Technology has and continues to rapidly change and transform businesses, government, social and economic landscape.
The World Economic Forum (WEF) had spotlighted in May 12, 2022 that Startups are a catalyst for economic growth both globally and locally. The value that startups create is nearly on par with the GDP of a G7 economy and the amount of startup funding in 2021 surpassed $600 billion, shattering funding records. The number of unicorns is well past the 1,000 mark and growing exponentially.
In recognition that technology based businesses are contributing significantly to economic growth and national prosperity. Governments worldwide are according priority to offer support and financing to this critical group of businesses.
The Malaysian Government is strengthening venture capital financing and support for start-ups and tech based businesses through major initiatives; Malaysia Venture Capital Roadmap (MVCR) and KL20.
A Flashback to the mid1980s-2016
The Malaysian VC industry was established in 1984 with the formation of Malaysian Ventures Sdn Bhd. Between 2001 and 2016, various VC guidelines were introduced to facilitate industry growth
Office of the Science Advisor (OSA), Prime Minister's Department-1984
In 1984 a Science Advisor's post was created in the Prime Minister's Department Y Bhg Tan Sri Datuk Dr Omar Abdul Rahman was the first appointee to the post till he retired in 2001. Dr Omar was instrumental initiating a number of national programmes for enhancing research and development funding, for commercialization of the results of research and for the overall improvement of the national science and technology management processes.
Malaysian-Industry Government Group for High-Technology (MIGHT)- 1993
Under the leadership of the Science Advisor, Dr Omar established MIGHT under then the Office of Science Advisor, Prime Minister's Department strengthening public private partnership for enhancing Malaysia's High-Tech ecosystem.
Following from strategic initiatives to consolidate R&D funding, it was observed that commercialization of technology had faced challenges in seeking suitable funding to support technology-based businesses and thus strategies were developed to introduce innovation in financing to spur technological innovation
MIGHT Consultation 1997 themed “ Financing of High-Tech Industries in Malaysia” in March 1997
Recognizing the urgent need to introduce Innovation in financing to spur technological innovation including new models of financing to support and grow tech based businesses, MIGHT, Office of Science Advisor, Prime Minister’s Department had organized a MIGHT Consultation 1997 themed “ Financing of High-Tech Industries in Malaysia” in March 1997 to provide an avenue for key stakeholders including Government, private sector representatives from industry and finance sector, academics and technopreneurs to identify issues and factors that impedes the growth of technology driven businesses in Malaysia
Then Minister of Finance, now Malaysia’s 10th Prime Minister, YAB Datuk Seri Anwar Ibrahim had delivered a Keynote Speech at this event with international and national presenters providing a global and national overview of the current issues, challenges as well as best practices pertaining to the financing of technology-based businesses
Report on Enhancing Venture Capital Financing in Malaysia outlining recommendations to support and promote VC financing in Malaysia- April 1999
Further consultations with additional stakeholders were conducted following from this event which culminated in the Report on Enhancing Venture Capital Financing in Malaysia, dated April 1999 which was submitted to the Ministry of Finance.
I was honored to serve as Chairman of the Drafting Committee of this Report.
Outcome of the Report- First large quantum RM 500 Million allocated for VC Financing- Budget 2000 announced in October 1999
The above Report dated April 1999 had highlighted the critical need for additional VC funding to further support tech-based businesses. Budget 2000 announced in October 1999, had allocated RM 500 million for Malaysia’s VC industry
Bank Negara outlined that Special Funds were allocated for Malaysia’s VC Industry;
RM200 million was launched to finance high-tech projects. Bank Industri Malaysia Berhad was restructured to become Bank Industri dan Teknologi Malaysia Berhad and is managing the fund and Two VC funds for high-tech projects of RM150 million were launched. BNM channeled RM100 million each to Mayban Ventures Capital Company Sdn Bhd and Commerce Technology Ventures Sdn Bhd. These two companies contributed another RM50 million each. Total funds available for start-up companies amounted to RM300 million.
Additionally as the then Multimedia Development Corporation (MDC) now MDEC was formed to support and promote ICT and multimedia companies, a RM120 million fund, MSC Venture One, was launched by the Malaysian Development Corporation Sdn Bhd (MDC) to provide VC financing to information technology and multimedia companies.
Malaysia’s 10-Year Financial Sector Masterplan 2001-2010 launched in March 2001
Several recommendations from this report was accepted by the MoF which were incorporated into Malaysia’s 10-Year Financial Sector Masterplan 2001-2010 launched in March 2001 setting the direction for amongst others VC financing in Malaysia for the next decade.
The second quantum of RM 500 Million allocated for VC Financing and the establishment of MAVCAP- Budget 2001 announced in October 2000
The Ministry of Finance had reported in its Economic Report 2001/2002 that a venture capital fund amounting to RM 500 million has been channeled to the newly established Malaysia Venture Capital Management Berhad (MAVCAP) to provide venture capital financing for high-tech companies in line with the strategy to develop innopreneurs and technopreneurs.
Establishment of Malaysian Venture Capital and Private Equity Development Council (MVCDC) in 2005
The Securities Commission had outlined that in 2005, the Malaysian Venture Capital and Private Equity Development Council (MVCDC), chaired by the SC was established to deliberate issues and formulate recommendations pertaining to the VC/PE ecosystem. Membership of the council includes both public and private sector representatives, which facilitates the development of holistic policy proposals.
VC/PE Task Force was set up in late 2016
Under the auspices of MVCDC, an industry-led VC/PE Task Force set up in late 2016, with the SC as the secretariat had explored various approaches to stimulate the mobilisation of the nation’s savings pool in financing innovation via VC/PE investments. Recommendations from the task force and MVCDC which were adopted by the Economic Council (EC) and announced in Budget 2018
Fast forward 4 decades later - 2024
1st April 2024 had ushered in a watershed moment for Malaysia’s Venture Capital Industry with the launch of Malaysia’s Venture Capital Roadmap (MVCR) 2022-2030 by YB Chang Lih Kang, Minister of Science, Technology and Innovation (MOSTI). (Fig 1)
Fig 1: Launch of MVCR on 1st April 2024
MAVCAP CEO Shahril Anas Hassan Aziz had dovetailed that the Roadmap presents 10% of efforts and that 90% would be needed for its execution ( Fig 2)
Fig 2: MAVCAP CEO Shahril Anas Hassan Aziz delivered the Opening Speech
Minister Chang highlighted that the MVCR outlines 3 key strategies including i) Improving Ease of Doing Business; ii) Improving Funding Accessibility; and iii) Elevating Talent Pool to foster a thriving venture capital landscape that nurtures entrepreneurship, fuels innovation and drives sustainable Growth. (Fig 3)
Fig 3: Minister MOSTI YB Chang Lih Kang delivered the Welcoming Speech
The Minister shared the Government’s quest for Malaysia to attain a rank of the top 10 VC & PE Country Attractive by 2030 and beyond ( Fig 4)
Fig 4: Malaysia aspires to attain the rank of Top 10 VC & PE Country Attractive by 2030 and beyond
MAVCAP COO Ms Noor Amy Ismail offered an overview of the Roadmap’s 11 interventions including (Fig 5) enhancing cross- border capital flow, alignment of off shore and on shore tax incentives and increasing exit options
Fig 5: Ms Noor Amy Ismail, MAVCAP COO delivering her presentation on the 11 interventions of the MVCR
MVCR outlined two key enablers; establishment of a single window platform to consolidate and centralize the ecosystem, allowing for a more efficient process of accessing VC fundsand establishment of a VC council to be chaired by Ministry of Finance (MOF) to ensure more effective coordination between stakeholders in both public and private sector. The members iwill comprise Ministry of Science, Technology and Innovation (MOSTI), Bank Negara Malaysia (BNM), Securities Commission (SC), and MAVCAP. It is envisaged that the VC council offer input to the National Economic Action Council (MTEN), the National Digital Economy and 4IR Council (MED4IR)
Additionally, MAVCAP had highlighted that it aims to nearly double its current RM 758 million VC fund to RM 1.4 billion growing the VC contribution to Malaysia’s GDP from 0.19 percent to 0.35%
As Chairman of Drafting Committee of the Report on Enhancing VC Financing in Malaysia1999, it is with great interest that I follow the progress and development of VC/PE in Malaysia, including the launch of the MVCR ( Fig 6) of which I am appreciative to MOSTI and MAVCAP for the kind invitation to be part of the guests at this key event and wish to offer the following recommendations for the Government of Malaysia to further strengthen our nation’s VC/PE.
Fig 6: Ms Sheriffah Noor Khamseah with Ms Noor Amy Ismail, COO MAVCAP
Recommendations for the Government of Malaysia- Part 1
1. Select the Best Entity to Promote and enhance Malaysia’s PE&VC
In Malaysia’s 10 Year Financial Sector Masterplan launched in 2001, one of the key recommendations called for the establishment of a One-stop centre to strengthen Malaysia’s VC landscape.
In 1999, MIGHT was instrumental in pioneering strategic initiatives to develop Malaysia’s VC industry. When MAVCAP was established in 2001, it was mandated to develop the nation’s venture capital sector.
In 2016 Malaysian Venture Capital and Private Equity Development Council (MVCDC) established to deliberate issues and formulate recommendations pertaining to the VC/PE ecosystem had set up a Task force in 2016 to provide recommendations to enhance innovation via VC/PE investments
And recently as announced in the Budget 2024, Khazanah has been tasked to spearhead the strengthening of the local venture capital (VC) ecosystem in collaboration with VC agencies such as Penjana Kapital and Malaysia Venture Capital Management Bhd (MAVCAP).
Thus there has been several initiatives by a variety organizations and/or structures set up or tasked with enhancing Malaysia’s VC/PE Industry.
In view that Minister Chang Lih Kang had shared Malaysia’s aspiration to reach top 10 of VC/PE country attractiveness, it is imperative the Government reviews international structures , organizations and or committees that have been set up for this purpose, in particular by the present top 10 VC/PE country attractiveness nations ( Fig 7) to identify the best model , structure or organization for Malaysia to reach the desired ranking position.
Fig 7: The VC & PE Country Attractiveness Index
2. In view of the critical need to offer a comprehensive range of financing to support tech based businesses, from early Phase, to Expansion Phase and right up to Later stages and IPO, it is imperative the Government shift its focus from just strengthening venture capital financing, but instead to review the entire lifecycle of tech base business development ( Fig 8) and strive to strategise to strengthen other key financing sources including amongst others business angel financing, crowdfunding, private equity as well as debt financing of loans for targeted tech businesses including but not limited to IT, life sciences, drone tech and AI.
Fig 8: Life-cycle of a firm and stages of financing
3. As the Ministry of Economy under YB Rafizi Ramli is putting great efforts into supporting Start-ups through several initiative including the upcoming KL20, cooperation amongst key Ministries and private sectors could be better coordinated via a suitable organizational structure including maybe the Special Advisory Committee to the Minister of Finance steered by Tan Sri Hassan Marican
A Sub Committee or Task Force on Innovation in Financing to accelerate tech business development could be formed to ensure comprehensive suite of financing is available for tech businesses throughout their business lifecycle to further support and spur Malaysia's economic growth and prosperity.
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