[Q&A] Malaysia as the New China for Foreign Technology Companies

Ng Wan Peng is Chief Operating Officer of upcoming technology hub Malaysia’s Multimedia Development Corporation (MDeC). Here he talks to Business Review Europe about why tech companies should consider Malaysia for investment, challenging the Chinese dominance in this field.

BRE: What are the main incentives for foreign tech firms to invest in Malaysia?

NWP: Malaysia has changed immeasurably in the last 10 years, yet we’re facing a bit of an image problem.

While the country is fast-becoming viewed as a top Asian holiday destination, with beautiful beaches and luxury hotels, it doesn’t immediately spring to mind as a place for foreign firms to invest or in which to establish their Asian hub.

So why would a foreign tech firm choose to apply for MSC Malaysia status? The answers range from the economical, to the cultural, to the financial. For one, we are politically and socially stable.

We also believe our multi-cultural society holds a business advantage – we Malaysians are used to sitting across the table from someone of a different ethnicity to us from an early age, so we’re used to conducting business with people from all geographies and walks of life.

Being a largely English-speaking population is also attractive to Western investors, while our world-class infrastructure helps to facilitate global commerce without fear of being disrupted by natural disasters.

We also offer generous government initiatives in the form of a ‘Bill of Guarantees’ which promises MSC Malaysia-status companies a 10-year income tax holiday or investment tax allowance for up to five years, freedom of ownership, strong cybersecurity laws, and no internet censorship.

We have unrestricted employment of foreign knowledge workers, allowing foreign firms to bring in their own overseas talent without stumbling upon visa-related red tape.

Just as importantly, Malaysia has passed a number of new laws which protect intellectual property and promote freedom of thought and expression. As a result, Malaysia offers investors a young, educated and productive workforce at a competitive cost for the region.

In terms of European companies’ investment in the country, this actually makes up the largest portion of foreign-owned companies. Of the seven percent of MSC Malaysia companies that are foreign-owned, 33 percent are from United Kingdom, followed by 19 percent from The Netherlands, and 14 percent from Germany.

Is the plan to concentrate on and excel in a specific technology area?

At a broad level, our ‘Digital Malaysia’ initiative comprises four key goals to hit by 2020: create 160,000 high-value jobs; increase Malaysia’s ICT contribution from 9.8 percent to 17 percent; provide an additional one percent SME contribution to Gross Domestic Product; and create an additional $2,164 of digital income per annum for 350,000 Citizens.

To help us on our journey to achieving these goals, one of our key objectives is to increase revenue and fuel growth in five specific technology areas: ICT Services, eCommerce, ICT Manufacturing, ICT Trade and Content and Media.

What are the main challenges to Malaysia's aspirations to be Asia's pre-eminent ICT hub?

While we’re feeling positive about our growth and prospects, there are undoubtedly some challenges that need to be addressed if we’re to achieve our digital goals.

For one, we need to shift the Malaysian mindset about technology from consumption to production. About five million Malaysians will enter the workforce over the next few years. We want them to embrace technology to produce and create, rather than simply use it to surf the web and socialize.

To help institutionalize the idea of ICT as an invaluable working tool, and avoid increasing the digital divide, we’re pushing for a minimum number of hours to focus on using ICT as a tool in educational syllabuses, be it in the form of labs or practical training.

We’re also working to address the current IT skills shortage which is an issue being experienced across Asia, and the rest of the world, as ICT demand outstrips supply. In a bid to close the gap, we’re encouraging educational institutions to adapt their curricula and put more emphasis on practical industry experience.

Another challenge lies in the area of finance and investment. With a traditionally cautious culture, most Malaysian venture capitalists find tech startups too risky an investment. Certainly, our startup culture is evolving and there’s a huge number of seed and series A investments.

But Malaysian VCs tend to look at tech companies in a rather old-school way – profit and revenue multiples, rather than potential. Currently, most of the funding for IT entrepreneurs is provided by the government to plug the gap. Looking ahead, we hope to see a change in local VC attitudes towards startups, as more Malaysian entrepreneurs prove themselves on a global stage.