Malaysia Exploring Blockchain In Order to Boost its Three Biggest Industries
The Malaysian government is looking to utilize the distributed ledger technology in its three largest sectors: renewable energy, palm oil industry and Islamic finance. The Malaysian Industry-Government Group for High Technology (MIGHT) will be in charge of implementing blockchain solutions which the officials are hopeful will help to increase transparency, sustainability, and efficiency in logistics operations.
Currently, Tenaga Nasional Berhad (TNB), the largest publicly-listed company in Southeast Asia, is the sole utility provider in Malaysia. Officials believe that using blockchain would both increase renewable energy adoption as using an immutable distributed ledger means that providers must provide details of how exactly the energy was generated.
Users would likely prioritize green energy producers and could even buy excess electricity from private solar panel owners. This would increase efficiency, as distributing power over long distances is more wasteful. According to Mastura Ishak, program director at MIGHT, “Blockchain is interesting because it allows small players to have a say about what’s going on.“
Despite being the biggest Malaysia’s export, palm oil is under scrutiny due to widespread reports that child labor is being used to produce it. Environmental activists also claim that palm oil, 90 percent of which is produced in Indonesia and Malaysia, is directly responsible for the rainforest destruction in the South East Asian countries. Earlier this year major UK food chain Iceland announced it would stop using palm oil in its own-brand products.
Despite these bad practices, 43 percent of Malaysia’s agricultural revenue comes from the product, making this a major area in desperate need of blockchain adoption. It would help the government to supervise and monitor production and make more sensible regulatory decisions based on the data, provided by distributed ledger tech. Also, sellers and consumers would be able to track the source of palm oil and choose the more sustainable producers.
Under the Islam law, it is forbidden to collect interest on a loan and any created debt must be backed by a commodity, for example, precious metals. Meanwhile, Western financial institutions use intangible assets, such as futures contracts. These two different approaches result in complex legal infrastructure and comes with higher legal and administrative costs.
These costs could be significantly reduced via blockchain by employing smart contracts that are automatically executed on the distributed ledger. This would also prevent tampering, increasing transparency. It is yet unclear whether cryptocurrencies are compliant with Syariah law. Crypto companies in Dubai and Malaysia are already trying to overcome this obstacle by creating virtual currencies, pegged to gold.
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