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Malaysia security market: Challenges and opportunities

Malaysia security market: Challenges and opportunities
This article looks at the Malaysia security market, sectors that are especially booming and challenges and opportunities the market faces.
Malaysia’s security market is expected to register growth this year, albeit small amid a sluggish economy. Security demand is driven chiefly by government and private investments in sectors such as transportation, education and data centers. This article looks at the Malaysia security market, sectors that are especially booming and challenges and opportunities the market faces.

Macroeconomic conditions

Compared to 2022, Malaysia’s economic performance for 2023 was somewhat lackluster. According to the Central Bank of Malaysia, the 2023 growth for the Malaysian economy registered at 3.7 percent, following a strong growth of 8.7 percent recorded in 2022. The slowdown occurred amid a challenging external environment “due mainly to slower global trade, the global tech down cycle, geopolitical tensions and tighter monetary policies,” the central bank said.

Market growth expected

The sluggishness in the larger economy is somewhat reflected in Malaysia’s security market, where single-digit growth is expected. “In general, Malaysia's security industry struggles as growth falls short of expectations, Ringgit weakens, and many challenges loom ahead. It is hard to predict the future but we estimate that the growth will be hovering between 3 to 5 percent in 2024,” said David Chen, Product Manager at KLA Tech.

Growth drivers

Demand for security is driven by investments in various industries by Malaysia’s government and private sectors. For the former, Malaysia government spending reached an all-time high of 65.1 billion MYR (US$13.9 billion) in the fourth quarter of 2023, according to Trading Economics.
Spending is particularly noticeable in certain sectors. “Recent government spending in Malaysia helped to drive growth in the security industry mainly in the healthcare and education sectors. The next sector that we will be following closely are the transportation hubs. The demand for security in the public sector is constant but we hope that better public policies and initiative will encourage private funding to assist in the growth,” Chen said.
Another good example is Malaysia’s ID digitization effort. “Induced spending in the public sector will undoubtedly contribute to the increasing demand for digital security and identity solutions in Malaysia. The MyDigital ID system, which will be fully implemented in 2024, is a good example,” said Lee Wei Jin, Regional Director of FARGO, Secure Issuance for Asia Pacific at HID. “Authorities in Malaysia have targeted to have 10 million citizens registered for the MyDigital ID system by the end of the first three months in 2024, which is leading the overall security and identity market in the country currently. The new digital ID will not replace the existing identity card system (Mykad) and will serve as a secure personal identification for various purposes including business and banking transactions, and accessing government services. We expect Malaysia’s security and identity market to grow further this year as a result of the rollout of such a large-scale digital identity project.”
Private investment in certain Malaysia sectors is robust, too. One example is the Malaysia data center market, whose size has been on the increase. According to Mordor Intelligence, the Malaysia data center market size is estimated at 0.71 thousand MW in 2024, and is expected to reach 1.36 thousand MW by 2029, growing at a CAGR of 13.73 percent during the forecast period (2024-2029). Total raised floor space for data centers stands at 4.07 million square feet in 2024 and is expected to increase to 7.7 million by 2029, the research firm said.
“We have enjoyed a certain amount of growth from the private sector in the semiconductor industry, data centers and business process outsourcing – just to name a few of many. Foreign investments are the major contributors for this growth. That leaves us opportunities in 2024 from the local (private) investment,” Chen said. “Apart from the global economic challenges, I'm optimistic that the private spending and private investment in Malaysia will trickle down in due course.”


It should also be pointed out that security is influenced heavily by compliance. “In Malaysia, the demand for security solutions is driven by a range of compliance laws designed to protect data, ensure privacy and secure transactions across various industries. These include the Personal Data Protection Act (PDPA), Communications and Multimedia Act, Digital Signature Act, the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act, and Bank Negara’s Risk Management in Technology guidelines, just to name a few,” Lee said. “Organizations operating in Malaysia must ensure compliance with these laws and regulations, which often drives the demand for various security solutions, including data protection, secure identity verification and compliance management systems.”

Ideas and innovation critical

Indeed, Malaysia’s security market faces challenges from several fronts. As aforementioned, growth has slowed, and end users’ purchasing powers have diminished. That, coupled with fierce competition in the market, makes ideas and innovation all the more important now in Malaysia’s security market.
“I think the biggest challenge faced by security players is the lack of ideas and innovation. They are stuck in a Chicken and Egg situation. Should you invest in new technology? Or look for sales to create the technology,” Chen said.
“Innovate, stay lean and strive to improve efficiency,” he added. “Malaysian manufacturers are facing intense competition from Chinese products. The only way to stay relevant is to provide localized solutions to meet the different requirements of different consumers. Do not sell a product, instead innovate and offer solutions. Always look to collaborate with various parties to help problem-solving and increase innovation.”

“HID invests significantly in research and development to stay at the forefront of technology, which allows us to develop new innovations and solutions that meet today’s diverse and evolving security and identity needs across multiple industries,” Lee said. “In addition, we stay abreast of market trends and customer needs closely, which enables us to adapt our products and solutions accordingly. These factors have enabled us to maintain our competitive edge in the security and identity market.”

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