Malaysia Tech Week 2019: No longer any laurels to sit on

• Global giants, not Malaysian companies, will benefit from 5G race
• With capital scarce in Malaysia, time to bank on value creation and talent

WHILE the debate on who will win (and lose) in the global 5G race continues, the bigger question is how Malaysian companies will benefit from the eventual 5G rollout in the country.

Rakuten Ventures managing partner Saemin Ahn believes that this may not necessarily be the case at all. While consumers will benefit from a local rollout, especially if the telcos deploy it in a very cost-effective manner, local companies will not be the key beneficiaries.

“The biggest beneficiaries on the enterprise side unfortunately, will not be the Malaysian companies. The biggest beneficiaries will actually be those that have the upper hand in the technology disparity, which are the Alibaba Clouds and Microsoft Azures of the world,” he opined during a panel session with fellow venture capitalists during the inaugural Malaysia Tech Week from June 17 to June 21.

He believes however, that Malaysian companies can step up and work on supporting these companies via services and software related to 5G. “This doesn’t just happen because you plop a lot of money on it, you also have to understand what your immigration policy is, what your tax laws are in getting those IPs [intellectual properties] out,” he explained.

Saemin pointed out that among the things Singapore does well is in cornering the market in creating the IPs in Singapore specifically. “There has to be a multi-variated and orchestrated maneuver that the Malaysian government needs to execute,” he added.

When asked by moderator and 500 Startups managing partner Khailee Ng about his predictions in the tech scene, Vynn Capital managing partner Victor Chua said he has noticed a blurring of lines between tech and non-tech companies. In the past, traditional companies and tech companies were not willing to talk to each other but that has changed, he said.

“And with 5G, it is more about applications. More companies should be looking at how to leverage on the existing platforms. Without this convergence, a lot of businesses will eventually become commodities. If AirAsia wasn’t doing what they’re now doing, their stock price would be deflated and most airlines will be like that in the future. If you don’t catch up on the application of technology and be just another airline that is not able to capture value for your consumers, you won’t survive,” he added.

Dearth of capital in Malaysia

Other VCs were concerned about the dearth of capital in Malaysia. Gobi Partners managing director, Malaysia, Jamaludin Bujang said that this is a concern. “There are a lot of companies that need funding, and yet in Malaysia, the amount of capital is not a lot. There are a few people/parties that can give money and for a lot of them their budget is coming down. I think we need to sit down and see where the money is going to come from, even for the VCs.”

In an aside to Digital News Asia, Jamaludin noted that the government has done much for the past 20 years in providing capital to the relevant agencies (Mavcap, Cradle and others) and that we can't expect this to continue further.

“The ball now is with the private sector and institutional funds (Khazanah, KWAP, EPF, TH, PNB, SOCSO etc). This is where corporates should play a bigger role (we have seen some like Air Asia, Axiata, Johor Corp etc) but we need more companies to get involved. It's for their own survival too! If they don't invest in tech companies/tech funds, they are the ones who will suffer from competition from other companies in the region.”

“On Malaysian companies seeking capital abroad, my view is we can't stop them. It's their personal choice. As VCs, we just have to be very competitive against foreign VCs in Singapore, etc.’” he added.

Solving the problem

Cradle Fund Sdn Bhd acting group CEO Razif Aziz shared his personal view on the matter. “I think the days when the government pointed a lot of money and continued to push momentum in this area have gone. The challenge from this year onwards perhaps is to see how much the private sector can close this gap.”

He explained that many Malaysian companies may have to go to Singapore, Australia and Hong Kong to raise funds “because there’s way too much money [in those countries]”. “Personally, I think we shouldn’t go head-to-head with Singapore because we will lose. I think the strategy should be how we can keep a lot of the value creation process in Malaysia for the long-term. For example, Grab still spends a heck of a lot of money in Malaysia even though they are in Singapore.”

Razif expounded on this to Digital News Asia. For one, he defines value creation as any spending, investment, job creation or even ‘market or opinion leadership’ that a company does.

(Market or opinion leadership is his own term - it refers to activities that a leading or successful company does that influences or inspires others to follow suit e.g. like when an MNC/blue chip adopts industry best practices which then serves to inspire others to follow.) This helps lift the rest of their peers.

“In other words, if we continue to have this value creation in Malaysia, we will continue to enjoy the benefits despite the startup having de-camped to Singapore (or other jurisdictions),” he added.

“How do we do this? By creating an environment that is compelling enough for them to naturally want to keep part of their operations in Malaysia,” he said.

According to Razif, Malaysia has some natural USPs that are compelling — we’re still cost competitive, relatively English speaking, we have a common law system (similar to Singapore or other hotspots like Australia-ASX, Hong Kong-GEM, UK-AIM), large population pool, great infra for digital technology companies, supportive/pro-business policies/government (there is already a comprehensive set of incentives offered by Mida for example), stable government and rule of law.

“Beyond this, we need to develop our talent pool. Businesses chase two things – money and people (talent). While I think it’s too late for us to be a money pool aka financial hub, it is still not too late for us to become a talent pool. Our diversity, English literacy and in many cases multi-lingual ability, already ticks all the right boxes. The only thing left would be to widen and deepen this resource,” he explained.

The government can’t do all these alone, however. “This needs the effort of both the public and private sectors. Much of the USPs I spoke of above are already there. The ones we need to put in place need to be private sector-driven.”

He added that the government’s role will be to continue supporting the tech startup space so that it continues to build confidence and catalyse the space. However, everything else needs to be developed by the private sector — the supporting infrastructure, the peripheral support sectors and the talent development.

“If we do this well it will actually lift the whole industry, and before you know it, the relative advantages (or disadvantages) between Singapore and Malaysia will appear insignificant. Key will be open channels of communication between the two parties. Public-private sector coordination needs to be aligned. KKMM’s initiative to set up the MIPC placed under MDEC could be a step in the right direction,” he concluded.