This article first appeared in Digital Edge, The Edge Malaysia Weekly on January 13, 2025 - January 19, 2025

The rise of generative artificial intelligence (Gen AI), a technology touted to be as transformative as electricity or the internet, is capturing the imagination the world over.

Governments and businesses, wary of being left behind in the AI race, are scrambling to stake their claim in this new frontier. Malaysia is no different. On Dec 12, the country established the National AI Office (NAIO), which will serve as a centralised authority to bring clarity to this surge in innovation while addressing the uncertainties surrounding AI’s rapid evolution.

NAIO’s mission is twofold: to ensure Malaysia remains competitive in the global AI landscape and to establish safeguards that protect its citizens from the technology’s potential risks.

Heading this initiative is Shamsul Izhan Abdul Majid, who is cognisant of the fact that Gen AI adoption often outpaces the understanding of how to harness it. NAIO’s objective is to harmonise efforts across ministries and industries, and serve as the linchpin of Malaysia’s AI agenda. This coordinated approach will ensure that the country speaks with one voice with regard to AI, domestically and internationally.

For Malaysia to thrive in the AI revolution, Shamsul asserts that the country must move beyond merely consuming the technology and instead become a key developer and producer of AI solutions.

This is because AI is projected to have a cumulative global economic impact of US$19.9 trillion through 2030 and drive 3.5% of global gross domestic product in 2030, according to an IDC Research report titled The global impact of AI on the economy and jobs.

To capitalise on this, the country must make a concerted effort to develop and implement a cohesive AI strategy to harness the many benefits of the technology, says Shamsul in an exclusive interview with Digital Edge.

With the setting up of NAIO, he expects better coordination among AI players, enhanced visibility on long-term AI goals and robust frameworks and regulations.

“The formation of NAIO brings together all the AI players [in the country, which] includes agencies that had started their [own AI initiatives] even before NAIO [was launched]. Everybody has a view [on the narrative of AI]. We need to [send] a unified message about AI,” he stresses.

NAIO, currently in a 12-month incubation period within MyDigital Corporation, outlines seven key deliverables for its first year of operations. MyDigital Corporation, an agency under the Ministry of Digital, was established to oversee the implementation of initiatives under the Malaysia Digital Economy Blueprint and the National 4IR Policy.

The seven deliverables outlined by NAIO are the AI Technology Action Plan 2026-2030, an AI Adoption Regulatory Framework, initiatives to accelerate AI technology adaptation, an AI code of ethics, an AI impact study for government applications, a National AI Trend Report and the development of datasets related to AI technology.

According to Shamsul, there will be extensive stakeholder engagement and public consultations to ensure inclusivity and relevance. NAIO aims to complete all seven deliverables within its 12-month incubation period, with staggered releases planned throughout the year to maintain momentum and focus.

“Each of the deliverables will shed light on the nation’s AI needs, and we plan to start rolling out these findings by the third or fourth quarter of next year (2025). Whatever those findings are, we will compile them into a report for the government.”

One of the key deliverables, the AI Technology Action Plan 2026-2030, is a road map designed to boost Malaysia’s competitiveness and instil confidence among foreign investors. It will play a pivotal role in charting the nation’s AI trajectory in the coming years.

The plan focuses on cultivating local talent, fostering research and development and driving the adoption of AI across various sectors. Equally important, it affirms the need for ethical and responsible AI development, ensuring that technological advancements are aligned with societal values and priorities.

“Essentially, it’s a five-year plan [for] how AI [will shape Malaysia’s path forward]. It’s a foresighting exercise. We can’t predict everything, but we can extrapolate enough to guide investments and skills development to position Malaysia strongly [on the global stage],” says Shamsul.

The other deliverables, meanwhile, will focus on promoting the widespread adoption of AI across sectors, assessing the impact of AI in government, utilising data to develop and implement tailored initiatives for target groups, and ensuring the ethical and responsible use of AI.

NAIO has identified four priority sectors in which AI can make a significant difference — agriculture, transport, public services and healthcare.

“Once these deliverables are released, we expect several needle-moving outcomes. First, it should drive investments in AI. More innovation [should also] emerge, showcasing Malaysia’s readiness to embrace AI while upskilling [the workforce]. It should also foster more collaboration where [stakeholders] can talk [to NAIO] and we can connect them. We should also see the formation of safeguards and policies to address societal, ethical and economic challenges,” says Shamsul.

“Governance and security [should become more robust]. We want to show investors that Malaysia has a transparent AI ecosystem [grounded] in ethical use.”

After the incubation period, NAIO’s role will evolve based on its achievements in 2025, he explains. This means there could be an extended incubation, whereby NAIO will either continue to function as a flexible, project-driven body to tackle emerging challenges, or transition into a formal entity that provides long-term governance and support.

The establishment of NAIO was backed by a RM10 million allocation under Budget 2025, specifically for its first year of operations during the incubation phase.

Shamsul concedes that the funding for AI development in Malaysia is comparatively low, given the billions of dollars being invested by countries such as China and India, which have reportedly invested US$1.3 trillion (RM5.9 trillion) and US$1.25 billion respectively. But he stresses that this initial funding is to support NAIO in laying the groundwork for its deliverables and operational framework.

Future funding, he adds, will depend on the role and structure it adopts after the incubation period.

“[The allocation] is purely tied to the first year and the foundational things NAIO needs to do. It covers projects, the effort of the seven deliverables and manpower, [among other things]. If NAIO’s incubation [is extended,] it might be another RM10 million the following year. If [the purpose of] NAIO is [crystal] clear after 12 months, it could be 10 times more.”

To be a success, NAIO requires a whole-of-nation approach, Shamsul says. It must maintain open channels with industry, academia and policymakers, which will invite continuing engagement and focus on the long-term value of AI.

“I would say it boils down to collaboration. Other countries aren’t approaching AI with a closed door policy; they’re taking an open door policy. The challenges over the next year are keeping up with what the world is doing and how fast AI is evolving. Terms like artificial general intelligence and artificial super intelligence may sound simple, but they represent technologies that will morph [in unpredictable ways]. The challenge is understanding what AI can become and ensuring Malaysia isn’t caught off guard.”

Long-term planning is essential to remain competitive in the global AI race, Shamsul says. This is because AI is rapidly evolving, with new technologies, use cases and risks emerging frequently.

For example, the UK government’s National AI Strategy is a 10-year plan to strengthen investments in innovation and secure public trust on how AI is used.

To keep up, Malaysia must focus on legal and technology frameworks while ensuring innovation and technology development, he highlights. Moreover, the country must leverage both public and private sector strengths to remain competitive.

In this context, it is crucial that guidelines strike a balance between adaptability and structure, offering flexibility to accommodate the rapid changes in AI while providing clear direction on its ethical, safe and responsible use, Shamsul explains. The guidelines should provide a framework for responsible AI use without putting up barriers, fostering an environment where innovation can occur.

“The application and impact of AI vary across industries, regions and cultural contexts. One-size-fits-all policies may not address these nuances effectively.”

As Malaysia will be the Asean chair this year, NAIO will collaborate with the Malaysia Centre for Fourth Industrial Revolution to establish the Asean AI Safety Network, which aims to ensure the safe and ethical development of AI in the region.

“With the chairmanship, we [will be able to] guide the region’s narrative, and one key narrative is AI safety. Other countries are investing in certain areas of AI [such as] large language models and building their own hardware. [Our main offering] could be a network of safety elements when it comes to AI,” says Shamsul.

“We will champion key principles of safety when it comes to AI, [with each Asean country] following a shared framework [without losing its sovereignty]. We have not started formal negotiations yet, but we plan to do so in the first or second quarter. Even after we’re no longer the Asean chair, Malaysia will be the central point for ongoing discussions about AI safety.”

Ultimately, NAIO envisions transforming Malaysia from a consumer of AI technologies into a producer of AI innovations.

Shamsul admits, however, that this will be a gradual process. It starts with building widespread AI literacy and encouraging adoption across industries and communities. From there, the focus will shift to developing localised AI solutions tailored to Malaysia’s unique needs and challenges.

“Will Malaysia ever be a 100% producer? That is uncertain. But we also don’t want to remain a 100% consumer. It’s good that everyone can drive the AI car, but at some point we must ask which parts of the car we can make ourselves.”

As Malaysia has traditionally focused on technology adoption, transitioning into a technology creator will require a significant shift in mindset, Shamsul says.

The shift will bring tangible benefits, he explains. These include creating intellectual property, attracting increased investment and fostering a production-oriented psyche.

However, Malaysia cannot attempt to produce every component in the AI value chain, and should instead focus on identifying areas where it can leverage its strengths and cultural context to create solutions that address local challenges.

In its role as a connector and facilitator, NAIO wants to bridge gaps between stakeholders and encourage knowledge sharing, says Shamsul. By linking individuals and organisations, it seeks to shorten development cycles and foster collaborative problem-solving.

The goal is to leverage unique solutions through partnerships rather than working in silos, which often leads to duplication of effort and wasted resources, he elaborates.

“AI moves extremely fast. In six to 12 months, [entirely new solutions may appear]. If you work in isolation, you might spend time and resources creating something [that already exists]. But, if you just look left and right and talk to NAIO, you will find that you can plug and play certain things so that you can shorten the time to solve the problem,” Shamsul says.

“If you invent the wheel, then you are going to spend a lot of time making the wheel perfect, whereas somebody else may have already done it.”

The agency will also act as a validation point for academics and practitioners who want to share their AI-related findings.

Additionally, NAIO aims to foster a culture of experimentation by supporting pilot projects in controlled environments, such as AI sandboxes. These spaces will allow for safe and iterative development while enabling the identification of necessary policy changes to facilitate the large-scale deployment of AI technologies.

“NAIO will not develop a sandbox [from scratch if existing ones can be adapted to AI]. Several ministries and private entities already run sandbox projects in property, transport [and other sectors]. But, most of them were developed before AI was mainstream. So let’s inject AI early in the sandboxes. So get those sandbox owners to kind of play together with AI,” says Shamsul.

“Some problem statements [could not] be solved because they were too difficult. But now AI is in the picture and it can help with the impossible tasks. Solve it in the existing sandbox and make sure that the non-tech people, the policymakers [and regulators] can support the operationalisation of the outcome.”

In addition, there is a need to upskill and reskill the workforce to adapt to the demands of AI, he points out. This requires embedding AI and digital skills into the core of learning and professional development to ensure that every level of talent understands how to harness the full potential of AI.

Because AI is evolving so rapidly, Shamsul believes fundamental principles such as ethics, data literacy and problem-solving skills should be prioritised rather than purely technical details that might become outdated quickly.

Moreover, AI does not only belong in science, technology, engineering and mathematics (STEM), he says. Aspects such as humanities, philosophy, psychology and social sciences are equally crucial to develop AI that respects local culture, ethics and social value.

“Think of it as combining STEM with a humanistic lens, ensuring AI solutions remain ethical and inclusive.”

To fulfil its long-term objectives of driving AI investments, promoting AI innovation, fostering collaboration, formulating robust policies and supporting governance and security, NAIO will focus on channelling financial resources towards the advancement of AI technologies and infrastructure that stimulate economic growth and societal benefits, says Shamsul. It will also prioritise research and development to encourage the creation, adaptation and application of AI technologies to drive progress and address current and future challenges.

It is important to note that NAIO will lead the formulation of policies and frameworks that guide ethical, responsible and inclusive AI deployment, which align with national and global standards, he adds. This includes strong governance structures and cybersecurity measures to build public trust, safeguard data and ensure the responsible use of AI.

All this requires a unified ecosystem that fosters partnerships among government, industry and academia.

This is because strategic partnerships are pivotal in advancing NAIO as they bring in expertise, build talent and deliver impactful AI solutions, says Shamsul. For instance, Microsoft will be partnering with NAIO to launch a National AI Adoption Accelerator and an AI Governance Sandbox Framework.

Also, Global AI Village, an AI design and development services firm co-founded in Malaysia by US-based investor, Hive Global AI Fund, is partnering with NAIO to incubate high-impact AI applications for Malaysian corporations and the government in energy, cybersecurity, supply chain, transport and healthcare.

The adoption of AI presents a unique opportunity for the country to secure its place as a regional leader in the digital economy, says Shamsul. By harnessing AI, Malaysia can optimise its supply chains, improve agricultural yields and create smarter cities with better infrastructure and services. The country must continue to invest in education, innovation and infrastructure to achieve this.

“The future belongs to those who harness the power of AI. By seizing this opportunity, Malaysia not only secures its place in the global digital economy but also sets an example for how nations can use AI to build a better, more inclusive and sustainable future.”

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