OBG talks to Badlisham Ghazali, Former CEO, Multimedia Development Corporation (MDeC)

Interview: Badlisham Ghazali

What specific advantages does Malaysia possess over other ASEAN countries in the ICT sector?

BADLISHAM GHAZALI: The Malaysian ICT industry has enjoyed the advantage of consistent support from the government, including during the Asian financial crisis of 1997-98. Another advantage is that English is widely spoken in Malaysia. One must also bear in mind that the types of segments that we are trying to develop in Malaysia are not just a pure technology play or a hardware component play. Our play is also in two other segments: shared services and creative multimedia.

Many ICT companies have relocated to Malaysia, but can the country create its own local champion, such as the likes of Microsoft, Google or Facebook?

GHAZALI: It is difficult to name a large global brand in the ICT sphere that is not from the US. However, while there may not yet be a Malaysian counterpart to Microsoft, Google or Facebook, the country has no shortage of entrepreneurs who are making their online presence felt, both regionally and worldwide. During a recent visit to Silicon Valley we identified three Malaysian companies that had successfully partnered with foreign firms and had the intellectual property (IP) necessary to enter the global market. The first, Malaysia On-line (MOL), is one of Asia’s leading online payment service providers, handling over 60m transactions with an annual payment volume of more than $500m. The second, Pulsate, is building a big data hub in Cyberjaya, from which it will mine client data to predict future trends and patterns. The last is Joota, whose founders are developing a web-based social platform connecting users through content. Indeed, six out of the top seven largest publicly listed companies by market capitalisation in the ASEAN online sector are Malaysian.

To what extent are you concerned about the ICT sector developing a dependence on foreign workers?

GHAZALI: MSC Malaysia allows foreign companies to bring talent into Malaysia from abroad without any quota, and MDeC processes work visas on their behalf. We also encourage local companies to consider hiring expatriates, as there is unfortunately insufficient local talent to satisfy demand. I would estimate that only around 13% of MSC Malaysia’s workforce are foreign knowledge workers. If that figure were to exceed 35%, it would suggest some serious structural flaws, and it would also negatively affect MSC Malaysia because their entire cost structure would be heavily weighted towards relatively expensive labour.

How have changes in the global market affected shared services and outsourcing firms (SSO)?

GHAZALI: Any crisis should be treated as an opportunity. During the global financial crisis of 2008-09, Malaysia’s SSOs experienced one of their strongest years. The poor economic outlook forced companies to focus on cost containment, consolidation, leverage or synergy. In the shared services field, countries such as Malaysia with a long-term commitment to the development of this segment have benefitted the most.

Are banks addressing the needs of ICT start-ups? What can be done to expand the pool of investors?

GHAZALI: While there is room for improvement, almost RM3bn ($936.3m) is currently available for ICT start-ups in Malaysia. The government has announced that the Intellectual Property Corp of Malaysia (MyIPO) will take a closer look at IP valuations as an asset class for financing. The group will work with Bank Negara to identify and assess IP valuations, putting a ratio between IP and tangible assets in the hope that the banks could recognise IP as a tangible asset, allowing businesses to raise funds and expand operations. Moreover, the 2013 budget implemented the Angel Tax Incentive, under which Malaysians can receive a personal tax exemption of RM500,000 ($156,000) by investing in tech companies, mitigating the challenges of early stage investment in Malaysia. So far, we know of at least two angel networks that have been established as a result.