Malaysia launches Malaysia Digital, succeeding MSC Malaysia

Since the initial announcement of the Multimedia Super Corridor (“MSC”) in 1996, the world has undergone significant transformations. For one, the technologies available to us now did not exist back then.

Additionally, many people and businesses did not feel comfortable using technology then. The MSC was an ICT-led programme designed to change all that, and it has been generally successful with its flagship applications such as Smart Schools and E-Government.

Tun Dr. Mahathir Mohamad, the fourth prime minister of Malaysia, established MSC Malaysia, formerly known as the MSC, to turn Malaysia into a knowledge-based nation. The former prime minister, Datuk Seri Najib Tun Razak, launched Digital Malaysia for the first time in May 2011: “to establish an ecosystem that supports the extensive use of ICT in all aspects of the economy to create internationally connected and real-time interactive communities.”

Malaysia Digital (‘MD’) was eventually launched by the Prime Minister of Malaysia, Dato’ Sri Ismail Sabri Yaakob, on 4 July 2022.

The Guidelines on Malaysia Digital Status (“Guidelines”) were published on June 30, 2022. These Guidelines included, among other things:

• the eligibility criteria for MD Status;
• the conditions of MD Status;
• other general conditions;
• the benefits available to MD Status Company;
• the application process for MD Status;
• the continuing obligations of an MD Status Company;
• reporting and monitoring; and
• the revocation and surrender of MD Status.

What is Malaysia Digital

Malaysia Digital is the new national strategic initiative the Government of Malaysia introduced.

This initiative aims to encourage and attract companies, talents, and investments while empowering Malaysian businesses and the Rakyat to play a leading role in the global digital revolution and digital economy.

MD is taking the role of the Multimedia Super Corridor, which has been in operation for the past 26 years (it was officially inaugurated on 12.2.1996) and aims to improve Malaysia’s digital capabilities and the national digital economy.

What does Malaysia Digital offer?

The Malaysia Digital initiative will introduce:

• MD Status with revised conditions, governance and benefits;
• Malaysia Digital Catalytic Programmes (PEMANGKIN); two of these have already been identified – DE Rantau and Digital Trade;
• Continuous efforts on existing projects, programmes and other benefits will be aligned under the Malaysia Digital initiative to benefit Rakyat, businesses, and investors.

For more information, kindly refer to mdec.my/malaysiadigital

How does It work?

Malaysia Digital is the engine that accelerates the growth of our ecosystem within the nine (9) focus areas and drives digital adoption and opportunities in the digital economy via the Malaysia Digital Catalytic Programmes (PEMANGKIN) and other competitive offerings.

Presently, Malaysia Digital Focus Areas are as follows:

1. Digital Trade
2. Digital Agriculture
3. Digital Services
4. Digital Cities
5. Digital Health
6. Digital Finance
7. Digital Content
8. Digital Tourism
9. Islamic Digital Economy

Note: The list above is non-exhaustive and will be reviewed and updated from time to time

MD Status Company – Eligibility Criteria

For a company to be able to apply for MD Status, the following criteria must be met:

1. Incorporated under the Companies Act 2016 and resident in Malaysia; and
2. Proposing to carry out or is currently carrying out one or more of the MD activities in Appendix 1 of the Guidelines (‘MD Approved Activities’).

MD Approved Activities

1. big data analytics (BDA);
2. artificial intelligence (AI);
3. financial technology (Fintech);
4. Internet of things (IoT);
5. cybersecurity (technology/software/design and support);
6. data centre and cloud;
7. blockchain;
8. creative media technology;
9. sharing economy platform;
10. user interface and user experience (UI/UX);
11. integrated circuit (IC) design and embedded software;
12. autonomous technologies;
13. robotics (technology / software / design);
14. systems/network architecture design and support;
15. 3D printing (technology/software/design and support);
16. global business services or knowledge process outsourcing;
17. virtual, augmented and/or extended reality;
18. drone technology;
19. advance telecommunication technology; or
20. other emerging technologies deemed significant for the digital ecosystem subject to approval by the Approval Committee.

Benefits to MD Status Company

An MD Status Company is eligible for certain benefits, rights, and privileges outlined in the Malaysia Digital Bill of Guarantees (also known as the “MD-BoGs”), which the Government of Malaysia issued.

Under the MD-BoGs, the following are the incentives, rights, and privileges:

• BoG1: To provide a world-class physical and information infrastructure;
  • only available for MD Status companies located in MD Cybercities/Cyber centres
• BoG2: To allow employment of local and foreign knowledge workers;
• BoG3: To ensure freedom of ownership by exempting MD Status companies from local ownership requirements;
• BoG4: To give the freedom to source capital globally for MD infrastructure and the right to borrow funds globally;
• BoG5: To provide competitive financial incentives, namely income tax exemption or investment tax allowance and exempt imported multimedia equipment from duties;
• BoG6: To become a regional leader in Intellectual Property Protection and Cyber laws;
• BoG7: To ensure no censorship of the Internet;
• BoG8: To provide globally competitive telecommunications tariffs;
  • only available for MD Status companies located in MD Cybercities/Cyber centres
• BoG9: To tender key MD infrastructure contracts to leading companies willing to use Malaysia as their regional hub, an
• BoG10: To appoint MDEC as a high-powered implementation agency to act as an effective one-stop super shop.

An MD Status Company is eligible to access facilitation of other benefits, such as access to local and international markets and ecosystems, business matching and partnership, grant and funding facilitation, and participation in MD catalytic programmes, provided that they meet the applicable eligibility criteria.

Qualifying Conditions of MD Status

Within the first year after the date on which it was granted MD Status, a company must fully comply with the following main conditions to maintain its MD Status:

1. start conducting its MD Approved Activities in Malaysia, either by operating there or by beginning to do so;
2. hire a minimum of two full-time ‘knowledge workers‘ (as defined in Appendix 2 of the Guidelines) for the MD Approved Activities, with a minimum average monthly base remuneration of RM5,000 per month for each of them;
3. be required to spend a minimum of RM50,000 annually on operating costs for MD-approved activities; and
4. Have a minimum of RM1,000 in paid-up capital.

Governance

The Malaysia Digital Coordination Committee (MD-CC) will be established by the Ministry of Communications and Multimedia Malaysia to coordinate the governance and operations of Malaysia Digital (MD), including the awarding of Malaysia Digital Status (“MD Status”) to companies that meet the requirements.

In addition, the Ministry above and the Malaysia Digital Economy Corporation (commonly known as “MDEC”) will be the primary agency in charge of driving the MD programme forward.

Application for MD Status

The procedure to follow to apply for MD Status can be found in paragraph 7.0 of the Guidelines. The following are the most critical points:

1. MDEC will evaluate the application, and then it will be sent to an “Approval Committee,” which is made up of members of the government, for a decision;
2. a successful applicant will be asked to acknowledge and accept t the terms of the approval letter, following which it will be awarded an MD Status Digital Certificate; and
3. the MD Status is permanent, provided the applicant continues to fulfil all accepted conditions.

All new applications are subject to a non-refundable processing fee, which is published on the website. An unsuccessful applicant may re-apply by submitting a new application to MDEC, subject to meeting the eligibility criteria.

Reporting and Monitoring

The MD Status Company is required to submit all true, correct and complete information and/or documents annually as may be requested by MDEC to report on the progress of the MD Approved Activities and/or determine compliance with the applicable conditions through a Self-Declaration Form (SDF) or other detailed standard forms as specified by MDEC.

All information submitted by the MD Status Company must first be verified by an independent external auditor appointed by the MD Status company at its costs or in such other manner as may be specified by MDEC.

Continuing obligations of an MD Status Company

The MD Status company is required to notify MDEC of the following:

1. Change in the paid-up capital (higher than the minimum condition), equity or shareholding structure of the company;
2. change in its name, business operating address, contact person(s) and/or contact details; and
3. Change in the name of the product or services (re-branding) stated under the MD Approved Activities in the approval letter;

by completing, signing and submitting the necessary forms in the system, available on MDEC’s website and the required supporting documents.

Automatic Transition

According to an article published on June 13, 2022, in The Star with the headline “MSC companies to transition to Malaysia Digital status”, companies that have been given the status of Multimedia Super Corridor will automatically transition to an MD Status companies without the need to reapply.

The benefits will continue to exist, provided that the companies continue to comply with the conditions that are currently in place.

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