IN a bold pivot from consumption to creation, Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim unveiled Budget 2026 with a strong commitment to transforming Malaysia into a powerhouse of homegrown innovation and artificial intelligence (AI).
“Malaysia must no longer remain a mere consumer. We must create — develop products and services, and lead in technology and digitalisation,” Anwar declared in Parliament, underscoring Tekad Empat, a pillar of the MADANI Budget aimed at scaling ‘Made by Malaysia’ innovations for global markets.
AI, RDCI, and Digital Sovereignty at the Core
The government is making AI a national priority, with Budget 2026 expanding institutional support and infrastructure development.
Key allocations include strengthening the National Artificial Intelligence Office (NAIO) and advancing AI education at local universities, including specialised AI applications in semiconductors (USM), medicine (UM), cryptology (UPM), and broader tech ecosystems via MMU.
Malaysia’s first Bahasa AI language model, *Intelek Luhur Malaysia Untukmu (ILMU)*, was jointly launched by Universiti Malaya and YTL AI Labs.
Global tech giants are also anchoring major investments:
Microsoft will inject USD2.2 billion to develop a West Malaysia Cloud Region, train 800,000 Malaysians under the “AI for Malaysia’s Future” programme, and establish a National AI Innovation Centre.
Google has pledged USD2 billion to build a new data centre and Google Cloud Region in Selangor.
Amazon Web Services (AWS) is assisting SMEs with digitalisation through machine learning and big data analytics.
To reinforce Malaysia’s AI leadership by 2030, the government has earmarked RM5.9 billion across ministries for research, development, commercialisation and innovation (RDCI) initiatives.
A further RM20 million goes directly to NAIO to build high-skilled talent and an efficient AI ecosystem.
A Sovereign AI Cloud will be developed by the Malaysian Communications and Multimedia Commission (SKMM), with RM2 billion investment, alongside the formation of an AI Transformation Centre with MMU and an ethics-focused Centre of Excellence for Emerging Technologies.
Tax incentives will support upskilling, with a proposed additional 50% tax deduction for SMEs that spend on AI or cybersecurity training recognised by the MyMahir National AI Council for Industry (NAICI), co-led by TalentCorp and MyDigital.
To accelerate emerging tech adoption, RM53 million is allocated under the Malaysia Digital Acceleration Grant for blockchain, AI, and quantum computing. MIMOS will lead development of blockchain and deepfake detection technologies.
Science outreach programmes like Malaysia Techlympics, National Science Week, Rehlah Sains and Science on Wheels will receive RM15 million to foster a culture of innovation among youth.
Commercialising Malaysian Creations
Moving beyond the lab, Budget 2026 emphasises commercialisation of locally developed technologies.
“Public university research should not stay confined to labs — we must ensure it reaches the market,” said Anwar.
With 450 university spin-offs and only 5% commercialisation success, the government will allow academics who are spin-off founders to take a year-long sabbatical to develop their ventures.
A new RM10 million National Spin-off Fund will support 50 selected lecturers to scale their startups, targeting private investment inflows of RM30 million with a threefold multiplier impact.
Research breakthroughs include USM’s portable kidney dialysis machine and oral cancer therapy, and UM’s fertility and biological therapy treatments for osteoarthritis. A separate RM12 million will help public university hospitals apply these innovations in patient care.
Over 550 products have been granted the MySTI logo — denoting verified scientific innovation — and these will be prioritised in government procurement and pilot trials.
In line with sustainability goals, companies using locally produced green technologies certified with the MyHIJAU Mark will qualify for a 100% Green Investment Tax Allowance for in-house use.
The government will also ramp up the *Buy Malaysian* campaign, dedicating RM20 million to promote domestic products locally and abroad.
Festival of Ideas to Champion Local IP
To further elevate Malaysian research and innovation, Anwar announced the **Putrajaya Festival of Ideas**, a new public platform where higher education institutions can showcase inventions, technologies, and intellectual property to the broader community and potential investors.
“We want to democratise innovation — to bring it into the public sphere, into the hands of the people,” he said.
This innovation-driven strategy aims to strengthen Malaysia’s economic resilience while building its identity as a nation of creators. - October 10, 2025
