The Multimedia Super Corridor (MSC)

ABSTRACT

Initiated by the Prime Minister Datuk Seri Dr Mahathir Mohamad, the Multimedia Super Corridor (MSC) is the catalyst that will propel Malaysia to take its place among the developed nations of the world by 2020. Since its launch in 1996, the MSC has made significant progress and impact to the country. The MSC aims to leverage on information and communication technology (ICT) and create an environment that encourages creativity and innovation to help boost both local and international companies to reach new technology frontiers that will change the way we live, work and play for the better.

To kick-start the MSC, the government has initiated several initiatives. Among them are setting up the right infrastructure and infostructure, introducing incentives, creating the Bill of Guarantee, cyberlaws, Multimedia Development Corporation (MDC) as a one-stop centre, and implementing the Flagships Applications. EGovernment, Multipurpose Card, Telehealth, Smart School, World Wide Manufacturing, and Borderless Marketing were the early Flagship Applications being introduced to spearhead the growth of the MSC.

This paper describes the strategy of the MSC, the principal factors that differentiate the MSC from any other initiatives, and challenges and issues in developing the MSC.

1. THE STRATEGY

MSC or Multimedia Super Corridor was first conceptualized by the Prime Minister of Malaysia in 1996. With a strategy to catalyze the transformation of Malaysia economy and society into the Information Age, the MSC is conceived as the next engine of growth for Malaysian economy. The development of MSC was initiated based on the following rationales:

The recognition that Malaysia was losing its comparative advantage in its traditional economic sectors;
The need to drive the economy towards higher productivity through technology and high value-added economic activities;
Knowledge Economy and converging technologies presented the best opportunities for socio-economic transformation.
The need for the adoption & application of ICT to enhance national competitiveness and to help bridge the Digital Divide.

In order to accelerate the transition of Malaysia to information Age, the MSC provides an appropriate strategy to achieve the objective through collaborative approach – combining world-class companies and local companies. By attracting world-class companies to use MSC as a hub and simultaneously catalyzing the competitive cluster of Malaysian companies to become world-class will lead to enhancement of domestic productivity as well as creation of values & new wealth through information age businesses.

A comprehensive Masterplan was developed for MSC to provide world-class Information & Communication Technology and Multimedia environment, infrastructure, and incentives. Among the principal factors that differentiate the MSC from any other initiatives include:

World-class infrastructure and infostructure
Leading-edge Cyberlaw and incentive package
MSC Flagship Applications
Multimedia Development Corporation as a one-stop-centre for investment

2. INFRASTRUCTURE AND INFOSTRUCTURE

Under the first phase of MSC implementation, the MSC area occupies a 15 km by 50 km corridor; stretching from the Kuala Lumpur International Airport in Sepang and the Kuala Lumpur City Centre, earmarked for development into an environment that is conducive for the world-class and emerging multimedia industry. In term of transportation, MSC area will also be developed with integrated logistic hub with rapid rail links to Kuala Lumpur and for telecommunication, MSC is supported by a high capacity global telecommunications and logistic network built on a 2.5 – 10 gigabits digital fibre optic backbone.

3. INCENTIVE PACKAGE AND CYBERLAW

Companies that qualify and are granted the MSC status, will be located at designated corridor in the MSC area. These companies will benefit from the specifically tailored incentive scheme as per the Bill of Guarantees. The financial and non-financial incentives package offers under the Bill of Guarantees are as follows:

World-class physical and information infrastructure.
Unrestricted employment of foreign knowledge workers.
Freedom of Ownership.
Freedom to source for borrowings and capital globally.
Financial incentives; no income tax up to 10 years or investment tax allowance

of up to 5 years.

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3. INCENTIVE PACKAGE AND CYBERLAW

World-class physical and information infrastructure.
Unrestricted employment of foreign knowledge workers.
Freedom of Ownership.
Freedom to source for borrowings and capital globally.
Financial incentives; no income tax up to 10 years or investment tax allowance

of up to 5 years.

Intellectual property protection and cyberlaws.
No internet censorship.
Globally competitive telecommunication tariffs.
Tender MSC infrastructure contracts to web-shapers
MDC as the one-stop shop.

To further facilitate the electronic commerce and encourage specific multimedia application, Malaysia was also among the first country in the world that established comprehensive legal framework including Cyberlaws.

4. MSC FLAGSHIP APPLICATIONS

To spearhead and promote the growth of MSC, seven prime applications have been identified. These applications, known as MSC Flagship Applications, are the building blocks of creating a technologically advanced precinct. It offers concrete business opportunities to facilitate the MSC development and provide optimal environment that supports multimedia companies entering the MSC. The Flagships are Electronic Government, Multipurpose Card, Smart School, Telehealth, Research & Development Cluster, Borderless Marketing and World-Wide Manufacturing Web. Most of these flagships are currently at pilot implementation stage.

4.1 Electronic Government

Under the Electronic Government application, government services will be modernized using multimedia and information technology. Five pilot projects are currently being developed to lead the development of the Electronic Government flagship. The projects are Project Monitoring System, Human Resource Management Information System, Generic Office Environment, E-Procurement and E-Services.

4.2 Multipurpose Card

The Multipurpose Card project introduces Malaysian to two prime smart cards, namely the Government Multipurpose Card (GMPC) and Payment Multipurpose Card (PMPC). Both cards are being developed based on a single common technology platform to enable later migration of all applications onto a single card. Currently the GMPC incorporates 4 government applications, which are Identification Card, Driving Licence, Immigration Information and Health Data, and 2 optional applications, which are MEPS Cash and Public Key Infrastructure. PMPC will incorporate payment functionalities such as debit card, credit card, ATM and MEPS cash.

4.3 Smart School

The Smart School application endeavours to create a new generation of Malaysian who are creative and innovative in their thinking, adept with the new technology and able to manage the information. The pilot project involves the development of multimedia teaching-learning materials, school management applications, technology infrastructure, training and consultancy services.

4.4 Telehealth

Through the Teleheath application, the quality and delivery of healthcare and health services will be enhanced and modernized via seamless availability of health information and virtual health services.

4.5 World Wide Manufacturing

World Wide Manufacturing Web seeks to position Malaysia as the manufacturing hub in the region. This initiative aims to create an optimal environment for manufacturing services companies to deliver value-added services and products to the customers.

4.6 Borderless Marketing

Borderless Marketing is an initiative designed to create an environment in the MSC for companies to use multimedia technology to create and deliver marketing messages, customer services and information products to their multi-cultural and multi-national customers. The World Wide Manufacturing and Borderless Marketing Flagships have recently been combined under E-Business Environment Flagship to promote the take-up of EBusiness activities in the country.

Research & Development Cluster helps ensure that the MSC is an attractive location for companies to develop next-generation multimedia technologies and innovations. In view of the needs to nurture the development of local technopreneur, the Government has launched a Technopreneur Development Flagship. Among the initial focus areas for this flagship include the development of technopreneur portal; talent development programs; granting MSC status for incubators; funding programs; and market access and venture development programs.

5. MDC AS A ONE-STOP-CENTRE FOR INVESTMENT

To ensure the successful implementation of MSC, Multimedia Development Corporation (MDC) was established as a one-stop centre to market the MSC globally,facilitate investment, formulation of new Cyberlaws and policies, and sets standards for the MSC's information infrastructure and urban developments.

As of 9 February 2006, a total of 1439 companies have been granted the MSC-Status of which 351 are international world-class companies such as NTT, Fujitsu, IBM, Sun Microsystems, Microsoft, Oracle, Ericsson, Nokia, and Siemens. The MSC aims to attract more international world-class companies by end of 2006. The MSC-Status companies are involved in various sectors of the Information Communication Technology (ICT) industry such as web development, e-commerce, application service providers (ASP), content development, telecommunications, education and training, security, system integration, networking and software development.

Foreign companies with the MSC-Status constitute around 35 percent of the total MSC-Status companies with the majority coming from Europe, USA and other Asian countries. In tandem with the country’s Vision 2020, the MSC is actively promoting the development of a Malaysian knowledge society as well as the development and growth of local small and medium enterprises (SMEs). As a result of these efforts, the number of Malaysian companies constitutes the majority of 65 percent of the MSC-Status companies.

To support the growth and demand of the industry, the MSC has encouraged the growth of institutions of higher learning (IHLs) and this has tremendous impact on the group enrolment ration (GER) – for the 18-21 year olds entering tertiary education. The number of IHL has increased from 170 in 1996 to 693 in 2001. The GER has also increased from 13% to 25.3% over the same period. The net supply of ICT and Engineering graduates to the market has increased rapidly, it is estimated about 3,000 graduates will enter the ICT market yearly.

6. MDC’S ROLE AS A CATALYST OF KNOWLEDGE TRANSFER AND WEALTH CREATION

Apart from implementing and monitoring the development of MSC, MDC provides advisory and support services to nurture and develop local companies, especially those granted the MSC-status. MDC has established specific departments to facilitate the growth of local companies involved in multimedia and information technology.

The key areas of focus are mainly development of incubator network, financial assistance, human resource development and international marketing. Under the MSC incubation program, start-up companies are offered cost effective infrastructure and facilities as well as network of incubators that can nurture talent, ideas and technological innovation to develop a strong pool of entrepreneurs.

In term of financial assistance, MDC offers financial funding for R&D project under the MSC Grant Scheme and MDC also provides initial investment for potential IT and multimedia companies through MSC Venture Corporation.

7. IMPACTS OF MSC

The impact of MSC to Malaysian economy is rather substantial. Revenue generated by ICT companies in Malaysia has grown progressively averaging 5% growth annually, in which revenue recorded in year 2001 was RM5.9billion. Another major impact of the MSC is the growth of personal computer (PC) penetration from 880,000 in 1996 to 2.2 million in 2001. The number of Internet subscribers’ growth is even more rapid from 90,000 in 1996 to 1.68 million. These substantial growths are indicators of Malaysia’s quest to become a knowledge society as envisioned in the country’s Vision 2020.

Among the major spin-off created by MSC is the rapid development of ICT and multimedia technology implementation and deployment by the private and public sector. As a result of this, both sector managed to achieve higher efficiency and productivity. Apart from the development, it is also noted that collaboration between international and local companies has contributed towards a more effective transfer of knowledge and technology to the nation. The collaborative approach between international and local companies has been adopted by most of the flagship projects. This approach provides an effective mode of closing the technological gap between the international and local companies.

8. MSC’S CHALLENGES AND GROWING PAINS

8.1 Minimal Economic Impact

Significant impact on the economy has yet to be felt through the implementation of the MSC flagship applications. The rational is due to the current implementation of pilot projects at Phase I. It is expected that the economic impact will be realized once these flagship applications are rolled out nationwide. Mass adoption among the public is the key ingredient to significant economic attainment. To borrow a sentence from Intel’s Andy Grove, the inflection point creates a whole new demand and economic landscape. Therefore, the inflection point for the MSC flagship applications has yet to reach but once reached, the economic impact can be potentially enormous.

8.2 Limited Participation

A second challenge faced is the limited participation of the leading Malaysian conglomerates in the MSC. The corporate culture of being risk averse among many local conglomerates is being acknowledged as the main cause. Majority of the leading Malaysian conglomerates prefer to bet on proven business ventures instead of investing in “greenfield” business ventures. There are signs of change amidst the restructuring of a few key industries and it is hoped that the pace will pick up significantly.

8.3 Presence Of Productivity Gaps

Another challenge is the productivity of local conglomerates. Based on a survey done in year 2000 by MDC, the findings showed a similar pattern among local conglomerates of various industries. The pattern indicated the presence of productivity gaps among local conglomerates and Malaysian based multinational companies. The lack of ICT utilization within the local conglomerates is identified as one of the main reasons for the productivity gap.

With the awareness of these challenges, the Government of Malaysia and MDC took a proactive and aggressive role in overcoming these issues. The main aim is to encourage local conglomerates in embracing ICT. As the Government recognized, the local conglomerates and Small and Medium Enterprises (SMEs) will be the one leading and catalysing the country to the next phase of economic growth and dynamism. The Government’s role is to provide a conducive platform for these players to spawn new and breakthrough ideas and business ventures. Below is a list of attractive plans and incentives available to the public and companies.

1. Government initiated grants available to corporations

a. DAGS (a RM 100 million total grant size)

b. MGS (a RM 200 million total grant size)

2. Government initiated venture capital & loan

a. MSC VC (a RM 120 million total fund size)

b. MAVCAP (a RM 1.6 billion total fund size)

3. Technopreneur Development - 8th MSC Flagship Initiative

4. Last year, MDC customised its funds for specific industries based on their

unique requirements & characteristics

9. COMPELLING FACTORS OF MSC

The success of MSC depends on various factors. The right mix of factors will enhance the probability of success. The following factors aim to create a conducive business environment for companies to thrive in:

1. Comprehensive package for ICT players

2. Strong socio economic fundamentals

3. Strong support for Government and business leaders

4. Strong support for growth of Tehnopreneurs

5. Human resource development

6. Competitive cost of doing business

7. Gateway to Asia Pacific market

8. English is widely spoken

10. CONCLUSION

The MSC project has shown that several factors have to be present to ensure success: Visionary and bold leadership, hard work, compelling incentives, world-class infrastructure, and multi-stakeholder participation. Success is certainly possible even for a small economy that was impacted by the regional financial crisis.

11. REFERENCES

3. The Multimedia Super Corridor (MSC): Kuala Lumpur's Cradle of Innovation

By Rafi-uddin Shikoh, Oct 20th, 2005

5. Malaysia's multimedia super corridor (MSC)