E-Commerce Strategic Directions For Malaysia

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E-Commerce Strategic Directions For Malaysia

  1. 1. Cabaran dan Peluang dalam E-Dagang E-Commerce Strategic Directions For Malaysia With emphasis on:“Bridging the technopreneurs in need of capital and investors looking for high returns” Dewan Perniagaan Melayu Malaysia Pulau Pinang 18 November 2000
  2. 2. AGENDA1 Observations – Global Industry Trends & Developments E-Commerce & The way it works2 Towards The Ideal Environment The EC Framework3 EC Challenges Venture Capital4 Venture Capital In Malaysia An Overview
  3. 3. TECHNOLOGY ADOPTION RATES Television Electricity (1926) (1873) 100 Radio (1905) TelephonePercentage of ownership (1876) 80 VCR (1952) Automobile (1886) 60 PC 40 (1975) PC (1975) 20 Internet (1975) 0 20 40 60 80 100 120 Years since introductionNetwork Services Executive Summit, USA
  4. 4. INTERNATIONAL INDUSTRY TRENDS AND DEVELOPMENTSMain observations emerge froma survey of international developments Some markets are now approaching the point of critical mass Global leaders in virtually all industry sectors are quickly implementing EC capabilities Countries wishing to participate strongly on the supply side of EC have to define strategies relative to global market leader, the US New start-ups, entrepreneurial new firms, are shaping the world of Electronic Commerce
  5. 5. THE E-WORLDFor a country to be internationally competitive, there is little alternativefor governments and business but to operate within an environmentcompetitive with the major economic powers. United Kingdom Canada Ireland Germany United States of America Japan India Singapore Australia New Zealand
  6. 6. ONLINE USERS WORLDWIDERegion Users % (millions)Asia/Pacific 89.68 23.7% 80% of the world’sAfrica 3.11 0.8% population live in this regionLatin America 15.26 4.0%Middle East 2.40 0.6%Canada & USA 161.31 42.7% 70.7% of the online usersEurope 105.89 28.0% worldwide are from the west.World Total: 377.65 1As of September 2000 “While the world has 6 billion people,Source: Various; Methodology – NUA Internet Surveys there are only 0.8 billion phone lines. Over 80% of the world has yet to make http://www.nua.ie/surveys/how_many_online/index.html a phone call, let alone surf the web.”
  7. 7. E-COMMERCE? There are many definitions for E-Commerce. Examples: “The electronic exchange of information goods, services and payments” but underneath the surface E-Commerce is also: …the digitization of information ...Internetworking of human ingenuity creating a new socio-economic transformation …propelled by BRAINS instead of BRAWN …driven off by both technology push and business pull …the foundation of a new economic order Nations need to identify clusters for industrial development and reposition themselves to be at the centre of the virtual marketspace…
  8. 8. HOW DOES AN ELECTRONIC MARKET WORK? USER PROFIILE USER1. Buyer logs on 2. Buyer 3. Buyer 4. Buyer PREFERENCING SYSTEM 7. Buyerto the marketplace searches for selects orders pays for product product product product PURCHASE ORDER PAYMENT HOMEPAGE CATALOGS ORDER INFORMATION OPTIONS CONTENT DYNAMIC TRANSACTION TRANSACTION SERVER PUBLISHING PROCESSING 6. Seller PROCESSING SERVER confirms In some systems, 5. Purchase order Content can 8. Payment sellers can update be generated order sent to information their own product dynamically seller sent to bank information. based on In others, a central user profile. DATABASE DATABASE administrator does INTEGRATION INTEGRATION that job. Some systems 12. Product also list 11. Product SELLER received shipped DATABASE advertising, news SYSTEM and specials SELLER’S BANK BANK BUYER’S BANK 10. Credit approved 9. Credit checked Source: Modified from Copyright April 28, 1997, by ComputerWorld, Inc. Farmingham, MA 01701
  9. 9. E-BUSINESS ADOPTION CURVE High Short-Term Strategies Long-Term Strategies Unassisted E-Business Selling Integrated Tech-Enabled Web Store Relationship Mgmt. Supply Chain Management Collaborative Extranets InteractiveBusiness Channel Master Marketing Extranets Value Web Storefront & E-Catalog Procurement Automation Community Extranets B2C Customer Web Brochures B2B Self-Service Short-Term Projects Operations Automation Low Time to Implement High Source: GartnerGroup, B2B vs. B2C Paths to E-commerce Success
  10. 10. FIVE (5) REQUIREMENTS FOR EFFECTIVE PARTICIPATIONPRECONDITIONS FOR PARTICIPATION IN GLOBAL E-COMMERCE GOOD BANDWIDTH FULFILMENT SYSTEMS AND LOGISTICS EFFICIENT AND TRUSTED PAYMENT SYSTEMS STABLE AND SUPPORTIVE INSTITUTIONAL ENVIRONMENT USER FRIENDLY, AFFORDABLE ACCESS DEVICES & INTERFACES
  11. 11. THE EIGHT PILLARS FOR COMPETITIVENESS QUALITY TRUSTED IP MARKET BRAND PRODUCTS SERVICEINNOVATION CONTENT PROTECTION DISTRIBUTION ACCESS IDENTITY & SERVICES INTERFACES The EIGHT PILLARS FOR COMPETITIVENESS represent the core requirements for firms to participate competitively in Electronic Trade and the Supply Side of E-commerce
  12. 12. THE IDEAL ENVIRONMENT E-COMMERCE FRAMEWORK B Q T I D M R U R A UI P I A A L SN C S R N I &N T I O P T K D T E NO N R R E Y S E D TV T O I T I P R EA E T B D S R R VT N E U A E O I E FI T C T C N D C R AO T I C T U E V CN I O E I C S I E S C S O N S T T N S Y E S GOOD BANDWIDTH EFFICIENT AND TRUSTED PAYMENT SYSTEMS FULFILMENT SYSTEMS AND LOGISTICS USER FRIENDLY, AFFORDABLE ACCESS DEVICES & INTERFACES STABLE AND SUPPORTIVE INSTITUTIONAL ENVIRONMENT
  13. 13. SERVICE PROVIDERS IN MALAYSIANetwork Services Operator Mobile ISPTelekom Malaysia Atur450 / Mobifon TMnetwww.telekom.com.my TM Touch (PCN)Time Telecommunications ADAM (PCN) TimeDotComwww.time.com.myCelcom ART900 / Celcom GSM Celcom Internetwww.celcom.com.my & ETACSDigi Telecommunicationswww.digi.com.my Digi1800 (PCN) DigiNetMaxis Communications MaxisMobile (GSM)www.maxis.com.my Jaring (MIMOS) Source: Ministry of Energy, Communications & Multimedia
  14. 14. MALAYSIAN INTERNET ECONOMY 4.50 Total Internet Users (m) 3.91 • Internet Users 4.00 Total Revenue/Year (US$b) 3.63 1.89 million in 2000 3.50 growing to 3.91 million 3.23 in 2004. 3.00 2.72 2.50 • Internet Devices 1.06 million in 2000 to 2.00 1.89 3.14 million devices in 2004 1.50 1.27 1.00 • E-Commerce 0.58 Total Revenue from US$ 0.44 0.50 426 million in 2000 to US$3 billion in 2004 0.00 1997 1998 1999 2000 2001 2002 2003 2004Source: IDC -- Internet Market Forecast For Malaysia
  15. 15. NATIONAL DIGITAL DIVIDE SCENARIOOut of 22+ million people in the country, only 1.89 million are expected to beInternet users. PC penetration lies at mere 11% and Internet penetration hasreach only 6% of the population. Would there be problems for Malaysia?? Northern 14% 5% Eastern Sabah 7% Central 56% 11% Southern Concentration of Internet Sarawak users in Malaysia. 7% Source: Ministry of Energy, Communications and Multimedia / TMnet / Jaring Dec.1999)
  16. 16. ECONOMIC ACTIVITIES Gross Domestic Product by State (1998) RM million in 1978 prices Perlis RM783 Kedah RM6,285 Kelantan RM2,892Penang RM9,920 Trengganu RM9,374 Perak RM 10,891 Wilayah RM16,880 Pahang RM5,973 Selangor RM26,061 Sabah RM8,647 N.Sembilan RM4,470 Melaka RM3,422 Johor RM15,293 Sarawak RM10,293 Source: 7MP
  17. 17. PEOPLE PER PC (1999) India 352 Indonesia 132 PR China 98 GROSS NATIONAL PRODUCT (GNP) PER CAPITAL Thailand 2960 Philippines 86 Thailand 37 Malaysia 4,370 Malaysia 11 Korea 10610 Taiwan 7 Hong Kong 24290 Korea 6 Singapore 30550 Hong Kong 4 New Zealand 15720 Singapore 3 Australia 20090New Zealand 3 USA 28020 Australia 2 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 USA 1.5 0 50 100 150 200 250 300 350 400
  18. 18. TOP TRADING PARTNERS - 1999TOP 10 in 19991. USA Malaysia’s Top-10 major trading partners contributed 77% of the total2. Singapore RM308.6b gross export earnings.3. Japan4. Netherlands5. Taiwan6. Hong Kong7. UK Netherlands8. Thailand 5.1%9. Korea - Rep. UK 3.8%10. China USA 21.9% Japan 11.6% China 2.7% R. Korea 3.0% Taiwan 4.5% Hong Kong 4.5% Thailand 3.3% Singapore 16.5%LATEST:Malaysia’s Top-3 trading partners, the USA, Japan and Singapore. Thethree countries collectively contribute for about half (50.8%) of Malaysia’s tradeduring January – March 2000. Source: Department of Statistics / Note: "% share" is share of total exports
  19. 19. CHALLENGES (MALAYSIA) Build Critical Mass Build Trust on the Web Attracting Inbound Consumers Policy and Regulatory Framework Organization Transformation
  20. 20. BUILD CRITICAL MASS Increase internet penetration Increase access devices penetration Improve telecommunication infrastructure Improve tariff and network access
  21. 21. BUILD TRUST ON THE WEB Security Privacy of information Electronic payment systems Improve fulfillment services Building awareness & skills
  22. 22. ATTRACTING INBOUND CONSUMERS Global connectivity Local content development Web hosting Building local branding
  23. 23. POLICY AND REGULATORY FRAMEWORK Intellectual property rights & commercial codes Consumer protection Taxation Dispute resolution
  24. 24. ORGANISATION TRANSFORMATION Creating EC Corporations Workculture Digital value chain Incentives Venture funding
  25. 25. ORGANISATION TRANSFORMATION – VENTURE FUNDING Objective/Outcome: Develop Venture Capital and IPO markets to aid innovative companies• Provide Incentives to attract Venture Fund companies to invest in early stage growth companies.• Provide tax concessions to encourage inward investment from foreign Venture Capitalists e.g. the granting of MSC status.• Promote and market technopreneurs and start-up companies to potential venture capitalists.• Create sufficient pool of technopreneurs to build up critical mass for viable venture capital investments• Review existing IPO markets for technology companies such as Mesdaq in order to attract more IPO’s within Malaysia
  26. 26. SOURCES OF CAPITALWhere money can come from:• Funds from personal savings (from friends and relatives) – “Bootstraps”• “Angels” rich people with money to get start-ups rolling and help preparing for next-round funding from VCs.• Raise your money from Venture Capitals – “Classics”• Raise money from suppliers and business partners – “Creative”• The “Hybrid” start-ups, get seed money from mixture of angels, venture firms, and corporations• Other unconventional sources of funding. “You never have enough money, things always take twice as long to do as you think”
  27. 27. WHAT VCs COMMONLY LOOK FOR?The Economic Laws that govern a start-up:• ROI – return on investment • looking at the “multiple” – how many times the value of one share invested rises by the time the initial public offering (IPO) is done. • true % annual (percentage per annum) ROI• Cash Flow (“burn-rate”)• The IPO (initial public offering) – “holy grail”• Liquidity (“exit strategy”) is everything for the Venture Capitalists – converting the investors’ shares into cash.
  28. 28. FROM IDEA TO IPOThe Idea Founders’ Commitment Resignation Create Business Plan Getting People Seed Capital Cash-in Capital & Incorporation Launch 1st Product Raising Working Capital The IPO
  29. 29. VENTURE CAPITAL TO SUPPORT GROWTH MALAYSIAN GOVERNMENT Internet Devices • All EPF members are allowed to make 5.00 Internet Users 4,000 withdrawals for computer purchase. Internet Commerce • 1,262 computer laboratories will be 4.00 established in rural schools • New computers given by companies to 3,000 their employees are exempted from income taxMillion 3.00 US$Million • Government employees will be allowed 2,000 to apply for computer loans once every 2.00 5-years. • Contributions in cash and in kind to 1,000 projects promoting information and 1.00 communication technology (ICT) will be allowed as tax deductions. • RM500 million venture capital fund to be established as an alternative source 1999 2000 2001 2002 2003 2004 Source: IDC -- Internet Market Forecast For Malaysia of capital financing for ICT Source: Budget 2001
  30. 30. OVERVIEW OF VENTURE CAPITAL IN MALAYSIAGreenfield industry with tremendous potential for growth.To date venture capital has been in the area of contractmanufacturing, plastic molding, tool and die machining, agro-technology and information technology.• Malaysian Venture Capital Association (MVCA) (Website: www.mvca.org.my) Mission: To promote and develop venture capital industry in Malaysia – Formed on 27 February 1995 – Started 13 founding members (currently 33 members)
  31. 31. VC IN MALAYSIA (OVERVIEW)• Malaysian Technology Development Corporation (MTDC) (Website: www.mtdc.com.my) – first corporate venture capital in the country – they do deals within the manufacturing arena with a view of acquiring high tech companies for incubation and development in Malaysia. – they have set-up a number of funds such as • Sumber Modal Satu - Fund targeted at Bumiputra entrepreneurs • Scheme for Women entrepreneurs
  32. 32. VC IN MALAYSIA (OVERVIEW)• MSC Venture Corporation (MVC) (Website: www.mdc.com.my/mscvc) The first VC to be wholly focused at information technology and multimedia ventures. Covering everything from dot.coms ,“clicks and mortars” to technology companies • Incorporated on 8 February 1999 • Wholly-owned subsidiary of the Multimedia Development Corporation (MDC) • Launched our first fund Venture One Sdn Bhd on 28 June 99
  33. 33. VC IN MALAYSIA (OVERVIEW)• MSC Venture Corporation (MVC) Fund size: US$30 million (RM120 million)• Life of fund: 10 years• Announced first investment on 17th February 2000• To date: 4 companies • (1) GO2020 MSC dot com – www.go2020.com.my providing electronic commerce engine • (2) VMS Technology – VoIP solutions provider • (3) Interbase (auction site) – www.lelong.com.my (4) VOL Asia – www.volasia.com Online Service Provider focused on Asian content
  34. 34. INVESTMENT STRATEGIES Country Focus: Malaysia Investment Size: RM1-5 million (USD300k – 1m) Minority stake Maintain balanced portfolio of start-up, growth and pre-IPO companies Co-invest with other VCs Provide support and assistance - promotions, international marketing, fund raising Exit strategy via IPO or sale to strategic investors
  35. 35. MSC -- A CONDUCIVE ENVIRONMENT TO CATALYZE E-COMMERCE Source of knowledge workers Good Venture Funding Flagship to Kick Start MSC InitiativeCyber Law for E-Commerce Grants to Encourage R&D Environment to Incubate for High Bandwidth Infrastructure Technopreneurs
  36. 36. Thank-you suhaimi@mdc.com.my

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