Asia–Pacific Economic Statistics Week 2019

Integrating economic statistics in monitoring Agenda 2030

Theme of APES 2019

Topic 2:

Emerging Issues in Economic Statistics

Title:

E-COMMERCE:

THE CONTRIBUTION TO THE MALAYSIA’S ECONOMY

by:

Hasnah Mat
Mazreha Ya’akub

Services Statistic Division

Department of Statistics Malaysia (DOSM)

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 Asia–Pacific Economic Statistics Week 2019
Integrating economic statistics in monitoring Agenda 2030

Asia-Pacific Economic Statistics Week

Bangkok
17 – 21 June 2019
Seminar Component
Name of author: Hasnah Mat, Mazreha Ya’akub 1

Organization: Department Of Statistics, Malaysia

Contact address: Block C6, Complex C,

Federal Government Administrator Centre,
62514 Putrajaya

Contact phone: 03-8947 9092 and 03-8947 9100

Email: [email protected]; [email protected];

Title of paper:

E-Commerce: The Contribution to the Malaysia’s Economy

Abstract

E-commerce is a medium or platform of buying and selling goods and services over the internet.
This mechanism is widely used by all economics activities in Malaysia where its transform the
traditional way of doing business. These significant transformations influence the specific
economy in Malaysia such as manufacturing and services sectors. Anticipating the importance
of e-commerce growth and its contributions to the economy, Department of Statistics, Malaysia
(DOSM) took the initiative to embark on the surveys regarding the Usage of ICT and E-
Commerce by Establishment (ICTEC) and ICT Use and Access by individuals and Household
survey (ICTHS) to obtain the required statistics. Therefore, this paper aims to share the findings
of the surveys and the compilation of e-commerce in Malaysia. The contribution of ICT to
Malaysia’s economy in 2017 was 18.3%, comprising of ICT industry 13.2% and e-commerce for
non-ICT industries 5.1%, while value added of e-commerce registered RM85.8 billion.
Meanwhile, percentage of individuals using internet increased by 9.0 percentage points from
71.1 percent in 2015 to record 80.1 percent in 2017. This result was in tandem with the target
of Sustainable Development Goals (SDGs): Goal 9 to build the resilient infrastructure, promote
inclusive and sustainable industrialisation and foster innovation. Apparently, Malaysia has
improved on the ICT infrastructure especially on the access and development of information
and communications technology and strive to provide universal and affordable access to the
internet. The statistics reflects Malaysia’s efforts to achieve the target of goal 9 especially on
the inclusiveness and competitive economic forces in order to generate employment, income,
facilitate international trade and enable the efficient use of resources. The fast growth of e-
commerce business and ICT’s technology will accelerate economic growth, connectivity,
mobility and well-being of the people.

Keywords: ICT, e-commerce, SDGs (286 words)

1
The views expressed are solely the authors’ and no responsibility for them should be attributed to the
Department of Statistics, Malaysia. Special thanks to Mdm. Nurhidayah Abu Zarin for her fruitful contribution
of this paper.

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Integrating economic statistics in monitoring Agenda 2030

INTRODUCTION

E-commerce offers lucrative and vast opportunities. The convergence of the informational
economy through ICT, Internet and electronic commerce has become more important
transformation towards economic growth. It's not a surprise that selling and purchasing also
have taken to the internet and provide to the opportunities that are abound to make a significant
presence in the global market. This has become a trend, and has brought many changes in
the society which has affected the pattern of human life and the world of economy. In Malaysia,
these significant transformations of e-commerce have influenced the specific economy such
as manufacturing and services sectors. Thus, a standard concept and definition has been
used to measure the impact especially on the e-commerce growth and its contributions to the
economy,

Internationally, Organisation for Economic Co-operation and Development (OECD) plays a

vital role in producing the manual for ICT, internet and e-commerce. This manual is used to
measure the development of e-commerce statistics where it is part of reliable source of
comparable economic statistic and social data amongst the National Statistical Office (NSO).
The OECD also monitors trends, analyses and forecasts economic developments, and
researches social changes and evolving patterns in trade, environment, agriculture,
technology, taxation, and other areas. Moreover, OECD is to promote policies that will improve
the economic and social well-being of people around the world by providing a forum in which
governments can work together to share experiences and seek solutions to common problems
and identify good practice and coordinate domestic and international policies, (OECD, 2011).
The Malaysia’s NSO namely Department of Statistics Malaysia (DOSM) is a premier
government agency under the Ministry of Economic Affairs entrusted with the responsibility to
collect and interpret the latest statistics in monitoring of national economic performance and
social development.

Based on mid-term review of the Eleventh Malaysia Plan 2016-2020, the share of
e-commerce to Gross Domestic Product (GDP) was targeted at 20.8 per cent by 2020. The
National E-Commerce Strategic Roadmap will assist all e-commerce traders to increase their
contribution to the overall GDP to reach RM211 billion by 2020. Realising the importance of
e-commerce activities to the Malaysia’s economy, DOSM has took the initiative to embark
on the surveys regarding the Usage of ICT and E-Commerce by Establishment (ICTEC) and

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Integrating economic statistics in monitoring Agenda 2030

ICT Use and Access by individuals and Household survey (ICTHS) to obtain the
e-commerce statistics. Therefore, this paper aims to share the findings of the surveys and
the compilation of e-commerce in Malaysia. These surveys are conducted through face to
face interview with establishment and household. The structured questionnaire has been
design to collect the usage of ICT and e-commerce information. The statistics obtained from
the surveys were in line with the target of Sustainable Development Goals (SDGs): Goal 9
to build the resilient infrastructure, promote inclusive and sustainable industrialisation and
foster innovation. As a result, Malaysia has improved on the ICT infrastructure especially on
the access and development of information and communications technology and strive to
provide universal and affordable access to the internet. The findings of the surveys reflects
Malaysia’s efforts to achieve the target of goal 9 especially on the inclusiveness and
competitive economic forces in order to generate employment, income, facilitate international
trade and enable the efficient use of resources. The fast growth of e-commerce business and
ICT’s technology will accelerate economic growth, connectivity, mobility and well-being of
the people.

LITERATURE REVIEW

In a study of e-commerce (Purohit and Purohit, 2005) stated that e-commerce contains a
massive development potential which contribute to the economic growth. In arrange to realise
its full potential to bring around the basic changes required for economic development; it is
relevant to recognise that e-commerce gives an environment in which different activities can
effectively be created.

E-commerce arguably has a potential to add a higher value to businesses and consumers in
developing countries than in developed countries. Yet most developing country-based
enterprises have failed to reap the benefits offered by modern information and
communications technologies (Kshetri, 2007). Some business models have emerged that
overcome e-commerce obstacles in developing countries. In a developing country, a
company’s success depends on its ability to immediately organise and manage multiple
e-business models. The lack of economies of scale in a developing country excludes the
ability of the country’s businesses to focus in one or a few e-business activities

According to Infocomm Media Development Authority of Singapore (2016), the engagement of

e-commerce activities among enterprises had maintained around 13% from 2014 to 2016.

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Integrating economic statistics in monitoring Agenda 2030

There is considerable interest in the role of e-commerce as a significant factor to the contribution
of economic growth. For example enterprises from Infocomm and Media sector, Transportation
and Storage sector were more likely to engage in e-commerce compared to those in other
sector. According to the working paper of Defining and Measuring the Digital Economy 2018 by
Bureau of Economic Analysis (BEA) U.S Department of Commerce in 2018 e-commerce output
generally measured as the wholesale or retail trade margin on “digitally ordered’ goods and
services sole over the internet or through some other electronic market which is include
Business to Business (B2B) wholesale and Business to Consumer (B2C) retail transactions
from e-market establishment. From 2006 to 2016, BEA estimates that digital economy real value
added grew at an average annual rate of 5.6 percent, outpacing the average annual rate of
growth for the overall economy of 1.5 percent. In 2016, the digital economy was a notable
contributor to the overall economy, it accounted for 6.5 percent of current dollar GDP, 6.2
percent of current dollar gross output, 3.9 percent of employment, and 6.7 percent of employee
compensation.

The implementations of e-commerce during the early years between 2008 until 2011 were
spurred by the increased availability of internet services and usage of computer in the
households and offices. The development of e-commerce in the late 2000s was so well received
that they become the country most online marketplace and as part of economic contributions
(Economic Planning Unit, 2015).

Government of Malaysia is committed to drive Malaysia towards Digital Economy. A Malaysia

Digital Economy Forum with the theme of “Transforming Business and Society through E-
Commerce” was jointly held by Ministry of International Trade and Industry (MITI) and the
Malaysia Digital Economy Corporation (MDEC) in 2018. The forum aims to educate local
stakeholders, including Small Medium Enterprises (SMEs), on the importance of digitalisation
and encourage them to leverage on e-commerce for their businesses. In the forum, it was
reported that Malaysia’s digital economy has seen exponential growth since 2016. In 2016,
58,824 online businesses have already registered with the Companies Commission of Malaysia
(SSM).

Malaysia is the first in the world outside China to establish a Digital Free Trade Zone (DFTZ)
which comprises e-Fulfilment Hub, Satellite Services Hub and e-Service Platform to stimulate
growth in electronic trade. The purpose of DFTZ is to develop the digital economy and
cross-border trading activity using the e-commerce. DFTZ is aims to increase e-commerce

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Integrating economic statistics in monitoring Agenda 2030

growth and contribution to GDP by RM211 billion (approximately US$47.68 billion) by 2020
(Malaysia Digital Economy Corporation, 2017).

CONCEPTS AND DEFINITIONS

Based on OECD: Glossary of Statistical Terms 2013; e-commerce transaction is the sale or
purchase of goods or services, conducted over computer networks by methods specifically
designed for the purpose of receiving or placing of orders. Method of payment and the
ultimate delivery of the e-commerce goods or services might be done through computer
network/internet or traditionally. This concepts, definitions and classifications are adapted to
Malaysia’s requirement to reflect the e-commerce industry in Malaysia

METHODOLOGY AND FRAMEWORK

Usage of ICT and E-Commerce by Establishment Survey (ICTEC) is a structured survey to

collect the necessary information on e-commerce. It serves as essential information to answer
the research questions and objectives pertaining to e-commerce in Malaysia. In general, this
survey used a sampling design approach which covers all economy sectors which are
Agriculture, Mining & Quarrying, Manufacturing, Construction and Services.

Sampling design of the survey is a one-stage stratified random sampling. Categories of

industries and state level have been classified as stratum, and the establishment as the
sampling unit. Each stratum (industry) has been set up to four substrata to ensure the
distributed sample takes into account the economic characteristics of the industry. The main
substratum is heterogeneous, was fully covered. Whereas, other substratum that are
homogeneous were sampled. Main substratum include large establishments that have a
significant total revenue in the industry while for the second to fourth substratum are based
on small and medium enterprise (SME) categories.

Meanwhile for ICT Use and Access by Individuals and Households survey (ICTHS) data
collection was carried out using the personal interview approach. The sampling frame used
for the selection of sample ICTHS 2017 was based on the Household Sampling Frame which
made up of Enumeration Blocks (EBs) created for the 2010 Population and Housing Census
which was updated from time to time. EBs are geographical contiguous areas of land which
identifiable boundaries created for survey operation purposes, which is on average, contains

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Integrating economic statistics in monitoring Agenda 2030

about 80 to 120 LQs. 57 All EBs are formed within gazette boundaries i.e. within
administrative, districts or local authority areas.

The measurement of e-commerce value added derived from the ICT Satellite Account (ICTSA)
is based on the recommendations by Internet Economy Outlook 2012, OECD. There are
two recommended approaches, which are narrow and broad. Narrow approach takes into
account the value added of wholesale and retail sectors. While broad approach includes all
industries across the economy. For Malaysia's case, the broad approach was applied in
measuring the value added of e-commerce. It is assume the share of revenue from e-
commerce in total revenue for each industry sector is proportional to the share of value added
from e-commerce in total value added for the same industry.

The existing annual surveys and censuses were also enhanced to accommodate ICTSA
compilation by incorporating ICT module that provides data on e-commerce value by
establishments and sectors. E-commerce information is essential to measure the overall
performance of Digital Economy in Malaysia. ICTEC will also provide information on the
e-commerce transactions by categories of Business to Consumer, Business to Business and
Business to Government. The survey enables us to break down the e-commerce value by
categories, and identify the providers and users of e-Commerce services

MAIN FINDINGS

ICTEC 2017

The e-commerce transactions recorded a value of RM447.8 billion compared to RM398.2

billion in 2015 with an annual growth rate at 6.0 per cent. Income from e-commerce
transactions in Malaysia in 2017 was dominated by the domestic market of RM399.8 billion
with a share of 89.3 per cent compared to the international market of RM48.0 billion (10.7%).
In 2017 the highest income from e-commerce transactions by type of customer was obtained
through Business to Business (B2B) at RM352.2 billion with annual growth rate of 4.9 per
cent. This was followed by Business to Consumer (B2C) of RM82.5 billion (9.5%) and
Business to Government (B2G) RM13.1 billion (19.1%).

The e-commerce expenditure transactions recorded a value of RM228.8 billion compared to

RM195.1 billion in 2015 with an annual growth rate at 8.3 per cent. It was recorded domestic

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Integrating economic statistics in monitoring Agenda 2030

market of RM202.8 billion with a share of 88.7 per cent compared to the international market
RM26.0 billion (11.3%). In 2017, business to business (B2B) recorded the highest e-
commerce expenditure of RM213.1 billion with annual growth rate of 7.9 per cent. This was
followed by business to consumer (B2C) (RM9.5 billion; 5.0%) and business to government
(B2G) (RM6.1 billion; 32.7%) as shown in Table.

Table: Income and Expenditure of E-Commerce Transaction

E-commerce transaction shows a growing annual change of 9.2 per cent from 2016 to 2017
as shown in Chart 1.

Chart 1: Annual Change Income of E-Commerce Transaction

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ICTHS 2017

Percentage of individuals using Internet increased by 9.0 percentage points from 71.1 per cent
in 2015 to 80.1 per cent in 2017. Internet usage in urban area showed an increase of 7.7
percentage points to 84.0 per cent in 2017 from 76.3 per cent in 2015. The Internet usage in
rural area also increased to 68.0 per cent in 2017 from 55.0 per cent in 2015 as shown in
Exhibit.

Exhibit: Percentage of Individuals Using Internet by Strata, 2015 And 2017

ICTSA 2017

On overall, in 2017 ICT contributed 18.3 per cent to GDP comprising of ICTGDP (13.2%)
and e-commerce for non ICT industries (5.1%). The value added of e-commerce registered
an increase to RM85.8 billion as compared to RM75.0 billion in 2016. E-commerce recorded
a growth of 14.3 per cent led by non ICT industry with a share of 80.3 per cent. The
contribution of e-commerce to GDP recorded 6.3 per cent attributed by e-commerce for non
ICT industry 5.1 per cent and e-commerce for ICT industry 1.2 per cent as shown in Chart
2.

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Chart 2: Contribution of ICT to Economy - Value and Percentage Share

CONCLUSION

Malaysia is rapidly growing region with overwhelming usage of internet access and becoming
more attractive to business especially to the e-commerce activities. Modern businesses are
in a race to provide the best finest services to their consumers, with the development of ICT
technology and the era of digital economy, most business has become simple, easy and up to
date. However, there are challenges to identify the businesses involvement in the digital
economy toward e-commerce. Some of the digital economy identification is not available in
business registration. As at now, only Wholesale and Retail Trade activity has an identifier as
an online business in Companies Commission of Malaysia registration.

This paper has shared the findings of the surveys and the compilation of e-commerce in
Malaysia. The statistics of ICT usage and e-commerce are important in order to monitor the
resilient infrastructure of ICT and sustainable industrialisation in Malaysia as indicated in the
SDGs, by 2016, the proportion of the population covered by a third generation (3G) mobile
broadband network stood at 61 per cent in the Least Developed Countries (LDCs) and 84
per cent globally. Based on the result, Malaysia has improved on the ICT infrastructure
especially on the access and development of information and communications technology

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Integrating economic statistics in monitoring Agenda 2030

and strives to provide universal and affordable access to the internet. These efforts will make
the e-commerce business become more competitive in order to generate employment,
income, facilitate international trade and enable the efficient use of resources as targeted in
goal 9 of SGDs. The fast growth of e-commerce business and ICT’s technology will
accelerate economic growth, connectivity, mobility and well-being of the people.

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