The development of high-tech industries is a key part of the Malaysian government’s long-term development strategy, the Economic Transformation Programme (ETP). This aims to create a knowledge-based, high-income economy and drives the country’s development programmes at both the federal and state levels, with Sarawak being no exception. Numerous programmes have been launched to develop ICT nationwide, with participation between public and private sector players recognised as a key component of success. Sarawak’s ICT sector plays a particularly important role in the state’s overall development, acting as the backbone for progress in many other sectors and industries in this diverse and geographically challenging territory, as well as being a positive force for increasing social and economic equity.
NATIONAL KEY ECONOMIC AREA: The federal Ministry of Information, Communication and Culture, as well as sector regulator the Malaysia Communications and Multimedia Commission (MCMC), are guiding and driving many ICT programmes. The bulk of these are delineated in the ETP and its associated initiatives. The ETP comprises 12 National Key Economic Areas (NKEAs) with various Entry Point Projects (EPPs). Within these, the Communications Content and Infrastructure Sector NKEA was designed to establish communications infrastructure and policies that can help transform Malaysia into a knowledge-based economy – a priority for the country. The NKEA aims for the sector to make RM57.7bn ($17.55bn) in contributions to the country’s GNI and create 43,162 new jobs by 2020.
The goals set out in each NKEA are meant to be realised via the execution of EPPs. The EPPs related to the Communications Content and Infrastructure Sector NKEA include: getting more businesses online, boosting creative content, encouraging e-learning, setting up e-government and e-health care services, closing the rural-urban digital divide, building up bandwidth, and establishing the use of radio frequency identification (RFID) technology. Continuing objectives under this NKEA involve addressing affordability and accessibility issues, with the aim of delivering high-quality and affordable broadband to 95% of the population by 2020 and providing all urban areas with broadband speeds of no less than 100 Mbps. Sarawak, however, had a broadband household penetration rate of 41.2% in the third quarter of 2014 – lower than the national average of 58.6%, according to the MCMC.
NATIONAL BROADBAND INITIATIVE: Foremost in Malaysia’s attempt to reach these broadband goals has been the National Broadband Initiative (NBI), a strategy to deliver broadband services to every part of the country. Nationally, the NBI has seen good results. In its “ETP Annual Report 2013”, the Performance Management & Delivery Unit (Pemandu), which is under the Prime Minister’s Department and is responsible for overseeing the implementation of the ETP, noted that around 90% of schools and nearly 3000 health facilities nationwide now have high-speed broadband. Additionally, 70% of government services may be accessed online. In 2010 five initiatives were announced to reach the NBI’s goals: setting up 1Malaysia Internet Centres and Mini Community Broadband Centres; distributing 1m netbooks to low-income students; introducing “ekiosks”; implementing the Community Broadband Centre (CBC) project; and expanding cellular coverage.
Underlying the NBI to a great extent is the High-Speed Broadband (HSBB) project, a public-private partnership (PPP) between the government and former state company Telekom Malaysia (TM). The initiative’s aim is to build broadband infrastructure in selected areas, expanding the existing broadband and cellular coverage under the Universal Service Provision (USP) Fund. The USP Fund was established in 2002 to promote equal access to ICT infrastructure, with a focus on boosting access in remote locations. The HSBB network has been made available to other service providers on a wholesale basis, enabling them to use TM’s infrastructure, reducing unnecessary duplication. The HSBB’s targets include increasing high-speed services to 10 Mbps or more through fixed-line technologies in high-impact areas. The first phase of the HSBB project has been completed in more than 100 industrial and urban areas. Phase two was announced in the 2014 budget speech, and by mid-2014 had seen the issue of tenders for 400 telecoms towers for rural areas nationwide, as well as a new submarine cable system, called Sistem Kabel Rakyat 1Malaysia (SKR1M), which will connect Sarawak and Sabah with Peninsular Malaysia. The additional capacity opened up by SKR1M is expected to attract more international telecoms companies and countries in the region to transit via Malaysia, as well as to bring down internet charges for subscribers.
A MAJOR FOCUS: In the budget speech, Malaysian Prime Minister Najib Razak announced a three-year allocation of RM5.75bn ($1.75bn) to fund a second phase of HSBB and the associated PPPs to deliver faster broadband to more areas. “In the next three years, we are expanding the roll-out of high speed broadband in city areas to have a minimum speed of 100 Mbps and upgrade the broadband in suburban areas to have at least a minimum speed of 4-10 Mbps,” said Mohamed Sharil Tarmizi, then MCMC chairman.
Pemandu also drew attention to four main business opportunities related to the Communications Content and Infrastructure Sector NKEA that are expected to provide RM11.7bn ($3.56bn) in incremental GNI, as well as create an additional 17,625 jobs by 2020. These opportunities are related to the opening up of regional operations and the provision of fixed, mobile, courier, post and broadcast services.
Sarawak is similar to the rest of the country when it comes to fixed-line and mobile telephony penetration rates. Sarawak had a 25.7% rate as of 2013, against a 31.1% rate for fixed lines nationally, according to the latest figures from the Department of Statistics Malaysia (DOSM). The same year, the state’s mobile telephony penetration rate reached 93.3%, compared to 93.3% in Sabah and just shy of the national rate of 94.2%.
LICENCES & REGULATIONS: The MCMC is tasked with carrying out the many initiatives related to this NKEA (among others) and oversees the sector by distributing licences, regulating licensees and establishing policy in accordance with the 1998 Communications and Multimedia Act (CMA). Under the CMA, the MCMC grants licences to four kinds of providers: network facilities, service providers, applications services and content application services. In January 2015, the MCMC announced it would fast-track a review of the CMA, with a view to strengthen the effectiveness of the act to cope with internet-related issues, such as defamation and cyber-crime. The review was expected to be completed by mid-2015. Changes to the CMA will likely affect the ICT sector and content creation industry.
The MCMC also manages the USP Fund. The fund was established under the CMA to promote the availability and use of network and applications services throughout Malaysia. This includes the installation of network facilities and the provision of broadband services in rural and underserved areas – a provision of particular relevance to Sarawak. All telecoms licensees meeting certain revenue thresholds are obliged to pay out 6% of their weighted net revenue to the USP Fund. Contributing licensees are then authorised to bid on USP contracts to develop and operate services in rural areas. The USP Fund plays an important role in Sarawak’s telecoms sector because a significant portion of the state’s communications availability and take-up falls under the “rural” and “underserved” designations. Rural internet use in Sarawak was only 29.9% in 2013, compared to 58.5% in urban areas, according to the DOSM.
MCMC, in cooperation with the CBC, has taken many steps to address the state’s digital divide. These steps include distributing netbooks to low-income families, building internet centres in rural communities and establishing Kampung Tanpa Wayar, or 1Malaysia Wireless Villages. In the Kampung Tanpa Wayar, wireless internet services are made available through network service providers that contribute to the USP Fund, such as Celcom Axiata, Digi Telecommunications, Maxis Broadband and TM. By year-end 2013, there were 731 of these villages in Sarawak, out of 3728 nationwide.
SPEEDING UP: Mobile phone use is already widespread in Sarawak, with 93.3% of citizens using a mobile phone, compared to less than half who use a computer (45.9%) in 2013, according to the DOSM. In addition to bulking up the communications infrastructure in the country’s eastern states, the roll-out of 4G long-term evolution (LTE) technology also promises to bring faster speeds to Sarawak and Sabah. LTE is expected to boost capacity to meet the growing demand for data.
In 2012 MCMC awarded the 2.6 GHz spectrum band for LTE to eight operators: Celcom, DiGi, YTL Communications, Maxis, Packet One Networks, Puncak Semangat, RED tone Marketing and U Mobile. MCMC noted that it expected operators to form alliances to provide more efficient coverage.
In December 2014 DiGi announced it was launching LTE in Kota Kinabalu, Sabah, with plans to complete its LTE network roll-out by strengthening its infrastructure in east Malaysia by the end of 2014. DiGi said it expected expand coverage to Miri, Sarawak, by the end of 2014. Other operators, including DiGi, TM (via its TM go service), Maxis and Celcom, have already rolled out LTE coverage in Kuching, and Celcom had partnered with Ericsson to increase coverage beyond Kuching in Sarawak to include Miri, Bintulu and Sibu. However, LTE coverage remains sparse outside of urban area – a situation that new communication towers are anticipated to improve, if not resolve.
LOCAL PLAYERS: The operators’ roll-out of LTE in Sarawak’s cities has been made possible by infrastructure upgrades carried out by Sacofa. Sacofa, which is 85% owned by the Sarawak state government and 15% owned by Celcom, is a central network facilities provider with a remit to promote common sharing of Sarawak’s telecoms infrastructure among the operators in the state. Sacofa holds exclusive rights to own and develop telecommunications towers in Sarawak and has partnered with local telecoms provider Danawa Resources to provide services to rural and isolated areas such as Betong, Mukah and Tanjung Manis. In order to more quickly and economically build out the state’s telecoms infrastructure, Sacofa is currently exploring the possibility of erecting rapid assembly poles, referred to as rapoles, and installing cables on existing lamp poles as an alternative to building costly new towers. Sacofa also operates a submerged 1000-km fibre-optic network that links Mersing to Buntal (Kuching) and is responsible for laying a 3000-km, inland fibre-optic network throughout Sarawak.
Another local company that is drawing national and international attention is Sarawak Information Systems (SAINS). In its role as the state government’s de facto IT department, this state-owned ICT service provider manages and delivers all IT-related resources and human capital for the state government. Building on its previous achievements in the public sector, SAINS has developed into a locally grown software development company with an integrated system of legal software, SAINS Integrated Court Systems (ICS).
ICS, developed to cope with the heavy caseloads experienced by Malaysia’s courts of law, was launched in Sarawak in 2007, and in Sabah the following year. In January 2015 it was reported in the local press that Qatar’s Supreme Judiciary Council was interested in acquiring ICS for use in its own courts. Additional Sarawak-based ICT providers include SAP partner Comserv and Instacom, which is heavily involved in telecoms network services (see analysis).
OUTLOOK: While Sarawak’s ICT sector is clearly moving towards the goals set for it by the overall national development plan, government ministers recognise that more needs to be done in order for the sector to really take off. As the state continues to build the basic infrastructure and market improvements necessary to bring its ICT sector up to par – setting down fibre-optic networks, building more communications towers and laying submarine cables – the businesses that power Sarawak’s ICT sector will be anticipating the opening of the next level of the communication highway.
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