Malaysian Government Initiatives

In its efforts to be transformed into a K-economy, the Malaysian government has actively promoted the move towards digitization. On August 1, 1996, Malaysia created a new urban zone designed specifically to enhance and develop a world-class multimedia industry – The Multimedia Super Corridor (MSC). The Multimedia Development Corp (MDC) was set up to promote, implement, coordinate and manage the MSC. As at end of November 8, 2002, 779 companies have received MSC status, of which 522 are Malaysian owned companies.

There are government incentives such as zero income tax for 10 years or a 100% investment tax allowance on new investments made in MSC designated zones. The government also promulgated various laws to support and strengthen MSC activity. The laws are:  The Digital Signature Act 1997, which covers electronic signatures . The Computer Crimes Act 1997, which outlaws the fraudulent use of computers and unauthorized access to and modification of the contents of computers . The Electronic Government Act 1997, which regulates communication within the public sector. This Act also enhances the communication between the public and private sectors.

The Multimedia Convergence Act 1997, which regulates communication, information and broadcasting services. Details of these laws are discussed in greater detail later in the book. For now, it suffices to note that the government has been playing its part in promoting e-banking, albeit in a cautious manner. Bank Negara categorized three types of websites facilitating Internet banking: Informational websites This website is intended to distribute general information about the bank and to advertise products and services but provide no interactive capability.

Banks may also establish a hypertext link from its website to third parties or advertise products and services of third parties. Bank Negara views this as low risk as the website is not linked to the banks internal computer systems that stores the database of the banks although information may be vulnerable to alteration. Communicative websites This website allows some interaction between the bank and customers, where the latter may send information and make account enquiries. The modes may include email, online forms and account enquiries.

These sites present a higher level of risk as they may provide the path to the banks' internal networks via email or attachments. Banks are expected to have in place controls to prevent, monitor and alert management of any unauthorized attempt to access the banks' internal network. Transactional websites This website allows customers to execute transactions and presents the greatest risk to banks as it provides a link to a bank's internal network and the computer systems holding the account information. These sites would require the highest level of protection, including encrypted transmission of highly sensitive data.

Bank Negara provided preferential treatment to domestic banks by allowing them to establish: Communicative or Transactional websites with effect from June 1, 2000;  Locally incorporated foreign banks were allowed to establish Communicative websites with effect from January 1, 2001; and Locally incorporated foreign banks were allowed to establish Transactional websites with effect from January 1, 2002. Acknowledging the risks involved with Internet banking, Bank Negara has outlined guidelines on how each of these risks are to be approached and eliminated where possible or at least minimized (PriceWaterhouseCoopers, 2001).