Malaysia: Staffing the knowledge economy

News that a Malaysian IT start-up company was bought by a large US outfit is a landmark acquisition that represents a significant step forward for entrepreneurism in the country.

The sale is a good example of what the Malaysian government means when it talks of the country’s potential to become a knowledge economy. This potential was also the matter debated at October’s “Silicon Valley Comes to Malaysia” event held in KL. This brought 17 A-list figures in the world of IT start-ups into contact with an array of aspiring Malaysian companies and entrepreneurs.

Groupon, the Chicago-based bulk-coupon online retailing phenomenon, acquired a Joel Neoh’s Malaysian outfit, GroupsMore (now Groupon Malaysia) for an undisclosed amount earlier this year.

“The acquisition of GroupsMore is further evidence of Groupon’s strong commitment to working with only the best collective buying sites throughout Asia and across the globe,” Rob Solomon, president and chief operating officer of Groupon, said.

The Groupon Malaysia acquisition is perhaps the highest-profile achievement to date for Malaysia’s government in breaking through the silicon ceiling.

The government has long been determinedly pursuing a strategy to encourage Malaysian entrepreneurs to create businesses via innovation in order to seed the country’s knowledge economy.

Incentives such as tax breaks, initiatives to provide funding and university training to bring the required skills and talents together have been offered to get Malaysia into the online fast lane.

The long list of government programmes and incentives aimed at spurring the economy by accelerating innovation – from the Digital Malaysia Master Plan to MSC Malaysia, the national ICT initiative – seems to be making a breakthrough.

This is in large part due to the efforts of the government’s Multimedia Development Corporation (MDeC), which has spearheaded a wide variety of programmes and initiatives to get the knowledge economy into high gear. MDeC oversees MSC Malaysia, which aims to attract high-tech companies to Malaysia, mostly by offering tax breaks.

MSC Malaysia also incubates local talent, offering entrepreneurs government funds for research and development (R&D) for information and communications technology products, intellectual property protection and “pre-seed funds” for “technopreneurs” who need start-up funds to take their business ideas to the next level.

In addition, the government has been sponsoring conferences that bring the world’s best and brightest to Malaysia.

The “Silicon Valley Comes to Malaysia” event, sponsored by MDeC, Startup Malaysia, Global Entrepreneurship and YouNoodle, was held in KL on October 20-21. This saw about a thousand aspiring Malaysian entrepreneurs pitching their ideas to digital leading lights, including YouTube co-founder Jawed Karim, AngelList founder Naval Ravikant, LinkedIn co-founder Konstantin Guericke and CMEA Capital partner Saad Khan.

The Silicon Valley event addressed learning critical skills such as fundraising, how to take ideas to market, and acquiring talent – the latter being one of Malaysia’s biggest obstacles to growth in the knowledge industry.

Indeed, brain drain presents a serious problem for Malaysia’s dreams of becoming a knowledge economy.

The country sees its most promising talent leave the country for more rewarding careers in places such as Singapore, Australia, the US and the UK every year. The World Bank estimates that more than 330,000 educated Malaysian workers left the country for jobs elsewhere in 2010, and in the past 20 years the number of skilled Malaysians living abroad has tripled, with two out of every 10 Malaysians with tertiary education opting to leave. As of April 2011, the bank estimated that 1.5m Malaysians, or 5.3% of the population, lived outside of the country.

In an effort to slow the flow of skilled talent from the country, in 2010 the government unveiled Talent Corp, which seeks to bring back skilled Malaysians by offering incentives such as spousal visas and tax incentives under the Returning Expert Programme. As of November 1, the government said it had brought home 450 Malaysian professionals working abroad under the programme.

In addition to persuading educated Malaysians to come back, the World Bank recommends boosting productivity and strengthening inclusiveness to address the country’s brain drain – but this is not so easily accomplished. Indeed, to do it comprehensively, many argue a major overhaul of the education system could be required, not to mention the adoption of merit- and need-based inclusiveness policies.

The government is aware of the challenge and is currently pushing through an array of development master plans aimed at revising the education, training and R&D arms of the economy.