Malaysia’s government will table a proposal in the parliament in two weeks to restructure government-linked venture capital (VC) funds, a minister said on Thursday.
The Ministry of Energy, Science, Technology, Environment and Climate Change (MESTECC) is currently preparing a memorandum on the restructuring of five government-linked VC agencies – Cradle Fund, Malaysia Debt Ventures (MDV), Malaysian Technology Development Corporation (MTDC), Kumpulan Modal Perdana (KMP) and the Malaysia Venture Capital Management Bhd (MAVCAP).
“We are not only looking to restructure these agencies but also at how to consolidate them to make them more effective in catalysing growth in the VC ecosystem… Hopefully, we can announce the new set of policies for the VC industry by the end of the year,” MESTECC minister Yeo Bee Yin said during a keynote address at the Southeast Asia Venture Capital & Private Equity Conference 2019 in Kuala Lumpur.
The restructuring is in line with the national budget announcement made by Finance Minister Lim Guan Eng last November to streamline all state-linked VC funds.
In May, DealStreetAsia had reported that the Malaysian government had initiated the process of restructuring government-linked VC funds and that the move may result in the closure of Cradle Seed Ventures, the VC arm of Cradle Fund as well as MTDC and KMP.
MTDC is a wholly-owned subsidiary of sovereign wealth fund Khazanah Nasional Bhd. It was set up to promote the adoption of technologies by local companies via commercialisation of local research and development or acquisition of foreign technologies.
KMP was established under the Ministry of Finance to invest in local tech firms.
MAVCAP, which has previously backed startups including Fashion Valet, Hermo, TheLorry, Katsana, Easy Parcel, Aerodyne and Carsome, is expected to be reorganised as a fund of funds and will cease to make direct investments. The VC firm is an LP in Teak Capital, Axiata Digital Innovation Fund and the Meranti Asean Growth Fund.
The minister declined to comment on whether the restructuring could result in the closure of any agencies involved but said the process will focus on three areas – grants, VC and private equity, and venture debt.
Yeo also announced that the finance ministry has agreed to implement a new 20-million ringgit tax incentive by the end of 2019. The move would allow those investing in VC firms to claim a tax rebate three years after their investment. The initiative was announced by former Prime Minister and Finance Minister Najib Razak in the country’s 2018 budget.
Previously, the tax exemption could only be claimed upon exiting the investment, which could take 8 to 10 years.
“We hope that this will incentivise more corporates to invest into VC funds or companies in Malaysia,” she added.
Noting that government-linked investment corporations (GLICs) tend to be more risk-averse, Yeo said MESTECC is in discussions with various stakeholders on how it can encourage institutional investors to allocate more capital to local VC funds and companies.
In February, the Securities Commission had said targeted government interventions were needed to spur further growth in the local VC ecosystem.