislation also focuses on universal service obligations: "We have ensured that this is facilitated by the 1998 Communications and Multimedia Act in the provisions concerning the implementation of a systematic and effective universal service obligation (USO) programme. This is vital for enhancing access to affordable services for the disabled and less privileged, lower-income groups and areas that are not economically viable."

According to Dato Moggie, the telcos will help to finance improvements in services in rural areas: "A special USO fund will be set up from mandatory contributions from various service providers, used to finance the capital roll-out required to increase access to services in these areas.

"Under the E-Community Task Force, the issue of access and equity to these basic infrastructure and infrastructure will be our main focus. Our mission is to promote and grow a Malaysian E-community across all groups and areas through comprehensive access, the uptake and diffusion of information and communications technology to improve the quality of life of all Malaysians by the year 2020."

Impact of equal access

The Malaysian telecoms market is being deregulated, with competition for fixed line services opening on January 1 1999. Dato Moggie talks about developments: "Competition in the fixed market for heavy usage business customers has been an intense area of activity for some time now. Active competition between the five fixed operators through equal access both for business and residential customers, however, started on January 1 1999. Ease of access to alternative service providers (by dialling a carrier selection code) is something that consumers are enjoying. However, a great deal will depend on marketing innovation and the service quality of the fixed line operators."

Dato Moggie continues on the benefits of equal access and initial teething problems "The equal access scheme was introduced to foster healthy competition among the telcos, which would lead to the promotion of better quality services and pricing. This will benefit not only all the fixed-line operators, but also the users. This new arrangement is also more equitable, as the cost of provisioning the service is more accurately calculated through a new formula - in other words this constitutes cost-based pricing for inter-connection, instead of the current practice based on revenue-sharing. Since April 1999 about 26,000 registered customers receive the benefit of equal access; although it is still in a trial period. There are still some technical issues pertaining to the full operation of equal access. We believe that these will be resolved by the end of year. As you are well aware, even the US took a while (about five years) to fully get its act together. The 16-digit numbering system is a world-wide problem."

At the same time the operators cannot offer discounts or undercut the incumbent telco, Telekom Malaysia, by over 20%. Dato Moggie refutes the suggestion that the new scheme provides the incumbent with an unfair advantage: "The 20% discount is an innovation. This is only offered on certain popular routes, as each telco provides its own pricing plan and packaging of services. We don't believe that Telekom Malaysia will lose out in this new arrangement or be left with an unfair advantage, as we expect the market to expand with the entry of new operators. We do not anticipate a reduction in the customer base. Telekom Malaysia will not suffer any loss. Instead they are being accorded the opportunity to be more efficient. The floor price is necessary to discourage unreasonable competition through cost-cutting. However, the 20% does not apply to all tariffs. It is only applicable to certain popular routes."

Cellular and the need for a 3G system

Malaysia has 2.4 million cellular subscribers. With projected growth of 15% a year, the government is focusing more on mobile. Dato Moggie describes mobile trends in Malaysia and government plans to introduce a 3G system, which should facilitate the switch to digital systems: "In Malaysia the so-called shift to wireless has been under way for some 10 years now. To date the full spectrum of services - NMT, analogue/digital AMPS, GSM and PCN - are represented on the market. The government is considering the introduction of a 3rd generation wireless system based on the ITU IMT-2000. But this may not necessarily be an addition to existing operators. We will first of all move towards fully digital systems and then see how we can make the systems compatible with each other to facilitate domestic roaming. This will ensure a more efficient use of the frequency spectrum, while at the same time providing the customer with a better deal. This will be an important development, as it will also address the universal service issue, whereby communications and multi-media services need to become accessible even in the remotest parts of the country."

Moggie attributes recent problems in the paging industry to the increase in cellular penetration and describes the steps that the government has taken to revive the sector: "We have been receptive to the needs of the paging industry. Last year measures were taken by the government to lower the import duty imposed on paging equipment and gadgets from 40% to 32%. As it is, ASEAN member countries observe the same tax structure for equipment under the ITA agreement. As to paging subscribers, the market performed consistently well from 1991 to 1997. But there was a significant drop in the number of subscribers last year, due to the popularity of mobile phones."

"However, we believe that the paging industry can pick up, not as a substitute or competitor, but rather as a complementary service to mobile telephones. This is possible if the industry continues to offer users new and more compelling services or products. Global trends have indicated that pagers are still capable of making a comeback even after the mass proliferation of hand phones, as people still find an economical use for pagers. The local paging industry needs to focus on new, enhanced services with value-added features to meet the higher expectations of Malaysians on the move. It must move away from providing traditional paging services that merely convey limited information. It needs to match the skills of their global counterparts to stay competitive. The industry should also position itself to reach more specific market segments."

Preparations for the Y2K problem

Dato Moggie explains how the government is tackling the Y2K problem: "Like other countries in the world, Malaysia gives serious attention to the Y2K problem and considers it a priority issue. Of course, like all other countries, we would like to usher in the new millennium with all systems intact and as little glitches as possible. We are lucky in the sense that, compared to developed countries which are IT-dependent, Malaysia is considered a "green horn" in IT build-up. While some critical sectors may be IT- intensive, some are still manually operated. Compared to some countries in the region, Malaysia's efforts to address the Y2K problem have been considered as commendable by many quarters.

"Overall, even though Y2K efforts at the national level only started in 1998, critical organizations had actually embarked on their own Y2K efforts much earlier. To further intensify efforts to address the Y2K problem, a national Y2K steering committee and a Y2K project team were set up last year. Through these mechanisms, the government intensifies its efforts to facilitate, monitor and co-ordinate steps taken by both the public and private sectors in addressing the Y2K problem. To ensure that they are effectively carried out, members of the national steering committee are made up of representatives from regulatory agencies and umbrella agencies from the public and private sectors."

Moggie talks about the funding for the Y2K problem: "As to the Y2K budget, the government recently announced an allocation of RM850 million ($223 million) for Y2K efforts in the public sector as an indication of our seriousness and commitment to tackle the problem. The amount included the $100 million loan which we secured from the World Bank. In the mean time, to facilitate the need of the SMIs, financial assistance is also being provided through a RM100 million technology fund for SMIs and a financial grant established under the ministry of international trade and industry, which oversees the development of SMIs in the country. A RM1.5 billion ($394 million) SMI Fund managed by the Central Bank is another source of funding for SME/SMIs to address the Y2K problem."

Dato Moggie attributes Malaysia's progress in this area to the readiness of the state and corporate sector to co-operate and share information: "All in all we are happy to say that we have received full co-operation and commitment from both the public and private sectors. The element of co-operation is tremendously important for our Y2K efforts. This is because the effectiveness of these efforts necessitates information-sharing and co-ordination across organizations, sectors, industries, even down the supply chain of vendors, suppliers and consumers. This public/private sector co-operation has always been our strong point in Malaysia. We are confident that this spirit of co-operation will carry us through the millennium glitch."