Citing recommendations proposed by the Institute for Capital Market Research (ICMR), the Securities Commission (SC) Malaysia said targeted government interventions were needed to spur further growth in the local venture capital ecosystem, according to its statement on Monday.
The recommendations are based on an in-depth study by ICMR, which was commissioned by the SC as part of its ongoing efforts to facilitate the intermediation of risk capital and enhance access to financing for startups and early-stage companies in the Malaysian capital market.
The report proposed eight recommendations to the SC which include the restructuring of existing public VCs to be more commercially-driven; establishment of a dedicated government agency to bridge the funding gap for nascent and high-growth ventures; establishment of fund-of-funds with matching elements and appropriate incentive mechanisms.
“The independent report by ICMR highlighted the need for targeted government interventions to catalyse greater private sector participation, more integrated cooperation among the VC ecosystem stakeholders and adoption of a global mindset,” said the SC.
SC will also consider the creation of a single platform for market access to assist domestic entrepreneurs overcome developmental challenges; facilitation of the expansion of the venture debt sector; and, further liberalisation of VC tax incentives.
The report also suggested the establishment of a centralised information gateway to assist in research, policy formulation and industry profiling and the establishment of an inter-ministerial council to ensure alignment of objectives across different ministries involved in the VC ecosystem.
“The SC will engage with relevant industry stakeholders directly, as well as through the Malaysian Venture Capital and Private Equity Development Council, which it chairs, on the operationalisation of these recommendations,” it said.
In the Malaysian budget 2019 announcement, finance minister Lim Guan Eng had said all state-linked VC funds – Malaysia Technology Development Corporation, Malaysia Debt Ventures Bhd, Malaysia Venture Capital Management Bhd (MAVCAP) and Cradle Fund Sdn Bhd – would be streamlined and made more efficient in delivering capital to companies in various stages of financing needs.
However, Lim was coy about the “streamlining” operation when asked if it would involve any reshuffling or shutdown of any of these state-linked VC funds.
Last May, in a move to enhance the local VC ecosystem, the SC has called upon VC management companies to apply for the RM1 billion ($250 million) fund committed by major institutional investors, with a strong investment preference towards sectors such as ICT and biotechnology.