Putrajaya’s self-made Datasonic problem
THE government has ruled out buying Datasonic Technologies Sdn Bhd (DTSB), the supplier of MyKad and Malaysian passports.
It has not, however, denied that it had considered doing so.
This raises a more fundamental question.
Why was Putrajaya contemplating paying for control of a business that became strategically important largely because the government itself chose to outsource critical national identity functions to it?
The question is even more pertinent because Putrajaya had only recently committed itself to another six years of dependence on DTSB, a wholly owned subsidiary of NexG Bhd.
Beginning June 1, 2026, DTSB was awarded two Home Ministry contracts worth RM2.74bil combined.
One covers Malaysian passports while the other involves MyKad, MyTentera and MyPoca.
On Aug 20 noon, NexG said it has been requested by the government to provide an indicative price for the possible acquisition of DTSB.
On a sum-of-parts basis, it says a preliminary internal assessment indicates RM7.5bil in value – way above NexG’s market capitalisation of just over RM1bil.
This was announced only via a media statement, instead of a stock exchange filing.
So why consider buying the supplier shortly after extending its contracts?
One possibility is that the interest went beyond bringing MyKad and passport production under government control.
NexG’s own statement offers some clues.
According to the company, DTSB is developing a digital ecosystem combining biometric QR identity verification with Salur, a government digital wallet designed for targeted subsidies and assistance.
Salur would allow the government to determine who receives assistance, how the money can be spent, where it can be used and how public funds are ultimately utilised.
More intriguing is another line in the statement.
NexG says Malaysia is exploring the modernisation of voting, including biometric voter verification and electronic voting, and argues that a biometrically verifiable national identity would provide the necessary foundation.
The wording deserves attention.
It does not establish that the government plans to use DTSB for electronic voting.
NexG is describing the strategic potential of its own subsidiary and its technology.
Still, its inclusion raises legitimate questions.
Was the government’s interest in DTSB driven purely by MyKad and passport production, or was it examining a broader national identity infrastructure covering biometrics, government payments and potentially future voting systems?
If the latter was part of the consideration, the public deserves greater clarity – even if the takeover plan is off the table.
NexG describes DTSB as an integrated national identity business with capabilities stretching from secure document manufacturing to biometric verification.
It also says few operators globally possess comparable capabilities across the entire process.
There is some merit to the argument.
The government cannot replace DTSB at short notice.
Replicating capabilities accumulated over decades would require substantial capital, specialised expertise and, crucially, time.
But “difficult to replace” should not mean impossible to replace.
NexG has previously described DTSB as the sole provider of MyKad to the National Registration Department since 2012.
This may not amount to a monopoly in the strict legal sense, but it represents substantial concentration in a single private supplier for functions central to citizenship, border control and public administration.
The problem is not outsourcing itself.
Governments do not need to manufacture every chip, develop every software system or operate every production line.
The problem arises when outsourcing creates such deep dependence that changing suppliers becomes difficult, expensive or operationally risky.
Singapore provides a useful comparison.
Its Immigration and Checkpoints Authority remains responsible for national identity cards (ICs) and passports, while Singpass, its national digital identity system, is provided by the Government Technology Agency.
Private companies still supply technologies and services to Singapore.
The distinction is that the state retains firm control over the core identity architecture.
India follows a similar model.
Aadhaar, the world’s largest biometric ID system, is administered by the Unique Identification Authority of India, a statutory government body that controls the central identity repository and determines the standards governing authentication and identity management.
Private companies participate extensively in the ecosystem, but the central identity infrastructure remains under government authority.
India’s passport system also combines government control with private sector participation rather than placing the entire function in the hands of one commercial operator.
Malaysia already retains significant sovereign control too.
Home Minister Datuk Seri Saifuddin Nasution Ismail says the MyKad database and sensitive citizen information belong entirely to the government and are stored in government-controlled high-security data centres.Passport chip information is also encoded by the Immigration Department.
Which brings us back to the central question.
If the government already owns the databases, controls citizens’ information and retains the statutory authority, what exactly would it have been buying by acquiring DTSB?
Part of the answer lies in technology and infrastructure.
DTSB says it owns identity-related intellectual property, biometric verification technology and manufacturing capabilities.
NexG also says DTSB has committed about RM1.9bil to equipment, systems, personnel and two manufacturing plants.
But Malaysia is simultaneously building another government-backed identity infrastructure.
MyDigital ID, developed through Mimos Bhd, is intended to provide secure digital authentication.
It does not replace MyKad today.
Mimos itself has made this clear. But as government services become increasingly digital, MyDigital ID should progressively reduce the need to depend on a physical card for many forms of authentication.
Singapore’s Singpass already demonstrates where such a system can lead.
Its digital IC can be used for identity verification in many situations where a physical identity card was previously required.
Malaysia therefore needs to decide what its national identity architecture should eventually look like.
Buying DTSB would have brought a major private supplier under government ownership.
It would not necessarily have resolved the more important governance question.
How did one private company become so difficult to replace in the first place? More importantly, DTSB’s parent – NexG – is nearly controlled by just three individuals.
According to its latest annual report, executive chairman Datuk Ishak Ismail owns a 23.78% stake, deputy chairman and group chief executive officer Datuk Abu Hanifah Noordin has a 9.58% equity interest and Tan Sri Mohd Khairul Adib Abd Rahman has a 16.1% stake.
It is noteworthy that Abu Hanifah has granted Ishak the call option over 323.7 million shares, equivalent to 9.28%.
Manufacturing and specialised technology can still be outsourced.
Dependence, however, should not be.
The DTSB episode should therefore prompt Putrajaya to explain how one company came to occupy such a dominant position across MyKad and passport supply, whether credible alternative suppliers exist and how future procurement will prevent excessive reliance on a single vendor.
National identity is too important for the government to outsource critical capabilities for years and later contemplate spending billions of ringgit to regain control over capabilities it allowed to become concentrated outside the state.
A sound national identity strategy should ensure that the government controls its databases, standards, security architecture and critical intellectual property while maintaining the ability to change vendors when it is necessary.
Then again, bringing the entire system under government control is no guarantee against misuse if governance, oversight and accountability remain weak.