Cost the main impediment to growth of broadband in Malaysia: World Bank Group

KUALA LUMPUR: Malaysia should adopt four important policy goals to unlock the full potential of its digital economy, which includes addressing its biggest impediment, the cost of broadband.
According to a new World Bank report "Malaysia's Digital Economy: A New Driver of Development" launched today, Malaysia should create a dynamic and more competitive digital ecosystem; achieve universal, fast and inexpensive internet connectivity; improve human capital through better curriculum and lifelong learning opportunities; and safeguard future digital tax revenues.
World Bank Group lead economist Richard Record said Malaysia is a mobile first country but underperforms in terms of broadband speed and price, driven by a lack of market competition.
"The biggest impediment is the cost of broadband. There's an opportunity here to intensify competition in the broadband telecommunications market. If costs come down, speeds improve, that takes out one impediment," he told a press conference at the Public Policy in a Digital World Conference here today.
The report revealed that Malaysia has slower download speeds than most advanced economies. Malaysian consumers also pay more than consumers in most other Asean countries for similar mobile and fixed broadband plans. If Malaysia continues at its current rate of development, it will not have competitive speeds in the next decade.
The fixed broadband market is also especially concentrated.
In his speech, Deputy Finance Minister Datuk Amiruddin Hamzah said to increase ICT adoption, the government is committed to reduce the price of internet connectivity while ensuring higher speeds and better quality of services. He said many policies have already been put in place, though there is always room for improvement to address the slow internet connection, the relatively high cost for high-speed broadband and low digital adoption by businesses.
"We need to look from many dimensions of verticals of digital economy from talent development, education, taxation, employment, cybersecurity, e-commerce activities, start-ups companies and funding requirements, to digital free-trade zone," said Amiruddin.
World Bank Group digital development specialist Siddharta Raja said it is possible for Malaysia to achieve double the broadband speeds at half the price, but this would still leave the country far behind the targets of other countries in the world.
"For Malaysia, which has been a pioneer in the digital space over the last decades, now is a chance to set ambitious targets, looking at what businesses will be in this future economy. It's possible to set even more ambitious targets and even achieve those," said Siddharta.
Record said regulatory actions to expand coverage can help Malaysia transform its digital infrastructure. This includes enforcing regulations to use existing infrastructure more efficiently and enacting new policies to attract private capital to close coverage gaps.
With the digital economy growing faster than the overall economy, Malaysia's trading partners are updating their international tax frameworks to reflect the growing digital economy.
Malaysia's options for taxing the digital economy include an indirect charge on imported services, shoring up options for direct taxation, boosting compliance, and signalling intentions to increase certainty for the private sector.
"Taxation will have to happen at some point, because eventually more and more companies will be digital and governments around the world will have to make that leap (taxing the digital economies). We encourage policymakers to look at other countries. When they feel that the time is right, given the domestic situation, then consider doing something similar (taxation) to other countries.
"Malaysia is under fiscal pressure, it's important to ensure that the (taxation) system is future-ready," said Record.