The Complete Guide to Using AI in the Government Industry in Malaysia in 2025

Introduction: AI in Malaysia's Government (2025) - Malaysia's public sector is shifting fast: the National AI Office (NAIO) now drives national programs including the AI Technology Action Plan 2026–2030 and an AI Adoption Regulatory Framework (Malaysia National AI Office (NAIO)), while the Ministry's non‑binding National Guidelines on AI Governance and Ethics set seven principles to guide deployments across health, finance and smart cities (Malaysia National Guidelines on AI Governance and Ethics).

Practical rollouts - from Kuala Lumpur's CCTV networks that count vehicles and read plates to the public‑sector rollout of Google Workspace's Gemini Suite to 445,000 officers - show the upside, but legal gaps remain (for example ADM is not yet covered by the PDPA).

For agency teams that must implement responsibly, targeted workplace training matters: Nucamp's 15‑week AI Essentials for Work bootcamp teaches prompt‑writing and hands‑on AI tools for non‑technical staff, a pragmatic bridge between policy and real services (Nucamp AI Essentials for Work syllabus).

"If you want to ensure that an emerging economy succeeds, remains competitive, and sustainable, then it has to be through a quantum leap, and AI is the answer for that." - Anwar Ibrahim

AI matters for Malaysian government services because it turns backlog and opaque processes into faster, more responsive public-facing systems: studies show deployments deliver measurable gains - EY finds enhanced citizen experience (27%), improved monitoring and evaluation and cost savings - while academic research reports processing times can fall by around 60%, and pilot programmes prove the point practically.

At scale, the Ministry of Digital's AI at Work 2.0 partnership (covering 445,000 public officers) brings generative tools like Google's Gemini suite and video-maker Google Vids into everyday workflows so officers can draft policy papers, summarise meetings and produce explainers without toggling platforms, freeing time for higher‑value work and more personalised citizen interactions; in other words, what used to take days can now be distilled into a short brief or a two‑minute explainer.

But the EY playbook is clear: to capture that value agencies need data foundations, ethics and skills - so targeted training and governance (not just technology) turn promise into reliable public value, especially for services from health to smart cities where trust and transparency matter most (AI at Work 2.0 initiative, EY report on AI in government).

“The ability of public and private sector organisations to improve service delivery using next-generation technologies will play an essential role in establishing Malaysia as a digitally-driven, high-income economy.” - YB Tuan Gobind Singh Deo

Malaysia's stance on AI is pragmatic and principle‑led: in September 2024 MOSTI published the National Guidelines on AI Governance & Ethics (AIGE) to operationalise the National AI Roadmap 2021–2025 and to steer public‑ and private‑sector deployments toward trust, safety and human‑centred outcomes, while leaving room for innovation (Malaysia AI Governance and Ethics FAQ (NAIO), Overview of Malaysia National Guidelines on AI Governance and Ethics).

The AIGE lays out seven core principles - fairness; reliability, safety and control; privacy and security; inclusiveness; transparency; accountability; and the pursuit of human benefit and happiness - and targets three stakeholder groups (end users, policymakers and developers) with concrete obligations such as disclosure of AI use, consent and stronger consumer remedies.

Notably, the Guidelines explicitly protect rights like the ability to be informed about algorithmic decisions, to request deletion and even to

“interact with a human instead of an AI,”

a vivid consumer safeguard that makes the policy feel immediate and practical.

While the AIGE are not yet legally binding, they align with international standards and are positioned as the foundation for future regulation, asking agencies and suppliers to embed risk assessment, continuous monitoring, explainability and accountability into every AI lifecycle so deployments deliver public value without undermining trust.

The National AI Office (NAIO) has rapidly become the hub for Malaysia's AI strategy: approved by Cabinet on 28 August 2024 and formally launched on 12 December 2024, NAIO - incubated under MyDIGITAL for an initial year - was created to centralise resources, standardise governance and fast‑track adoption across government and industry, with concrete deliverables that include an AI Technology Action Plan 2026–2030, an AI code of ethics, an AI Adoption Regulatory Framework and consolidated government datasets to boost competitiveness and investor confidence; the office also received a targeted RM10 million boost in Budget 2025 to kickstart collaborations with academia and industry.

For agency teams, that means a single contact point for policy guidance, risk frameworks and sandboxing opportunities designed to move projects from pilots into production with clearer oversight - details are published on the NAIO FAQ and in contemporaneous launch briefings that track these early milestones (National AI Office (NAIO) FAQ and mandate, NAIO official launch and RM10 million Budget 2025 allocation coverage).

“another historical moment in our digital transformation journey.” - Prime Minister Datuk Seri Anwar Ibrahim

Malaysia's recent PDPA overhaul tightens the legal leash around data used in public‑sector AI but leaves honest transparency work to be finished: the amendments introduce mandatory Data Protection Officers, extend the Security Principle to processors, classify biometric data as sensitive, create a right to data portability and impose mandatory breach notifications (with guidance framing 72‑hour reporting windows), while penalties were ratcheted up to a maximum RM1,000,000 - concrete moves that align Malaysia closer to international norms (Future of Privacy Forum guide to Malaysia PDPA and AI ethics, DLA Piper Malaysia PDPA timeline and summary).

Yet gaps remain where it matters for responsible government AI: the PDPA still does not expressly regulate automated decision‑making and profiling (the PDPD is consulting on ADM/Profiling, DPIAs and Privacy‑by‑Design), cross‑border rules now rely on Transfer Impact Assessments rather than a whitelist (helpful flexibility that could be hollow without robust enforcement), and explainability obligations for

black box

systems are mostly voluntary under the AI Guidelines - so agencies that deploy AI must pair tech pilots with strong documentation, human‑review paths and DPO oversight or risk large fines; think of it as a 72‑hour wake‑up call for public teams to prove they can detect, report and explain AI harms before they escalate.

Which industry is clearly on the rise in Malaysia in 2025? Fintech - and it isn't just buzz: the broader Malaysia Fintech Market was valued at $46.86 billion in 2024 and is forecast to surge toward $143.35 billion by 2032, with a strong CAGR projected in the late 2020s (see the Malaysia Fintech Market report), while AI-specific fintech activity is already material at home (Malaysia's AI fintech market was about USD 1.9 billion in 2023 and industry forecasts point to steady growth through 2030).

AI is the accelerator here - powering fraud detection, alternative credit scoring, robo‑advisors and RegTech automation - which matters because fraud is rising rapidly (Malaysia's Central Bank reported a 35% year‑on‑year jump in fraudulent loan applications in 2024), so demand for real‑time transaction monitoring and machine‑learning behavioural analytics is urgent.

For government teams, that means fintech partnerships offer two wins: better citizen services through faster payments, lending and eKYC, and a clear imperative to pair deployments with robust PDPA‑aligned controls, explainability and DPO oversight so innovation doesn't outpace trust (for more on fraud trends, see GBG's analysis and the Malaysia AI fintech market overview).

When picking a single name that best captures Malaysia's AI momentum, homegrown scale-ups lead the story: Aerodyne Group stands out for industrial computer vision and drone analytics - its DT3 platform processes millions of data points and has cut inspection costs by up to 80% across infrastructure and utilities - while rising chip and hardware plays like MaiStorage and SkyeChip are building the on‑shore silicon and storage that will keep models fast and local; regional heavyweights such as ADA bring massive data‑analytics capabilities and global firms (Google, Microsoft, IBM) supply the cloud and enterprise AI muscle that underpins national projects.

This mix - practical industrial wins, emerging chip sovereignty and big‑tech investment - explains why ecosystem maps and industry roundups list these firms among Malaysia's leaders (see the Top 10 AI Companies & Startups in Malaysia [2025] and VeecoTech's Malaysia AI Landscape for details).

For government teams, the takeaway is pragmatic: partner with proven local specialists for domain work (e.g., drones, fintech, smart cities) and rely on global cloud partners for scale and compliance, so pilots become reliable public services rather than one‑off experiments.

“If you want to ensure that an emerging economy succeeds, remains competitive, and sustainable, then it has to be through a quantum leap, and AI is the answer for that.” - Anwar Ibrahim

Malaysia's talent and funding picture is shifting from patchwork to a clearer growth trajectory: Budget 2025 ties targeted incentives - special tax deductions for training, double tax deductions for AI R&D and a RM1 billion strategic investment fund - to practical capacity building, while a RM10 million seed for the National Artificial Intelligence Office (NAIO) gives coordination a home to scale those investments; these measures make it easier for agencies and vendors to co‑invest in skilling, internships and TVET partnerships and to hire skilled foreign graduates where gaps persist.

The policy mix encourages employers to underwrite training (training and job‑creation tax breaks), universities to co‑design courses with industry, and agencies to pilot portable learning credits so retraining investments follow workers across roles - an essential plank if clerical backlogs are to become data‑literate public services rather than displaced jobs.

For practical next steps, agencies should map high‑value roles, use R&D incentives to fund apprenticeship projects, and lock DPO and PDPA‑aligned training into procurement; learn more in the Budget 2025 overview of incentives and R&D support and the case for portable learning credits.

“Budget 2025 fosters a conducive environment for accelerating AI adoption. With the support of incentives and R&D initiatives, companies can enhance their competitive edge, scale operations, and drive Malaysia's digital transformation.” - Adrian Marcellus, CEO of MyDIGITAL Corporation

Practical Implementation Checklist for Malaysian public agencies: start by mapping where AI makes high‑impact decisions and require a documented DPIA and Privacy‑by‑Design for those services (the PDPD is consulting on DPIA/DPbD and ADM guidance so plan now), appoint and register a Data Protection Officer where thresholds apply and publish contact details, and embed 72‑hour breach detection and notification playbooks tied to clear escalation paths so that incidents become a measurable compliance routine (Malaysia PDPA updates and breach notification rules - FPF guide).

Operationalise the AIGE's seven principles by building transparency into procurement - require training-data descriptions, explainability measures and a documented human‑in‑the‑loop for any automated decision‑making - and add contractual clauses that force vendors to support auditability and traceability (Malaysia National Guidelines on AI Governance and Ethics (AIGE)).

For cross‑border flows, perform Transfer Impact Assessments before exporting datasets; for inter‑agency work, follow the new public‑sector Data Sharing Act checklist (purpose, handling, safeguards and a 14‑day response window) so requests are defensible and auditable (Malaysia Data Sharing Act requirements for public sector).

Finally, use NAIO sandboxes, KPIs and curated government datasets to pilot and monitor models, lock in DPO oversight for deployments, and treat the first 72 hours after a breach like a fire drill - fast, rehearsed and fully documented - so AI projects deliver public value without becoming a public crisis.

“the right to interact with a human instead of an AI”

Conclusion: Next Steps and What to Watch in Malaysia (2025+) - The immediate test for Malaysia's AI strategy is execution: the National AI Office's AI Technology Action Plan 2026–2030 and its AI Adoption Regulatory Framework will determine whether policy translates into safer, scalable public services or remains a paper roadmap - watch for published sectoral KPIs, sandbox outcomes and whether the Action Plan accelerates pilots (like the Gemini rollout to 445,000 officers) into routine operations (National AI Office (NAIO) - About and Deliverables).

Equally important are legal fixes: upcoming Profiling and Decision‑Making Guidelines under the PDPA and stronger ADM rules will shape citizen rights and agency obligations, so follow legal updates and commentary from practitioners who track these shifts (Malaysia AI governance practice overview (Chambers Practice Guide)).

Finally, skills and procurement matter: targeted workplace training and vendor clauses that enforce explainability, DPO oversight and 72‑hour breach playbooks will decide whether AI lifts service quality or exposes agencies to risk - practical courses such as Nucamp's AI Essentials for Work offer a concrete route to build those prompt‑writing and operational skills quickly (Nucamp AI Essentials for Work syllabus (AI Essentials for Work bootcamp)).

Keep an eye on NAIO's next publications, PDPA guideline rollouts, and early sandbox evaluations - these will be the clearest signals of whether Malaysia converts ambition into accountable, people‑centred AI at scale.

“If you want to ensure that an emerging economy succeeds, remains competitive, and sustainable, then it has to be through a quantum leap, and AI is the answer for that.” - Anwar Ibrahim