Abdul Rasheed Ghaffour: Embracing the digital revolution -
harnessing benefits of digitalisation for future growth
Special remarks by Mr Abdul Rasheed Ghaffour, Deputy Governor of the Central Bank
of Malaysia (Bank Negara Malaysia), at the launch of Malaysia Economic
Monitor, Kuala Lumpur, 9 February 2023.
* * *
Introduction
Assalamualaikum w.b.t and a very good morning, Yang Berhormat Menteri, Tuan Mohd
Rafizi bin Ramli, Minister of Economic Affairs of Malaysia, Dr Ndiame Diop, World Bank
Group Country Director for Brunei, Malaysia, Philippines and Thailand, and
distinguished guests.
I am honoured to be here with you today to witness the launch of the latest Malaysian
Economic Monitor Report. Allow me to take this opportunity to commend the World
Bank for all the good work that goes into this publication. Over the years, I have found
the reports in this series to be an insightful resource for thinking about contemporary
policy issues facing the nation.
It is my privilege to speak this morning on behalf of Bank Negara Malaysia and share
our thoughts on the implications of digitalisation for the nation's economy and financial
sector. In my remarks, I will explore the possibilities that digitalisation opens up, and
suggest some pointers on how we can make the most of the opportunities and navigate
the challenges ahead.
The possibilities that digitalisation opens up for Malaysia
Ladies and gentlemen,
We may not think about this all the time, but the world we live in is considerably
different to what it was just 10 years ago. So many things that we take for granted today
- like e-hailing a ride to this venue, getting text notifications on our wrists, seeing
electric vehicles being charged in the parking lot - would have been considered
futuristic back in 2013. Indeed, technology has revolutionised the way we live, work,
and communicate. Many aspects of our lives are now conducted online and digitally -
including how we experience financial services.
In Malaysia, we have seen a strong shift towards digital payments. Digital transactions
per capita has more than quadrupled, increasing from 49 to over 221 transactions per
capita in the decade between 2011 and 2021. By 2026, we expect this to rise to over
400 transactions per capita. The World Bank Global Findex data showed that about 5
million Malaysians made their first digital merchant payment after the COVID-19
pandemic began. This rapid rise of digital finance and mobile payment platforms has
made financial service much more accessible and usable almost anywhere, any time.
This is invaluable particularly for those in remote and geographically underserved areas.
We have also seen financial institutions use digital technology to make their products
more convenient and personalised. For example, customers can now adjust their
insurance and takaful policies to cater for pay-as-you-go motor insurance through apps
and telematic devices.
Apart from individuals, digitalisation also gave businesses a new lease of life during the
pandemic. Many stories emerged of how merchants used digital solutions to pivot
business models and maintained operations in the face of movement restrictions.
I believe that many of us here will agree that the innovations we have seen are just the
beginning. If Malaysia can harness the vast possibilities opened up by the digital
revolution, we can leverage technology to address many of the major challenges we
face as a society. Allow me to share just three examples:
First, managing cost of living issues. Innovations such as precision agriculture and
vertical farming can improve food yields, support better supply chain management and
enhance price discovery to reduce food inflation.
Second, increasing labor efficiency with reduced foreign worker dependency. For a
10,000-hectare palm oil estate, drone technology completes tree counting and detection
of soil conditions in a span of 4 hours, instead of over 14 days involving 20 people
ordinarily. With wider adoption, this supports redeployment of labour into more strategic
activities.
Third, enhancing social protection for vulnerable households. Digital solutions can
integrate social benefit databases across the ecosystem, reduce leakages and help
improve take-up of social programs. This leads to targeted social planning and resource
savings. It also means more resources for other critical needs such as health, education
and sanitation.
Unfortunately, the vast possibilities opened up by digitalisation presents not only
benefits, but challenges as well. A pressing issue right now is the uneven pace of digital
development across different segments of society, which exacerbates longstanding
inequalities. For instance, while fixed broadband download speed in Malaysia is at par
with the global average, access remains out of reach for many in Malaysia, particularly
in rural areas where internet connection is slow and sometimes non-existent. Also,
highspeed internet in Malaysia is more expensive compared to other countries. These
issues widen the digital divide within Malaysia and with other countries.
As more social and economic activities move online, criminals have also caught on.
Where criminal syndicates once organised brick-and-mortar burglaries and robberies,
many have now pivoted to cybercrimes. We are thus seeing digital scams and fraud
becoming much more rampant, with RM1.6 billion of losses reported by the Royal
Malaysian Police between 2019 and 2021 from online fraud cases alone. Unchecked,
this can worsen as more people are digitally connected.
Navigating the digital future (3Ps - Policies, Platforms, People)
In light of these opportunities and challenges, Malaysia's success in the digital future
will depend on how we realise the potential upsides and manage the emerging risks
from digital developments.
I thus find it reassuring that Malaysia has taken the initiative to consider these issues
and begin charting a path forward to make the most of the digital revolution.
Malaysia's National Digital Economy Blueprint aims to accelerate our digital economy
and increase digital jobs. E-commerce, digital payments, and digital government
initiatives are all part of national plans to transform Malaysia into a digitally driven,
highincome nation by 2030.
For the Bank, our Financial Sector Blueprint, launched last year, also sets out strategies
to harness digital finance. These include futureproofing key digital infrastructures,
enabling more digital finance solutions, strengthening cyber security readiness and
supporting greater use of technology for regulation and supervision.
Of course, while blueprints are important and helpful for thinking things through
proactively, we are also cognisant that we cannot plan every detail in advance against
the backdrop of a rapidly evolving digital landscape. What we can do is to position
ourselves to make the most of digital developments as and when opportunities and
challenges arise. Specifically, I believe this means getting the basics right with regards
to our Policies, Platforms and People. Let me elaborate briefly on these three aspects.
First, developing and executing smart policies that maximise the benefits of
We want to ensure that appropriate regulations are clear, inclusive and
digitalisation.
supportive of innovation in the ecosystem. With smart policies, good innovations can
flourish.
For the financial sector, we realise the need to regularly adapt our policies to facilitate
innovation and entry of new players. We expect new digital banks to begin operations
over the next couple years, while the licensing regime for digital insurers and takaful
operators will be finalised this year. We also expect to enhance the current Regulatory
Sandbox this year to facilitate testing of more innovative digital financial solutions.
With these measures, we hope to see more 'digital first' financial solutions and for all
Malaysians to have digital options in finance. This will provide increased access and
promote financial inclusion for the previously excluded.
Nevertheless, we recognise that new technologies bring about new risks. A balanced
approach is thus critical to ensure financial soundness and consumer interests are
protected. With that in mind, policies have also been deployed to strengthen cyber
hygiene practices and combat emerging cyber-risks. This includes the five key
measures to combat financial scams, ranging from requiring more secure authentication
methods to tightening fraud detection rules.
Ladies and gentlemen,
Digital platforms
The second pillar underpinning our digital future is on platforms.
or infrastructure are essential building blocks of a digital economy. They serve as
'highways' upon which value-added digital offerings can be built upon.
I would like to highlight some of the critical digital platforms that the Bank is embarking
on, or advocating for. I believe the advancement of these platforms is key to secure our
digital future.
First, we should build an open data ecosystem that is fit for the future. Open data has
the potential to drive innovation and improve real-time decision-making. On this front,
efforts are underway to enhance data infrastructure and facilitate seamless
datasharing arrangements in the economy. These range from sharing platforms for medical
insurance claims data to development of common standards for economy-wide data
sharing arrangements. Such initiatives go hand in hand with policies to ensure ethical
practices and high standards of data governance within the financial industry.
Second, for Malaysia to have in place a robust Digital Identity infrastructure. From what
we see in successfully digitalised countries, National Digital ID is the key infrastructure.
It acts as the passport into the world of digital offerings and inclusion. I believe our
digital economy prospects will be greatly enhanced once a National Digital ID is
operational.
Third, we must work to future-proof our payment infrastructures. Continuous efforts are
being taken to enhance Malaysia's payment capacity in an increasingly borderless,
digital future. Bilateral payment linkages with Thailand and Indonesia are now live. This
means traveling Malaysians can make instant payments by scanning QR codes at
participating merchants. For the future, we are also exploring a multilateral model for
payment systems, led by the Bank of International Settlements (BIS).
Fourth, Malaysia must strive to ensure widespread and efficient access to the internet
and broadband. Broadband access remains essential for bridging the digital divide,
promoting economic growth and enabling the full potential of technology. For Malaysia
to realise productivity and efficiency gains, enhancements to quality, access and
affordability of the internet will be critical, especially in the rural areas.
With the right policies and platforms in place, the final ingredient is to ensure that the
people or rakyat glean optimal benefits from digital innovation and are not left
behind.
Digital developments are expected to increase labour productivity and create up to
500,000 jobs by 2025. Yet, within the same timeframe, almost half of the workforce will
need reskilling as jobs become replaced or obsolete.
Work preferences are also shifting with the expansion of the gig workers and remote
work. With that in mind, the Bank is contributing to labour market policy reviews to
ensure a future ready workforce. These complement national level initiatives such as
MyFutureJobs.
Linked to digital skillsets, is the importance of digital literacy. A vibrant digital economy
must be supplemented by consumer awareness and education efforts. The Bank
continues to promote the usage of e-payments with campaigns such as e-Duit to
supplement DuitNow QR. Industry campaigns to promote e-angpao and e-duit raya
have also garnered attraction to use e-payments. This is a crucial step in achieving our
goal of a cashless society and enabling seamless transactions for all Malaysians.
However, with the emergence of digital financial fraud, we need to do more to raise
consumer awareness on how to tackle scams. This is why we have launched initiatives
to increase public confidence in digital financial solutions and help consumers identify
and avoid potential scams. The National Scam Response Centre, a joint effort between
multiple agencies for rapid responses to online financial scams, is one such example.
I believe that by promoting both financial and digital literacy, we can empower
Malaysians to fully participate in digital financial services and ultimately the broader
digital economy.
Concluding message
Let me conclude. Digitalisation is evolving at an exponential pace. It is a force both
formidable and irreversible. The challenges we face are thus immense, but so too are
the payoffs.
Building a digital future is the work of an entire ecosystem. Just as all parts come
together to form a collective whole, we must strive together as a whole-of-nation to
formulate solutions for a digital Malaysia.
I would like to end by drawing wisdom from the past. To share a quote from Abraham
Lincoln: "The best way to predict the future is to create it".
On that note, I wish you every success for today's event. I hope the event will generate
a fruitful and productive discussion.
Thank you.