Malaysia's thriving GBS Sector: A driving force in the digital economy
According to the Malaysia Digital Industry Report 2020 – 1H2022, investments in the Global Business Services (GBS) sector accounted for approximately 50% of total digital investments in Malaysia between 2017 and 2021. The report highlighted that the GBS segment is the largest contributor to the digital industry, accounting for 69% of exports and 60% of job creation in 2021. The GBS industry is now one of the key pillars supporting Malaysia's digital economy.
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Malaysia's offshoring industry, formerly known as Shared Services and Outsourcing (SSO) and Business Process Outsourcing (BPO), has existed since the mid-1980s. The industry experienced significant growth in the mid-90s with the introduction of the Multimedia Super Corridor (MSC) initiative by the government, attracting international players like Intel, IBM, DHL, and Fujitsu. Over time, the outsourcing landscape evolved into what is now known as Global Business Services (GBS).
As of 2021, Malaysia has 607 GBS companies, with 58% foreign direct investments. Approximately 30% of these companies are listed in the Forbes Global 2000 and/or Fortune 500. The presence of these prestigious companies underscores Malaysia's attractiveness as a destination for GBS investments, contributing to the growth of the country's digital economy and creating significant employment opportunities.
Occupier footprint
GBS companies are primarily concentrated in Greater Kuala Lumpur, with a presence across various industries. In the northern region of Penang, Malaysia, most companies engage in manufacturing-related activities. Established GBS nodes include KL Sentral, Bangsar South, Petaling Jaya, Bandar Utama, and Bandar Sunway. Initial office space requirements for GBS players typically range from 15,000 to 25,000 sqft, with plans for gradual growth up to 100,000 sqft.
In the near future, the Malaysia Digital Economy Corporation (MDEC) aims to create "5km concentric GBS hubs" across the country, including Greater KL. Tun Razak Exchange (TRX), the country's new international financial centre, is being considered as the GBS hub for finance-related players. At the same time, Cyberjaya remains the focal point for IT-related companies.
Outlook
The Malaysian government is committed to nurturing the country's digital landscape through initiatives such as the National IoT Strategic Roadmap and MyDIGITAL, a 10-year blueprint with three phases. Key incentives like the National Fourth Industrial Revolution (4IR) Policy and Industry4WRD are designed to accelerate digital transformation, industry transition, and supply chain optimisation. The creation of the Digital Ministry in January 2024 further emphasises the government's dedication to digitalisation efforts.
Under the 'Digital Investment Future5 (DIF5) Strategy' launched in 2021, MDEC aims to attract MYR 50 billion (approx. USD 12 billion) in digital economy investments by 2025. This includes attracting 50 Fortune 500 technology companies and creating 50,000 high-value jobs. The strategy also focuses on the growth of Digital Global Business Services through establishing Centres of Expertise (CoE) to cultivate tech talents. Various initiatives, including #MyDigitalWorkforce Work in Tech (MYWIT) and Premier Digital Tech Institute (PDTI), emphasise upskilling and reskilling to bridge the digital talent gap.
In Greater KL, real estate costs are expected to remain competitive due to the tenant-led market in the short to medium term. The government's decision to remove location restrictions for tax benefits of MD-status companies is likely to incentivise landlords of new office developments to future-proof their offices. At the same time, existing buildings may undergo refurbishment to become "digitally-ready" spaces. This offers GBS companies seeking expansion or new office setups in Malaysia a range of quality office spaces at competitive rental rates.
As GBS businesses increasingly adopt technology to enhance efficiency and streamline operations, the availability of skilled digital talent and a robust digital ecosystem become crucial factors in determining expansion and relocation strategies. With strong government support, competitive real estate costs, and a growing pool of digital talent, Malaysia remains an attractive destination for GBS companies looking to thrive in the digital era.