MITI’s Malaysia’s Strategic AI Push: Key Government Initiatives and What It Means for Businesses and SMEs

This update is relevant to businesses in the AI and technology sectors, including startups and SMEs, looking to capitalize on Malaysia’s evolving AI regulations and government-backed initiatives for growth and innovation.

For businesses keen on adopting Artificial Intelligence (“AI”) and those in the technology sector, recent updates from the Malaysian government highlight critical developments that signal AI’s growing importance. These initiatives reflect the government’s acknowledgment of AI’s transformative potential and its role in advancing digital transformation—a key element for attracting foreign investments. Below is a summary of the key initiatives designed to position Malaysia as an AI leader in the ASEAN region.

Key Government Initiatives

1. National Artificial Intelligence Office (NAIO): On 28 August 2024, the Malaysian Cabinet approved the establishment of the NAIO. In its early stages, NAIO will operate under the guidance of MyDIGITAL Corporation, a government agency under the Ministry of Digital, before its official launch in November 2024. NAIO is tasked with driving Malaysia’s AI agenda, coordinating various national AI initiatives, and ensuring the development of a robust AI ecosystem.

2. National Guidelines on Artificial Intelligence Governance and Ethics (AIGE): Launched on 20 September 2024, AIGE is designed to ensure AI development in Malaysia adheres to safety, trustworthiness, and ethical standards. It targets three main AI stakeholder groups:

• End Users (Public): AIGE promotes consumer protection through mandatory disclosure of AI-generated content and requires explicit user consent for data usage in AI model training.
• Policy Makers: Encouraged to balance innovation with accountability and risk mitigation
• Developers and Industry Players: Must maintain ethical standards, establish governance systems, ensure fairness, share data responsibly, and monitor AI systems for improvements.
  The AIGE outlines seven guiding principles for responsible AI: fairness, reliability, safety, control, privacy, inclusiveness, transparency, accountability, and human benefit.

3. Future AI Initiatives: The government has also laid out ambitious AI plans, including:

• Finalizing the AI Technology Action Plan 2026-2030 within 12 months;
• Establishing a regulatory framework for ethical AI usage while promoting adoption in key sectors;
• Promoting the “AI Untuk Rakyat” program to boost public awareness;
• Implementing the National AI Talent Roadmap 2024-2030 to nurture a skilled AI workforce;
• Launching the AI Sandbox Pilot Programme whereby the Ministry of Science, Technology and Innovation through collaboration with the Higher Education Ministry aims to establish up to 900 AI Startups and develop at least 13,000 new AI talents by 2026.

Regulatory Landscape for AI

While there are no specific laws governing AI in Malaysia yet, though businesses should be vigilant of existing laws like the Patents Act 1983, Copyright Act 1987, and Personal Data Protection Act 2010 (PDPA), etc. as it may be relevant to certain AI-related matters.

For example:

1. Intellectual Property: Though the Patents Act 1983 and Copyright Act 1987 do not directly address AI-generated inventions, works, or data processing, the present legislation provides it as such that AI cannot be considered an inventor under patent law. However, there is a chance that AI-generated output might qualify for copyright protection. Whether the final products are eligible will depend on meeting the criteria specified under the specific legislations (e.g. Copyright Act 1987), which requires evaluating if enough effort has been made to render the work original in nature.
2. Personal Data: The PDPA is also relevant as it seeks to govern AI’s processing of personal data, requiring adherence to data protection principles and regulations.
3. Contracts: AI-based contracts may be enforceable under the Contracts Act 1950, provided the elements of a valid contract are satisfied, and no vitiating factors are present
4. Computer Crimes: The Computer Crimes Act 1997 governs offenses related to unauthorized access to computer materials, computer system manipulation, and misuse of networked services and it could apply if AI is used in cyberattacks or if an AI system is exploited to gain unauthorized access or manipulate data. The Computer Crimes Act 1997 further sets out penalties for cybercrime, which could include AI-driven fraud or unauthorized data processing

Though Malaysia has yet to enact specific AI regulations, the Ministry of Science, Technology and Innovation emphasizes the importance of public awareness, education on AI’s potential biases, and ensuring AI innovations are balanced with managing associated risks. Future legislation may address these areas, aligning with global efforts in AI governance.

Implications for Businesses

Businesses, especially those in AI and digital sectors, must align with the AIGE principles by incorporating AI governance frameworks and ensuring compliance with the ethical guidelines. The government’s AI initiatives, particularly the AI Technology Action Plan, offer significant growth opportunities for startups and SMEs. By tapping into government-backed programs, businesses can access resources and expertise to foster innovation and expand AI talent.

Final Thoughts

While there are no specific laws in Malaysia governing AI at present, businesses must remain vigilant and take note of existing laws such as the Patents Act, Copyright Act, Personal Data Protection Act, Contracts Act, and Computer Crimes Act, all of which provide guidance on AI-related matters. Pending such enactments, it is crucial for companies to also stay observant of developments under the National Guidelines on AI Governance and Ethics (AIGE). By doing so, businesses can ensure compliance with current legal frameworks, adopt responsible AI practices, and be prepared for future regulations as Malaysia continues to evolve its AI landscape.

***

This article was written by Low Rui Thong (Pupil in Chambers) from Donovan & Ho’s corporate practice. 

Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. Feel free to contact us if you have any queries.