1. W T O R E G I O N A L S E M I N A R O N E L E C T R O N I C C O M M E R C E Geneva, Switzerland  22 April 2002 Revenue Implications Of E-Commerce Government and Private Sector Experiences MALAYSIA Presentation by: Suhaimi Nordin Senior Manager - Borderless Marketing / E-Business Multimedia Development Corporation [email_address]

6. The MSC Strategy Create the ideal multimedia environment to attract world-class companies to use MSC as a hub Catalyze a highly competitive cluster of Malaysian multimedia/IT companies that become world-class over time MSC STRATEGY Go Global Lead Regional Create value from Information Age businesses Enhance domestic productivity

10. World Class Companies With Regional Initiatives in the MSC

11. Other World Class Companies in the MSC

14. E-Business Within MSC Status Companies Companies with own transaction capabilities Developing solutions to enable E-Commerce 1997 1998 1999 2000 2001 2002 Forecast* MSC Status Co. directly involved in E-Commerce Businesses / No of MSC Status Companies 138 621 86 429 Percentage of E-Commerce related businesses 22% 20% 300 197 94 700* 34 11% 20 10% 35%* 245* 33 105 15 71 3 32 50* 195* Indicator 6 6% 0 6 19 1

19. Growth of Internet Subscribers in Malaysia (1995-2005) Source : MECRA (TMnet, Jaring, MaxisNet, TimeNet), PIKOM, MDC, MECM 25 90 210 442 892 1,852 3,111 4,225 4,837 5,525 6,005 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 Year (1995 – 2000) (‘000 million) Projected growth An Internet penetration of 20% of population will spur the growth of E-Commerce in Malaysia

20. Total E-Commerce Revenue Growth for Malaysia (1997 – 2005) Source : IDC Internet Commerce Market Model, IDC 2001 eCommerce Revenue continue to grow US$384 million in 2000 to US$9.4 billion in 2005 US$383.5m US$675.6m US$million US$9,336.2b

22. E-Commerce – Lessons Learnt There are many definitions for E-commerce. Examples: “ The electronic exchange of information goods, services and payments” but underneath the surface E-commerce is also: … the digitization of information ...Internetworking of human ingenuity creating a new socio-economic transformation … propelled by BRAINS instead of BRAWN … driven off by both technology push and business pull … the foundation of a new economic order Nations need to identify clusters for industrial development and reposition themselves to be at the centre of the virtual marketspace…

23. E-Commerce Reduces Transaction Costs “ Transaction costs represent more than 50% of the activities within the US economy. Transaction activities are defined as defining, protecting, and enforcing property rights to goods (the right to use, the right to derive income from the use of, the right to exclude, and the right to exchange.” - Douglass North, US-economist and Nobel laureate Source: OECD 8.0 1.0 Airline Tickets 1.08 0.54 0.13 2.22 to 3.32 0.54 0.13 400-700 200-350 15.00 5.00 0.20-0.50 Banking Bill Payment Term Life Insurance Software Distribution US$ per transaction E-commerce reduces transaction costs ! Traditional System Telephone based Internet based

24. The Destruction Of The Vertically Integrated Value Chain Integrated monolithic Vertical value chain Multiple product specialists collaborating within an e-business community, creation of alliances Domain: Closed Proprietary Network Domain: The Internet CHANGE These Companies can deliver products and services at a much lower cost and utilising fewer assets !

25. New Infomediaries – “Hollowing-Out” Physical Economy ‘ Marketplace’ Digital Economy ‘ Marketspace’ Product e.g. Malaysian Consumers $$$ Foreign/Malaysian Consumers e.g. Malaysian intermediaries Multi Products INFOmediaries: Portals, Search Engines, Communities Gateways, Call/Service Centers Information Customisation Fulfillment Multiple Sources

26. A Service Centric Model Infomediary leverages information by “BUYING at the point of LEAST COST and SELLING to the point of HIGHEST PRICE” INFOMEDIARY operating under the VIRTUAL VALUE CHAIN PHYSICAL INFRASTRUCTURE (i) Telecommunications (ii) Integrated Global Logistics Supplier A Country 1 Manufacturer B Country 2 Designer C Country 3 Distributor D Country 2 Customer E Country 4 Utilize : 1.Infrastructure to arbitrage cost, skills, productivity, taxes, etc. across multiple jurisdictions 2. Network and information 3. Channels of distribution

27. E-Commerce Implications In Context Of Globalisation 1. First-mover enjoys entrenched position as ‘lock-in’ increases switching costs 2. There will winners and losers in Knowledge Age 3. Government interventionist policies are needed to correct for market imperfections 4. Capital will gravitate towards a few ‘hubs’ which have developed a critical mass of users and producers E-Business may be used to circumvent non-tariff barriers and gain access to the protected service sectors of emerging economies. United States of America Canada Australia New Zealand Japan United Kingdom Germany Singapore Ireland India Malaysia

34. Dispute Resolution MALAYSIA LEGAL SYSTEM New System Jurisdiction of dispute Malaysian Court Choice of law Malaysian Law Evidence Act REFJA (Reciprocal Enforcements of foreign Judgement Act) REFJA is not enforceable in some major trading partners Evidence electronic document Choice of law foreign or local? Jurisdiction of dispute Local or foreign court? Existing System The nature of E-Commerce causes existing laws not able to cover the resolution process especially in cross border issues

41. Thank-You