By Wong Cheng Hau
PETALING JAYA, Oct 6 (Bernama) -- While Malaysia ranks among the top three global business services (GBS) hubs in the world, primarily driven by its cost advantage, the country must also place greater emphasis on the digital impact and talent development to maintain its competitive edge.
Joon Teoh, a GBS expert and digital transformation consultant, said that despite Malaysia being ranked the third best GBS destination in the 2023 Global Services Location Index (GSLI), this should not be taken for granted as the “weighted dimensions” may change in the future, potentially causing the country to fall out of the top 10.
She noted that the 78 countries in the GSLI list were evaluated based on four major categories - financial attractiveness; people skills and availability; business environment; and digital resonance, with different weightages applied to each.
“In the past and up to now, the weightage on financial attractiveness is 35 per cent and the weightage on digital resonance is only 15 per cent, whereas people skills and availability as well as business environment account for 25 per cent each.
“What we are saying is that going forward, what do (GBS) companies want when they decide that they want to locate the global business services to a particular place? Are they placing so much weightage just on financial attractiveness? That’s the question,” Teoh told Bernama on the sidelines of the AGOS GBS Summit 2024 here recently.
According to the 2023 GSLI report by global management consultancy Kearney, India, China and Malaysia led last year’s index. Malaysia scored 6.5 in total with the highest contribution of 2.58 coming from financial attractiveness, which includes factors such as labour and infrastructure costs.
Teoh said assuming the weightage of digital resonance as well as people skills and availability increased by 10 per cent respectively, while financial attractiveness decreased by 20 per cent with the business environment remaining unchanged, Malaysia’s GBS ranking could fall out of the top 10 under such circumstances. “It is a challenge and of course, this is predictive but a very important prediction that we should not ignore,” she added.
The 2023 GSLI report also revealed that as the focus turns to people skills and availability and digital resonance, traditional cost-focused countries lose their competitive advantage, with countries such as Malaysia, Indonesia, Vietnam, Thailand, and Mexico at the highest risk of dropping out of the top 10.
Malaysia has ranked third in the GSLI for 20 years since the index, which is generally biennial, was first launched in 2004.
A multinational will set up a GBS centre in countries like Malaysia to provide shared services such as finance, human resources, procurement, supply chain and information technology to their subsidiaries around the world by using digital technology.
Teoh said that as per the AGOS GBS Digital & AI Survey 2024, which interviewed 34 GBS companies in Malaysia, about 10 per cent of respondents are in the top quartile, demonstrating both high adoption and high awareness of digital and artificial intelligence (AI) technologies. However, most are in the third quartile, with high awareness but low adoption.
Teoh, also chief executive officer of AGOS Asia, mentioned that a positive takeaway from the survey conducted by the GBS consulting firm is that most GBS companies have already begun adopting technologies like robotic process automation, advanced analytics, and AI. “We found that 75 per cent of them have already started adopting these. Meaning, it could have started in the first year or second year, but less than three years...it’s encouraging to see that, ” she said.
She emphasised the need to accelerate and intensify efforts in digital and AI adoption to safeguard Malaysia’s standing in the GSLI, where the country currently holds a top preferred position, noting that this would also be able to showcase a successful case study to attract potential investors considering investments in Malaysia.
Global expansion
Moving forward, she stressed that Malaysia’s GBS companies need to think about what digital and AI strategies they want to adopt. “Once they know that, they have to communicate to their people and make sure that people accept it and drive the strategy,” she said.
Teoh said GBS centres have to ensure that their talent is properly trained to embrace and adopt new technologies, whilst also being able to provide necessary recommendations to the management team.
The survey also showed that the availability of a talent pool equipped with advanced technological skillsets remains a challenge, requiring greater attention to upskilling and talent development to meet industry demands.
Teoh expressed hope that Malaysia’s GBS sector could expand globally, becoming robust not only in Asia but also across the European continent, and this was why the 2024 AGOS GBS Summit was themed “Global Leadership: Pioneering GBS Expansion, Talent Regeneration, and AI Advancement.”
“This year is about what we call global leadership, meaning as global business services, can we go beyond just servicing the Asia continent? Can we use Malaysia as a base even for the European continent? So that is one area to look at, about expansion of the GBS,” said Teoh.
According to the 12th Malaysia Plan 2021-2025, global services (GS), which comprise principal hubs, GBS and headquarters operations, is the main contributor of foreign direct investment in the services sector. Total investments in the GS sector are estimated to reach RM89 billion by 2025.
-- BERNAMA
