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Malaysia set for digital boost with new "cloud-first" strategy

24 Oct 2017

Malaysia’s prime minister, Najib Razak, recently announced the nation’s “Cloud-First” strategy for government agencies and public sector – an initiative that aims to boost the country’s digital economy.

Announced just before the release of the 2018 Budget, Razak’s “Cloud-First” is set to become a part of the National Agenda, starting with the public sector.

The goal of the strategy is to see an increase in cloud adoption by government agencies, which the Government sees as an opportunity to inject innovation into the public sector without having to invest in initial equipment costs and IT infrastructure such as data centers.

The Internet Alliance (IA), a not-for-profit Malaysian organization, welcomes the new initiative, with the company’s president Chan Kee commenting, "We at IA, are thrilled that the government recognises how the cloud is fundamental to digital transformation.”

“The cloud has become a powerful and cost-efficient method to deliver ICT solutions and services to support the economy.”

“Therefore, prioritizing government agencies to adopt Cloud-based ICT solutions, sets a strong example of how to free from the high costs of initial equipment investments."

Lower or Exempt Withholding Tax

However, Chan calls on the government to consider lowering or exempting withholding tax for local organisations wanting to adopt Cloud or other Digital Services.

Chan says that currently, Malaysian companies that want to adopt cloud technologies or deploy digital services by foreign vendors have to pay an additional 10% withholding tax on top of the fees they already have to pay to foreign cloud providers.

“Some common instances of Malaysian companies incurring this additional 10% withholding tax are when a) Advertising with Google and Facebook b) Subscribing to overseas’ Software-as-a-Services (SaaS) and/or foreign Cloud services such as Amazon Web Services (AWS) and Alibaba Cloud c) Purchasing software licenses.”

Chan continues, “If the ‘Cloud-First’ strategy is to be a successful National Agenda, there should be economic incentive to boost it too.”

“Therefore, IA highly suggests that by lowering or even abolishing this additional withholding tax for Malaysian businesses, they will feel incentivized to accelerate their adoption of Cloud-based services and digital services.”

Buy local  

Chan also encourages local government agencies and businesses to choose cloud services from local Malaysian cloud providers.

“Together with the implementation of strategic taxation policies such as reducing or abolishing this withholding tax, encouraging public agencies to adopt a ‘Buy-Local’ mentality will also collectively boost the ‘Cloud-First’ towards a higher rate of success under the National Agenda."

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