DIGITAL readiness will be the key measure of success for micro, small and medium enterprises (MSMEs) under the 2026 Budget, as Malaysia shifts its focus towards artificial intelligence (AI)-driven growth.
Vice President of Digital Adoption at Malaysia Digital Economy Corporation (MDEC), Wan Murdani Wan Mohamad said incentives under the 2026 Budget are largely positioned to strengthen the national AI ecosystem, in line with Malaysia’s aspiration to become an AI nation, rather than providing direct grants specifically for MSMEs.
“The question of incentives or grants for MSMEs is not really the right way to frame it. The main driver for MSMEs is the Ministry of Entrepreneur and Cooperatives Development (MECD), while MDEC comes in from the spectrum of digital adoption,” he said during a forum session titled ‘Budget Strategy: MSMEs Through Digital Adoption’, held in conjunction with the 2026 Sarawak Budget Conference in Kuching, today.
He explained that funding allocations under the upcoming budget are more focused on accelerating AI adoption across industries, as announced by the Prime Minister, to strengthen the country’s digital ecosystem and ensure sufficient capital flow to support advanced technologies.
“There are no specific grants for MSMEs, but there are specific allocations for AI. That is how we are positioning ourselves for the 2026 Budget,” he said.
Wan Murdani said MDEC’s priority is to improve the overall readiness of MSMEs to adopt digital and advanced technologies, citing findings from surveys conducted on businesses nationwide.
According to him, MDEC categorises MSMEs into five levels of digital maturity, ranging from basic adoption at Level One to advanced integration at Level Five, covering back-office operations, internal business processes and customer-facing systems.
“From our findings, about 80 per cent of the businesses surveyed fall under Level Two, which means very minimal exposure to digital adoption. Only about 20 per cent are at Level Three or Four,” he said.
He said Level Three represents businesses with a more mature digital ecosystem where automation is embedded into operations, while Level Four and above involve advanced and integrated use of technology.
“Our aim is to uplift these businesses, to move them from Level Two to Level Three or Four. That is where incentives, programmes and interventions come in through a whole-of-government approach,” he said.
Wan Murdani said effective digital transformation requires profiling MSMEs to identify readiness gaps and matching them with the right ecosystem partners, stressing that no single agency can drive transformation alone.
He identified four critical categories of support needed to help MSMEs advance digitally: financing partners, talent development, business advisory services and access to affordable technology solutions.
“Financing is often the biggest gap. Talent is equally important so businesses can understand and sustain their digital agenda. They also need proper business advisory, and finally, access to affordable solutions that they can immediately adopt,” he said.
He said the success of MSME digitalisation should be measured by how many businesses are successfully uplifted from lower to higher digital maturity levels.
“The more we can move MSMEs from Level Two to Level Four, that becomes the parameter of how successful we are,” he added.
On aligning MDEC’s strategy with Sarawak’s development priorities, Wan Murdani said the agency adopts a sector-based approach, focusing on industries that are ready to adopt technology and have the potential to generate strong economic impact.
He cited agriculture as a key example, noting that MDEC has implemented about 700 agri-tech pilot projects nationwide, including in Sarawak.
“From these projects, yields have increased by 30 per cent, costs have been reduced by 30 per cent, and productivity has also improved,” he said.
He said the projects leverage AI and Internet of Things (IoT) technologies for smart farming, crop monitoring and aquaculture, benefiting farmers who largely fall under the micro-enterprise category.
“The idea is to bring technology to the farmers, create awareness, and translate that into real outcomes. These pilot projects can then be replicated and scaled nationwide,” he said.
Wan Murdani added that MDEC is working closely with the Sarawak Digital Economy Corporation (SDEC) to ensure federal initiatives align with Sarawak’s priorities, following the signing of a partnership agreement during the International Digital Economy Conference Sarawak (IDECS).
“Whether it is oil and gas digitalisation or data centres, our programmes will be aligned, customised and tailored to Sarawak’s needs so that MSMEs can be uplifted in the right sectors,” he said.
He stressed that close collaboration between federal agencies and the Sarawak government is crucial to closing digital gaps and ensuring MSMEs contribute meaningfully to the state’s economic goals.
“With the right interventions and partnerships, we can help MSMEs move up the digital maturity ladder and achieve the outcomes that Sarawak is aiming for,” he added.
