Industry generally upbeat about Budget 2013

By Digital News Asia October 2, 2012

Most industry pundits praise focus on SMEs and education
Others note a more concerted effort needed to drive ICT

WHILE Malaysia’s latest transformation program, the Digital Transformation Program or just Digital Malaysia, got no mention at all in Prime Minister Datuk Seri Najib Tun Razak’s Budget 2013 speech, there were some initiatives that benefitted the information and communications technology (ICT) industry, often indirectly.

As reported by Digital News Asia's Edwin Yapp, there were some announcements pertinent to the industry in the proposed Budget:

Najib proposed that a deduction equal to the amount of investment made by an angel investor in a venture company be allowed to be set off against all his income;

The Government will continuously plan and implement programs and activities centered on knowledge, creativity and innovation;

100 Internet Centers will be established from 2013 to 2015 in suitable areas in the city, all of which will be equipped with computer facilities and broadband services for daily usage -- industry regulator the Malaysian Communications and Multimedia Commission will provide an allocation of RM150 million (US$48 million) for this;

Through the Youth Communication Package, a one-off rebate of RM200 will be provided for the purchase of one unit of 3G smartphone from authorized dealers – however, this is only for youths aged between 21 and 30 years of age with a monthly income of RM3,000 and below. A sum of RM300 million is allocated benefiting 1.5 million youths;

An allocation of RM38.7 billion (US$12.4 billion) to improve the quality of education as well as the allocation of RM500 million (US$160 million) for continued development in teaching skills in core subjects such as Bahasa Malaysia, English, Science and Mathematics through the Higher Order Thinking Skills;

The establishment of a New Entrepreneur Foundation (NEF) with an initial allocation of RM50 million (US$16 million) as a platform to provide training and guidance programs;

A fund of RM1 billion (US$320 million) will be provided under the SME (Small- and medium-sized enterprise) Development Scheme to be managed by the SME Bank in a bid to accelerate the growth of SME and the expansion of industrial areas nationwide;

The GTFS (Green Technology Financing Scheme) fund will be increased by RM2 billion in order to boost the production and utilization of green technology-based products, and the application period extended for another three years ending Dec 31, 2015;

Training programs will be developed to hone new skills in line with future needs of industry in a high-income and developed economy; RM3.7 billion will be allocated in 2013 to train students in technical and vocational fields;

The Domestic Investment Strategic Fund worth RM1 billion under the Malaysian Investment Development Authority (MIDA), which aims to leverage outsourcing activities and acquisition of technology by Malaysian companies; and

A tax incentive for the commercialization of resource-based R&D findings to be extended to commercialization of non-resource based findings.

Industry generally upbeat about Budget 2013 Multimedia Development Corporation (MDeC) chief executive officer Datuk Badlisham Ghazali (pic) said he was very positive about the Budget, which he believes would have a strong impact on the ICT sector and mesh well with Digital Malaysia.

“We are very excited about the Intellectual Property Financing Fund scheme -- MDeC has been closely collaborating with the industry to create the much needed intellectual property market for technopreneurs. The fund will enable local ICT companies to increase their funding capability, allowing them to diversify their product offerings to generate more home-grown innovative solutions,” he said.

“In line with our aim to become a developed digital economy by 2020, by focusing on moving Malaysians from digital consumers to producers and creating more knowledge workers, MDeC welcomes the various youth-related incentives, including the new smartphone incentives (the Youth Communication Package) and the announcement of the New Entrepreneur Foundation (NEF) to train and mentor young ICT entrepreneurs with an initial allocation of RM50 million.

“In addition, we are also pleased with the announcement that a Young Entrepreneurs Fund will be established with an allocation of RM50 million by the SME Bank that will offer soft loan aimed at youths aged 30 and below, with a 2% interest rate subsidy for loans up to RM100,000 with a seven-year repayment period,” he said.

Badlisham also noted the Get Malaysian Business Online Programme (GMBO) to assist small entrepreneurs, particularly women, to increase their sales online.

Industry generally upbeat about Budget 2013 “This will be another key boost to the digital economy. There is a huge latent business opportunity here and this program will help accelerate this otherwise dormant sector,” he added. “This is exactly the kind of Budget that will enable us to drive Malaysia towards a strong Digital Economy in the years to come.”

The national ICT association, Pikom, is pleased to acknowledge some of the initiatives are directed at stimulating the ICT sector.

In a statement, its chairman Woon Tai Hai (pic), said the allocation of RM50 million targeted to increase the number of women entrepreneurs in the ICT sector via promoting the e-commerce program is a significant step forward not only uplifting standard of living of woman but also the ICT sector itself.

“Indirect positive impact to the ICT industry include RM 600 million allocation given to five R&D universities, particularly in the field of bio-tech and nano-technology, and Graduates Employability Program targeted at new entrants of the job market,” he said. “Baskets of incentives including financing for SMEs also poised to foster ICT growth in the sector. This initiative is certainly in line with our consumption to creation initiatives”, added Woon.

‘Best gift since the MSC’

MOL Global Group CEO Ganesh Kumar Bangah (pic) said that the proposed policies would be able to holistically fill the gap in Malaysia’s ICT ecosystem.

“These are great policies to promote the ICT industry,” he said, adding that the tax write-off for angel investors would “provide an effective mechanism of filling the funding gap between early stage start-up and growth businesses.”

Ganesh also said that the tax incentives and exemption for companies that invests in their subsidiaries that undertake the commercialization of R&D findings would help fuel the country’s economy into a higher value-add economy, as would the proposal to enable SMEs to further expand their businesses by using intellectual property rights (IPR) as collateral to obtain financing.

“All in all, this basket of policies for the ICT industry … is the best gift that the Government has given to the Malaysian ICT Industry since the formation of the Multimedia Super Corridor in 1995,” he added.

Industry generally upbeat about Budget 2013 Albern Murty (pic), chief marketing officer of DiGi Telecommunications Sdn Bhd, was happy about the one-off rebate for smartphone purchases.

“Youths today are hungry to improve their quality of life, and the Internet is a perfect tool to help them source for knowledge, share experiences or launch their enterprises.

“We believe this incentive … will place more smartphones in the hands of young Malaysians. This will help drive usage in line with the Government’s aspiration for a connected Malaysia,” he said, adding that the plan to set up 100 1Malaysia Internet Centers in the city would help bridge the digital divide.

Microsoft Malaysia managing director Ananth Lazarus called out the focus on education. “It is clear that the Government places a premium priority on securing the future success of the nation with over RM41billion, along with various tax incentives and other allocations, committed to improving the quality of education in the country. We certainly laud the Government’s commitment to transforming education by lending the necessary budgetary commitment to meet the aspirations outlined in the recently announced National Education Blueprint,” he said.

Industry generally upbeat about Budget 2013 At the same time, the Government’s incentives towards leveraging intellectual property appear to signal the country’s recognition that it needs to move up the value chain, said Ananth (pic).

“This is certainly a step in the right direction in achieving the country’s aspiration to become a high-income nation,” he added.

Meanwhile, HP Malaysia managing director Narinder Kapoor said his company was very supportive of the commitment to providing affordable and ubiquitous access to ICT.

“Initiatives such as the broadband program would help increase the adoption of ICT among more Malaysians. Promoting a more pervasive ICT environment will facilitate the transition of Malaysians to engage in high value and high yield activities online, while allowing them to compete effectively in knowledge-driven economic opportunities.

“Indeed, as Malaysia continues to evolve into a knowledge-based and high income economy in line with the Government’s transformation plans, ICT’s role in driving efficiencies and innovation becomes pertinent,” he said.

He also lauded the effort to facilitate SMEs in growing their businesses, saying that SMEs are indeed the lifeblood of the global economy.

“SMEs, which make up more than 99% of entities registered in Malaysia, are increasingly important to the economic development of the nation. The initiatives presented under the Budget 2013 allow SMEs to take advantage of better access to financing and to harness new technologies such as cloud computing, which can enable acceleration of growth through increased innovation and productivity,” he said.

Industry generally upbeat about Budget 2013 Pang Yee Beng (pic), managing director of the Dell Global Business Center, Cyberjaya, said that the vibrant economy in Asia has led to a highly competitive IT industry, where skilled talent is always in high demand.

“The Government’s continued focus on human capital development is key to maintaining our competitive edge and long-term growth. Budget 2013’s financial incentives on quality education, teacher training, graduate employability and skills development reflects the Government’s priorities in building a skilled pool of human capital that has both industry relevance and soft skills,” he said.

Autodesk Malaysia country manager C.S. Tan was especially happy with the focus on innovation and creativity.

“Autodesk certainly looks forward to greater incentives and increased opportunities for Malaysians to promote development in the area of innovation and creativity technology.

“With the support and incentives from the Government, this strategic growth sector – the creative economy – will help accelerate the nation towards becoming a high-income and developed nation by 2020 and to help businesses stay competitive in the global marketplace,” he said.

Yuri Wahab, managing director for Cisco in Malaysia, said that the Government’s move to extend the Green Technology Financing Scheme (GTFS) to 2015 to further boost the production and use of green technology-based products will encourage greater participation by local companies to offer and adopt green technology solutions, especially energy efficient data centers, as well as the creative use of networking for energy conservation.

“This would in turn contribute to Malaysia’s fundamental aim of reducing its carbon emissions by 40% by the year 2020,” he said.

The initiatives and plans announced in Budget 2013 would potentially contribute to an exciting environment for the development of e-commerce in Malaysia, said Masaya Ueno, Rakuten president and CEO.

“Notably, Rakuten applauds the fund of RM1 billion under the SME Development Scheme to intensify the growth and development of SMEs, which form a huge segment of business in Malaysia,” he said, while also praising the GMBO program.

More can be done

While lauding most of the measures outlined in the Budget, other industry members noted that more could have been done in certain strategic areas – for example, in encouraging the adoption of home-grown technologies.

Thanks to the favorable conditions created by the Government and the entrepreneurial spirit embodied by many Malaysians, the nation has many great examples of companies that have successfully harnessed technology to grow locally and regionally, said Kenny Goh (pic), Group CEO of the Macrokiosk Group.

“Despite having many local companies that are able to provide high quality technology products and services comparable to that of international counterparts, many Malaysian conglomerates and companies still look towards global brands to meet their business needs,” he said.

“We feel that there is still a lack of incentives to encourage Malaysian businesses to be more supportive of each other. We would like to see, moving forward, incentives being provided to local companies that are willing to try and buy Malaysian-made technology products and services.

“We have seen great examples of how such incentives can support the growth of local SMEs and entrepreneurs in the other markets that we are present in,” Goh said, adding that Macrokiosk, a mobile technology enabler, is now active in 14 different countries and serves 18 key industries.

Industry generally upbeat about Budget 2013 HP Malaysia’s Narinder (pic) also noted the expanded focus on talent and human capital development, saying this would not only help develop an entrepreneurial spirit, but also set the foundation and churn out more knowledge-based workers.

“Developing a bigger pool of local ICT talent with the right set of hard and soft skills that meet industry expectations will certainly help enhance Malaysia’s global competitiveness,” he said.

However, Narinder had a word of caution, saying that while the education sector focuses on improving proficiency in core subjects, more concerted efforts are needed at higher learning institutes to include course that focus on sub-specialization within the ICT industry.

“Developing the right talent and human capital in ICT becomes even more important now as the Digital Malaysia initiative targets to create over 160,000 high-value jobs by the year 2020,” he said.

Narinder’s view was echoed somewhat by Prakash Mallya, Intel Malaysia country manager, sales and marketing.

“Technology is an essential foundation of education transformation. Therefore, Intel hopes that the Government will continue to prioritize and channel allocations towards integrating technology in the entire education process.

“Over and above enhancing teaching skills in core subjects, Intel also hopes that allocations will be made to support training in ICT-enabled education modules for teachers nationwide and provide them with the right tools and strategies (or pedagogy) to support a student-centric learning environment,” Prakash said, adding that was a need for a more focused approach in ICT allocations in the Budget.

Symantec Malaysia country director Alex Ong, while praising proposals related to SME development, education and skills development, noted that while the Government has introduced measures to reduce the crime rate and has allocated a total of RM591 million for the year 2013 in four key areas, none of the cover cybercrime.

“With the 81% increase in malicious cyber-attacks in 2011, and the cost of consumer cybercrime at US$110 billion globally, this is a key area that needs to be looked into.

“The impact of information loss from cybercrime is detrimental -- according to Symantec’s 2012 State of Information Survey, organizations in Malaysia have highlighted the impact of data loss to their business, including loss of customers (50%), damage to reputation and brand (45%), increased expenses (41%) and decreased revenue (37%),” he said.

“As the Government moves towards connecting more Malaysians to the Internet, the rapidly changing cybercrime landscape poses a greater risk than before. Symantec recommends that the Government consider initiatives and investments in crime reduction to include cyber-crime and increase the awareness of the rakyat (citizenry) in the changing trends of cyber threats and the common tactics of cybercriminals,” he added.

Industry generally upbeat about Budget 2013 Also concerned about security – of a more physical kind – was Nafis Jasmani (pic), country manager of Axis Communications, Malaysia.

“The Malaysian Government has allocated RM4.6 billion for the development of the security sector, more specifically, RM591 million to beef up public security by installing additional 496 units of Closed Circuit Televisions (CCTVs) in 25 local authorities and equipping the police force with modern technology and state-of-the-art equipment.

“This will encourage enforcement officers to react and respond to crime issues more effectively and efficiently,” he said.

“We are also very excited that tax deduction on the installation of security control equipment has not only been brought forward to the same year, but that this incentive has been extended to housing developers,” he added.

However, he also suggested that for crime prevention to truly take off, the Government may want to invest in city-wide surveillance platforms to improve information-sharing between multiple agencies such as law enforcement, fire stations and emergency response crews; and enhance response time to incidents.

“With recent advances in computing power and IP capabilities, cities of all sizes can deploy a cost-effective and reliable solution that gives them network and hardware flexibility, and the freedom to grow their system over time,” he added.