As we transition from Budget 2025 to Budget 2026, Malaysia’s trajectory towards becoming an artificial intelligence (AI) nation by 2030 demonstrates remarkable momentum and strategic coherence.
The past year has validated the government’s approach, while the latest budget signals an ambitious leap from foundational readiness to scaled, institutionalised deployment.
Foundations laid
Budget 2025’s emphasis on building readiness and capability has yielded tangible outcomes. Most notably, Malaysia attracted RM3.29bil in approved AI investments between January and June alone, with projections indicating the creation of 6,920 potential jobs.
This reinforces the government’s foresight in creating an enabling environment for AI adoption.
The digital economy is expected to meet or surpass the 25.5% of projected gross domestic product by the end of this year.
Major technology investments from Amazon Web Services, Microsoft, Google and Oracle totalling US$16.9bil for the period up to 2038 underscore international confidence in Malaysia’s digital transformation.
These achievements stem directly from Budget 2025’s strategic pillars: research and development funding, educational initiatives, infrastructure investments, and targeted support for small businesses and entrepreneurs.
Budget 2026 represents a significant evolution, characterised by four distinct strategic shifts that build upon the foundations of the previous budget.
The centrepiece of Budget 2026 is the RM2bil investment in a Sovereign AI Cloud through the Malaysian Communications and Multimedia Commission.
With Malaysia leading efforts to advance AI governance through the AI Safety Network, we are broadening our focus beyond enhancing Internet coverage (through targeted support for specific groups) to establishing sovereign, secure AI infrastructure.
The Sovereign AI Cloud paves the way for the enablement of large-scale AI applications whilst ensuring national data sovereignty in an increasingly complex geopolitical landscape.
The National AI Office has seen its allocation almost double from RM10mil to RM18.1 million, reflecting its expanding role in shaping Malaysia’s AI strategies and promoting collaboration across ministries, government agencies and the private sector.
This institutional strengthening signals the government’s commitment to coherent whole-of-nation AI governance.
Accelerating adoption
While Budget 2025 focused on building capacity through education and research, Budget 2026 pivots towards demand-side activation. The RM53mil allocation for the Malaysia Digital Acceleration Grant will catalyse the adoption of technologies such as blockchain, AI and quantum computing across businesses and communities.
The 50% tax deduction for small businesses undertaking AI and cybersecurity training courses (recognised by MyMahir National AI Council for Industry and jointly led by TalentCorp and MyDIGITAL) directly addresses adoption barriers.
Combined with up to RM1bil in financing and grants through development financial institutions for automation and digitalisation among small businesses, these measures demonstrate a concerted effort to democratise AI adoption beyond large corporations.
Building and nurturing talent is critical to addressing bottlenecks to AI adoption.
Upskilling initiatives can go a long way, including HRD Corp’s RM3bil allocation for digital and technology training, the Skills Development Fund Corp’s RM650mil financing for more than 25,000 trainees in New Industrial Master Plan fields including AI and the RM200mil for Khazanah’s K-Youth programme in strategic sectors.
Particularly noteworthy is the RM45mil allocation for the National Technical and Vocational Education and Training Council to impart digital technology and AI knowledge to 10,000 religious school students, as well as the addition of 1,500 new undergraduate placements in five research universities for fields of study including AI.
This inclusive approach ensures that AI readiness extends across diverse educational pathways and communities.
Trust, security, and ethics
Digital trust is the cornerstone of sustainable digital transformation, with RM30mil allocated for cybersecurity.
With cyber attacks continuing to evolve and grow in complexity, it’s timely to hear about the development of advanced cryptographic security services and the establishment of a Centre for Cryptology Development under the National Cyber Security Agency.
The forthcoming Cyber Crime Bill complements this year’s legislative enhancements, while the RM12mil allocated for the National Scam Response Centre addresses immediate citizen concerns.
It’s not only crucial to use AI responsibly, but to deploy it strategically to outpace tomorrow’s cyber challenges.
The establishment of a Centre of Excellence in Ethics for Emerging Technologies signals that we’re taking a step in the right direction by embedding responsible AI development at the institutional level.
National AI policies are only as impactful as their on-the-ground execution.
To bridge the gap, Malaysia must prioritise agile implementation frameworks, empower local agencies and foster industry pilots that translate strategy into tangible outcomes.
Success will be measured not by policy documents, but by the AI-driven solutions that improve the daily life of businesses and citizens alike.
For Malaysian industries, the AI opportunity is real but so is the challenge. Businesses must move beyond awareness to action: upskilling teams, investing in AI-ready infrastructure and collaborating with ecosystem partners.
Those who adapt and scale AI solutions early will capture new markets and drive productivity. This calls for a shift in focus from proof of concepts to piloting AI solutions in core business processes to demonstrate value and build internal capabilities.
Malaysia has made impressive strides in digital governance, but to ensure that its benefits are experienced across the ecosystem equitably, we need deeper public-private collaboration.
By co-creating standards, sharing data responsibly and piloting regulatory sandboxes, government and industry can accelerate innovation while safeguarding trust.
A more open, partnership-driven approach will ensure digital policies remain relevant and responsive to real-world needs.
Malaysia’s journey from AI readiness to scaled deployment is marked by strategic investments, institutional strengthening and a clear commitment to inclusive, responsible growth.
With measurable results already emerging, it’s evident that the nation is not just building capacity but operationalising its AI ambitions.
The government’s leadership, paired with industry and societal engagement will be crucial for Malaysia to realise its vision as a regional AI leader by 2030.
Yap Sau Shiung is head of digital services and tax technology partner at PwC Malaysia. The views expressed here are the writer’s own.
