In June 1997, the Malaysian Government, with the collaboration of UNU/INTECH and MIMOS Bhd. (the Secretariat to the National Information Technology Council - NITC) launched a nation-wide project on the potential of teleworking to complement the national agenda to steam roll Malaysia into the digital age.¹ For to be a developed country by the year 2020, the Malaysian Prime Minister has constantly reminded the populace that an ‘IT do or die’ stand must be taken, particularly with the increasing globalisation of the economy and the spread of electronic commerce. The focus of the teleworking and development project on selected sectors, including software, banking and finance and printing and media, point to how telework, and particularly teletrade, can enhance the expansion of E-Commerce. It would open new vistas to firms, including small and medium industries which can take advantage of such telemediated opportunities, both nationally and internationally.

Recently, with the increasing presence and capability of the Internet to undertake E-Commerce, there has been debate on the regulatory mechanisms of such transactions, both tangible and intangible. The United States Administration has put forward a framework for global E-Commerce with the general objective of preserving the Internet as a non-regulatory medium. ² Developing countries, including Malaysia, are discussing the implications of such a framework; for example, while it is possible to trace tangible merchandise, what about intangible products such as software, services and financial transactions? Who would benefit in the long run if the global market place is left totally unfettered? The present currency crisis hitting the region points to lessons that have to be learnt in an unabated climate of selling and buying.

This paper will examine Malaysia’s attempts to implement teleworking and E-Commerce through the various mega projects, not least of which is the Multimedia Super Corridor (MSC). ³ The MSC concept will be discussed and an assessment of the project will be made in relation to E-Commerce, including the potential of telework and teletrade. The second section of the paper will discuss the attempts of the Malaysian Government to facilitate as well as to regulate the dynamic and ever-changing IT industry as seen in the formulation of several cyber laws, three of which were recently passed in Parliament. The final section attempts to assess Malaysia’s prospects in capturing a share of IT-led international commerce.

As mentioned earlier, the Malaysian quantum IT leap is concretised in the unveiling of the ambitious Multimedia Super Corridor (MSC) concept in 1996, stealing the thunder, analysts say, from Singapore’s booming IT industry. In an address to Canadian investors in Ottawa in July this year, Dr. Mahathir Mohamed, Malaysia’s Prime Minister and chief MSC proponent, declared that Malaysia was offering a green field site ‘unencumbered by industrial practices and legacies or entrenched interests. It is a site dedicated to new age electronic commerce’ (New Straits Times, 22 November 1997).

The MSC, the prime drive of the digital economy, is envisaged to be a multimedia island of excellence comprising a ‘system of capabilities, technologies, infrastructure, legislation and policies and creating an environment specially crafted to meet the needs of leading edge companies seeking to reap the rewards of the Information Age in Asia’ (Malaysian Trade Quarterly, Vol. III No. 3). Spanning an area 15 km by 50 km, it stretches from the Kuala Lumpur City Centre (KLCC) to the Kuala Lumpur International Airport (KLIA – the biggest airport in Asia). Within this core would be located Putra Jaya, the new administrative hub and model of a paperless, electronic government as well as Cyberjaya, the IT City which is to be an ‘intelligent city’ providing top quality business facilities and infrastructure to multimedia companies to experiment and thrive in the next millenium. The entire area will be served by a 2.5 to 10 gigabyte , 100 per cent digital fibre optic network with direct links to the world. Indeed, in the words of the Prime Minister, the MSC, as a global electronic test-bed, is ‘Malaysia’s gift to the world’.

Accordingly, seven flagship applications have been prioritised to lead the potential of the MSC and to provide avenues to channel all new software and content. These applications are:

• Electronic government which will be a multimedia-networked paperless administration facilitating inter-government collaboration and citizen access to government services
• Telemedicine, in terms of establishing Malaysia as a regional centre for telemedicine
• Research and development clusters of universities and corporations which will use distance learning to produce world-class graduates and next-generation innovations
• Worldwide manufacturing web, as a remote manufacturing coordination and engineering support hub which will electronically enable companies in high cost countries to access lower-cost manufacturing facilities in Malaysia and Asia as virtual extensions of their domestic operations
• Borderless marketing centre in terms of becoming a multimedia customer service hub and leveraging on Malaysia’s multi-cultural links to provide electronic publishing, content localisation, telemarketing and remote customer care to the more than 2.5 billion people in Asia
• Smart schools which will introduce information technology into the learning environment
• National multi-purpose smart card, a world’s first One card which will have the individual’s ID and electronic signature giving acess to all kinds of services e.g. government, banking, credit, clubs etc.

To ensure the success of the MSC, the Government is providing a set of attractive incentives as well as a Bill of Guarantees to companies with MSC status. The incentives include corporate tax exemption for 5-10 years, no curbs on foreign ownership, 0 per cent income tax for up to 10 years or a 100 per cent investment tax allowance, no duties on multimedia equipment, unrestricted import of foreign knowledge workers for the next 10 years and unrestricted employment conditions (Malaysia Trade Quarterly, op.cit.). As for the Bill of Guarantees, it includes:

• A world class physical and information infrastructure
• Freedom to source capital globally and the right to borrow funds globally
• Provision of competitive financial incentives
• Becoming a regional leader in intellectual property protection and cyberlaws
• No Internet censorship
• Provision of globally competitive telecoms tariffs
• Provision of a high-powered implementation agency to act as an effective one-stop super shop

Given these incentives and the fact that the MSC has an International Advisory Panel comprising the giants of the IT industry, provides a certain international certainty, if not guarantee to investors. To date, 66 companies have received MSC status, while many others are lining up to apply for this prestigious position. Apparently more than 1,000 companies have expressed keen interest, while more than 160 companies have submitted their applications for MSC status (New Straits Times, 24 November 1997). Out of these with MSC status, about 30 per cent are local firms, while joint ventures account for 27 per cent of the total. The rest are international companies such as Sun Microsystems, Oracle, Nippon Telegraph and Telecommunications (NTT) and Siemens Multimedia, to name a few.

If the MSC takes off successfully, then its contribution to E-Commerce will be immense, particularly in the production and sale of multimedia processes and products, which can be traded digitally supported by world class infrastructure. In addition the various flagship applications will also create the environment for teleworking to add value in terms of the decentralisation of knowledge, skills development, creative outsourcing as well as lead to cost effectiveness for companies. Another role would be its contribution in the realm of legislation, as Malaysia just passed three cyberlaws to facilitate business opportunities in the MSC, with another two in the pipeline in 1998.

Apparently Malaysia is transforming its legal and regulatory environment to support multimedia commerce as seen in the formulation of six high-impact cyberlaws. According to the Multimedia Development Corporation (MDC), the MSC one-stop Centre, these are:

• The digital signatures cyberlaw which enables businesses and the community to use electronic signatures instead of handwritten ones in legal and business transactions
• The computer crime cyberlaw which provides law enforcers with a framework that defines illegal access, interception, and use of computers and information standards for service providers, as well as outlines potential penalties for violating computer systems and intercepting data traffic
• The telemedicine development cyberlaw which empowers medical practioners to provide medical services from remote locations using electronic medical data and prescription standards, in the knowledge that their treatment will be covered under insurance schemes
• The electronic government, multimedia convergence and multimedia intellectual property Acts are the three remaining bills to be passed in 1998. The first allows politicians, public servants and the public to communicate electronically through established and secure formats and standards; the second aims to create an up-to-date communications framework bringing the different media together which were governed before by different acts, while the third will give multimedia developers full intellectual property protection through the on-line registration of works, licensing and royalty collection.

While these laws have been gazetted, they have yet to be put into effect; hence it is too early to assess how effective they will be both in terms of its facilitative as well as its regulatory functions in the regime of E-Commerce. Nonetheless, they can be applauded as Malaysia’s efforts to seriously propel the nation, if not the world into the information market place. However, several observations and implications are worth pondering about. In the first place, there is a concerted push led by the WTO to de-regulate trade in services, E-Commerce included. This means that companies will be free to roam the world over and will basically be treated as any other local company. The MSC goes one step forward in providing extravagant incentives for these foreign companies within its borders. In essence those who benefit will be the investors and companies which have a head start in the IT industry. In this context the cyberlaws facilitate more such a process, rather than regulate the operations and financial transactions of these companies. For example, the Digital Signatures Act provides greater certainty and safeguards to transactions conducted electronically, but does NOT regulate such mediated transactions. Contracts or agreements negotiated through electronic mail would still be subject to the provisions of existing laws such as the Contracts Act. Thus while this Act provides some protection, it does not control the transaction. On the other hand, both the Telemedicine and Computer Crimes Acts do provide regulatory guidelines in terms of what constitutes telemedicine, and what defines a computer crime. What is clear is that while the Malaysian Government supports (deregulated) free enterprise, it has learnt very recently that certain financial transactions need to be regulated. While still debating the nature of this regulation e.g. re tariffs on E-Commerce, it is proposing the setting of An ASEAN Cyber Court of Justice to handle the legal issues pertaining to E-Commerce, such as data protection and enforcement of contracts. This kind of ambiguity and conflicting interests need to be resolved to ensure equity on all sides and to bear in mind the current, uneven playing field.

What is clearly lacking however, are efforts to regulate the protection of knowledge workers, especially those involved in a teleworking relationship, both nationally and internationally. For example, if a company sources workers internationally within a teletrade relationship, what kinds of employment protection would be accorded to these workers thousands of miles away? Even within national soil, how would women working electronicaly from home or from telecentres be treated in terms of employment benefits, health protection, promotion, training and education? What about the collective bargaining rights of teleworkers who might be temporary, part-time, or contract workes in this globalised era of casualisation and flexibilisation? These are critical issues in the area of employment and human resources development which need to be addressed, but which somehow have been forgotten in the discourse on trade liberalisation and deregulation.

The UNU/INTECH teleworking project, which includes Malaysia and India as country case studies, hopes to examine some of the above concerns, the outcome of which would be a key contribution in the age of E-Commerce. It would also help to address concerns regarding sustainable human development, with social and gender equity as two significant signposts to be kept in mind. It is the position of the project that commercial gains must not be diametrically opposed to improving the quality of life of the working population; and all the more if IT is supposed to unleash the full potential of human society towards a higher order.

What are the chances of a Made in the MSC trademark gaining international reputation and having strategic access to the international market? Can the vision of making Malaysian the regional software hub be made a reality by the turn of the century? There are certain strengths which can certainly be optimised to make the dream possible; however there are also limitations which can throw cold water to make the MSC the mother of all nightmares. Let us look at these in turn.

Factors which can make Malaysia leapfrog into the IT Age include:

• Strategic location in Asia and Southeast Asian multiculturalism
• Fluency of its people in English and other languages
• A highly literate and trainable workforce
• Long term commitment from the highest levels of government
• Political stability
• Cost advantages over developing countries in the region

To be sure, the fact that the MSC is being backed by a strong corporatist state already ensures half of its success. In the 1970s, when Malaysia started its Export Processing Zones and gave various incentives to the electronics industry to invest in Malaysia, there were many criticisms of this strategy and would-be fly-by-night firms which only exploit cheap, unskilled local labour and would not transfer technology to the local population. Today, these same companies have stayed, are moving into capital-intensive operations and Malaysia is now recognised as the world’s largest exporter of semi-conductors. On the other hand, it is also true that, despite this success, Malaysia still does not have the capacity to build its own indigenous wafer factory. Similarly, the MSC is a replica of the same idea – albeit in the area of multimedia technology. Nonetheless some of the earlier criticisms remain valid today.

There are still various gaps to making Malaysia a key player in IT and E-Commerce. One of the most important is the critical shortage of skilled human resources, particularly if Malaysians are to absorb the hi-tech skills needed to compete in the international market place. The Seventh Malaysia Plan points out that the demand for IT manpower is 49,471 for the period 1996-2000; however the projected output is only 39,520 – a gap of almost 10,000 personnel. The MSC needs 37,500 skilled and semi-skilled knowledge workers and 7,500 engineers (Sunday Times, 12 October 1997) clearly signalling the vacuum in trained IT personnel. The success of the Indian software industry would well be a learning experience for Malaysia where the software industry is dominated by sales, rather than development activities.

While the existing telecommunications infrastructure (a necessary condition for IT take-off) is more advanced compared to the ASEAN neighbours (except Singapore), the NII is still not as efficient as the west and the high-income Asia-Pacific countries. Problems of universal access arise, particularly as the rural areas are not served well – the rural telephone penetration is 3.1 per 100 (1995 figures) compared to a national teledensity of 19 per cent. Internet subscribers are concentrated in the major towns, especially in the Klang Valley. The number of PCs in the country is still low, although the IT industry has chalked encouraging growth. There is a realistic fear among ordinary Malaysians that the MSC will only cater to the IT-haves, creating new socio-economic and skills gaps in the population.

Another problem is how to overcome the psychological barrier of thinking and acting in a digital fashion. According to a survey by International Data Corporation (IDC), outsourcing does not seem to be popular among Malaysian IT managers. Sixty-five per cent of the 325 local IT firms interviewed were not interested in outsourcing; and only 12 per cent were outsourcing while the others were considering it (Malaysian Industry, October 1997). According to the writer, Jini Wong, ‘many obstacles must be torn down before outsourcing can be generally accepted, such as the removal of this secretive mindset of the Asian companies and the general fear of losing control of IT functions’.

However, at this moment, the current economic conditions affecting the region will be a test of how Malaysia and its neighbours weather the storm, IT not withstanding. The learning experiences must point to more co-operation in the global market place, rather than unbridled competition. Information communication technologies and their various applications, including teleworking could well facilitate this much desired new solidarity and smart partnership.

1. The teleworking and developing project is part of a global UNU/INTECH project on the employment and trade implications of telework. The Malaysian component is funded by the United Nations Development Fund (UNDP), and has the following objectives:

• To identify the extent and nature of telecommuting and teletrade in Malaysia
• To identify stimulants and barriers to the growth of teleworking

• To identify the relationship between management practices and teleworking

• To identify the training and human resource development issues associated with teleworking, particularly those that are linked to the position of women and other marginalised groups in the labour market

• To propose policy guidelines which will promote teleworking as an attractive model of employment and protect against its negative consequences

1. The five principles for global electronic commerce are 1) The private sector should lead; 2) Governments should avoid undue restrictions on E-Commerce; 3) Where government involvement is needed, its aim should be to support and enforce a predictable minimalist, consistent and simple legal environment for commerce; 4) Governments should recognize the unique qualities of the Internet; and 5) E-Commerce on the Internet should be facilitated on a global basis (http://www.iitf.nist.gov/eleccomm/execsu.htm)
2. I would like to thank Sukanya Das and Lee Tang Ching of the Malaysian INTECH office for their assistance in the preparation of this paper. The contribution of Asmah Hani and Ramesh from MIMOS Bhd. is also acknowledged, particularly in relation to E-Commerce.

A Framework for Global Electronic Commerce: Executive Summary (http://www.iitf.nist.gov/eleccomm/execsu.htm)

Austria, Cecille (1997), "Asia Plugs into the Virtual Office", World Executive Digest Technology, Fall.

Malaysia Trade Quarterly, Vol. III, No. 3.

Mohd. Arif Nun (1997), "The Multimedia Super Coridor: Building World Class Companies Together", paper presented at 3^rd International Conference on Communications and Computer Networks, 23-25 October.

Wong, Jini (1997), "Outsourcing – Treading on Hallowed Ground", Malaysian Industry, October.