Boasting a young, mobile savvy population, widespread internet penetration and relative political stability, Southeast Asia (SEA) has emerged as a prime foreign direct investment (FDI) destination in recent years, with investments focused on projects and businesses linked to or underpinned by new technologies. An affordable yet skilled labour market has also helped to encourage many companies in developed markets to outsource their customer service, analytics, and process automation to the region. Even before the pandemic, modern global business services (GBS), such as those offering specialist CX lifecycle management services powered by digital tools, cyber security protection and other high-value services, have been flocking to the biggest SEA economies, with a focus outside Singapore, where costs have escalated.
Over the four years between 2019 and 2023, analysis from market intelligence firm GlobalData shows that SEA GBS FDI grew by 62% – $12 billion.
An emerging regional hub
Malaysia in particular has been emerging as an important regional hub, as more than two decades of Government initiatives and policies designed to accelerate digital transformation in its economy seems to be paying off. GlobalData analysis shows Malaysia’s GBS sector has had a compound annual growth rate (CAGR) of 22.3% between 2019 and 2023 and further growth is projected as the SEA country fully embraces the evolving digital era.
The Government’s new roadmaps for cloud adoption, AI and tightening laws around cyber security illustrate Malaysia’s commitment to scaling its digital economy in line with the latest tech developments. In addition, the Government agency Malaysia Digital Economy Corporation (MDEC), set up in 1996, remains committed to driving digital economic growth through high impact catalytic partnerships and facilitating strategic international investments. This is achieved through fiscal incentives including reduced tax rates, investment tax allowance, grants, import duty and sales tax exemption and non-fiscal incentives such as various types of foreign knowledge worker quotas and passes tailored to different individuals and companies.
Since its establishment, MDEC has successfully attracted over RM485.21 billion in digital investments, contributing to the creation of 223,231 jobs as of 2022. This success is driven by Malaysia Digital (MD), a national strategic initiative launched in 2022 as a more ambitious successor to the Multimedia Super Corridor (MSC), which was originally focused on creating a ‘hyper-digital’ economic zone in a limited area in the capital. As of November 2024, there were more than 3,600 active MD companies.
The plan was always to roll out the concept nationally.
Leveraging Malaysia’s digital infrastructure and initiatives
Digital CX firm Daythree is an award-winning GBS firm that has been supported by MDEC. It is based at UOA Business Park, Shah Alam within the MSC Malaysia Cybercentre. CEO Raymond Devadass says being in Malaysia has strategic advantages for companies such as Daythree that rely on digital connectivity and using technology to improve client processes.
“With internet user penetration at more than 85% and the extensive deployment of fibre networks, Malaysia ensures reliable and fast internet access,” he saids. “This allows seamless integration of work from home models, enhancing employee satisfaction and productivity. The flexibility to integrate work and home domains has become increasingly important in the global business landscape, providing companies the resilience needed during unforeseen disruptions,” he added.
“The high-quality connectivity in Malaysia supports the adoption and integration of advanced technologies such as automation, artificial intelligence, and machine learning. These technologies are pivotal in transforming industries, particularly the GBS industry, by improving efficiency, customer service quality, and operational cost management,” he said.
He also points to Malaysia’s strategic geographic location in Southeast Asia as a “gateway” to other rapidly growing economies in the region, offering significant opportunities for regional business expansion. “The time zone advantage also facilitates efficient coordination with both Eastern and Western markets, making it ideal for global operations.”
Daythree stated that MDEC helped them to gain brand visibility both regionally and globally, by exposing the team to key audiences. “This has helped us open new markets and find new partners. They have also provided guidance and assistance in helping us develop our proprietary digital tools,” said Devadass.
Another business that has benefited from MDEC’s Malaysia Digital national strategic initiative is Teleperformance Malaysia, which has five offices across Penang and Kuala Lumpur and more than 6,000 employees in the country. MDEC has helped the firm with accelerating onboarding foreign talent and access new partnership opportunities.
Andy Rangel, Teleperformance Malaysia CEO, says: “The AI Roadmap aligns with Teleperformance’s vision of integrating advanced AI technologies into our operations, setting clear goals for AI adoption and innovation that enhance productivity and growth.”
Malaysia prepares for an AI future
Official figures show that Malaysia’s digital economy is approaching 25.5% of gross domestic product (GDP) by 2025. To continue this transition, the Government has committed to key initiatives and legislation to ensure the country remains ahead of new tech developments.
It is hoped that the country’s National Artificial Intelligence Roadmap 2021-2025 and the Artificial Intelligence Talent Roadmap 2024-2033 will underpin the creation of a sustainable and ethical AI innovation ecosystem that supports Malaysia in becoming a high-tech, high-income country. This includes developing regulation, introducing basic AI literacy in schools and worker upskilling programmes.
Rangel said: “Malaysia’s National Artificial Intelligence Roadmap (AI Roadmap) and the country’s workforce upskilling programmes are pivotal to fostering a robust digital economy in the APAC region. AI is central to our strategic vision to enhance our capabilities and workforce efficiency.”
Devadass described the roadmap as a “gamechanger” for the country. “We see it as a strategic guide, aligning everyone – government, business, and educators – towards common AI goals. This roadmap isn’t just about tech; it’s about boosting our economy by making industries more productive and attracting investments.
“We see this as our playbook for staying competitive globally. It supports industry transformation, making operations smarter and more efficient. Plus, it’s a big win for education and workforce development, ensuring our talent is ready for AI-driven jobs.”
At the same time, Malaysia is doubling down on making sure the private and public sector can manage risks in the AI age, introducing the Cyber Security Bill 2024, which brings the country’s legal framework on addressing cyber security in line with Singapore and the US. The Budget 2024 allocated RM60 million (US$12.72 billion) to CyberSecurity Malaysia for developing a 5G Cyber Security Testing Framework and promoting local 5G expertise to manage cyber vulnerabilities.
The 2025 Budget or Belanjawan 2025 allocated RM53 million for CyberSecurity Malaysia, including to develop advanced cyber technology security assessment and testing capacities (CENTREACT) and to strengthen cyber threat monitoring, detection, and reporting.
To learn more about Malaysia’s growing digital economy and initiatives that promote the integration of AI, machine learning, and automation in GBS operations, download the free whitepaper below.
