Malaysia lays roadmap for regional AI hub
04 Feb 2025
AI is projected to contribute RM530b to the economy by 2030, further strengthening the country’s commitment to lead in digital growth
MALAYSIA is positioning itself as South-East Asia’s (SE Asia) artificial intelligence (AI) hub, aiming to make AI a cornerstone of its economy by 2030.
With initiatives like the National AI Roadmap and investments in AI start-ups, research hubs and digital transformation policies, the government is driving AI adoption across key sectors such as healthcare, education and agriculture.
AI is projected to contribute approximately US$115 billion (RM530 billion) to Malaysia’s economy in five years, according to the Digital Ministry, further strengthening the country’s commitment to leading in digital growth.
In line with these efforts, RM10 million has been allocated for the National AI Office (NAIO) and RM50 million for AI education under Budget 2025.
These funds aim to enhance AI coordination, develop regulatory frameworks and create a skilled workforce to drive AI advancements, ensuring Malaysia’s leadership in the region.
High-value Activities
Science, Technology and Innovation (MOSTI) Minister Chang Lih Kang said a key initiative supporting AI’s integration various sectors is the introduction of the Strategic Investment Fund, which amounts to RM1 billion.
“The fund is intended to foster high-value activities in AI, robotics and the Internet of Things, stimulating local talent development and nurturing homegrown innovation. This investment was announced during the prime minister’s speech in the Dewan Rakyat on Oct 18.
“The Strategic Investment Fund will help Malaysia leapfrog in AI and innovation, making sure local entrepreneurs and tech companies thrive,” he told The Malaysian Reserve (TMR).
Chang also mentioned that Malaysia has been successful in attracting foreign investments, including major commitments from tech giants.
A US$2 billion data centre project from Google LLC and a US$2.2 billion investment by Microsoft Corp in cloud and AI services are set to significantly boost the country’s digital infrastructure.
He noted that these projects are expected to create jobs and enhance Malaysia’s global competitiveness.
Chang said the government is equally focused on fostering innovation among AI start-ups and research hubs.
The Strategic Investment Fund and the National Start-up Single Window platform, developed by MOSTI, provide crucial financial support and simplify the process for start-ups to access resources.
“We are creating a supportive ecosystem for innovation, connecting research institutions, universities and the private sector to accelerate the development of AI technologies,” he said.
The integration of AI in key sectors is also a priority. The National AI Roadmap identifies agriculture, education, healthcare, smart cities, transport and public services as strategic areas for AI adoption.
In agriculture, AI-powered tools are being introduced to enhance precision farming, while in education, personalised learning solutions are being developed.
“AI is transforming how we approach every sector, from farming to healthcare, making Malaysia an example of how AI can drive sustainable growth,” Chang said.
The government is also tackling the challenges posed by AI adoption, especially workforce displacement and the need for skill development.
Malaysia’s upskilling and reskilling programmes are designed to equip workers with the skills necessary for emerging digital and AI-driven industries.
Collaboration between MOSTI, the Human Resources Ministry and agencies like Malaysia Digital Economy Corp (MDEC) is crucial to the success of these programmes.
“We are preparing our workforce to take on new roles in AI, data analytics and other tech-focused sectors, ensuring they are not left behind in this digital revolution,” Chang said.
In addition, the government is integrating AI and digital literacy into national education, with universities and technical schools offering dedicated programmes in AI and automation.
Education reforms are a key part of the strategy to ensure the next generation is ready for the AI-driven future.
Malaysia’s AI strategy is designed to address workforce displacement and skill development through a multi-pronged approach that includes upskilling programmes, educational reforms, industry-specific support and public-private collaborations.
The aim is not only to protect workers from the negative impacts of AI but also to equip them with the skills and opportunities needed to thrive in the evolving digital economy.
Challenges and Opportunities
A Mimos Bhd researcher said Malaysia’s AI strategy, as outlined in the nation’s AI Roadmap, revolves around several key components designed to strengthen the country’s position in the rapidly evolving digital landscape.
“The roadmap focuses on developing strong policies to guide AI development, boosting research and innovation, building a skilled AI workforce, and promoting AI awareness and use across all sectors,” the researcher told TMR.
One of the industries benefitting from this strategic focus is healthcare, where AI is improving diagnostics, streamlining operations and even supporting remote patient care.
The researcher added that in healthcare, AI’s potential to enhance precision medicine and predictive analytics is immense.
In manufacturing, AI’s role in improving efficiency and driving growth has been transformative.
It enables more accurate quality inspections, predictive maintenance and reduces costs, which ultimately boosts industry competitiveness.
The transport sector, too, has seen AI’s impact, particularly in enhancing traffic management and optimising energy consumption.
AI is crucial for supporting smart cities and sustainable development goals, such as waste reduction and energy efficiency.
The researcher added that enhancing the country’s digital infrastructure to support AI applications is crucial for ensuring reliable connectivity.
Malaysia also faces significant challenges in becoming a leader in AI, with a major hurdle being the shortage of skilled talent.
To tackle this, efforts to reskill the workforce and attract global experts are key.
“Expanding industry-based AI education programmes will also be a critical component of overcoming this challenge,” he said.
Another significant concern is the need for stronger infrastructure to support AI training and data processing.
While data centres are being developed, there is a need for more robust infrastructure to fully leverage AI’s potential.
Data privacy is another crucial issue, with the Personal Data Protection Act playing an essential role in ensuring responsible AI use.
Additionally, promoting ethical AI practices, reducing bias and ensuring transparency are critical for fair and trustworthy AI adoption.
Bridging Financing Gaps
Malaysia Debt Ventures Bhd (MDV) CEO Rizal Fauzi said Malaysia’s AI ecosystem offers substantial opportunities across multiple sectors, including healthcare innovation, agritech (agriculture technology), fintech (financial technology), regtech (regulatory technology), green technology and smart manufacturing.
He explained that these sectors leverage AI-driven solutions to address industry challenges and unlock efficiencies, creating a fertile ground for innovation and investment.
He also mentioned the government’s initiatives to support AI development, such as the National AI Roadmap and targeted incentives. These efforts include the AI Sandbox Programme, which fosters the development of start-ups and aims to establish 900 AI companies and train 13,000 AI talents by 2026.
He noted that the AI Talent Roadmap 2024-2030 focuses on building a skilled workforce to enhance Malaysia’s global competitiveness.
Moreover, Malaysia holds a competitive position in SE Asia, supported by a strong foundation of talent, robust infrastructure and stable policies.
“Malaysia’s unique advantage lies in its balanced approach to affordability, scalability and market-readiness.
“This positioning not only attracts investments but also fosters collaboration, reinforcing Malaysia’s role as a key player in AI innovation and adoption,” he told TMR.
He touched upon the challenges Malaysia faces compared to regional players like Singapore and Indonesia, such as talent retention and access to international capital.
However, these gaps are being addressed through national efforts to scale research and development initiatives, and strengthen the talent pipeline.
“MDV plays a pivotal role in bridging financing gaps for start-ups, further solidifying Malaysia’s AI ecosystem and enhancing its regional standing,” he added.
Overcoming Misconceptions
Industrial digital intelligence Agytek Sdn Bhd CFO David Xiong noted that the government is attracting a huge amount of investments into AI-related industries, providing opportunities for start-ups to participate in this surge of growth.
He said initiatives such as NAIO have been created in a timely manner to support and consolidate these efforts.
One of the biggest challenges AI start-ups face in Malaysia, he said, is the perception and understanding of AI among the general population and businesses.
“During our client engagement, we have come across many cases where customers have, to a degree, an inaccurate understanding of AI.
“Simpler technology such as rule-based approaches are being perceived as AI, which is really not. This creates additional challenges for companies like ours, which are going for real machine learning capabilities, as we are effectively competing in an unfair style,” he said.
Furthermore, Xiong explained one of the biggest resource requirements for AI is graphics processing unit (GPU) computing power, and Malaysia is uniquely positioned to become a GPU hotspot in the upcoming months and years, as proven already by the huge amount of investment pouring into this sector.
However, more importantly, Malaysia has one of the most diverse economic structures within ASEAN, which provides training grounds in practically every single application scenario, fostering a more innovative social culture.
Xiong said Malaysia’s position as a hub within ASEAN gives it a significant edge for AI start-ups.
“As a hub in ASEAN, businesses proven in Malaysia are well-positioned to venture into other regional countries, which gives Malaysia an edge as the place of choice for AI start-ups,” he added.
Talent and Infrastructure
New Digital Sdn Bhd CEO and founder Nhu Nguyen said the company is committed to supporting Malaysia’s ambition to become a regional AI hub by 2025, focusing on research and development to create cutting-edge AI solutions.
In terms of collaboration, Nguyen explained that New Digital is actively engaging with various sectors and government bodies.
New Digital is a tech agency mainly focused on ticketing solutions for industries such as fleet, transport, hotels and tours, as well as virtual event platforms. On top of that, it offers AI solutions for customer service and sales inquiries.
Nguyen said the company is keen to contribute to Malaysia’s digital transformation by integrating AI in these sectors.
In terms of scaling operations and attracting talent, she said New Digital is taking proactive steps to ensure sustainable growth.
“We invest in AI infrastructure and collaborate with universities to nurture local talent through special programmes.
“We also partner data experts and AI academies to drive innovation together. The company is working with government initiatives such as MDEC’s Malaysia Digital Status Network and promoting Malaysia as a strategic tech hub,” she added.
Source: The Malaysian Reserve
