This article first appeared in Digital Edge, The Edge Malaysia Weekly on July 14, 2025 - July 20, 2025

Malaysia is at a pivotal moment in its artificial intelligence (AI) journey. Oxford Insights’ Government AI Readiness Index 2024 ranked Malaysia 24th in the world with a total score of 71.4 — well above the global average (47.59).

This shows that the government’s proactive approach, through initiatives like the National AI Roadmap 2021-2025 and the Madani Economy Framework, has laid a strong foundation for AI readiness, says Laurence Si, managing director of Microsoft Malaysia.

Budget 2025 supports this trajectory as it includes targeted incentives for AI-related research and development (R&D), tax deductions for high-tech training and job creation, and streamlined processes for hiring skilled foreign talent in AI and advanced technologies, he says.

“A major milestone in Malaysia’s AI journey is the establishment of the National AI Office (NAIO) to coordinate Malaysia’s AI strategy and ensure alignment across sectors. We see this readiness translating into real momentum,” says Si.

“The general availability of our Malaysia West cloud region is a testament to our confidence in the country’s digital maturity and its ability to harness AI at scale.”

Findings from Microsoft’s 2025 Work Trend Index show that 86% of business leaders in Malaysia are confident in using AI agents to expand workforce capacity and more than half are already using agents to fully automate workstreams.

On the whole, Si says he sees increasing adoption across sectors — from financial services to manufacturing and the public sector — driven by a shared ambition to build a more resilient, inclusive and innovation-led economy.

Generative AI (Gen AI) is no longer just a buzzword. The focus has moved from intent to impact and novelty to value. Microsoft’s 2025 Work Trend Index highlights the emergence of Frontier Firms — organisations powered by hybrid teams of humans and agents.

The index also shows that workers and leaders at Frontier Firms are more than twice as likely to say their companies are thriving and that they can take on additional work. They are also more likely to report having opportunities to do meaningful work.

In Malaysia, Frontier Firm workers report notably high levels of opportunity for meaningful work (92%) and ability to take on more work (58%), far above the Asia-Pacific average (77% and 21%, respectively).

“From conversations with partners and customers, we’ve also seen a clear shift from experimentation to purposeful deployment. Organisations are asking sharper questions: ‘How can Gen AI help us serve customers better?’ and ‘How can it improve productivity and decision-making?’”

Research by Kearney showed that AI could contribute nearly US$1 trillion to Southeast Asia’s gross domestic product (GDP) by 2030, with Malaysia poised to capture US$115 billion of this amount. A report by IDC on the business opportunity of Gen AI also found that Gen AI is estimated to deliver substantial returns at 3.7 times the investment per dollar spent.

For top leaders using Gen AI, the returns are even higher with an average return on investment (ROI) of US$10.30 for every dollar spent. The ROI is highest in the financial services sector, followed by media and telco, mobility, retail and consumer packaged goods, energy, manufacturing, healthcare and education.

This all goes to show the unprecedented rate of AI diffusion around the globe and even in Malaysia, says Si, signalling the nation’s strong enthusiasm and excitement for AI’s positive impact on productivity, innovation and creativity.

Only a year ago, findings showed that while 88% of Malaysian leaders believe their company needs to adopt AI to stay competitive, 66% worry that leadership lacks a plan and vision to implement it.

As a result, 83% of Malaysian AI users brought their own tools to work — not only missing out on the benefits that come from strategic AI use at scale but also putting company data at risk.

This year, leaders are ahead of the curve. Sixty-eight per cent of local leaders report being highly familiar with AI agents, compared with just 39% of employees. To bridge these gaps, skilling plays a critical role in helping organisations and workers truly benefit from AI.

In December 2024, Microsoft introduced the AI for Malaysia’s Future (AIForMYFuture) initiative, which aims to equip 800,000 Malaysians with AI-related skills by the end of 2025. As at May 2025, it had successfully skilled 400,000 people across the government, large and small-medium corporations, start-ups, educational institutions and underserved communities, as well as the general workforce.

The fight for talent is still a prominent challenge and a robust talent pipeline is crucial for Malaysia’s AI economy, says Si. Microsoft works closely with a broad cross-section of stakeholders including government, industry, education and civil society to drive opportunities at all levels of society.

“Each of our skilling initiatives offers tailored learning experiences for diverse groups of people — from government officials and civil servants, professionals in key industries, teachers, students, underserved and marginalised communities to general job seekers and employees looking to upskill.

“This continued commitment builds on the success in providing digital skills to more than 1.53 million Malaysians as part of our Bersama Malaysia initiative to help create economic opportunities for people and businesses in the digital era,” he says.

Last year, Microsoft announced its single-largest investment of US$2.2 billion in its more than 30-year history in Malaysia, which is aimed at supporting the country’s development trajectory in line with national aspirations to be a leader in the regional digital and AI economy.

“Moving forward, we remain committed to being a trusted technology partner for Malaysia’s AI-powered transformation — supporting a digitally enabled government, empowering businesses to build resilience digitally and bridging the digital opportunities for all Malaysians,” says Si.

This is against the backdrop of agentic AI, which is gaining traction as it represents the next evolution of AI — from reactive tools to proactive collaborators. These systems can plan, reason and act autonomously toward goals, which opens up new possibilities in areas like customer service, operations and software development.

Si says in the next six to 12 months, industries will be entering a phase where AI agents will become more capable, more autonomous and more deeply integrated into everyday workflows. These agents will be powered by models with advanced reasoning capabilities — able to solve complex problems, execute mult-istep workflows and adapt to user intent.

“Alongside these innovations, there will be a heightened emphasis on AI safety, governance and transparency, as organisations seek to deploy AI at scale, responsibly,” he adds.

If AI is to serve everyone in the country, it needs to be built for everyone. Hence, it is important to create an inclusive and equitable AI access ecosystem as it is also a powerful equaliser for emerging economies like Malaysia.

Si explains that an inclusive AI ecosystem strengthens the entire economy — from improving public service delivery to transforming agriculture and manufacturing — as it addresses long-standing challenges while also unlocking new pathways for growth and resilience.

It also enables broader participation in the digital economy, fosters innovation from diverse perspectives and builds societal resilience. A report released by the Malaysia Centre for the Fourth Industrial Revolution (Malaysia Centre4IR) and Access Partnership, titled The Economic Impact of Generative AI: The Future of Work in Malaysia, estimates that Gen AI can potentially unlock US$113.4 billion of productive capacity for Malaysia, equivalent to 28% of GDP in 2022.

“AI is not just a driver of economic opportunity but also a tool for building a more inclusive and sustainable society. That is why our skilling programmes are designed to go beyond technical training — they are about creating real pathways for people to participate meaningfully in the AI economy,” Si explains.

“We’re not limiting our programmes to urban or high-tech sectors. From teachers in rural schools, workers transitioning from sunset industries and women re-entering the workforce to students in TVET (technical and vocational education and training) institutions, we are creating learning opportunities that meet people where they are, with content tailored to their context and career goals.”

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