6 big ideas to make Malaysia the leader of the digital revolution in SEA

By Mr. Patrick Grove

Co-Founder and CEO of Catha Group

I have written and spoken about the power of ASEAN entrepreneurs so many times that I’m at risk of sounding like a broken record! You see, I’ve always believed in the potential and might of ASEAN - its people, economy and diversity. 

But Malaysia, in particular, is a special place to me. From the street food vendors to the executives in the Petronas towers, I’ve found an amazing entrepreneurship spirit and astounding drive to progress the country forward. I still believe that Malaysia is the best country in SEA to operate global businesses from - where the cost of business operations remains low and the language barrier is basically non-existent compared to most countries in the region. I’m convinced that businesses could only benefit from establishing their base in Malaysia (after all, I’ve done so with 5 businesses under the Catcha portfolio).

However, not everyone agrees. Malaysia has yet to become the country of choice for SEA unicorns for various reasons. As a big supporter of the country and all that it has to offer, here are my 6 big ideas to make Malaysia the leader of the digital revolution in SEA, and to showcase our immense potential.

1. Establishing a “Team of Eminent Persons” solely focused on the tech sector.

I strongly believe that having a team of experienced individuals advise the government on its policies and strategies concerning progress in the digital sector, will prove the government’s commitment to make us the digital hub of SEA and its openness to new ideas. The individuals making up this team have to not only be experienced, but also command respect from both the public and private sector.

In a country where government-linked companies and investment vehicles still figure heavily as part of the economic and corporate world, the Team of Eminent Persons could extend their role to them - advising GLCs, GLICs and other large incumbents across key industries on their digitisation strategies. The team will also consult ministries and agencies on all policy matters and issues affecting local tech companies.

I strongly believe that it’s very important to establish this as soon as possible because any technological innovation and advancements could greatly affect the Malaysian people and its economy.

2. The establishment of KL Internet City (KLIC)

Getting our local tech companies to the same level as global and regional giants isn’t something they can do on their own. In today’s globalised world, local tech start-ups can only benefit from exposure to foreign investments and ideas. One of the best ways to provide this exposure is to establish an internet city to house all tech ecosystem players where local players can mingle with global tech giants to expand their networks and exchange ideas.

The KLIC is a public-private sector partnership led by Catcha Group with the support of MDEC. We envision it as a digital hub for global tech giants from China, the US and other major countries around the world targeting Southeast Asia, as well as regional tech leaders and local startups. It will facilitate end-to-end support, networking, tech-specific education and knowledge-sharing to drive innovation in the digital economy.

KLIC will include customised corporate and personal tax incentives to attract these various players (all of whom typically may have looked to other countries, instead). 

One more way the government could help push this vision forward is to emulate what other governments have done. For example, the Singaporean Economic Development Board has been actively approaching global tech companies to set up their offices in Singapore. We feel that this additional support from the right government agency can hasten the effectiveness of KLIC.

3. Technology-dedicated unicorn fund with GLICs as LPs

In 2017 alone, 72% of investments into SEA companies came from China, amounting to USD$4.3bn invested in 3 of the biggest deals in the region. While this shows that we have the right credibility to pull in big investments, there is a substantial funding gap locally. In Malaysia, particularly, local Malaysian unicorns (for e.g. Grab and iflix) have received no growth funding from local capital.

One of my biggest hopes for the next few years is to see at least 50% of local tech companies being funded by Malaysian money. To achieve this, it’s important for the government to set the tone by establishing a fund specifically for startups who have achieved massive growth here and are looking to scale to other competitive markets.

This fund will also go towards setting Malaysia up as a regional HQ for global unicorns. Together with KLIC, the unicorn fund could be a game changer for the nation’s digital economy. Collectively, they would address all 4 key building blocks of a vibrant tech ecosystem – education, collaboration, talent and funding.

Many Malaysian GLICs are still playing catch-up when it comes to having an in-depth understanding of the tech space, so it might be useful to partner with a seasoned private sector partner in the early stages, before they can independently evaluate, execute and harvest the right investments.

4. Creating ample “public currency” and liquidity for tech companies

One of the key elements in laying out the foundation for local tech startups to excel is the accessibility to an IPO. Most tech startups bring disruptive ideas and technology to bear. This often requires big upfront investment and because of their disruptive/pioneering business, most of these startups are not expected to make a profit in their first few years of operation.

This makes it difficult for tech startups to chart the path to an IPO with Bursa Malaysia, considering its strict profit requirements.

To prevent local tech companies from listing abroad (FDV & iCar Asia, our Catcha Group companies, are listed on the ASX) , Bursa may want to look into more tech-friendly listing rules, as well as allow for the listing of tech funds and incubators. This has been successfully implemented in Australia, the UK and the US.

5. Full digitization of government services

The Malaysian government has been very eager to fully embrace the digital revolution and we’ve seen some great strides in this area. A number of government platforms have been digitized, however, we could take things one step further by pledging a completely digitized public service.

One of the best points to use technology in the government’s operations, is in consumer-facing activities. Collecting payments could be done digitally with the implementation of exciting technologies like blockchain while other activities could be facilitated through AI and machine learning. When it comes to using technology to empower people, there’s so much we can do and the sky’s the limit!

This effort should be done via public-private partnerships, where trusted and capable private partners are brought on board to provide their expertise and experience to help execute the plan. This would allow the local tech ecosystem to play their part in developing the nation too.

6. The carrot or stick approach: “encouraging” all non-tech incumbents to either develop tech capabilities of their own or partner with tech companies.

Many traditional companies who are large players in their respective industries are either slow to embrace innovation, fearful of the change that technology brings, or just do not understand what’s required to make it work. This is understandable considering the business dynamics and regulations they have had to operate in. However, disruption waits for no one, and these organisations must move fast as well.

They will need to fully embrace the application of technology to business, and the government could facilitate this by supporting non-tech incumbents to work together with tech companies. It can be done by introducing tech-related laws to penalise / reward companies accordingly - e.g “Tech penalties” for those who fail to adopt digital innovation, or “Tech tax incentives” to reward those who do.

Some of these ideas may seem far-fetched. But don’t all disruptive businesses start out so?

If all 6 of these are acted on, I don’t see any reason why Malaysia couldn’t be the next digital hub of Southeast Asia. I (and my group of rockstars at Catcha Group!) are more than ready to take a leading role in putting Malaysia on the world map as a global leader of the digital economy. We need all stakeholders - the Malaysian government, private sector, local entrepreneurs etc - to contribute everything they can to make this dream a reality.