The Malaysian internet economy is predicted to hit USD 26 billion in 2025, more than double from its current value of USD 11 billion, according to the 2019 Google-Temasek-Bain & Co report. The country’s administration is working to improve the startup ecosystem’s biggest challenge: its level of connectedness in relationships between founders, experts, and investors, according to the Global Startup Ecosystem Report 2018.
The government’s digital arm, Malaysia Digital Economy Corporation (MDEC) has established various initiatives to promote local startups to grow at a regional and even global scale. The organization provides fiscal, monetary, and development support, including a tax exemption system for tech companies that set up a presence in Malaysia.
MDEC also recently revamped the Malaysia Digital Hub platform, which will be a “one-stop platform for all startup necessities at every stage,” says Norhizam Kadir, the vice president of growth ecosystem development at MDEC.
KrASIA recently spoke with Kadir about the country’s digital ecosystem environment, its strengths, and its challenges.
KrASIA (Kr): What kind of monetary support do you provide to startups?
Norhizam Kadir (NK): In terms of monetary support, we provide grants for companies that are presenting and developing breakthrough technologies, or companies that are building the tech ecosystem. At the same time, we play a bridging role where we connect tech companies with VC firms or venture builders so that they can access potential funds. In November, we held Expand Indonesia, where we brought seven startups from Malaysia to network with various companies in Indonesia so they could tap opportunities there. Currently, we have Expand programs in Indonesia, Thailand, Philippines, and Vietnam.
To date, there have been seven Expand cohorts with around 47 startup participants since 2017 and 35% of them have entered the market that the programmes were held at.
Of course, we also provide access for startups from these countries to come to Malaysia and explore opportunities here. Essentially, any startups that want to come to a new market would need support from the start to scale up. There is a program called Malaysian technology entrepreneurs program, that is a visa program where they can come to the country to work or to set up branches, legally.
Kr: You also have a program called Global Acceleration and Innovation Network (GAIN), how is it different from Expand? And could you please share with us some success stories from the programs?
NK: Where Expand focuses more on startups, GAIN looks at fueling high potential Malaysian tech companies to soar on a global stage. The GAIN program is designed for more mature tech companies and there are a set of requirements that the companies need to fulfill.
An example of a success story from GAIN is a drone solution startup called Aerodyne. A member of GAIN’s program, Aerodyne started with two markets and today is present in 25 markets and is ranked third globally by Drone Industry Insights in its 2019 Drone Service Provider Ranking.
Meanwhile, Moovby is a great example of the success of the Expand program. Moovby is a peer-to-peer car sharing platform which participated in the 2018 Expand cohort. The startup successfully expanded into Indonesia and formed a strategic partnership with Traveloka. They’re also projected to make an impressive RM8.5 million (USD 2 million) sales by mid-2020.
Kr: How are you positioning the Malaysian startup ecosystem, compared to neighboring Southeast Asian countries?
NK: While Indonesia has a huge opportunity for domestic consumption and Singapore has that opportunity from funding availability, Malaysia has always been positioned as a test bed country for tech startups. There are multiple reasons for this, one of which is that Malaysia is a very multiracial and multicultural country. It has a bit of everything from Asia.
Many local and foreign companies use Malaysia as a test bed before they expand into India, the Middle East, or Indonesia. Moreover, the country facilitates the ease of doing business due to various policies that make it conducive and convenient for tech companies. Malaysia is one of the very few countries in Southeast Asia that has a hundred percent foreign ownership policy. So, if your startup wants to expand into Malaysia, you don’t even have to find a local partner.
Kr: With a lot of support from the Malaysian government, what are the current challenges faced by Malaysian tech startups? Are we going to see a local unicorn soon?
NK: Malaysia is a small market, so the mindset has to be global, or at least Southeast Asia for now. We work together with organizations that focus on capability building, such as the Malaysian Global Innovation & Creativity Centre (MaGic). One of our goals is to ensure that a unicorn company will be created here. I think that now, the startup with more possibilities to reach a unicorn status is probably the video streaming platform iFlix, which is nearing a USD 1 billion valuation. iFlix has been doing great, so let’s see and watch, fingers crossed.
Kr: What is the fastest growing sector in Malaysia’s digital economy?
NK: E-commerce is huge, and it is not necessarily only related to marketplaces, but its entire supply chain too, especially logistics. Fintech also has huge potential as the local regulators are progressive as well. Malaysia was the first country in Southeast Asia to regulate peer-to-peer financing and equity crowdfunding back in 2016. In fact, Malaysia just welcomed the newly launched crypto exchange company called Lumo, which is the first to be fully licensed by the Securities Commission. So, fintech is big, and within fintech, we started seeing the rising trend that focuses on Islamic fintech, which has plenty of opportunities.
We have more than 50 startups from the Islamic economy today, ranging from sharia fintech, to modest fashion, halal travel, and so forth. MDEC really makes an effort to support Islamic fintech to grow and tap into this USD 3.2 trillion global markets in the Islamic economy. For example, we work together with Gobi Partners and its Taqwa Tech program, and align our strategies around the Islamic economy development in Malaysia.
Kr: What new initiatives do you have coming up in 2020?
NK: We’ll launch the Digital Freelancers program by early next year. The program aims to entice skilled talents, especially in emerging technologies such as artificial intelligence (AI), deep learning, and blockchain, to work in Malaysia as expatriates for up to 12 months. They can also undergo practical training with a local company on behalf of an overseas firm. Through this program, we’re looking into how we could tweak the education system, preparing students to be more exposed, and to be ready to embrace these new sets of emerging technologies. We already proposed the project to the government, and hopefully, it will come through soon.
This interview has been edited for length and clarity.