In 1996, the then prime minister of Malaysia Mahathir Mohamad had launched the Multimedia Super Corridor (MSC) that Jack Ma reportedly said had inspired him to set up Alibaba. The goal of MSC was to spur the development of the IT sector, replicating Silicon Valley and becoming home to domestic and international tech startups.
Cut to 2021: Malaysia’s ambition to become a digital economy hub is only at its halfway mark. On February 19, current Prime Minister Muhyiddin Yassin launched MyDigital and the Malaysia Digital Economy Blueprint, to bolster growth of the digital economy.
“We are taking on a targeted approach to attract digital tech and services companies in the areas of AI, data analytics, cybersecurity, digital content, cloud computing and data centres, as well as emerging technologies such as augmented reality, blockchain and advanced robotics,” Malaysian Digital Economy Corporation (MDEC) chief executive officer Surina Shukri told DealStreetAsia.
MDEC (formerly MSC Malaysia) oversees the development of the digital economy in Malaysia since its establishment 25 years ago. Over the years, it has supported a slew of startups such as drone tech firm Aerodyne, payment system provider iPay88 and fintech company Soft Space, among others, thereby providing them mentorship, visibility, and access to finance/investment to pave their path to growth.
Today, Aerodyne manages over 300,000 infrastructure assets, while iPay88 has expanded to countries such as Cambodia, Indonesia, the Philippines, Thailand and Singapore. Meanwhile, Soft Space has created an omnichannel presence with over 20 financial institutions in 10 countries.
Edited excerpts from an interview with Shukri:
What’s the outlook for the digital economy in Malaysia? Could you highlight the initiatives that MDEC plans to undertake this year?
Malaysia’s digital economy is growing from strength to strength. We expect the sector to prove itself a much larger contributor to the national economy, growing to a projected 20% of GDP in 2020 from 19.1% in 2019, an improvement on the 18.5% contribution in 2018.
This increase shows how the sector has been growing healthily despite 2020’s challenges. One could even say that our digital economy prospects are even brighter due to the pandemic.
MDEC doubled down on efforts to help Malaysians find new avenues to generate income through digital adoption. For many startups, getting funding was key to their survivability. With typical venture capital firms (VCs) being less than receptive, and normal routes for fundraising posing strong challenges, MDEC partnered with equity crowdfunding (ECF) and peer-to-peer (P2P) financing platforms. We also introduced Founders Grindstone programme to help startups hone their pitching skills, enabling them to raise funds.
To date, our efforts have attracted more than 375 startups, totalling up to $243 million in funds requested. As of September 2020, we have raised close to 25% of this request.
In 2021, MDEC will move full steam ahead with Malaysia’s digital transformation. We must skill our people to be at the centre of Fourth Industrial Revolution (4IR) technologies and ensure the digital economy benefits the many.
MDEC will continue to work with partners to drive investments into vital deep tech sectors such as drone tech, artificial intelligence (AI), the internet of things (IoT) and big data analytics.
You mentioned, startups in Malaysia asked for $243 million in 2020 of which they have raised 25% so far. What does MDEC plan to do to arrange the remaining 75% of the corpus?
In Malaysia, it typically takes between six to nine months for startups to close an investment. In 2020, we began receiving funding requests around mid-March when the first movement control order (MCO) was announced. Less than two weeks later, on April 3, MDEC introduced its first funding initiative to connect local tech companies with various funding avenues – including venture capital, venture debt funders, equity crowdfunding (ECF) partners and peer-to-peer (P2P) channels – to help them tide over their challenges amid COVID-19.
Our GAIN Programme includes various initiatives to help startups to gain funding, mentorship, business expansion, connecting corporates and start-ups, matching startups with investors or VCs, collaborating with accelerators, among others.
Could you throw some light on the country’s tech ecosystem? What are the key challenges?
Our tech startup ecosystem is healthily growing and thriving. According to assessments made by advisory firm Startup Genome 2, our tech startup ecosystem is valued at $15 billion, higher than the global average of $10 billion. Malaysia was also identified as the 11th emerging startup ecosystem globally.
To date, we have produced many homegrown champions making their mark on the global stage. For instance, drone tech firm Aerodyne was recognised as the second-largest drone tech company in the world. Other examples include stock content company, 123RF and fintech firm Soft Space, among others.
We are also focusing our effort in establishing Malaysia as Asean’s fintech hub. Today, we have the largest Islamic Fintech market, with 26 Islamic fintech service providers. Malaysia is also home to the world’s first Shariah-compliant gold trading platform, HelloGold, which raised $4 million from 500 Startups, while Jirnexu, a financial services lifecycle management platform, received $21 million in Series B funding.
Moving forward, we will continue to ensure our startups and scaleup companies receive the support they need to become regional trailblazers. We are very optimistic about what is to come, especially as the Finance Ministry announced last year that – as part of the Dana Penjana Nasional initiative – 8 foreign VCs will invest in Malaysian startups, causing the fund to exceed its initial 1.2 billion ringgit target and bringing the indicative fund size to a total of 1.57 billion ringgit.
VC plays an important role in the development of tech startups. Your thoughts on the sector?
Due to the ongoing pandemic, Malaysia fell prey to the global trend of VCs not being particularly receptive to new opportunities during the height of the crisis. With conventional VCs being less than receptive, and with normal fundraising routes posing strong challenges, many startups saw their fundraising avenues severely limited. MDEC has helped over 30 local tech companies last year to seek funding via alternative avenues, namely ECF and P2P platforms. Companies who have benefited include ReGov Technologies, an AI and enterprise blockchain venture and Pentaip, a fintech leveraging AI-powered investment solutions provider.
MDEC has helped funnel many tech companies to obtain funding from corporate VCs, and we encourage more corporates to follow in the footsteps of exemplary organisations such as Petronas, Axiata Digital and AirAsia to contribute to the growth of our local startups by setting up VC arms.
For tech startups looking for talent, funding and mentoring, we offer the Malaysia Digital Hub initiative as an ideal launchpad to start, grow and scale their companies in Malaysia and beyond.
We see more regional and global tech giants and digital enterprises are leveraging opportunities in the Asean region. E-commerce giant Alibaba, Japan’s telecommunications company NTT, US information technology firm Clarivate, US-based computer firm Dell, French software company Dassault Systemes, Hong Kong-based telecommunications company PCCW are expanding into this region, making Malaysia their technology and digital services operations hub.
MDEC announced streamlining its organisational structure in November last year. It appointed industry trailblazers including AirAsia Digital president Aireen Omar to its board of directors. What does this restructuring mean?
The restructuring was done to reinvent MDEC’s role in leading Malaysia’s digital economy and ensuring sustainable socio-economic benefits for many. It emphasises our commitment towards executing more for less at speed, expanding mass outreach, addressing the disruption of the new norm and improving our standard of governance. This new and streamlined structure for the management team will help recalibrate, diversify and bolster our board’s breadth of expertise to critical digital technologies such as data and AI, digital transformation and entrepreneurship and governance. If we do not act now, we unwittingly risk becoming a digital colony. Now, backed by a strong team and led by the IOOI (Input, Output, Outcome, Impact) methodology, we are confident that we have the right team to drive Malaysia towards becoming the region’s digital capital.
MDEC is now fully focused on our role as a specialist Investment Promotion Agency. We are taking on a targeted approach to attract digital tech and services companies in the areas of AI, data analytics, cybersecurity, digital content, cloud computing and data centres, as well as emerging technologies such as augmented reality, blockchain and advanced robotics.
Another focus is Global Business Services (GBS), whereby MDEC aims to attract MNCs to establish their regional technology hubs and advanced digital service centres in Malaysia, while advocating the existing GBS industry to move up the value chain by embracing disruptive 4IR technologies.
On funding and grants for 2021, is the allocation cut significant? Could you highlight the amount?
Currently, available grants include the 100 million ringgit SME Business Digitalisation Grant, a matching grant aimed at actively encouraging more local businesses for digital adoption. There have been over 5000 approved applicants for this grant.
We are also supporting the 100 million ringgit SMART Automation Grant, a matching grant for services sector companies to kickstart their digital adoption journey and increase their digital capabilities. Additionally, part of the 35 million ringgit allocation aimed at boosting the digital content industry (part of the broader PENJANA economic recovery plan) will be channelled to the PENJANA Digital Content Grant (DCG). The DCG is aimed at helping local creative industry players adapt to the disruption caused by the pandemic and continue the strong momentum that our digital content industry has been seeing; in January-June 2020, the sector generated over 1.6 billion ringgit in revenue and over 260 million ringgit in total exports.
For drone technology startup Aerodyne and human resource and payroll software firm Swingvy, to what extent has MDEC contributed to their success? What about the other “not-so -happening” companies? How can MDEC help?
For Aerodyne, our assistance has helped them grow to become a global leader in its industry. We helped the company connect to prominent potential investors such as sovereign wealth fund Khazanah Nasional and KEJORA (the South East Johore Development Authority), and assisted them in raising their Series B funding.
We also provided the company with visibility and market access support on international programmes such as Korea Startup Summit, Russia – Malaysia Technology Day Virtual Conference, and Japan’s JETRO Webinar. We helped facilitate discussions with leading global entities in the area of drone tech to strategically position Aerodyne as a leading global player.
Meanwhile, we have provided growth intervention for Swingvy by providing market access support to help them obtain market insights and identify the best go-to-market strategy to capture regional markets, namely Indonesia.
Aerodyne and Swingvy are proof points that highlight how MDEC’s efforts are helping homegrown tech companies achieve scalable success and we look forward to helping more via the programmes we have which provide opportunity gateways, funding, co-working spaces to nurture growth beyond borders.