Malaysia's Multimedia Super Corridor An IFIP WG 9.4 Position Paper By Roger W.

Harris Vice Chair for Asia, IFIP WG 9.4 And Faculty of Information Technology University Malaysia Sarawak At the IFIP 9.4 Business Meeting on 19th February 1998 in Bangkok, it was agreed that the group would prepare position papers on important projects involving the use of IT in developing countries. The intention is to form teams that will record the history of such projects, to analyse local efforts to use new technologies for development purposes, and to study their impact. This is the first version of a case study on Malaysia's Multimedia Super-Corridor. Its aim is to stimulate a critique of this ambitious initiative within the Group. This version was completed in October 1998.

Malaysia's Multimedia Super Corridor Abstract Malaysias Multimedia Super Corridor (MSC) is a major national initiative that is designed to satisfy the countrys ambitions to achieve fully developed status by the year 2020. It embodies a 50-by-15-kilometre area adjacent to the capital, Kuala Lumpur, which will contain new cities served by a state-of-the-art multimedia infrastructure as well as providing the base for national and international companies in the multimedia industry. The Malaysian government has provided incentives for overseas companies to participate, and many have already begun operations. The MSC will spearhead a number of nationwide IT projects that are intended to transform major sectors of Malaysian society through the use of IT. These include education, healthcare, commerce, governance and manufacturing. As a prescription for IT-led economic development, the MSC is arguably the boldest, grandest and most ambitious scheme the world has seen. The MSC is an important experiment in the social implications of IT in a developing country. Rarely, if ever, has so much been placed at stake within a single IT implementation and rarely has any country embraced IT in such a wholehearted manor as has Malaysia. This paper describes the project and its background within the context of contemporary Malaysian society. The description is positioned within a framework for analysis that is used to guide a tentative evaluation of the project and of its likely outcomes. The MSC is characterised as a startlingly bold and technically sound proposition. At this early stage of its development, some observations can be offered with regard to the practicality of the planned implementations within a shifting economic environment and within the realities contained in Malaysian society for achieving such an ambitious outcome. Introduction It can be no accident that there is today no wealthy, developed country that is information-poor and no information-rich country that is poor and underdeveloped.
Dr. Mahathir Mohamad, The Way Forward - Vision 2020, 1991.

The speech by Dr. Mahathir Mohamad, Prime Minister of Malaysia, to the Malaysian Business Council in 1991, declared the governments intention to transform Malaysia into a fully developed nation by the year 2020. Subsequently, an IT programme was incorporated for the first time into a five-year plan which laid down specific programmes for the development of IT in the Sixth Malaysia Plan. Later, in August 1995, Dr. Mahathir announced the Multimedia Super Corridor (MSC) as the centrepiece of the national IT strategy under the Seventh Malaysia Plan (1996-2000), which devoted a whole chapter to IT. Thus, Malaysia decided to "make the Information and Communication Technologies (ICT) the dynamo for growth -- within all economic sectors" (Dr. Mahatir, opening The Multimedia Asia 1997 Conference And Exhibition, 16th September 1997). The MSC is a 15 by 40 kilometre area encompassing Kuala Lumpur City Centre (the nations capital) and the new international airport as well as a new administrative centre, Putrajaya, and an IT City, Cyberjaya, claimed as the worlds first intelligent city. The 2

MSC is intended to leapfrog Malaysia into the Information Age and to achieve the targets for development set by Vision 2020. MSC-status companies are expected to begin moving into Cyberjaya by the end of 1999. The announcement of the MSC propelled IT into the forefront of Malaysian national economic planning. A key component of the MSC project is the Flagship Applications, seven national initiatives for IT which are intended to fuel the development of applications by MSC companies. The Flagship applications are: Electronic Government Multi-purpose Card (Smart Card) Smart Schools Telemedicine R&D Cluster (including the Multimedia University) World-Wide Manufacturing Webs (value-added services in support of regional manufacturing operations) Borderless Marketing (Electronic Commerce) The full text of the MSC description and the flagship applications from the government's web site can be found in appendix A. The Malaysian initiative is not altogether unique. Governments from Ireland to Israel are actively involved in trying to encourage and attract IT investment by providing infrastructure, attractive taxation incentives and, most importantly, a well-educated work force with relevant skill levels ranging from technical to research. (Poole, 1997) The MSC initiative arose out of a proposal made to the Prime Minister and the National Information Technology Council by the consultant firm McKinsey & Company, entitled Making a Malaysian Miracle (Ahmad, 1998). The proposal asserted that the nations development strategy, which targeted manufacturing, imposed a ceiling on potential Gross Domestic Product (GDP) far below that which was envisaged by Vision 2020. By developing information industries and by leapfrogging into the Information Age, Malaysias GDP potential would be greatly enhanced, allowing achievement of the countrys development targets. The consultants report indicates that Malaysia can achieve world status in multimedia industries within five years through carefully-planned strategies and urgent action, thereby transforming itself into a knowledge-based society and harnessing the power of information as a springboard for socio-economic advancement (Ahmad, 1998). The first meeting of the international advisory panel of the MSC took place on January 16th, 1997 at Stanford University in California. In order to arrive at an understanding of the motivations behind the announcement of the MSC and to reach any conclusions with regard to its significance, both in terms of the diffusion of IT in a developing country and of the role of IT in the development process, several issues need to be addressed. Firstly, the political, social, cultural, geographical and economic contexts of the initiative have to be understood. The nature of the MSC, the investment which it represents and the circumstances of its promotion and implementation all carry ramifications of national significance which are intended to affect the daily lives of every Malaysian. Secondly, the historical context deserves some attention, as it will be shown that the MSC is far from being an inaugural event, but represents the latest in a series of actions in the continued development of what can be termed Malaysias National Information Infrastructure. Thirdly, the specific target which has been stated publicly and publicised widely, that of creating a fully developed nation by the year 2020, deserves attention as a unique and ambitious prediction for the consequences of an IT 3

implementation, albeit one on an industry-wide and national scale. This is the more so as the public pronouncements carry very little which might indicate that the government acknowledges the existence of, firstly, a variety of managerial, social and organisational components of successful technological implementations which require at least as much attention as the technology itself, and secondly, that substantial obstacles stand in the way of achieving the desired economic outcomes that the MSC is intended to produce. Some flavour of the doctrine associated with the MSC can be gleaned from the comments of Bill Gates reported in the Malaysian press (New Sunday Times, March 15, 1998). Malaysia offers a fine blueprint through the MSC initiative for how a developing country can use technology to move to the forefront of modern industry. All of the technology projects in the MSC initiative involve approaches that I have called the "digital nervous system" and the "web lifestyle". These are ways to use technology to create greater efficiencies in government operations, to serve citizens better, to improve and broaden education, and to help businesses compete globally. The government describes the MSC, among other things, as a vehicle for attracting world-class technology-led companies to Malaysia. On March 21, 1998 the Malaysian New Straits Times quoted Dr. Mahatir as saying that to date, MSC status had been accorded to 115 companies, out of which 84 were already in operation. Between April 1997 and March 1998, 180 applications for MSC status had been made, of which 34 per cent were from foreign companies, 43 per cent from Malaysian and 23 per cent from joint ventures involving Malaysian and foreign partners. The following sections of this report offer the following. Firstly, the Malaysian context is described in terms of geography, economy and its people. Whilst many aspects of the MSC may be found elsewhere, the contextual factors render Malaysias experiment wholly unique and consideration of them is essential in order to obtain some understanding of the significance of the project as well as facilitating some predictions with regard to its likely outcome. Secondly, the project is placed within a framework for analysis that has been applied to the experiences of other developing nations in their attempts at inducing economic development through the deployment of IT. Finally, some conclusions are drawn and a tentative assessment is attempted with regard to how the MSC project might unfold, to what extent the ambitions behind it could be realisable and what lessons might be gleaned for other developing nations hoping to emulate Malaysias experiences. The Malaysian Context Geography Malaysia lies just north of the equator in South East Asia. The country is physically divided into West (or peninsula) Malaysia and East Malaysia. The South China Sea separates these two portions. Thailand borders West Malaysia to the north and the island state of Singapore sits off its southern border. East Malaysia, comprising the states of Sarawak and Sabah, occupies the western and northern one-third of the island of Borneo, bordering Indonesia and Brunei. The country covers an area of 330,000 sq. km, slightly larger than Norway. Being equatorial, the climate is tropical and the terrain is characterised by coastal plains with mountainous, forested interiors. Malaysia's natural resources include tin, petroleum, timber, copper, iron ore, natural gas and bauxite. Roughly 3% of the country is arable land with a further 12% maintaining permanent crops. Fully 68% comprises forests and woodland.

Malaysia

People The 1997 population was estimated at 20 million with a life expectancy of 70 years. Malay and other indigenous groups comprise 58% of the population, with people of Chinese origin making up 26%, Indian 7%, and others 9%. The official language is Malay, but English is widely understood as well as a number of Chinese dialects, Tamil, and numerous tribal dialects. Literacy exceeds 83%. Religions include Islam (Malays), Buddhism and Confucianism (Chinese), Hinduism (Indians), Christianity and tribal religions. Adherence to Islam is considered intrinsic to Malay ethnic identity, and Islamic religious laws, administered by state authorities through Islamic courts, bind all ethnic Malays in some civil matters, such as family relations and diet. It is official policy to infuse Islamic values into the administration of the country, but at the same time, the constitution provides for freedom of religion and the government has resisted pressures to impose Islamic religious law beyond the Muslim community (U. S. Department of State, 1997). The government implements extensive affirmative action programmes designed to boost the economic position of the ethnic Malay majority, which remains poorer on average than the Chinese minority despite the formers political dominance. The government maintains that these programmes have been instrumental in ensuring ethnic harmony and political stability. Government The government is a constitutional monarchy. The Federation of Malaysia was formed in 1963 and is nominally headed by the paramount ruler (king) and a Parliament with two chambers. Most of the 13 states have hereditary rulers but the powers of state governments are limited by the federal constitution. Sarawak and Sabah are self-governing states, with foreign affairs, defence, internal security, and other powers delegated to the 5

federal government. The countrys legal system is based on English common law. The chief of state since April 1994 has been Paramount Ruler Tuanku Ja'afar ibni Al-Marhum Tuanku Abdul Rahman and the head of government since 16 July 1981has been Prime Minister Dr. Mahathir bin Mohamad. Economy The Malaysian economy is a mixture of private enterprise and public management. It grew by an average of 9% annually between 1988 and 1996, and this growth resulted in a substantial reduction in poverty and a marked rise in real wages. By 1996, Malaysia had become the world's largest exporter of hard disc drives for personal computers. Malaysia is also the world's largest producer and exporter of edible oil (palm and palm kernel oil) and the world's largest producer and exporter of tropical hardwood logs and lumber. By early 1998, foreign investors continue to commit large sums in the economy. By 1995, industry was estimated to make up 45% of the economy, with services at 41% and agriculture at 14%. The rate of inflation in 1996 was indicated by the consumer price index of 3.5%. Manufacturing engaged 25% of the 8 million workforce, agriculture, forestry, and fisheries 21%, local trade and tourism 17%, services 12%, government 11%, construction 8%. Unemployment in 1996 stood at 2.6%. Major industries in Peninsular Malaysia are rubber and oil palm processing and manufacturing, light manufacturing industry, electronics, tin mining and smelting, logging and processing timber. In East Malaysia; logging, agriculture processing and petroleum production and refining. In order to help position Malaysia economically and socially vis--vis its neighbours and some European countries, some comparative data is provided in table 1.

Table 1. Comparative Data for Malaysia, its Neighbours and some European Countries United Kingdom 57.6 $240.4 $20,400 29.5 77 20 388,831

Population (Millions) Exports (US$ Billions) GDP per capita (US$) * Telephones (Millions) Life expectancy (Years) Televisions (Millions) Highways (Kilometres)

Malaysia 20.5 $84.6 $10,750 2.5 70 2 93,975

Norway 4.4 $41.7 $26,200 2.4 78 1.5 90,261

Thailand 59.5 $57.3 $7,700 1.5 69 3.3 56,903

Indonesia 209.8 $49.8 $3,770 1.3 62 11.5 378,000

Singapore 3.4 $144.8 $21,200 1.2 78 1.0 2,972

* GDP dollar estimates are derived from purchasing power parity (PPP) calculations rather than from conversions at official currency exchange rates. The PPP method involves the use of standardized international dollar price weights, which are applied to the quantities of final goods and services produced in a given economy. The data derived from the PPP method provide a better comparison of economic well-being between countries (CIA, 1997).

The rapid and sustained growth of Malaysia's economy came to an abrupt halt as a result of the Asian economic crisis of 1997/98. The crisis began with the large-scale movement of funds out of domestic financial markets in Thailand before spreading quickly to neighbouring countries. The depreciation of one currency set off corresponding depreciations in the regions currencies. The Malaysian Ringit (RM) fell from a value of RM2.49 to the US$ in January 1997, to RM4.1 in August 1998. The Kuala Lumpur stock market suffered corresponding losses. The effect of the crisis caused predictions of Malaysia's economic growth rates for 1998 to plummet towards negative figures. An economic contraction of between -1% and 2% was forecast before any hope for an upturn could be foreseen. In response to the economic crisis, in August 1998, the National Economic Action Council (NEAC) of the government of Malaysia announced the National Economic Recovery Plan, which sets out six major objectives: To stabilise the ringit. To restore market confidence. To maintain financial and market stability. To strengthen economic fundamentals. To continue the equity and social economic agenda. To restore adversely affected sectors. The NEAC said the government had also identified sectors badly affected by the crisis that needed to be revitalised. These included information technology and the MSC. A tax rebate of RM400 for the purchase of a personal computer by each family was introduced and a sum of RM400million was allocated to government agencies to enable them to develop information technology and electronic government. Nevertheless, commentators were pointing to the regional currency and stock market turmoil as factors that influenced potential investors in the MSC to adopt a wait-and-see attitude. In some cases, it was said that the support facilities were not falling into place fast enough. Despite the crisis, a high level of optimism has been maintained for the MSC. In February 1998, members of the international advisory panel to the MSC expressed confidence in the Malaysian economy and renewed their endorsement of the MSC. Bob Bishop of Silicon Graphics World Trade Corporation said: "The MSC can be the catalyst to pull Malaysia and, possibly the region, out of the economic problems." Dr Mahathir was quoted as saying that with work a year ahead of schedule, "there is really no reason" why the MSC should be postponed. "If there is an impact at all, it has been accelerated." (New Straits Times, Friday, February 13, 1998). Commentary A reasoned analysis and evaluation of Malaysia's MSC project requires the use of an acceptable framework within which the various proposals, plans and events can be anchored and inter-related and which facilitates an interpretation of the resulting outcome and some projection of the likely consequences. Two such frameworks are used here, but within an analysis which integrates them both. The first framework is taken from Dedrick and Kraemer (1998), entitled "A framework for IT-led development". The second framework is derived form Hanna, Guy and Arnold (1995) in which the experiences of industrialised countries are used to develop lessons for developing countries for the diffusion of Information Technology. The two frameworks are complementary, with both overlaps and underlaps, so that their joint use allows for a more insightful analysis than would have been possible using only one or the other. 7

The framework of IT-led development from Dedrick and Kraemer (1998) is shown in Figure 1. The framework is based on four sets of variables; environmental factors, industry policy, industry structure and IT diffusion. The operation, strengths and interactions between these variables are said to determine the level of economic benefit which a nation can attain from IT. The Hanna, Guy and Arnold (1995) framework draws on best practices of industrial countries and suggests broad directions for adapting these lessons to the conditions of developing countries. The lessons include; removing barriers to technology diffusion, designing suitable national strategies, developing human, organisational and governmental capacity, tailoring programmes to their context, packaging programmes and services to achieve complementarity, disseminating information, and building institutional bridges and intermediaries. Each of these lessons will be addressed within the analysis of Dedrick and Kraemer (1998) framework. The following sections relate the actions and events connected to the MSC to each variable in the two frameworks, and assess the extent to which MSC furthers the operation of those variables in contributing to Malaysia's economic development.

Figure 1. Framework of IT-Led Development (Dedrick & Kraemer, 1998)

Education & Skills Technology Policy Infrastructure

Industrial Policy

Environmental Parameters

IT Diffusion
IT Production and Use

Economic Payoffs
Employment, Productivity and Economic Growth

Political, Social and Economic Environment

Industry Structure
Indigenous vs. MNC R&D

Environmental Factors Political Malaysia has enjoyed considerable political stability for much of its history, an important factor in the development of IT (Raman and Yap, 1996). This has enabled it to continue to attract foreign investment as well as maintaining continuity in its development policies. Members of the MSC International Advisory Panel have stressed the importance of continued political stability in Malaysia in maintaining their commitment to the MSC project. As the MSC depends on external investment for its success, political stability is essential. For this reason, investors will be carefully watching the current (Sept. 1998) blip on the political radar screen which has arisen as a result of the sacking and arrest of Deputy Prime Minister Mr. Anwar Ibrahim. Observers point out that political stability has been easily maintainable while the economy was growing. Dr. Mahathir retains the Finance and Home Ministry portfolios and his control of the political scene appears total. 8

However, as the economic situation deteriorates through mid-1998, and as the unrest surrounding the Anwar affair mounts, the political situation shows signs of destabilising. Foreign investors may show some reluctance to commit funds until internal matters stabilise. Regional competition is another political factor that affects internal developments in Malaysia, and the MSC cannot be excluded from its influence. In particular, analysts point to Singapore, which has not been sitting on its laurels but is storming ahead to develop its own multimedia corridor. This could in effect give some competition to the MSC, one analyst said. Singapore's national IT initiative, known as Singapore ONE, is a national drive to deliver interactive multimedia applications and services to homes, businesses and schools throughout Singapore. The intent is to establish Singapore as an "intelligent" nation. The government is already nurturing the republic's strong points in the computer industry, such as storage device and multimedia product manufacturing, while pushing advancements in less developed local industries like semiconductors and communication products. Singapore's Economic Development Board (EDB) provides funds to nurture promising entrepreneurs and further IT developments in Singapore will be supported by the Venture fund, the Technology Fund and the Innovation Development Scheme. According to an executive with Oracle, Singapore is ahead of the game, and already has much of what Malaysia is talking about (Asia Magazine, October 24-26 1997). For example, in July 1998, the Electronic Transaction Act came into force, providing the legal basis for electronic commerce transactions. Singaporeans can already file their tax returns via the Internet. Nevertheless, set-up costs in Singapore are high compared to Malaysia, which is beginning to attract companies away from the island republic. Additionally, Malaysia's neighbours, Thailand and Indonesia, are providing increasingly heated competition for high-tech manufacturing investments. A final consideration from the political perspective is the role of Dr. Mahatir himself. As the dominant figure in Malaysian politics since independence, it is evident that his drive and determination have had a significant impact on the nations recent economic advancement and on the conception and implementation of the MSC. A potential question arises therefore, with regard to the likely development of the MSC without Dr. Mahathir, who is over 70 years of age and whose position is subject to democratic processes within his party and within the country. Social At least three important features characterise Malaysia's social makeup with respect to IT. Firstly, despite the rapid growth of the economy in its transition to newly-industrialised status, half the population of Malaysia still lives in rural areas, according to the 1991 census, and this proportion rises to around 65% for East Malaysia. The implication is that for many Malaysians, IT has little direct impact on their lives, and will continue not do to so for some time yet. At least one academic observer has highlighted a likely "information apartheid" arising between the information "haves" and "have-nots". Secondly, Malaysia's distinctive ethnic and cultural mix serves to moderate the effects of social initiatives and experiments. The social effects of the MSC have to be considered in the light of the economic disparity between the Chinese ethnic community and the others. This is not to say that IT in Malaysia can be expected to widen or diminish the disparity, or even to have no effect on it. That has yet to be determined. But the nation's ambitions for fully developed status make a specific point of creating equal shares in prosperity for all 9

sections of the community. With so much hope being pinned on IT for achieving the desired level of prosperity, it would be short-sighted to assume that the development of IT in Malaysia would not be touched by the measures so far employed for favouring the economic development of specific sections of the community. Quite how this might play out has yet to be identified. Finally, an aspect of Malaysia's culture deserves attention. Hofstede's (1994) analysis of the national cultures of 50 countries rates Malaysia as highest of all on the "power distance" scale. Power distance relates to the tolerance a culture has for the differences between individuals in terms of their power or authority. This feature of Malaysian culture is readily recognisable by Europeans or North Americans (whose cultures generally feature low power distance) when they visit the country. At least one aspect of power distance is likely to manifest itself in the use of IT. Much of what can be gained through the deployment of IT is achieved through what is known as the "empowerment" of individuals, or through what is often termed "flatter organisations". These ideas relate to the increased provision of information to individuals who are then able to make decisions that were previously made by their superiors in the organisation. The results of such practices are often paraded in terms of improved customer service and enhanced job satisfaction. Malaysian government rhetoric occasionally makes reference to such ideas when the benefits of IT are touted. It seems that such practices run contrary to the accepted principles of power distance and respect for authority in Malaysia, where such authority is vested in decision-making. Additionally, the use and diffusion of information sometimes raises cause for concern in Malaysian society. Despite pronouncements that the Internet will not be censored, the government has expressed concern about the spreading of rumours. The Star newspaper reported on October 2nd 1998 that four people had been charged with spreading rumours on the Internet, and that the police were closely monitoring the distribution of e-mail. Such actions are indicative of some of the dilemmas which a culture with high regard for authority faces when adopting a technological artefact which originated in a culture which does have such a high regard for authority. Economic Malaysia's economic growth has already been described. Whilst rapid growth has been achieved as a result of attracting foreign investors to build an IT manufacturing industry, the government, through the MSC, now recognises the need to ensure widespread use of IT and development of software products in order to sustain high levels of growth in support of its target of developed status. However, around 20% of the work force is still employed in agriculture, forestry, and fisheries and slightly more than half the economy continues to be derived from extractive industries. The structure of domestic demand helps shape the diffusion of IT in developing countries (Hanna, Guy and Arnold, 1995), and in this respect, the Malaysian economy features some characteristic aspects of developing countries. For example, the absence of the middle-sized enterprise, the existence of isolated islands of sophisticated users, and the virtual total absence in the capital markets of venture capital for technology start-ups. On the positive side, some of the provisions of the MSC demonstrate that the government is coming to terms with its own information and communication needs, and as a large domestic user, this can catalyse a variety of spin-off and "me-too" applications. Although sometimes touted as a model for development, Malaysia's economy cannot yet be said to have totally moved away from its agrarian basis and its transition to a serviceoriented economy, which the MSC implies, has still to be achieved. As has been 10

discovered in other countries, for example Ireland, when MNCs are attracted by tax breaks and other incentives, short-term economic gains can emerge. But the MNCs tend to disappear when the tax breaks run out, leaving behind little in terms of technology or knowledge know-how. The challenge for the MSC is to ensure that the pressure for shortterm improvements is accompanied by measures that can provide for sustained levels of activity and growth. Finally, in August 1998, Dr. Mahathir announced a series of fiscal measures aimed at protecting the Malaysian economy from the speculative pressures which had contributed the regional economic downturn during 1997/98. Whilst the measures were designed as a deterrent to short term speculation, it remains to be seen what effect they will have on the long term foreign investment which is a key component of Malaysia's growth in general and of the MSC in particular. Industrial Policy Education and Skills According to Hanna, Guy and Arnold (1995) in industrial countries the human, managerial and institutional adjustments to IT have been profound. Manual skills lose their importance and information skills dominate. As technology transforms the economy, national development increasingly depends on the capacity to acquire and apply knowledge. A national IT strategy should help technical institutions respond. IT should unite university with industry and research with consulting. Education in IT was making some headway in Malaysia well before the MSC project was inaugurated. The Ministry of Education formulated a Computers-in-Education programme in 1989, involving the deployment of locally-made PCs into schools. This, and other initiatives aimed at computers in education, suffered from a lack of planning direction as well as the absence of a comprehensive plan for teacher training (Siowck, 1998). An IT syllabus within the National Curriculum has been defined (Theaker, 1997). A number of IT training organisations have established themselves across Malaysia, including Informatics and the National Institute of Information Technology (NIIT). The government has established a supercomputer research centre. Raman and Yap (1996) suggest that proficiency in the English language is necessary for assimilation of IT in developing countries. Following a de-emphasis of the English language immediately following independence, the government has since increased its emphasis on English and it is now taught as a second language and is widely used in business. Despite the continuing efforts to train the population in IT skills, commentators point to a scarcity of intellectual capital in Malaysia with regard to the managerial, entrepreneurial and strategy-formulating knowledge which is required for successful exploitation of IT on a competitive world stage. Whereas a few developing countries have established export industries based on "body-shopping of software products, Malaysia has yet to establish a critical mass of sufficiently skilled workers to emulate their success. Furthermore, as compared, for instance, to the Indian software industry, which is moving up the valuechain towards software design, Malaysia seems far behind in indigenous creative and entrepreneurial capability to catch up within a foreseeable time frame. The MSC planners acknowledge the enormous demand for IT skills which is implied by their plans. Accordingly, the MSC is to include the country's first Multimedia University, in Cyberjaya, which "can provide the trained manpower needed by companies operating in the Multimedia Super Corridor" (Dr. Mahathir quoted in the New Straits Times on Wednesday, February 11, 1998). The Prime Minister went on to say that "the MSC 11

needed 7,000 knowledge workers a year for several years, or 25,000 employees, and those who graduated from the university could be employed by the companies". It is expected that a continued and possibly chronic shortage of skilled workers will hamper MSC related developments for some time to come. Government figures indicate that the annual shortfall of 7,000 skilled IT workers during the period of the sixth five-year plan (1991-1995) will increase to a shortfall of 10,000 during the period of the seventh plan (1996-2000). Furthermore, the demand for IT skills from MSC projects is likely to have a centripetal effect, starving non-MSC companies and projects of the sills they need. Dependence on overseas staff will continue for the foreseeable future. MSC companies are serviced by fast-track immigration procedures that allow them to obtain work permits for overseas workers in a matter of days, a process that usually requires months. Beyond the development of skills for knowledge workers, there are signs that the government acknowledges the existence of widespread computer illiteracy among the general population, and that such a condition will inhibit the diffusion of IT. Accordingly a number of initiatives, such as road shows and cyber cafes, have been suggested. IT is the subject of a pop song, which is often played on the radio. The ultimate success of initiatives to educate the wider public with regard to IT has yet to be determined. Technology Policy Until the late 1980s, Malaysia's economy was based on its natural resources. In 1988, the government began formulating specific technology policies aimed at encouraging the manufacture of IT products and the increasing use of IT in government. Tariffs on IT hardware and software were reduced. Government itself began using computers more and in 1987the state-owned telecommunication company was privatised. In 1985, the government formed the National Committee on Data Processing (NCDP) and in 1987, it began to forge links with the private sector through the National Consultative Committee on Information Technology (NCCIT). The NCDP was tasked with several functions; formulating a national computer policy, developing a long-term strategy for IT, establishing guidelines for computing in the public sector, promoting a local computer industry, advising government on training and promoting research in computing. Raman and Yap (1996) provide a detailed history of the Malaysian government's actions toward IT during the 1980s. Their analysis indicates that the majority of actions were directed towards building and disseminating the necessary scientific and technical knowledge for the production and exploitation of IT as well as issuing directives to government departments to innovate in their use of IT. Such a pattern of action, claim Raman and Yap, is characteristic of developing countries, where the private sector lacks the capital and expertise to bring about evolutionary changes at the national level. The Sixth Malaysia Five-Year Plan (1991-1995) incorporated the nation's first IT programme, with the intent of; enhancing managerial effectiveness, improving the productivity of government departments, promoting the availability of information, developing an IT infrastructure and assisting in the creation of an information-rich society. The Seventh Malaysia Five-Year Plan devoted a whole chapter to IT. "With the Seventh Malaysia Plan we move into the Information Age" (Dr. Mahatir, opening the national convention on the seventh Malaysia plan, 1996-2000, 5th August 1996.

12

The Government allocated RM2.3 billion (US$ 790 million) for IT programmes for its agencies under the Seventh Malaysia Plan. This included establishing infrastructure, training and network installations. "The allocation is one of the largest allocated by any developing country to introduce and improve IT programmes at government agencies", said the Deputy Prime Minister. (Business Times, 11th December). The Seventh Plan also included measures to tackle other crucial issues including easing the IT manpower shortage, updating relevant legislations, and developing the local IT industry. Improvement of the telecommunications infrastructure was accelerated during the Seventh Plan period with a total planned investment of RM25.4 billion. This included development of the national information superhighway, which would be fuelled by the development of the MSC and the Putrajaya intelligent city. The role of the Joint Advanced Research Integrated Networking (Jaring) - the national wide area network operated by the Malaysian Institute of Microelectronic Systems MIMOS) - would also be expanded to form the basis for the national IT infrastructure. A sum of RM400 million was allocated to MIMOS to install an additional 100 Jaring nodes nation-wide, and to increase the capacity of the network . The seventh plan also announced that in view of its significant contribution to the development of industrial activities and the creation of high technology and skills, the local IT industry will be developed as a new growth-sector industry. This is expected to be boosted through promoting the development of new products as well as closer cooperation between local and international companies. Additional measures sought to attract new investment and spur further growth of existing local IT industry. Software design and equipment manufacturing had been identified as the activities that would spur the growth of the microelectronics, telecommunications and computer industries. During the five-year period, the software industry would be developed into an exporter of industrial software as well as software-related services. Equipment manufacturing would be focused on the production of value-added goods that have a rapid production cycle as well as the development of computer components and accessories of local brands. Measures were targeted to expedite transfer of technology in areas including software development, consultancy, systems integration, computer and accessory manufacturing, equipment handling and warehousing. In the area of IT human resource development, educational and training programmes in the public sector would be increased and expanded to cover all schools and training centres and institutions of higher learning. Investment in computers and related infrastructure would be increased to ensure that students get the chance to use IT. Teachers would also be given training to improve their knowledge in IT usage. The private sector would also be encouraged to complement the Governments effort to increase IT literacy. In the move to make Malaysia a regional IT hub, the country would provide the latest in IT services to encourage multinational companies to set up their research and development (R&D) operations in the country. Infrastructure The development of IT in Malaysia has been paralleled by development of the telecommunication infrastructure. The Sixth Malaysia Plan earmarked US$ 2.2 billion for development of telecommunications with the aim of converting to a fully digitized system by the year 2000. Following the establishment of JARING as the sole Internet Service Provider (ISP), Telekom Malaysia began operations in 1997 and the Government received further applications for the issuance of new ISP licenses from five more fixed line telecommunications operators; Binariang, Mutiara Telecommunications, Cellular 13

Communications, Time Telekom and Prismanet (previously known as Syarikat Telefon Wireless Sdn. Bhd.). Judging from the rate of growth of Internet subscribers, there is a need for more ISPs. The Government is opening up the ISP licences to all fixed line operators and it does not plan to restrict the number of licenses awarded. At present, there are some 300,000 Internet subscribers in Malaysia. The Government hopes that with additional ISPs, there would be more competition among the existing and new ISPs, causing the quality of Internet service to be upgraded and improved. Hanna, Guy and Arnold (1995) cite poor telecommunications and unreliable power supplies as common inhibitors of IT diffusion in developing countries. In Malaysia, such problems are largely absent in the urban centres. In the rural districts, though, many villages are without telephone access and electricity. Unless novel measures can be applied to such potential users, it seems likely that infrastructural deficiencies will hinder the diffusion of IT outside the urban centres. The MSC will have to address this issue if it is to fulfil its promises of equal sharing of the benefits of national development. IT Diffusion IT Production The electronics industry began in Malaysia in the mid-1970s and came to dominate Malaysian industrialisation, with exports reaching US$ 6 billion by 1988, representing 56% of manufactured exports. By 1990, Malaysia was the third largest producer of electronic components and the world's largest exporter. More recently, IT production has moved away from low value added microchips towards the manufacture of complete computers and peripheral devices.

Although the IT industry's current contribution to the gross domestic product (GDP) is relatively small, it is poised to grow at a tremendous pace in the immediate future. The National Economic Recover Plan notes that despite the economic slowdown, the pace of growth in the IT industry had been sustained in view of the strategic importance of IT. It was stated that the MSC will provide the catalyst for the synergistic expansion of related IT industries or products and create the enabling environment for orderly development of IT (New Straits Times, Friday, July 24, 1998). IT Use During the 1980s, the internal market for hardware, software and services increased fourfold. Internal use of IT grew rapidly throughout this period. In 1997, IT-related spending in Malaysia reached US$1.9 billion. This corresponded with similar growth in the infrastructural components of human resources, telecommunications and research and development. The heaviest users were in the MNC and government dominated areas of finance and petroleum with the bulk of applications in the traditional areas of finance and accounting, administration and data processing. Similar growth in the use of IT took place within government. However, manufacturing firms, especially locally owned firms, have yet to fully appreciate benefits of IT. Whist noting that IT usage must be based on best IT practices, the National Economic Recovery Plan recommended that the National Productivity Corporation (NPC) accelerate its programme in establishing a resource centre for IT-related information as well as spearhead the programme to spread awareness of best IT practices. Local firms had not taken full advantage of fiscal and other incentives offered by the Government to accelerate the use of IT. The Plan recommended that the NPC and the Federation of Malaysian 14

Manufacturers be required to encourage manufacturing firms to adopt advanced systems such as computer-aided design, computer-aided manufacturing and computer-aided process planning and manufacturing resources planning. The National Productivity Corporation (NPC) was established to spearhead the enhancement of productivity and quality throughout the country. It has focussed its activities onto upgrading local expertise in the field of productivity and quality; promoting greater awareness and practices of productivity and quality systems of management and work culture; developing databases on productivity indicators and benchmarks as inputs for policy formulation and planning to enhance productivity and quality. These activities are supported by promotion and information dissemination to educate the Malaysian workforce on the latest in productivity and quality. A three year National Productivity Enhancement Campaign (1997-99) is being undertaken with the theme "Productivity Drives National Development". Clearly, Information Technology and the MSC initiatives are deeply implicated in the achievement of the NPCs goals. Hanna, Guy and Arnold (1995) point out that the IT strategies of developed countries involved more than acquiring equipment, but included adapting given technology and improving it. Such policies were implemented with the creation of intermediary institutions within an enhanced technology support infrastructure. The NPC appears to conform to such an approach. Hanna, Guy and Arnold (1995) point out that productivity can be improved by adopting the "lean production" and "continuous improvement" innovations of the Japanese automotive industry. Such practices are often applicable without any IT investment, and it is often argued that they should be put in place first, before the IT is applied. Accordingly, investing in organisational change should be a higher priority than technological change where IT diffusion is desired. Specific initiatives that target organisational development in Malaysian enterprises, as opposed to technological development, are hard to find among MSC publicity. It may be that the first hurdle of deploying IT is absorbing most of the energy and that the real hurdle of deploying IT intelligently is yet to be confronted. Another indication of the rate of adoption of advanced systems is given by the fact that many organisations in Malaysia are encountering difficulties in introducing CASE to automate their systems development tasks. The difficulties are mostly attributable to human problems such as lack of expertise, training and management support (Selamat, Rahim, Choong and Othman, 1994). Significant internal disparities exist. In Malaysia, only 3.7% of households have personal computers (PCs). Many schools still lack electricity and the telephone penetration rate for rural areas is only 5.5 telephones per 100 people, as opposed to the urban rate of 24. The NITC acknowledges disparities in access to IT and has pledged "ongoing focus on issues like universal access and identifying key groups who could benefit from and contribute through IT, like senior citizens, non-working women and the disabled". "Among measures on the drawing board are media campaigns to demystify IT, promotion through groups like Residents' Associations, and setting up of cybercafes in smaller towns, villages and economically depressed areas of cities throughout the country." (New Straits Times, Saturday, September 28th 1998). Industry Structure Indigenous vs. MNC 15

The dominance of Malaysia in the manufacture of and export of electronic components can be attributed to the incentives offered by Malaysia to attract foreign investors and to environmental factors (Raman and Yap, 1996). Several free trade zones with minimum customs formalities were established. A number of MNCs established manufacturing facilities and took advantage the favourable infrastructure and abundant skilled and cheap labour. Foreign investment has been pivotal for the development of IT in Malaysia and MNCs now dominate the IT industry. Their investments have created jobs, encouraged feeder company start-ups, trained skilled staff, transferred technology and opened up international markets. In response to the absence of local companies, some analysts have called for the Government to consider providing venture capital for local IT start-ups. This is not easily available in Malaysia. Permanent secretary to the National Information Technology Council and chairman of Multimedia Asia '98 steering committee Dr. Mohd Azzman Shariffadeen said that providing venture capital for local IT start-ups requires expert credit evaluation which local institutions do not yet have the experience in (New Straits Times, Thursday, August 6, 1998). In April 1998, Malaysia's Deputy Prime Minister Anwar Ibrahim, launched the Demonstrator Applications Grant Scheme (DAGS) as a strategy to nurture IT initiatives throughout the country. The innovations should be indigenous in design, local in content, customised to the needs of the local community and developed by companies with at least 51% Malaysian ownership. The RM50 million (US$12.5 million) funding available from DAGS would be allocated on a dollar for dollar basis. By September 1998, about 30 applications had been received from mostly small IT/multimedia-based companies, which are exactly the type of users targeted by the grant scheme. The Multimedia Development Corporation has also set up the MDC Advisory and Consulting Centre for Enterprises (ACCESS) designed to assist small and medium-sized enterprises (SMEs) in becoming global players in the IT/multimedia industry. Of the 132 companies currently awarded MSC status, 52 are 100% Malaysian owned. Most of these 52 companies fall into the SME category. Of these 52 companies, large Malaysian companies back 14. Commentators and MSC insiders often point to the lack of openness in contract awarding procedures in Malaysia. Overseas investors are sometimes surprised when procedures for evaluating tenders do not emphasise the same values as those to which they are accustomed in their home countries. The phrase crony capitalism is sometimes heard in connection with evaluation of bids and the awarding of contracts. It is unlikely that such complaints will change the practices of the Malaysian government in these matters. Moreover, as some contracts seem not to have been awarded within the expected timescale, some companies are beginning to question their reasons for staying. It may be necessary for overseas companies to try harder to adapt to the cultural circumstances of the Malaysian way of doing business. Furthermore, if they are to make a sustainable contribution to the Malaysian economy, then measures should be designed to ensure that they are able to make a long-term commitment to the MSC and to the country. Economic Payoffs Employment The rate of unemployment in Malaysia in 1996 stood at 2.6%. Apart from the surge in demand for knowledge workers which the MSC is expected to create, eventual effects on employment from MSC activities are hard to predict. Experiences from developed nations 16

suggest a shift in employment from the industry to the service sector as IT encroaches on further into public life. In addition, flatter organisation structures tend to de-emphasis middle layers of management. Malaysias ambitions to be a regional player in IT and multimedia imply increased exports of IT products. However, sustainable job creation will only occur if the MSC is able to effectively transfer capability to indigenous organisations and reduce dependence on MNCs who can relocate to alternative locations when economic conditions change. Productivity In 1996 and 1997, Malaysias productivity grew at an annual rate of around 5.6%. In terms of contribution to GDP growth, productivity increases contributed 70% in 1997 while employment growth contributed 29%. According to the National Productivity Council, the contribution from productivity was due to the shift towards innovation, high technology, increased efficiency of human resources and proactive initiatives undertaken by both public and private sectors to enhance productivity. The primary contributor to productivity growth continued to be the manufacturing sector, which contributed 51%. Internationally, Malaysias productivity growth of 5.4% for the period 1990-97 exceeded that of seven major countries of the Organisation for Economic Co-operation and Development (OECD), namely Germany (2.7%), Italy (1.6%), the United Kingdom (1.6%), France (1.5%), Japan (1.2%), the United States of America (0.9%) and Canada (0.8%). Among selected Asian countries, Malaysia's productivity growth of 5.7% in 1996 exceeded that of Taiwan (5.4%), the Republic of Korea (2.6%), Hong Kong (1.3%), Singapore (0.7%) and the Philippines (-1.3%). The Seventh Malaysia Plan promotes a shift in the national development strategy, from input-driven towards productivity-driven through the enhancement of Total Factor Productivity (TFP). This is expressed as the rate of growth of output over and above that portion of growth that can be attributed to increases in labour and capital inputs. This strategy is further emphasised in the Second Industrial Master Plan. It is envisaged that improvements in TFP will lead to increased productivity and will enable the economy to generate output at a higher rate of growth vis--vis resources available and already utilised. The focus of economic activity must therefore turn to enhancing competitiveness through increased efficiency in the utilisation of productive inputs and employing systems that will increase innovations to achieve greater output per unit of input. The following initiatives are pertinent: Intensifying the Application of Information Technology; Implementation of Productivity and Quality Management Systems; Improvements through Benchmarking Activities; Skill Upgrading of the Human Resources; and Quality Products through Research and Development. (National Productivity Council) Hanna, Guy and Arnold (1995) cite technical and managerial capabilities and government capabilities as user, regulator and catalyst, as some of the differences between developed and developing countries in terms of their rates of IT diffusion. Management is key to technological dynamism, they say. In this respect, MSC initiatives that are intended to promote productivity at the national level must address the issue of building management capacity. If not just for the sake of achieving break-through improvements in domestic productivity, MSC planners should acknowledge that intensive IT users often become 17

competitive IT suppliers (as in the banking and airline industries). MSC projects, therefore, imply intensive use of "world-class" technology applications, which can be marketed on a world-wide basis. Whilst particular technologies will be heavily implicated in such a process, it will be innovative and entrepreneurial managers who will make it happen. Similarly, in representing half the domestic market for IT use, government IT planners need to understand their role as national catalyst for the diffusion of IT, and should be prepared to implement innovative applications with far-reaching effects. It is hoped that the electronic government flagship application can serve the purpose of advancing the national IT agenda by catalysing further applications, such as electronic commerce, within the private sector.

Economic Growth Malaysia's economic growth has been chronicled in earlier sections of this report. The consideration here is the extent to which the economy can return to the high levels of growth achieved in the 1980s and up to 1996. Also, the likely impact of the 1997/98 economic crisis on the MSC project and the longer term prospects for Malaysia achieving its ambitious targets through further application of IT. Another aspect concerns the extent to which the local market for IT products has been affected by the economic slowdown and the likely effect that will have on the IT manufacturing industry. Until recently, Malaysia has enjoyed several years of strong and relatively consistent growth. As shown in Table 15, during the years 1991-1995, Malaysia experienced growth on the order of 8.7%. Analysts report that for Malaysia to achieve developed status by the year 2020, they must continue to experience GDP growth of at least 7% per year. In view of the fact that labour costs are rising much faster (about two to one) than Malaysia's productivity, maintaining a GDP of 7% under normal economic conditions would be difficult. As of December 1997, analysts were predicting real GDP Growth for 1998 as low as 3.1%. By mid 1998, that figure should be revised to an even lower number, since the statistics for first quarter 1998 reveal growth to be a negative 1.8%. Bank Negara officials are now forecasting full-year 1998 growth of 2.5%. This implies a significant improvement in the economic situation during the remaining quarters of 1998. With regard to the likelihood of economic recovery, few observers doubt its eventual occurrence, the debate surrounds its timing, with estimates ranging from two to five years (from mid 1998). As to the likely impact of the economic downturn on the MSC, government officials assure the business community that all MSC initiatives are proceeding as planned. However, some budget cutbacks have already been announced and the evidence suggests that there will be more reductions in the allocation of public funds to projects. There has also been a delay in the awarding of contracts. The IT market in Malaysia will not see the high annual growth of past years, but industry analysts are confident in continued growth over the long term once the current dip in the economy is overcome. Unfortunately, industry analysts again cannot predict when sustainable recovery of the market will take place. PIKOM (The Association of Computer Industry Malaysia) reported in April 1998 that PC sales in Malaysia would grow by 25% during 1998. The association predicted sales of 500,000 units. PIKOM cited factors including tax rebates for Malaysians on PCs, lower equipment prices, and the Government's call to develop computer literacy to be influential in maintaining the PC demand. 18

In May 1998, just before the negative growth was reported, Deputy Prime Minister Anwar Ibrahim reassured the business community by claiming that even though Malaysia announced an 18% across the board cut last year, this cut will not affect vital infrastructure projects or essential social services. He said budget cuts would not affect development of the Multimedia Super Corridor and telecommunications infrastructure. In terms of the longer-term prospects for economic recovery, one observer suggests that the MSC will benefit the region as much as it benefits Malaysia. "It has got everyone thinking, and Asia will become a far more conducive environment for research and development, not to mention investment". (Asia Magazine, Oct 24-26 1997). One approach recommended by Hanna, Guy and Arnold (1995) is to exploit the complementarity of IT capabilities with more established technological strengths, as did Germany and Japan with machine tools and other engineering industries. The MSC can promote development of IT in Malaysia's existing industries, for example timber technology, in order to achieve further national diffusion of IT. Conclusions There can be few concrete conclusions to be drawn at this early stage of development of the MSC. This report serves its purpose if it positions the MSC within the Malaysian context such that the developing world can learn how IT can reliably fuel national economic development. It is intended to draw attention to the indicators which will help observers understand what works and why and to learn what should be avoided. The intention is to supplement this report with future observations and analyses which will be intended to bring out such lessons. A number of observations emerge from the description of the MSC project, which are already of interest to the developing world. They can be summarised as follows: Malaysia's choice of IT as a means for achieving developed status reflects the experiences of other newly developed countries in East Asia, although there are differences in detail between the circumstances and the experiences of each of them. Specific targets have been publicly proclaimed, i.e., that of achieving fullydeveloped status by 2020, indicating an unusual degree of confidence in the outcome of a technology-based initiative as well as in the country's ability to sustain the momentum of its development and to resist competition from its neighbours. The intended pace of change represents in itself an enormous social challenge, propelling Malaysia from an agrarian colonial existence into world technological leadership in two generations. Rarely has so much been put at stake on the basis of so much faith in information technology. Many other countries and major MNCs struggle to articulate such a clear vision for their IT investments as Malaysia's, and few manage to achieve results anywhere near as profound as Malaysia's ambitions. Should those ambitions materialise, there will be lessons for all from Malaysia's experience. Other than the need for a massive input into education in order to generate the knowledge workers that will be required to bring the MSC to fruition, little exists in the formal planning pronouncements which could be described as an acknowledgement of other obstacles to achievement of the stated outcome. In particular, the social, behavioural and managerial aspects of IT diffusion and adoption, organisational learning and transformation, knowledge dissemination and institutional support receive scant attention. 19

As a prescription for IT-led economic development, the MSC is arguably the boldest, grandest and most ambitious scheme the world has seen. Rarely has so much faith been pinned on IT as a means for achieving so much i.e., transforming Malaysian society from a developing third-world economy into a fully developed nation. The architects of such a scheme must be admired for their courage and vision. Those who take on the role of neutral observer can hardly fail to be impressed by the pace with which the government has pushed through its agenda as well as by the apparent willingness of the rest of Malaysian society to go along with it. Notwithstanding the optimism and publicity of the MSC and the sheer ambition of its scope, the neutral observer is still drawn towards certain cautionary indicators if a balanced perspective is being sought. In seeking such a balanced perspective, various sources need to be admitted. According to one opposition leader, Lim Kit Siang, compared to Singapore, Malaysia has been quite slow in realizing the critical importance of IT in enhancing competitive advantage in the global marketplace as well as the quality of life of Malaysians. Lim points to other countries, such as the Philippines and Canada, which are already establishing intelligent nations. He also refers to the ranking by the International Telecommunications Union (ITU) of 39 nations in terms of their multimedia readiness, which places Malaysia as 28th behind some of its Asian neighbours such as Japan, Singapore, Hong Kong, South Korea and Taiwan. Lim also makes reference to the possibility of a gap growing between the information-rich citizens of Malaysia and those who will remain information-poor, pointing to the high cost of computers compared to average Malaysian incomes. These concerns are echoed by Mustapha Anuar, a lecturer in mass communications at the Science University of Malaysia, who worries that the poor may remain bystanders in the new information age, suffering from an information gap. Another perspective is provided by the UK's Guardian newspaper: "There is something a little bizarre about all this futuristic talk. Just 20 years ago, Malaysia was still an overwhelmingly agrarian country dependent on rubber, tin and palm oil. Then it caught the industrialization bug and transformed itself within little over two decades compared with the 150 years it took Britain. To Western eyes, the super-corridor has moved with reckless, alien speed. For an Asian tiger, it is the norm. The sheer speed of it all can easily lull one into a false sense of expectancy, as if it is all perfectly natural. Hardly. This is happening in a nation still in the process of industrialising, where many of those over the age of 55 live in traditional villages or kampongs, where the education system leaves much to be desired and where there is a desperate shortage of skilled technicians. Malaysia totally lacks the capacity to realise the corridor on its own. Malaysia knows this and that is why it has scoured the world for the companies and techno-brains that can help. If this latest gamble with modernity pays off, as all indications suggest it will, then the ideas that inform it will be progressively applied across the country. Malaysia will move from a rural economy to an information age with little more than a hop step and a jump." The MSC might be viewed as Dr. Mahathirs strident challenge to the process of globalisation, a process that he characterises as the breaking down of the borders of countries so that those with the capital and the goods will be free to dominate the markets. Likening the forces of globalisation and its attendant linkages with non-trade issues, such as labour standards, to the old Imperial Preference which prevented the colonies from 20

industrialising, Mahathir suggests that we live in a brutal and unjust world, where astonishing developments in science and technology are not matched by the ability of governments to marshal forces to overcome social and economic inequities of their countries (Mahathir, 1996). There can be no doubting the governments determination to make Malaysia an IT-centric economy. The futuristic concept of the MSC and its seductive rhetoric can be enthralling, to the extent that it is almost heresy in Malaysia to even question the predictions or to seek evidence that they are materialising. Nevertheless, a vital contribution to the MSC's eventual outcome will consist of a great deal of organised and systematic reflection, so that hype is distinguished from fact, hope from reality and luck from judgement. One observation of the operations of the MSC so far is that such a reflective mechanism is highly noticeable by its absence or at least by any evidence that one might exist. In one sense, the MSC, Malaysia, and the rest of the developing world, deserves a sort of "official MSC opposition" to ferret out what is really happening behind all the pronouncements, what mistakes are being made, as they surely will be, and how they are being corrected. How do events affect the plans and how will the plans be changed, as all plans are? There can be no doubt that the contextual circumstances of the vision will change over the coming years, that the continued implementation of the MSC will change the circumstances for which it was originally created. At the very least, if recent rates of change are anything to go by, the technology will redefine itself four or five times up to the magic 2020. As Malaysia has invited itself into the information age, where the only constant is change, how is it arming itself for coping with and responding to the many inevitable changes that lie ahead? If the same depth of vision that lead to the creation of the MSC suggest five years down the track that, because of some new technology, the MSC should be scrapped, will the government of the day have the nerve to do so? Will it still have the visionary zeal that has got it so far? If the benefits that the technology brings can be made to be sustainable, can the vision that created the vision be sustained also? Will the MSC evolve into some sort of bureaucratic nightmare and continue with its technological agenda long past the time when even that technology has become obsolete and irrelevant? Time alone will provide answers to these questions and whatever the outcome of the MSC in terms of its intended benefits, the developing world will certainly benefit from Malaysias experiences. Ultimately, that lesson might represent perhaps Dr. Mahatirs most notable legacy to the post-colonial developing nations.

21

References Dedrick, J. and Kraemer, K.L, Asia's Computer Challenge: Threat or Opportunity to the U.S.? Oxford University Press, 1998 . Hofstede, G., Cultures and Organizations, Software of the Mind, Harper Collins, London, 1994. Hanna, N., Guy, K. and Arnold, E., The Diffusion of Information Technology: Experience of Industrial Countries and Lessons for Developing Countries, World Bank Discussion Papers; 281, World Bank, Washington, 1995 Mahathir, M., Rich in Hypocrisy, Sunday Morning Post, Hong Kong, October 6, 1996. U.S. Department of State, Malaysia Report on Human Rights Practices for 1996, U.S. Department of State, Bureau of Democracy, Human Rights and Labor, January 30, 1997. Poole, P. C., Information Technology: Sink or Swim? The Australian Academy of Technological Sciences and Engineering, 1997, http://www2.atse.org.au/www Raman, K.S. and Yap. C.S., From a resource rich country to an information rich society: an evaluation of Information Technology policies in Malaysia, Information Technology for Development, Vol. 7, 109-131, 1996. Selamat, M.H., Rahim, M.M., Choong, C.Y., and Othman, A.T., Non-use Phenomenon of CASE Tools: Malaysian Experience. Information and Software Technology, Vol. 36 No. 9, pp-531-7, 1994. Siowck-Lee Gan, An Overview of Information Technology and Education in Malaysia, Journal of Global Information Management, Vol. 6, No. 1, 27-32, 1998. Theaker, C., IT In Malaysian Schools, Computer Bulletin, April, 1997, 16-17. Useful links: Multimedia Development Corporation http://www.mdc.com.my MSC News http://xtremedia.com/asp/msc_mainpage.asp National Productivity Council http://www.npc.org.my/report97_1.htm Malaysia's National Economic Recovery Plan http://thestar.com.my/archives/neac/welcome.html New Straits Times http://www.nstpi.com.my CIA Factbook - Malaysia http://www.odci.gov/cia/publications/factbook/my.html 22

Appendices Appendix A. Malaysian Government Description of The Multimedia Super Corridor Project From the Multimedia Development Corporations Website http://www.mdc.com.my What is the MSC Overview Malaysia is a nation whose growth has been carefully shaped and guided by strategic fiveyear development master plans. Providing the ultimate backdrop to these programmes is Vision 2020, a national agenda that sets out specific goals and objectives for long-term development. Vision 2020 is an optimistic, yet realistic, aspiration which draws upon past achievements and embodies the collective hopes of the Malaysian people. The chief architect of this vision is Malaysias Prime Minister of 16 years, Dato Seri Dr Mahathir Mohamad. Malaysians have responded robustly to his challenge to become a fully-developed, matured and knowledge-rich society by year 2020. As a strategy to achieve the vision, Malaysia has embarked on an ambitious plan to leapfrog into the Information Age by providing intellectual and strategic leadership. This means investing in an environment that encourages innovation, helping companies, both Malaysian and international, to reach new technology frontiers, partnering global IT players and providing the opportunities for mutual enrichment and success. MSC Vision The Multimedia Super Corridor (MSC) is a gift from the Malaysian government. A gift to technology developers and users seeking to deliver high-value multimedia services and products to customers across an economically vibrant Asia and the World, to Malaysians wanting their country to prosper, and to neighbouring countries aspiring to partner with a technology hub. The MSC will be the first place in the world to bring together all the elements needed to create an environment that engenders truly mutual enrichment for all kinds of IT/multimedia companies. The MSC will bring together four key elements: Leading-edge soft infrastructure, including highly attractive incentives, unrestricted import of foreign knowledge workers, the world's first comprehensive framework of 'cyber-laws', world's first Multimedia Convergence Act, and a sharper focus on multimedia education. World-class IT network consisting of a high-speed backbone, and the most costcompetitive telecommunication tariffs offered to MSC companies. 23

MDC as a high-powered, one-stop shop that is empowered to ensure that companies interested in the MSC get what they need to succeed by providing information and advice on the MSC, and assisting in expediting permit and license approvals. Top-quality urban development in Cyberjaya, Malaysia's first major MSC-designated cybercity designed from the ground up. Welcoming the Information Age Malaysia welcomes the advent of the Information Age with its promise of a new world order where information, ideas, people, goods and services move across borders in the most cost-effective and liberal ways. As traditional boundaries disappear, and as companies, capital, consumers, communications and cultures become truly global, new approaches and attitudes to business are required. Malaysia upholds the virtues of the new world order, believing that the globe is collectively moving towards a century of the world, a century of world-wide peace and shared prosperity among nations. Malaysia has chosen to be open and pragmatic in dealing with change, and is committed to working with other world citizens to encourage creativity, innovation and entrepreneurship. Creating the Multimedia Super Corridor As a first step, Malaysia has created the Multimedia Super Corridor - a world-first, worldclass act - to help companies of the world test the limits of technology and prepare themselves for the future. The MSC will also accelerate Malaysias entry into the Information Age, and through it, help actualise Vision 2020. The MSC will bring together, for the first time ever, an integrated environment with all the unique elements and attributes necessary to create the perfect global multimedia climate. It is a length of greenfield corridor, 15 kilometres wide and 50 kilometres long, that starts from the Kuala Lumpur City Centre (KLCC), itself an intelligent precinct, which houses the worlds tallest buildings - down south to the site of the regions largest international airport, the Kuala Lumpur International Airport (KLIA), which will be commissioned in 1998. Two of the worlds first Smart Cities are being developed in the Corridor: Putrajaya, the new seat of government and administrative capital of Malaysia where the concept of electronic government will be introduced; and Cyberjaya, an intelligent city with multimedia industries, R&D centres, a Multimedia University and operational headquarters for multinationals wishing to direct their worldwide manufacturing and trading activities using multimedia technology. 24

Set to deliver a number of sophisticated investment, business, R&D and lifestyle options, the MSC will be: A vehicle for attracting world-class technology-led companies to Malaysia, and developing local industries A Multimedia Utopia offering a productive, intelligent environment within which a multimedia value chain of goods and services will be produced and delivered across the globe An island of excellence with multimedia-specific capabilities, technologies, infrastructure, legislation, policies, and systems for competitive advantage A test bed for invention, research, and other ground-breaking multimedia developments spearheaded by seven multimedia applications A global community living on the leading-edge of the Information Society A world of Smart Homes, Smart Cities, Smart Schools, Smart Cards and Smart Partnerships The Multimedia Development Corporation envisions a 20-year time-frame for the full implementation and execution of the MSC, when Malaysia will have achieved leadership in the Information Age. There will be three phases of activity: Phase I: Under this phase, the MDC will successfully create the Multimedia Super Corridor, attract a core group of world-class companies, launch seven Flagship Applications, put in place a world-leading framework of cyberlaws, and establish Cyberjaya and Putrajaya as world-first intelligent cities. Phase II: The MDC envisages that during this period, it will link the MSC to other cybercities in Malaysia and the world. It will create a web of corridors and establish a second cluster of world-class companies. It will also set global standards in flagship applications, champion cyberlaws within the global society, and establish a number of intelligent globally-linked cities. Phase III: During this final phase, it is expected that Malaysia will be transformed into a knowledge-based society - being a true global test bed for new multimedia and IT applications and a cradle for a record number of multimedia companies. It will have a cluster of intelligent cities linked to the global information super highway, and become the platform for the International Cybercourt of Justice. Cyberlaws As part of its commitment to promote the success of the MSC, Malaysia continues to work on passing a set of Cyberlaws. To date, three new Cyberlaws and one amendment to a previous Act have been passed: Digital Signature Act 1997, Computer Crimes Act 1997, 25

Telemedicine Act 1997, and Amendments to the Copyright Act 1997. Two additional Cyberlaws have been proposed: Data Protection Law, Multimedia Convergence Act (working title of Multimedia and Communications Act) Table 19 presents a list of Malaysia's Cyberlaws. Digital Signature Act 1997 - enables businesses and the community to use electronic signatures instead of the handwritten counterparts in legal and business transactions. Computer Crimes Act 1997 - provides law enforcement with a framework that defines illegal access, interception, and use of computer and information; sets standards for service providers; and outlines penalties for infractions. Telemedicine Act 1997 - mpowers medical practitioners to provide medical services from remote locations using electronic medical data and prescription standards, with knowledge that their treatment will be covered under insurance programs. Amendments to the Copyright Act 1997 - guarantees full copyright protection for multimedia works, and clarifies cyberspace or multimedia-specific issues such as legal status of digital transmissions and reasonable use of licensed multimedia works and their components. Data Protection Law (Proposed) - currently being drafted and will be tabled (discussed) mid 1998. Multimedia Convergence Act (Proposed) - currently being drafted and will be tabled (discussed) mid 1998. Telemedicine Act 1997 - This Act will " provide for the regulation and control of the practice of telemedicine; and for matters connected therewith" ("Cyber Laws "). This Act requires fully registered medical practitioners to obtain a certificate to practice telemedicine, which is valid for three years, from the Malaysian Medical Council. Medical practitioners must be fully licensed, but can hold a license granted from within or outside Malaysia. If a medical practitioner resides outside Malaysia, then telemedicine services must be performed through a fully licensed medical practitioner holding both a practicing certificate and a certificate to practice telemedicine. Failure to comply with the Act could result in a fine up to RM500,000 (~US$125 thousand) and/or imprisonment up to 5 years. The Act also requires written consent of the patient before practicing telemedicine and ensures patient confidentiality of their digital records. Failure to comply with this part of the Act could result in a fine up to RM100,000 (~US$25 thousand) and/or imprisonment up to 2 years. Multimedia Convergence Act 1997 - During the next session of Malaysia's parliament, the Multimedia Convergence Act will be tabled (discussed). This Act is still being drafted and is the result of overhauling the existing Telecommunications Act and Broadcasting Act. The new Multimedia Convergence Act is designed to regulate the very core of the Information Technology industry the regulation of telecommunications, computing and broadcasting. Once the Multimedia Convergence Act is passed, the Government realizes that a regulatory body will be necessary. Since the MSC is already in progress, the Government feels that somebody must be responsible for compatibility-related issues surrounding the multitude of networks and systems. If existing governmental bodies are not equipped to handle issues related to the Multimedia Convergence Act, then a new organization will be created. 26

Flagship Applications The Multimedia Super Corridor (MSC) is Malaysia's gift to the world. To spearhead the development of the MSC and give shape to its environment, seven primary areas for multimedia applications have been identified. These Flagship Applications contain an unprecedented and attractive opportunity for local and international business - in their variety and scope, and in the manner in which they are being offered to the global community. Driving the development of the Flagship Applications are government ministries and agencies that report directly to the MSC Implementation Council, chaired by the Prime Minister of Malaysia and his Deputy. These agencies work in close partnership with leading international and Malaysian multimedia companies to clarify the concepts and create detailed implementation plans. Joint government-private sector teams have developed concrete proposals for each Flagship Application between December 1996 and June 1997 and these have now entered the implementation phase since July 1997. Through the Flagship Applications, the Government of Malaysia extends an open invitation to the multimedia community in Malaysia and throughout the world to participate in the Multimedia Super Corridor. Companies that take up the offer will be able to create value for themselves and their shareholders in an environment uniquely suited to their needs, and at the same time have the opportunity to help transform Malaysia and the region. The MSC Flagship Applications are divided into two distinct categories: "Multimedia Development" Flagship Applications offering concrete business opportunities to facilitate the MSC's development, and; "Multimedia Environment" Flagship Applications providing an optimal environment that supports multimedia companies entering the MSC. 'Multimedia Development' Flagship Applications These projects have long-term objectives that reach far beyond the MSC's borders. Supporting Vision 2020, they aspire to transform core elements of Malaysia's technology infrastructure and social systems in areas such as education or public administration, using multimedia technologies as a critical enabler in the process. Each application will provide companies with concrete opportunities to collaborate with the Government of Malaysia in creating and implementing innovative multimedia solutions in a unique environment. Elements of these applications have already been implemented in other parts of the world. Nowhere has the entire breadth of each of these applications been attempted before in a single location. Thus, these projects will allow their implementation partners to use the MSC as a global test bed for multimedia and IT development.

27

The Flagship Applications and the lead agencies responsible for their development are: Flagship Applications Telemedicine Multi-Purpose Card Smart Schools Electronic Government Lead Agency Ministry of Health Bank Negara Ministry of Education Malaysian Administrative Modernisation & Management Unit

For each of these four Flagship Applications, teams comprising MDC, lead agencies and private-sector representatives have developed "Concept Request for Proposals" (CRFPs) that describe the requirements of identified pilot applications and give consortia of private sector companies the flexibility required to innovate and deliver the best solutions. 'Multimedia Environment' Flagship Applications Recognising the specific needs of emerging businesses and value-added service companies, these Flagship Applications substantiate the MSC's bid to develop a "Multimedia Utopia" for innovative producers and users of multimedia technologies. The "Multimedia Environment" Flagship Applications will provide both Malaysian and international companies with the opportunity to operate in an environment of close cooperation with leaders in the multimedia industry, research and academic institutions, and customers, in one of the world's most attractive business regions. These applications will also allow companies to build centres of excellence for their R&D activities, create hubs to efficiently deliver value-added services to companies throughout the region, and innovate entire businesses by taking full advantage of the MSC's unique environment and infrastructure. The Applications and the agencies responsible for their development are: Flagship Applications Lead Agency R&D Cluster Ministry of Science, Technology & Environment Worldwide Manufacturing Webs Ministry of International Trade and Industry Borderless Marketing MDC The Multimedia Development Corporation (MDC) Champion, Facilitator & Partner As a government-appointed, government-backed corporation, the Multimedia Development Corporation (MDC) was established to lead the development and management of the Multimedia Super Corridor. It is keenly and actively supported by the leadership including the Prime Minister Dato' Seri Dr Mahathir Mohamad who has taken on the role of champion and international promoter. The MDC's mission is to ensure that the goals of the MSC are rapidly and efficiently achieved. To do this, the MDC is driven by a number of objectives: To shape a world-leading environment To attract and nurture leading-edge and world-class companies To facilitate knowledge transfer and wealth creation, and To build a well-mandated, value-based, highly-effective institution. While owned and funded initially by the Government, the MDC has been incorporated under the Companies Act of Malaysia. It combines the efficiency and effectiveness of a private company having entrepreneurial flair, with the decision-making and authority of a high-powered government agency. 28

In working with companies setting up operations in the MSC, the MDC will serve as promoter and facilitator. To ensure that companies interested in entering the MSC have what they need to succeed, the MDC will function as a unique, performance-oriented, client-focused agency. It will provide information and advice on the MSC, assist in expediting permit and licence approvals, and introduce companies to potential local partners and financiers. The MDC guarantees a 30-day turnaround for applications, and will coach companies through the application process. Research The Multimedia Super Corridor Research and Development Grant Scheme (MGS) The Multimedia Super Corridor (MSC) offers an extremely competitive package of financial incentives to MSC-Status companies. An essential component of this incentive package is the availability of Research & Development (R&D) grants to qualifying companies. The Multimedia Super Corridor Research and Development Grant Scheme (MGS) is designed to help innovative local companies and joint ventures to develop relevant multimedia technologies and applications which would contribute to the overall MSC development. The main objectives of the MGS are: To encourage research and development in multimedia products and services, as well as their innovative use in the MSC. To stimulate R&D collaboration between international companies with leading-edge technology and local companies, especially SMEs. The ultimate aim is for these joint ventures to become competitive world-class companies. To support the development of Malaysian knowledge workers and improvements in productivity. To commercialise research and development results. The MGS adopts the definition of R&D as defined as in the Promotion of Investment Act, 1986: "Any systematic or intensive study carried out in the field of science and technology with the object of using the results for the promotion or improvement of materials, devices, products, produce or processes." Research in social sciences, the humanities, quality control, routine testing & data collection, efficiency surveys, management studies, market research and sales promotion are categorically excluded. Priorities are given to research and development projects leading to the development of innovative and high value adding products and services across the multimedia value chain and Flagship Applications. Cyberjaya: First Major MSC-Designated Cybercity Located at the hub of Asia's fastest growing markets, Malaysia's Multimedia Super Corridor is a bold initiative - a regional launch site for companies developing or using leading multimedia developers and users can harness the distinctive advantages of Cyberjaya. 29

International Advisory Panel Advising the Malaysian Government on the MSC's development is an International Advisory Panel chaired by the Prime Minister, which counsels on strategic issues to ensure that the MSC delivers the world's best multimedia environment. (The IAP now comprises 41 members, up from the 29 when its first meeting was held in January last year at Stanford University in California). Chairman: Dato' Seri Dr Mahathir Mohamad, Prime Minister, Malaysia Secretary: Tan Sri Dato' Dr Othman Yeop Abdullah, Executive Chairman, Multimedia Development Corporation Members: Dr Stan Shih (Chairman & CEO), Acer Incorporated Mr Serge Tchuruk (Chairman & CEO), Alcatel Alsthom Mr Gilbert Amelio (Former Chairman & CEO of Apple Computer) Mr L R Wilson (Chairman, President & CEO) BCE Inc. Mr Philip A Odeen (President & CEO) BDM International Mr Frederick Gluck (Vice-Chairman) Bechtel Group Inc. Sir Peter Bonfield (CEO) British Telecom Centre Prof. Shumpei Kumon (Executive Director) Centre for Global Communications Ambassador Diana Lady Dougan (Senior Advisor and GIIC Member) Centre for Strategic & International Studies Mr John Morgridge (Chairman) Cisco Systems Inc. Mr Eckhard Pfeiffer (President & CEO) Compaq Computer Corporation Mr Patrick Lupo (Chairman) DHL Mr Lester Alberthal (Chairman & CEO) EDS Corporation Dr Lars Ramqvist (President & CEO) Ericsson Mr Tadashi Sekizawa (President) Fujitsu Limited Prof. William F Miller (Professor, Public and Private Management, Computer Science) Graduate School of Business Stanford University Prof. Michael Spence (Dean) Graduate School of Business Stanford University Mr Lewis Platt (Chairman, President & CEO) Hewlett Packard Mr Louis Gerstner Jr (CEO) IBM HRH Prince Al-Waleed Talal Al-Saud (Chairman) Kingdom Holding Co. Mr John Doerr (Founding Partner) Kleiner Perkins Caufield & Byers Mr Bon Moo Koo (Chairman) Lucky Glodstar Group Mr Robert Madge (Chairman & CEO) Madge Networks NV Mr William Gates (CEO) Microsoft Mr Gary Tooker (Chairman of the Board) Motorola Inc. Mr James Barksdale (President & CEO) Netscape Communications Corporation Dr Tadahiro Sekimoto (Chairman) NEC Mr Jorma Ollila (President & CEO) Nokia Group Mr Jun-Ichiro Miyazu (President) Nippon Telegraph & Telephone Corporation Dr Kenichi Ohmae, Ohmae & Associates Mr Larry Ellison (President & CEO) Oracle Corporation Dr Heinrich von Pierer (Chairman) Siemens Corporation Mr Bob Bishop (Chairman) Silicon Graphics World Trade Mr Masayoshi Son (President & CEO) Softbank Corporation Mr Nobuyuki Idei (President & CEO) Sony Corporation Mr Scott McNealy (Chairman, President & CEO) Sun Microsystems Dr Robert Metcalfe (Publisher & CEO, Infoworld Publishing Company, Vice President of Technology, International Data Group, 3Com Founder) Mr Peter Job (CEO) Reuters 30

Mr Ben Verwaayen Lucent Technologies Mr Jack Valenti (Chairman & CEO) Motion Picture Association of America Mr Michael Bloomberg (President & CEO) Bloomberg Prof. Sir Alec Broers (Vice Chancellor) University of Cambridge Mr Craig R Barret (President & CEO) Intel Corporation (Chandler) Mr Jim Manzi (Former CEO of Nets Inc.)

31