Public Policy in a Digital World CONFERENCE REVIEW SEPTEMBER 2018 The conference on ‘Public Policy in a Digital World’ was organized as part of the World Bank Group Global Knowledge and Research Hub in Malaysia’s ongoing engagement on the digital economy, in collaboration with the Malaysian Ministry of Finance (MOF). Conference Objectives i. To highlight and generate awareness on Malaysia’s digital economy landscape, supported by findings from the Malaysia Digital Economy Report. ii. To share Malaysia’s experience in its digital economy agenda, and gain insights from other countries. iii. To serve as a platform for policy dialogue for the government’s digital economy agenda. Public Policy in a Digital World Conference 3 Welcoming Remarks Mara Warwick Country Director for Brunei, Malaysia, Philippines and Thailand, World Bank Group Dr. Mara Warwick is the World Bank Country Director for Brunei, Malaysia, Philippines and Thailand. She manages a portfolio of more than USD 3 billion in loans, grants and trust funds in these countries, and leads the Bank’s analytics and advisory services. Prior to this, Dr. Warwick served as the Portfolio and Operations Manager for China, Mongolia and Korea, and also Sector Coordinator for Sustainable Development in Ankara, Turkey. Before joining the Bank in 2003, she worked as an engineer in the private sector. Dr. Warwick received her B.E. in Civil Engineering from the University of Adelaide, and her M.S. and Ph.D. in Environmental Engineering from Stanford University, U.S. Official Remarks and Launch of the Malaysia Digital Economy Report YB Dato’ Ir Haji Amiruddin Hamzah Deputy Minister of Finance, Malaysia YB Dato’ Haji Amiruddin Bin Haji Hamzah is the Deputy Minister of the Ministry of Finance, Malaysia. He was previously a State Assemblyman for Kedah from 2002 until present and prior to that, was also the Kedah State Chairman of the Industry and Investment, Science and Innovation Committee. YB Dato’ Haji Amiruddin Bin Haji Hamzah has also had experience in the property and engineering sector. He holds a Master’s degree in Business Administration and a degree in Civil and Structural Engineering from Bradford University. Presentation of the Malaysia Digital Economy Report Richard Record Lead Economist, World Bank Group Global Knowledge and Research Hub in Malaysia Dr. Richard Record is Lead Economist in the World Bank Group’s Macroeconomics, Trade and Investment Global Practice. Now based in Kuala Lumpur, he manages the Bank’s engagement on economic policy issues in Malaysia, including publication of the flagship report Malaysia Economic Monitor. Richard has previously worked across a number of countries in the East Asia and Africa regions, including assignments based in Lilongwe and Vientiane. 4 Public Policy in a Digital World Conference Conference Program DAY 1 9.30 am – 10.00 am Registration 10.00 am – 10.15 am Welcoming Remarks Mara Warwick – Country Director for Brunei, Malaysia, Philippines and Thailand, World Bank Group 10.15 am – 11.30 am Digital Economy in Southeast Asia: Key Enabling Factors Presenter: Marcus Bartley Johns – Senior Private Sector Specialist, World Bank Group Panel Discussion: Digital Economy Landscape in Southeast Asia – Policy Challenges for Governments Moderator: Dr. Shahridan Faeiz – Chairman, Digital Economy Committee NCCIM/DPMM Panelists: Marc Woo – Country Head for Retail, Ecommerce, Travel & Financial Services, Google Malaysia Jeffri Cheong – Managing Director and Co-founder, Kaodim.com Mira Tayyiba – Assistant Deputy Minister for Creative Economy - Coordinating Ministry for Economic Affairs Indonesia Jeanette Whyte – Senior Policy Manager, GSMA - APAC 11.30 am – 11.45 am Tea/coffee break 11.45 am – 12.00 pm Official Remarks and Launch of the Malaysia Digital Economy Report YB Dato’ Ir Haji Amiruddin Hamzah – Deputy Minister of Finance, Malaysia 12.00 pm – 12.30 pm Presentation of the Malaysia Digital Economy Report Richard Record – Lead Economist, World Bank Group 12.30 pm – 2.30 pm Private lunch session with conference speakers and presenters Participants’ lunch 2.30 pm – 3.45 pm Digital Adoption in Malaysia Presenter: Bradley Larson – ICT Specialist, World Bank Group Panel Discussion: Digital Adoption in Malaysia – Successes, Challenges and Aspirations Moderator: Natasha Beschorner – Senior ICT Policy Specialist, World Bank Group Panelists: Stan Lee – Director, Partnership & Alliances, Fusionex International Tan Sri Saw Choo Boon – Council Member, Federation of Malaysian Manufacturers (FMM) Shaifubahrim Saleh – Board Member, SME Corporation Malaysia 3.45 pm – 4.00 pm Tea/coffee break 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 5 4.00 pm – 5.30 pm Taxing the Digital Economy Presenter: Richard Stern – Associate Partner, Ernst & Young Global Tax Panel Discussion: The Digital Economy – New Tax Opportunities and Challenges Moderator: Jonathan Leigh Pemberton – Tax Specialist, World Bank Group Panelists: David Lai – Executive Director, Tax, BDO Malaysia Datuk Noor Azian Abdul Hamid – Deputy CEO (Policy), Inland Revenue Board Malaysia Ali Salman – CEO, Institute for Democracy and Economic Affairs (IDEAS) DAY 2 9.00 am – 9.30 am Registration 9.30 am – 11.00 am Digital Connectivity in Malaysia Presenter: Siddhartha Raja – Senior ICT Policy Specialist, World Bank Group Panel Discussion: Affordable and Faster Connectivity in Malaysia Moderator: Firas Raad – Country Manager for Malaysia, World Bank Group Panelists: Dato’ Mohamed Sharil Tarmizi – Senior Advisor, ASEAN Advisory, Singapore Marcus Adaktusson – VP, Head of Public & Regulatory Affairs, Communications, Region Asia Group Corporate Affairs, Telenor Group Patrick Corso – Executive Director, Time dotCom Randeep Sudan – Adviser, Digital Strategy and Government Analytics, World Bank Group 11.00 am – 11.15 am Tea/coffee break 11.15 am – 12.45 pm Digital Entrepreneurship in Malaysia Nicole Tan – Country Director, Facebook Malaysia Christophe Lejeune – CEO, Lazada Malaysia Panel Discussion: Industrial Engagement Session on Digital Entrepreneurship in Malaysia – Challenges and Ways Forward Moderator: Ndiamé Diop – Practice Manager, Macroeconomics, Trade and Investment, World Bank Group Panelists: Razif Aziz – Acting Group CEO, Cradle Fund Sdn Bhd Christopher Chan – Founder, TMS Software Sdn Bhd and Joget Inc. Smita Kuriakose – Senior Economist, Finance, Competitiveness and Innovation, World Bank Group Nordarzy Razak – Director B40, Malaysia Digital Economy Corporation (MDEC) 12.45 pm – 2.30 pm Lunch 6 Public Policy in a Digital World Conference DAY 1 SESSION 1 10.15 am – 11.30 am Southeast Asia is fast embracing digital technologies. However, there are still many gaps that countries in the region need to address. This includes improving accessibility, digital infrastructure, and strengthening the policy and regulatory landscape. This session aims to provide an overview of the region’s digital economy adoption and understand broad policy challenges moving forward. PANEL DISCUSSION Digital Economy Landscape in Southeast Asia – Policy MODERATOR PANELIST Challenges for Dr. Shahridan Faiez Marc Woo Governments Chairman, Digital Economy Country Head for Retail, Committee NCCIM/DPMM Ecommerce, Travel & Financial Services, Google Malaysia A former World Bank official, Dr Shahridan Faiez currently Marc Woo is responsible for structures investments in the Google Malaysia's revenue, fintech, sustainable food, partnerships and industry and smart cities sectors. Dr initiatives within the Financial Faiez is the chairman for the Services sector. His scope digital economy committee covers Global, APAC and for the National Chambers SEA digital related work with of Commerce and Industry Malaysia based businesses. Malaysia (NCCIM) and the Marc graduated with first Malay Chambers of Commerce class honors in Actuarial Malaysia (DPMM). Dr Faiez has Science from the London a PhD from the University of School of Economics and Cambridge. Political Science. 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 7 Digital Economy in Southeast Asia: Key Enabling Factors PRESENTER Marcus Bartley Johns Senior Private Sector Specialist, World Bank Group Marcus is a Senior Private Sector Specialist in the Macroeconomics, Trade and Investment Global Practice of the World Bank, based in Singapore. He works on lending and advisory projects, as well as policy research, in the Asia-Pacific, especially relating to e-commerce and the digital economy, trade facilitation, and regional integration. Before relocating to Singapore in December 2016 Marcus was the focal point for World Bank engagement in the WTO and other Geneva trade and economic institutions. PANELIST PANELIST PANELIST Jeffri Cheong Mira Tayyiba Jeanette Whyte Managing Director and Assistant Deputy Minister Senior Policy Manager, Co-founder, Kaodim.com for Creative Economy - GSMA - APAC Coordinating Ministry for Jeffri is the Managing Director Economic Affairs Indonesia Jeanette Whyte is GSMA’s and Co-founder of the Kaodim Senior Public Policy Manager, Group. He was formerly a Mira Tayyiba works for the based in Hong Kong. She litigation lawyer, but began Coordinating Ministry for is responsible for providing his entrepreneurial journey Economic Affairs as Assistant public policy support and by launching Kaodim in 2014 Deputy Minister for Creative engagement in Indonesia, with the desire to digitize the Economy. She is the Executive Malaysia, Singapore, home services industry. He is Director for the e-Commerce Thailand and Vietnam. a firm believer in pushing the Roadmap Project Management Jeanette graduated from limits of technology to provide Office, and represents Loughborough University with compelling and novel user Indonesia as the National Lead a BSc (Hons) in Management experiences in Southeast Asia, Focal Point for the ASEAN Sciences. She is a Sloan growing the Kaodim Group over Coordinating Committee on Fellow with an MSc from the the last 3 years to become the e-Commerce. She is also a London Business School. leading services hiring platform member of the National ICT in the region. Council. 8 Public Policy in a Digital World Conference The stage is set for the Public Policy in a Digital World Conference. Arriving at a Digital Destination How can a nation’s economy move forward into a digital future if it’s referred to as something separate? What policy makers are calling the “digital economy” will be the economy. It’s no longer an “if” but a “when”, and it’s something that policy makers need to start preparing for now. “The digital economy is about more than from the World Bank Group’s Public Policy being online. It’s about businesses, it’s about in a Digital Economy conference agreed that citizens using that online access for productive the Southeast Asian region needs to start means and to help businesses to grow,” said gearing up for the day when the term “digital Marcus Bartley Johns in his presentation. economy” is obsolete. Marcus is a Senior Private Sector Specialist in the World Bank Group. In Malaysia, while digital adoption on an individual level is high, businesses have With the fast-growing use of tech and the been slow to digitize their work flows. Internet throughout the world, panelists Representatives from government ministries, 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 9 as well as specialists in the In Malaysia, the government private sector acknowledged has put in place some policies that facilitating the move into that aim to move the economy a digital world requires a towards a more digital slant. multi-stakeholder approach. Deputy Minister of Finance Dato’ Ir Haji A mir uddin While governments have a Hamzah highlighted five areas key role to play in terms of as “catalysts to spearhead” coming up with regulations, Malaysia’s move toward Mira Tay yiba, who is the becoming a global player in “Providing digital Assistant Deputy Minister the digital economy. infrastructure is for Creative Economy in one thing. Having Indonesia, says that it’s not an T he five areas include: easy process. big data analy tics, cloud the capacity to co m p u t i ng, e co m m e rce, use it is another.” Not only is the digital world Internet of Things (IoT) and -Mira Tayyiba moving at an ex tremely artificial intelligence. For any fast pace, there’s also a of these to really take off, the dearth of data available to government first has to tackle the government, she said. the issue of infrastructure ie. At the same time, digital making fast and affordable policies require input from a broadband available. range of ministries. “Working between ministries can be O n to p of t hat, Dato’ a challenging task,” Mira Amiruddin also recognized admits. the need for development “It’s not easy for governments. Different organizations are at different levels. It is an issue. What we need is multi-stakeholder engagement with the right people.” -Jeanette Whyte Marcus Bartley Johns giving his keynote presentation. 10 Public Policy in a Digital World Conference of local talent to ensure digital world by providing that Malaysians are “future facilities that make online ready”. transactions easier. However, existing policies Other private companies within the region are only like Kaodim.com are s c r atc hing t he s ur f ace. providing a platform for SME “For cross-cutting digital entrepreneurs to get online p olic y is s ues like dat a and connect to consumers “Technology is privacy and cross-border with ease. “We give them evolving very d a t a f l o w, r e g u l a t o r y an online presence,” said infrastructure in the region Jeffri Cheong, who is the rapidly. Consumer is underdeveloped,” said Managing Director and Co- intelligence is Johns. founder of the company. evolving as well. People want GSMA-APAC Senior Policy “70% of the SMEs on our more from online Manager Jeanette Why te plat form depend on our companies.” s ug g e s te d t hat p r i v ate platform for the growth of companies could play a role their businesses,” he added. -Jeffri Cheong in moving ASEAN into a more Panel Discussion Session 1 on the Digital Economy Landscape in Southeast Asia. 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 11 Key Challenges for the Region Governments are only now beginning to talk about how to develop policies for a digital future. There is still a long way to go in terms of digitization, and within the Southeast Asian region, governments are already behind. During her panel session, Mira Tayyiba, who is the Assistant Deputy Minister for Creative Economy in Indonesia, highlighted Dato’ Ir Haji Amiruddin Hamzah, Deputy Minister of three challenges that governments Finance Malaysia delivering his keynote speech. face when attempting to regulate the digital economy. 1. The digital world is dynamic and extremely fast-moving. Governments have to move fast to catch up. This can be difficult, especially with the level of existing bureaucracy. 2. To really understand the technology available, governments need data. “ASEAN is the fourth largest in However, industry players might terms of trade and the third be reluctant to share this data largest in terms of population. due to certain factors eg. tax It’s an incredibly exciting concerns. Governments need to region. The crux of this is not look for ways to collect data. so much the data flow, or the 3. There are many ministries challenges around regulation, in governments. Working but really the potential of what between ministries can be a the digital economy can bring challenging task. to the region as a whole.” -Marc Woo 12 Public Policy in a Digital World Conference Richard Record presents Malaysia’s Digital Economy Report. Four Main Streams of Research Digital adoption, digital connectivity, digital entrepreneurship and digital taxation. These are the four main issues that need to be addressed if Malaysia is to move forward into a digital future. During his presentation at the Public Policy in a Digital World Conference, World Bank Richard highlighted four policy goals Group’s Lead Economist Richard Record was that Malaysia should adopt: quick to stress that these four items did not • Create a more dynamic digital form “an exhaustive list”. ecosystem with increased competition “But it’s four issues that we found to be • Achieve universal, fast and inexpensive important and relevant,” he said. Internet connectivity • Improve human capital through According to Richard, Malaysia has yet better curricula and lifelong learning to reach its full potential in digitizing its opportunities economy. Paying attention to these four areas would enable Malaysia to unlock the • Safeguard future digital tax revenues full potential of a digital economy. 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 13 He also made an interesting challenge that Malaysia and the obser vation about how rest of the world faces. Malaysians generally have a high level of financial literacy, “This goes to the heart of our and yet, are extremely hesitant partnership with the Ministry of about making payments online. Finance. Malaysia is in the same position as almost every other “Malaysia’s There are other similar major economy,” said Richard. biggest incongruencies in Malaysia. impediment to For example, digital adoption The question that needs to in Malaysia is very high on an be addressed is this: How do digital adoption individual level but businesses you strike a balance between is the high cost have been slow to adopt digital facilitating the growth of this and slow speed technologies. new area of the economy of fixed and while safeguarding the future “We see lagging uptake of both of public finance and public fibre broadband digital payments and open revenues? internet.” data,” said Richard. -Richard Record Growing public revenue also “The number of Malaysians who ensures that the government is have bank accounts is very high, able to further invest into the but we do see that the rate at growth of the digital economy. which Malaysians are accepting For example, to reinvest into digital payments and digital human capital. transactions is not as high as in other comparable economies.” He also suggested the possibility of opening up public data sources and making that data available to businesses, to be used to grow the digital economy even more. In order to ensure fur ther growth of the economy, school curricula are being edited to include more digital-focused knowledge. Richard added that encouraging lifelong learning was an important aspect that the Malaysian gover nment should look into as well. As the economy moves even further into the digital sphere, one challenge that needs to From Left: Mara Warwick, Dato’ Ir Haji Amiruddin Hamzah, Firas Raad and be solved is taxation. It’s a Richard Record presenting the report on Malaysia’s Digital Economy. 14 Public Policy in a Digital World Conference DAY 1 SESSION 2 2.30 pm – 3.45 pm Malaysia has rapidly expanded access to basic internet services – outperforming most regional peers. But adoption by businesses remains low, compared to international peers and progress in other dimensions of the economy. This session examines the state of digital adoption in Malaysia, particularly in the business sector, and discusses obstacles that limit smaller businesses from riding the wave of the digital economy. PANEL DISCUSSION Digital Adoption in Malaysia – Successes, Challenges and MODERATOR PANELIST Aspirations Natasha Beschorner Stan Lee Senior ICT Policy Specialist, Director, Partnership & Alliances World Bank Group Fusionex International Natasha Beschorner is a Stan Lee has been in the IT Senior Information and industry for the past 15 years, Communications Technology starting with Trend Micro Inc, a (ICT) Policy Specialist in the global security solution provider World Bank’s Global ICT with his last position being Country Department. She has been Sales Manager for Malaysia. Stan with the World Bank since 1993 has presented over 400 public and her responsibilities include speeches covering numerous the design and management topics ranging from organizational of investment projects and best ICT security practices technical assistance programs and big data analytics (BDA). on telecommunications reform Stan is currently the Director of and ICT for development. Partnerships and Alliances for Fusionex International, a proud Malaysian establishment at the forefront of Big Data Analytics in the region and globally. 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 15 Digital Adoption in Malaysia PRESENTER Bradley Larson ICT Specialist, World Bank Group Bradley Larson is part of the World Bank’s World Development Report (WDR) team. He has worked on the Bank’s most recent WDRs, including on Digital Dividends. Prior to joining the WDR, he worked for the World Bank’s Public Sector Governance Unit, the Special Inspector General for Iraq Reconstruction, and the Center for Strategic and International Studies. He has an MA in Strategic Studies and Economics from the Johns Hopkins School of Advanced International Studies. PANELIST PANELIST Tan Sri Saw Choo Boon Shaifubahrim Saleh Council Member, Federation of Board Member, SME Corporation Malaysian Manufacturers (FMM) Malaysia Tan Sri Saw served 40 years and Mr. Shaifubahrim Mohd Saleh is retired as the Chairman of Shell a Board Member for SME Corp. Malaysia in 2010. Tan Sri Saw is and the Malaysian Venture now a Board Member of RHB Capital Management Berhad Bank, Digi.Com, Wah Seong Corp, (MAVCAP). Prior to this, he and the Chairman of MQREIT was the Chief Business Officer Management. He is also a Council for REDtone International member and a former President Board, and board member for of FMM. the Multimedia Develpment Corporation (MDEC). 16 Public Policy in a Digital World Conference Bradley Larsen delivering his keynote presentation. Why Digital Adoption by Businesses is Lagging According to Bradley Larson, ICT Specialist at the World Bank Group, this latest report addresses the “middle conversation” between the tech optimists and pessimists. The former are proponents of the conversation on how technology will “solve all our problems”, while the latter tend to spread fear about how the “robots will take over our jobs”. This current framework examines both is t he hig he s t in t he manu f ac t ur ing benefits and risks. “To mitigate or even industry. However, Federation of Malaysian eliminate risks, you have digital adoption Manufacturers (FMM) Council Member Tan plus these complements” said Brad. “These Sri Saw Choo Boon said that it’s “actually still complements” being innovation (increase low”. competition), efficiency (encourage upskilling) and inclusion (data access). “Traditionally, businesses are built on a low cost model that utilizes foreign labor. It’s Brad highlighted that digital adoption hard to talk to business owners about digital 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 17 adoption,” he said. There is a Alliances, Stan Lee believes high upfront cost associated that the lack of digital with making the move to adoption is more due to fear digital. than anything else. During the panel discussion on Besides this high upfront Digital Adoption in Malaysia, cost – which includes costs he said that we live in a time for software and hardware of “luxury”, where a lot of – Tan Sri Saw added that tech is free of charge. Thus, business owners have tech- cost is not a main issue. related security concerns, “For e-commerce, as well as a lack of access “ Te c h n o l o g y is in don’t depend to affordable high speed a b u n d a n c e,” h e s a i d . too much on Internet. These are the main Fusionex is a data marketplaces reasons why “manufacturers technology provider based like Alibaba or are not adopting Industry in Malaysia and based on Amazon. You must 4.0”, according to Tan Sri his experience, Lee believes Saw. many business owners are have your own complacent and are still in a website.” On the other hand, Fusionex wait-and-see mode. -Tan Sri Saw Choo Boon Director of Partnership and Panel Discussion Session 2 on Digital Adoption in Malaysia. 18 Public Policy in a Digital World Conference “The receptivity level of the SME Corporation Malaysia business person taking and Board Member Shaifubahrim incorporating tech as part of Saleh also believes that SME their business processes is entrepreneurs need to be the main issue,” Lee said. He made to understand that added that there are many technology is an enabler. government grants available “Get them to focus on their and obtaining money to customer,” he said. Tech digitize a business is very allows businesses to provide possible. Thus, cost should bet ter ser vices to their not be used as an excuse. customers. However, he believes that Due to the number of the government can do a SMEs in Malaysia, getting better job of broadcasting these companies to adopt the information on these technology would create grants ie. in a way that is also a huge jump in digital accessible to non-tech savvy adoption in Malaysia. entrepreneurs. Natasha Beschorner Full attendance at the Conference. 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 19 Stan Lee Tan Sri Saw Choo Boon Shaifubahrim Saleh On the current Malaysian Besides provision of government ’s to double m e nto r i n g to b u s i n e s s Internet speeds and halve owners to get them to go the cost, Shaifubahrim said digital, Shaifubahrim also that he would like to stretch added that the government that further. was also looking to revamp the syllabus in local “We have the capacity to universities, to ensure that achieve far greater. There local graduates are market- are technologies available ready for jobs that may not “The receptivity that will allow us to 10-fold exist yet. level of the business the Internet speed,” he said. person taking and Lee believes that all The panelists all agreed e nt re p re ne ur s ne e d to incorporating tech that there was a need have a level of IT literacy, as part of their for education. “In adding that perhaps this was business processes manufacturing, some are only something the government is the main issue.” at the stage of automation, could look into. -Stan Lee not even digitization,” said Tan Sri Saw. 20 Public Policy in a Digital World Conference DAY 1 SESSION 3 4.00 pm – 5.30 pm Taxing digital transactions effectively and efficiently is a challenge for many countries. It is important for the domestic fiscal framework to encourage development of the digital economy. However, it is also imperative for Malaysia to secure a fair share of tax revenue from profits generated by providers of digital goods and services, especially those based abroad. This session explores options to raise revenue from the digital economy, outlining the key challenges while considering recent actions by the international community. PANEL DISCUSSION The Digital Economy – New Tax Opportunities and Challenges MODERATOR PANELIST Jonathan Leigh David Lai Pemberton Executive Director, Tax Specialist, Tax, BDO Malaysia World Bank Group David Lai is the Head of Tax Jonathan Leigh Pemberton is Advisory/Executive Director, a Senior Tax Consultant and Tax at BDO in Malaysia. member of the Bank’s Global David has over 26 years of Tax Team. He spent 29 years experience in professional with the UK’s tax authority practice, investment and four years at the OECD. banking and was CFO of He also has a part time post a multinational group. He at the Vienna University of specializes in corporate tax Economics and Business’s advisory, indirect tax (GST/ Global Tax Policy Centre.  SST) and transfer pricing. He is a member of CTIM’s Direct Tax Technical Committee and is chairman of its Indirect Tax Technical Committee. 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 21 Taxing the Digital Economy PRESENTER Richard Stern Associate Partner, Ernst & Young Global Tax Richard Stern has led EY’s Tax Policy for Government Services since October 2017. He has over 20 years of experience in hands on tax reform in over 70 countries globally, leading the World Bank Group’s Global Tax team and developing the Bank’s international tax practice. He has experience in both direct and indirect tax but has had a particular focus on international tax issues, including transfer pricing, BEPS, tax treaty policy, and digital economy taxation. PANELIST PANELIST Datuk Noor Azian Ali Salman Abdul Hamid CEO, Institute for Democracy Deputy CEO (Policy), and Economic Affairs (IDEAS) Inland Revenue Board Malaysia Ali is CEO of IDEAS. Ali is an Datuk Noor Azian is the economist, public policy expert Deputy CEO (Policy) at the and a think tank professional. Inland Revenue Board Malaysia He has authored more than (IRBM). Her role includes thirty independent studies, giving input and advice reports and monographs on in matters relating to tax wide range of topics including policies, leading IRBM in tax regional trade, public finance, treaties, Mutual Agreement competition policy, innovation, Procedure (MAP) and Advance and youth policy for multilateral Pricing Arrangement (APA) agencies, governments, non- negotiations. She also profits and private firms. represents IRBM in meetings of the OECD/G20 Inclusive Framework on BEPS. 22 Public Policy in a Digital World Conference Richard Stern delivering his presentation on Taxing the Digital Economy. Guarding Government Revenues in the Future Economy As the economy becomes more digital, taxing digital sources become a must. The challenge policy makers face now is, as highlighted by Richard Stern is “do we know what we are taxing?” Since not all products sold online are tangible, IRB Malaysia Deputy CEO (Policy) Datuk how would they be valued? How do you define Noor Azian Abdul Hamid said that one of the what “enough economic activity” is for it to be concerns was maintaining consistency with taxable? the “international community”. “These are things that we are looking into,” she said. In the case of digital taxation, especially with its cross border implications, coming up with BDO Malaysia Tax Executive Director David the right terms and corresponding definitions Lai says that the current taxation model is a challenge. “doesn’t work well in the digital economy”. 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 23 “If Malaysia would like address the issue of prices and effect on consumers,” he added. taxing the digital economy, the first thing to do would be to revisit the scope of tax under IDEAS CEO Ali Salman concurred, and said the service tax – to extend it to services that the government must be careful when performed, including outside Malaysia. And coming up with tax policies. more on where the place of consumption is, rather than where the service was performed,” David further highlighted the importance of he suggested. aligning Malaysian tax policies with global standards, “to prevent things like double However, he raised a point of concern. “One taxation”. He suggests that the government of the most important things to look after first put in a place a shorter term plan – with a is the prices – to make sure that prices are simple tax system that does not place too much controlled. Whilst it’s a good idea to extend burden on businesses – while developing an the scope to cover digital, one also has to international model in the longer term. make sure that it doesn’t cause inflation in Clockwise from top left: Jonathan Leigh Pemberton, David Lai, Ali Salman and Datuk Noor Azian Abdul Hamid. 24 Public Policy in a Digital World Conference DAY 2 SESSION 4 9.30 am – 11.00 am Malaysia has made substantial progress in connecting people to basic internet services with nearly 80% of the population online, primarily through mobile networks. However, Malaysia lags in coverage and adoption of fixed broadband services. Ensuring that Malaysia’s digital infrastructure provides ubiquitous, reliable, and ultra-fast broadband internet service is key to unlocking the potential of the digital economy. This session provides an overview of the digital connectivity in Malaysia, and how this is impacted by the market structure and regulatory regime. PANEL DISCUSSION Affordable and Faster Connectivity in Malaysia MODERATOR PANELIST Firas Raad Dato’ Mohamed Country Manager for Malaysia, Sharil Tarmizi World Bank Group Senior Advisor, ASEAN Advisory, Singapore Dr. Firas Raad is currently the World Bank Country Manager Qualified as a lawyer and for Malaysia, beginning his now busy in the areas of assignment on August 15, 2018. corporate finance, M&A & As Country Manager, he heads regulatory advise. Formerly the World Bank Group’s Global Chairman & CEO of MCMC, Knowledge and Research Hub in Malaysia’s telecoms, media Kuala Lumpur. Prior to Malaysia, & postal regulator, during he served for three years as the which Malaysia’s household World Bank Country Manager broadband penetration in Kuwait overseeing a large moved from 28% to 70%. He Reimbursable Advisory Services also mentors several tech (RAS) Country Program focused companies globally. on supporting the long-term development priorities of the Kuwaiti Government. 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 25 Digital Connectivity in Malaysia PRESENTER Siddhartha Raja Senior ICT Policy Specialist, World Bank Group Siddhartha Raja is senior Digital Development specialist with the World Bank Group. He works with governments across Asia and Europe to connect more people to information, to markets, and to public services. He has a doctorate in telecommunications policy from the University of Illinois. PANELIST PANELIST PANELIST Marcus Adaktusson Patrick Corso Randeep Sudan VP, Head of Public & Regulatory Executive Director, Adviser, Digital Strategy and Affairs, Communications, Region Time dotCom Government Analytics, Asia Group Corporate Affairs, World Bank Group Telenor Group Patrick Corso is an Executive Director at Time dotCom, Randeep Sudan is the global Marcus Adaktusson heads one of Malaysia’s leading Adviser on Digital Strategy Public and Regulatory Affairs for telecommunications providers. and Government Analytics Telenor Group in Asia. He has ten Prior to this, Patrick was the for the World Bank. He years of managerial experience Managing Director and Founder was previously the Practice in telecommunications across of OST Capital, a private Manager for the Bank’s Scandinavia and Asia, and investment firm based in Hong Digital Development Unit was previously Director Kong, and Managing Director at Washington DC. Prior to of Communications at and Head of the Hong Kong joining the World Bank he Grameenphone in Bangladesh. office of Providence Equity worked as a member of the He holds a M.Sc. in Business Partners. Prior to that, Patrick Indian Administrative Service. Management from the Stockholm worked at the Credit Suisse First School of Economics. Boston and Morgan Stanley in London in their European Telecoms groups. 26 Public Policy in a Digital World Conference Siddhartha Raja delivering his keynote presentation. Affordable and Faster Connectivity What happens when Internet connectivity in a country is monopolized? It becomes less competitive, and businesses have limited options when it comes to Internet connectivity. Costs are high, and speed standards go unchecked. Some say that this is one of the issues that broadband infrastructure. These companies Malaysia currently faces with regards to chose to focus on mobile instead. digital connectivity. Many say that this lack of competition is due to existing regulations. Dato’ Mohamed Sharil Tarmizi, who used to be with the Malaysian Communications and However, those who know better say that Multimedia Commission said that “regulatory this isn’t the case. According to Randeep impediment” is not the issue when it comes Sudan, the Malaysian government issued to companies going into fixed or mobile five fixed line licenses in the early 90s. These broadband. licenses “did not go ver y far” because huge investments are required to go into “In 1998, Malaysia did a complete overhaul 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 27 of its telecommunications no regulatory impediment for regulator y framework. fixed or mobile,” he said. It promulgated the Communications and The hesitance of cer tain Multimedia Act, which was the companies to enter the fixed first legislation in the world broadband market has more that was converged. So there to do with cost, rather than was no distinction between regulations. media, telecommunications, broadcasting and so on. “Operators have decided to focus on their respective “In that framework, there a r e a s of b u s i n e s s a n d was no longer a distinction competency,” said Sharil. “More competition between fixed and mobile, as leads to better far as licensing is concerned. While there is no restriction services and more Companies like Telekom from a regulatory standpoint, Malaysia, Maxis, Celcom Sharil admits that the view is affordability for were free to choose what different from the ground. customers.” area of business they want “State authorities put up -Marcus Adaktusson to operate in. It’s important their own regulations,” he to note this because there is said. Due to these local Panel Discussion Session 4 on Affordable and Faster Connectivity in Malaysia. 28 Public Policy in a Digital World Conference state regulations, there can enough of those networks be a “big chunk” of capital in the country, it would be expenditure in civil works. impossible for mobile to advance as well. “That’s why some companies pursue mobile instead,” he Patrick Corso, TIMEdotCom said. Executive Director, says that regulators need to find a way Marcus Adaktusson from for companies to go into Te l e n o r G r o u p, w h i c h specific areas effectively in “The more has invested in the local order to save cost. As the competitive telecommunications situation is today, there are connectivity is, company Digi, says that it’s limitations as to how much obsolete to talk about fixed the company can access in particularly for and mobile Internet as two an area. businesses, the separate things as they are more competitive both converging at a very Gover nment s need to the economy will rapid pace. work together with private be. Not only now, companies in order for “Fib re is e s s e ntial for digital connectivity in the but in the future.” 5G net wor ks,” he said, country to keep improving. -Firas Raad adding that if there isn’t Participants listening attentively to the discussion. 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 29 Dato’ Mohamed Sharil Tarmizi Patrick Corso Randeep Sudan On top of panelist suggestions, Siddhartha Raja, who is a Senior ICT Policy Specialist at the World Bank Group, had two recommendations for Malaysia to increase its digital connectivity: • Use existing infrastructure more efficiently. This would include actions such as “sharing of passive infrastructure” so that more players are able to enter the market, thus encouraging competition and therefore, better value for “You cannot look consumers. at connectivity in isolation. It’s one • Make bold policy moves to attract private capital, for important part, example, treating broadband as a utility and making it compulsory for building developers to include for sure. But there broadband into all new construction. This could reduce are so many other the cost of future network deployment, allowing more aspects as well companies from the private sector to invest in network including training, setup. capacity building “For Malaysia to take the next step for ward into the and so on. These development of a digital economy, we’re going to need that things need to be underlying infrastructure to be in place. A reliable, high speed, invested in as well.” broadband infrastructure that is affordable,” said Siddharta. -Marcus Adaktusson 30 Public Policy in a Digital World Conference DAY 2 SESSION 5 11.15 am – 12.45 pm Promoting digital entrepreneurship is an important avenue through which Malaysia is attempting to spur economic growth and job creation. Over time, the government has implemented various initiatives in this area - but obstacles remain, including a lack of skilled workers and venture capital, and a slower uptake of digital transaction technologies. This session looks into Malaysia’s digital entrepreneurship ecosystem, the efforts by key players, and discusses primary challenges as it moves forward. PANEL DISCUSSION Industrial Engagement Session on Digital Entrepreneurship MODERATOR PANELIST in Malaysia – Ndiamé Diop Razif Aziz Challenges and Practice Manager, Acting Group CEO, Macroeconomics, Trade and Cradle Fund Sdn Bhd Ways Forward Investment, World Bank Group Razif is a senior executive with Previously the World Bank over 23 years of experience in a Lead Economist for Indonesia, variety of different roles ranging Ndiamé joined the World Bank from business development, in 2000 as a Young Professional. corporate, legal & regulatory He has worked successively as affairs, telecoms & broadcast, Senior Economist at the Trade government and biotechnology. Department, Senior Economist He is keenly aware of the and Resident Representative in impact that regulations, policy, Tunisia and Lead Economist for public sector frameworks and Jordan and Lebanon. technology have on the growth of business and have written extensively on these topics in specialist and daily newspapers. 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 31 Digital Entrepreneurship in Malaysia PRESENTERS Nicole Tan Country Director, Facebook Malaysia Nicole Tan is the Head of Malaysia for Facebook. In her role, Nicole leads the local business team to partner closely with businesses and agencies to help them get more value out of Facebook's solutions. Nicole was most recently Managing Director of J.Walter Thompson (JWT) Malaysia and carries 20 years of industry experience in the FMCG, tech, automotive sectors. Christophe Lejeune CEO, Lazada Malaysia Christophe is the CEO of Lazada Malaysia since January 2018, He is responsible for bringing products and brands to online shoppers in Malaysia, and developing comprehensive plans to ensure Lazada’s success in the country. PANELIST PANELIST PANELIST Christopher Chan Smita Kuriakose Nordarzy Razak Founder, TMS Software Sdn Bhd Senior Economist, Finance, Director B40, Malaysia Digital and Joget Inc. Competitiveness and Innovation, Economy Corporation (MDEC) With more than 20 years of World Bank Group Nordazry Razak is the experience in the IT industry, Smita Kuriakose is a Senior Director of the Sharing Chris was involved in the Economist in the Trade & Economy Ecosystem Division management of TMS Group and Competitiveness Global Practice of the MDEC, responsible for helped develop its strategic in East Asia and the Pacific with planning and implementing direction. Chris is actively over 12 years of development national programs. His involved in new startups policy experience. In her role, work involves creating a and investing in companies she has led policy dialogue with conducive framework and involved in mobile applications upper-middle, middle- and low- collaborative national model development, business income countries in Europe and for platform players and process management, IoT, and Central Asia (ECA), East Asia, participating citizens. distribution and payments Africa and South Asia. systems. 32 Public Policy in a Digital World Conference Nicole Tan delivering her presentation. The New Breed of Entrepreneurs We’ve arrived to a time when the term “digital entrepreneur” should be retired. “Think in terms of entrepreneurs utilizing digital tools,” said Facebook Malaysia Country Director Nicole Tan. One of the most powerful tools available right technology, international trade is possible for now is the mobile device. “We’re only at the even an SME with just one office Malaysia. beginning of the age of mobile,” said Nicole. And yet, businesses are still lagging behind. “Malaysian businesses already have cross border opportunities,” said Nicole, who cited “Businesses need to catch up to where people the example of a business run by a stay- are spending their time,” she said. at-home mom in Malaysia that was getting customers from South America. With the abundance of online tools available, entrepreneurs should be thinking global. At the same time, Lazada Malaysia CEO A company no longer needs to be in many Christophe Lejeune reminded everyone in countries to be global. With the use of the room that it takes collaboration to get 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 33 things done. “You can’t do agencies is incredible”. He is ever y thing yourself!” he the founder of TMS Software said. He believes that one Sdn Bhd and Joget Inc. should focus on what they’re good at, and that private “I wouldn’t be here today companies should work with if not for these government the government if Malaysia agencies,” he said. wants to move its economy into the digital world. H o w e v e r, M D E C B 4 0 Direc tor Nordar zy Razak “There’s no such In terms of government admitted that effor ts are thing as a digital suppor t, there has been of ten uncoordinated. entrepreneur. There’s much of it in Malaysia. With There have been cases of a wide range of government- duplic ated ef for t s from only passionate backed ins titutions and different organizations. entrepreneurs that agencies to suppor t the we see that are entrepreneur community, Cradle Fund’s Acting Group operating in a fast- like MAGIC, Cradle, MDEC, CEO Razif A ziz agreed moving, shifting Malaysia is a good place to with this. “When you have digital world. become an entrepreneur. that many ministries and agencies, it can be hard to That distinction is Entrepreneur Christopher coordinate,” he said. He important.” Chan agreed that the “role of suggested that perhaps all -Nicole Tan Christophe Lejeune giving his presentation. 34 Public Policy in a Digital World Conference Ndiamé Diop Razif Aziz Christopher Chan Nordarzy Razak tech-related agencies could aren’t too many coders. So come under one ministry. that’s the real challenge,” she said, adding that many S m i t a K u r i a ko s e f r o m Malaysian entrepreneurs the World Bank Group hired coders from Indonesia suggested that the and Vietnam. government make room for the private sector to “step in “That is going to be an issue and take some of the space”. in the medium and long “Everybody term. You want to have the “The government has technical expertise in-house, wants to be an p r ov i d e d t h e e na b li n g not to always be getting entrepreneur but environment and now it’s people from outside,” she there aren’t too time for the private sector to said. many coders. So come in, especially in areas that’s the real like education,” she said. Razif suggested that the private sector could provide challenge.” “Ever ybody wants to be suppor t in the form of -Smita Kuriakose an entrepreneur but there network, information, debt 12-13 September 2018 | Multipurpose Hall, Lanai Kijang, Kuala Lumpur 35 and so on. However, he said that there was a need to “catalyze the space” to make it interesting for the private sector to come in. “It’s not sustainable for Cradle to keep pumping in money,” he said. Interactive Q&A session with participants. We would like to thank all speakers, panelists and participants for making this a successful and fruitful conference.