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TeAM White Paper & Action Plan - Fostering Technopreneurship
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    TeAM White Paper & Action Plan - Fostering Technopreneurship TeAM White Paper & Action Plan - Fostering Technopreneurship Document Transcript

    • Technopreneurs Association of Malaysia – Detailed Action Plan Fostering A Sustainable Environment For Technopreneurship In Malaysia A Detailed Action Plan- Prepared & Submitted by 1
    • Technopreneurs Association of Malaysia – Detailed Action PlanTable of contentsINTRODUCTION.............................................................................................................. 4Section 1 - FUNDING IN THE NEW ECONOMY.......................................................6 1.1 Objectives and Current Status .................................................................................. 6 1.2 The Key Thrust of the Proposals .............................................................................. 6 1.3 The Seven Key Areas .............................................................................................. 7 1.3.1 Build a Pool of Angel Investors.............................................................................. 7 1.3.2 Credit Guarantee Corporation (CGC).................................................................... 8 1.3.3 Banking Sector....................................................................................................... 9 1.3.4 Grants ..................................................................................................................... 9 1.3.5 Incubators............................................................................................................. 11 1.3.6 Venture Capital..................................................................................................... 13 1.3.7 IPO on a Malaysian Exchange & MESDAQ ........................................................ 14Section 2 - MARKETING SUPPORT.........................................................................16 2.1- Marketing Emerging Malaysian Companies .......................................................... 16 2.1.1 Role of Government ............................................................................................. 16 2.1.2 Current Situation .................................................................................................. 16 2.1.3 Proposed Solutions .............................................................................................. 17 2.2 Reaching out to the World – Selling Malaysian Technology.................................. 19 2.3 Acceptance and Recognition - Buy & Use Malaysian ........................................... 21Section 3 - TECHOPRENEUR DEVELOPMENT....................................................24 3.1 Overall Strategy....................................................................................................... 24 3.2 Government Policy on Private Sector Development .............................................. 25 3.3 Technopreneur Development Program .................................................................. 28 3.4 Technopreneur Online Database............................................................................ 31 3.5 Unsuccessful ventures ............................................................................................ 32 3.6 The School of Technopreneurship.......................................................................... 32 3.7 Key Performance Indicators (KPIs)......................................................................... 33 3.8 Increasing the demand for ICT products and services in Malaysia ....................... 34 3.9 Increasing the number of Technopreneurs............................................................ 40 3.10 Showcase of leading Technopreneur Companies ................................................ 41 2
    • Technopreneurs Association of Malaysia – Detailed Action PlanSection 4 - MSC - INFRASTRUCTURE....................................................................42 4.1 Introduction.............................................................................................................. 42 4.2 Connectivity ............................................................................................................. 44 4.4 Extending MSC benefits to ICT companies............................................................ 46 4.5 Reorientation of Electronic Payment Mechanisms................................................. 47 4.5 Retail Merchants ..................................................................................................... 49Section 5 - CONCLUSION ..........................................................................................50Appendix A – Possible Funding & Incentive Schemes .....................................51 1. Government Technopreneur Investment Incentive Scheme (GTII) ...................... 51 2. Idea and Seed Development Scheme (ISDS).......................................................... 53 3. Government Venture Capital Investment Support For Mature Startups .................. 55Appendix B – Technopreneur Development Grant Scheme ............................57Appendix C – TeAM Information & Protem Council ...........................................59 3
    • Technopreneurs Association of Malaysia – Detailed Action PlanINTRODUCTIONFollowing the publication and the presentation of the TeAM White Paper entitled,“Fostering A Sustainable Environment For Technopreneurship In Malaysia –Findings And Recommendation Of TeAM’s Industry Dialogues” and the recentmeeting with MIGHT (Malaysian Industry-Government Group on High Technology) andpresentation to the joint NEAC (National Economic Action Council) – MIGHT Dialogue,TeAM has drawn up this Detailed Recommendations and Action Plan to be submittedto relevant authorities for their evaluation and further action.This report outlines the detailed recommendations and action plan for the 4 key areas,which were outlined in the white paper namely; 1. Funding in the new Economy 2. Marketing of Malaysian companies and technologies both locally and overseas 3. Technopreneur Development 4. Multimedia Super Corridor – InfrastructureThis detailed recommendations and action plan document and the White Papersubmitted prior to this are the result of approximately 1000 man hours of work carriedout by the members of the Protem Council of TeAM because we strongly feel that; 1. The government needs to know exactly what the grassroots ICT firms require in terms of funding and support and; 2. We also believe that the various government agencies seem genuinely concerned and appear to be working with an unparalleled sense of urgency as everyone realises the importance of the growth of the ICT sector of Malaysia to the future economic success of Malaysia, especially given the “hollowing out” in the manufacturing sector as firms move their operations to China and other low cost nations.Section one of the documents specifically deals with the issues associated with fundingof ICT companies in the new economy. We specifically outline an overview of the issuesfacing Technopreneurs especially at the seed stage of development. We then follow thisup with detailed examples of various schemes both as grants, loans and investments forcompanies at various stages of development.Section two deals with Marketing of Malaysian ICT products and services both locallyand overseas. Many Malaysian companies have difficulty in selling their software andservices both locally and overseas due to various reasons such as lack of experienceand poor perception of Malaysian ICT products and services. This section suggests howthe government may be able to introduce some initiatives to kick-start the export ofMalaysian ICT products and increase the purchase of Malaysian ICT products andservices locally. 4
    • Technopreneurs Association of Malaysia – Detailed Action PlanSection three deals with the very real problem of Technopeneurship Development inMalaysia. Since the ICT startup culture is still very new in Malaysia the government hasa significant role to play as a catalyst for the development but needs to work with theprivate sector, with organizations such as TeAM to take the whole industry forward.Section four deals with the very real issues that confront many ICT companies today andthese relate to the level of readiness of the physical infrastructure for Malaysia to be atthe forefront of the ICT industry.We have been very specific in many of our recommendations and have gone to theextent of devising various schemes and programs to ensure that these are very practicaland workable solutions. While we are proud of the initial results of the MSC ourconstructive insights into the various “ problem areas” must be viewed in the context ofour overwhelming desire to be competitive in the Global arena.TeAM is prepared to work with the Authorities in the implementation of these proposalsand in ensuring the success of the New Economy in Malaysia.It is our desire that with the implementation of many of these recommendations, a criticalmass of Technopreneurs is created and the products and services of these companiesas well as the Companies themselves are recognized as being World Class. 5
    • Technopreneurs Association of Malaysia – Detailed Action PlanSection 1 - FUNDING IN THE NEW ECONOMY1.1 Objectives and Current StatusThe current status of Funding in the New Economy is not satisfactory and this is provenin the many grouses of Technopreneurs who have not been able to adequately fundtheir ventures and also based on the fact that there are very few successful ICTcompanies in Malaysia compared to companies in Singapore, Korea, Hong Kong andChina.The Government recognises that there needs to be substantial change in funding ICTventures and has provided RM 500 million as venture capital funds and has announceda further RM 1.9 billion as debt financing. However, the rate of disbursement andconsequently the success of ICT ventures are negligible.Since it is the policy of the Government to ensure that Malaysia completes a successfultransformation from the production economy (p-economy) to the knowledge economy (k-economy), the avenue of Funding needs to be given greater attention and fundsprovided on a fast-track and successful basis to ensure the success of this policy andalso that of the MSCThe objective of this section is to provide key proposals and suggestions to ensure thatMalaysia regains the lead in the k -economy a progresses at a faster pace towards ndrealisation of the k-economy.1.2 The Key Thrust of the ProposalsWe propose a series of action plans and recommendations for all parties involved in ICTincluding government agencies, private sector corporations, not-for-profit organisationsespecially TeAM and finally Technopreneurs.These action plans specify exactly what needs to be done on a micro basis to ensure thesuccess of the Government’s policy and the transformation of the ICT industry into abustling, profitable and successful industry. 6
    • Technopreneurs Association of Malaysia – Detailed Action Plan 1.3 The Seven Key Areas 1.3.1 Build a Pool of Angel InvestorsMany successful US and European technology companies have often started theirventures by being funded by Angels - primarily wealthy individuals and corporations -who invest in Seed and Early stage companies and who provide them with enoughcapital to build a business from concept to prototype or pre-commercialization stage.This stage of funding known as Angel Investing is lacking in Malaysia and needs to beaddressed urgently. Although the Government has provided tax incentives for Angelinvestments, such incentives need to be reassessed and refined to make them moreeffective in encouraging Angel investments.Our Proposals are as follows: - Ø The previous budget (budget 2001) provided incentives for Angel investments, but these need to be reassessed and adequately publicized. One of these incentives includes tax deductions for Angel-type investments into early-stage ventures. Views from various Angel Investors have shown lukewarm response to this incentive, as it is only applicable to investments that eventually list on an exchange. The uncertainty of listing and lack of clarity of this incentive has generally not resulted in any increase in interest in Angel investing. This incentive should instead be modified to allow deductions in investment in any MSC status company, regardless of whether they list or not. In future the incentive should be extended to other non-MSC technology companies as well. Ø Need to organise Angel Investor Education Programmes via MavCap, MVCA and TeAM. Angel investing is very different from Venture Capital, and many do not know the differences. Ø Need to create an avenue to showcase Companies to Angel Investors. This can be through encouragement of pre-exchange markets (not unlike MESDAQ’s MeNet) where Angel investors can consider potential investments, and start-ups can showcase their ventures to Angels. More events like the Kuala Lumpur Angels Club should be facilitated Organisations like TeAM, MVCA, MDC and MavCap can also act as conduits for such showcases. Ø Encourage local corporations to set up Angel investment funds by publicising the incentives through seminars, workshops and newsletters. What local corporations have thus far initiated are more of Venture Capital Funds, which take majority stakes and run the show, versus Angel-type investing which are almost akin to grants. 7
    • Technopreneurs Association of Malaysia – Detailed Action Plan Ø Need to work with trade organisations to encourage member companies to invest as corporate Angels. Ø Broaden the role of Grant providers to act like angel financiers. This would entail the relaxation of grant terms and conditions, as well as reduction of grant amounts to as low as RM 50,000. Although presently there are no minimum amounts, most agencies are reluctant to look at too small an amount because of the effort required. This approach has to be revised, and a new but simple and FAST procedure for extending “micro-investments” must be devised.1.3.2 Credit Guarantee Corporation (CGC)The Banking sector is risk averse and loans to the technology sector are virtually non-existent in Malaysia. Even if there are, the loans are not based on the merits of thebusiness itself but rather rely on collateral and personal guarantees.To minimize the risk exposure and encourage Banks to lend to the ICT sector, we needto have a specific CGC for Technology companies (CGC-T). This may be a part of thecurrent existing structure of the CGC in Malaysia.Our Proposals are as follows: - 1. CGC-T to guarantee loans to ICT Companies. 2. The Government to provide additional funds towards specific technology guarantees by CGC-T. This can be done on an immediate basis via the RM 1.9 billion awarded by the Government to MavCap. 3. The funds provided to CGC-T must be at lower rates than existing cost of funds to encourage more guarantees. 4. The guaranteed amount to be at least 80% of the loan thus minimizing the risk exposure of Banks. We are confident that Technopreneurs will be able to secure the balance of 20%, which will also serve as their commitment towards their venture. 5. Need to set up special criteria for CGC-T to guarantee such loans. This can be done in collaboration with TeAM. 6. Education/info programs for CGC-T officers on the ICT industry 7. Special division of the current CGC to be created for ICT Companies financing and guarantees (to be known as CGC-T). 8
    • Technopreneurs Association of Malaysia – Detailed Action Plan1.3.3 Banking SectorThe Banking sector in Malaysia is far too risk averse and generally does not providefinancing for Technology companies. Thus, while there is a large pool of funds within thebanking system, very little is provided for Technology companies because of theperceived higher risks in technology. Without bank financing for working capital andequipment purchase, the cost of financing a technology business is very high inMalaysia and it retards the growth of the ICT sector.The CGC-T will help to minimise the risk, but more can be done.Our Proposals are as follows: - 1. Provide education/info programs for Bank officers on the ICT industry 2. Encourage Banks to fund ICT Companies with CGC-T guarantee. Bank Negara, for example, may make it a requirement for Banks to have a certain percentage of their loan portfolios in the ICT industry. 3. MoF and Bank Negara to provide low cost funds to banks to fund ICT Companies. 4. To bear in mind and quantifying the value of Intellectual Property, either in the form of patents or the like, when extending fnance. Currently, funding decision- i making appears to totally ignore the value of Intellectual Capital. 5. Special purpose banks specifically to fund ICT Companies. (e.g. like Bank Industry & Teknologi) to be set up or a special division under certain banks.1.3.4 GrantsGovernment Grants are an excellent method of funding next generation technology,R&D and D&D (Design & Development) proposals especially for Seed and Early Stagecompanies.The Malaysian Government has recognized this fact and has provided numerous grantschemes through many different agencies for funding of such proposals. Despite this,many grant schemes are never utilized and thus a great opportunity has been lost indeveloping excellent Malaysian products and companies.According to a report by Bank Negara, only 25% of some RM 2.2 billion of availablefunds in 1999 had been disbursed. Clearly the budgeted funds from the government arenot reaching Malaysian Technopreneurs.It should be noted that in a recent survey conducted by TeAM of the various agenciesand schemes, only a few listed the extent of their funds or the current disbursementdata.We believe that the key reasons for the lack of utilization of funds are as follows: 9
    • Technopreneurs Association of Malaysia – Detailed Action Plan Ø Difficulty in obtaining information about the availability of Grants and the application criteria. Ø Lack of clarity regarding the level of funds and the associated terms. Ø Too many different agencies to contact. Ø No Central Resource to approach for advice.The schemes have to be better utilized and administered to maximize opportunities fortechnology firms.Our Proposals are as follows: - 1. The various schemes should be consolidated and a one-stop agency be established for grants, this would ease the problems of lack of awareness and bureaucracy. 2. The grants agency should publish quarterly reports on the effectiveness of the various schemes and the ratios of funds total versus amounts disbursed. 3. The various application processes should be streamlined and standardized as much as possible. 4. There should be a checklist for each application process and targets set for the “turn-around “ of applications. 5. Valid reasons should be given for any application rejections based on a clear set of criteria. 6. Administrators must be qualified and experienced in each specific field. 7. Improved dissemination of information on all Grant schemes via all related organisations TeAM, PIKOM, etc. 8. Regular seminars to inform the public on the grants. 9. Workshops to educate Technopreneurs on the grant application process, documentation required, etc. 10. Timeframe for approval and disbursement to be minimized to three months with a standard guarantee of processing within that timeframe. 11. Disbursements timeframes to be shortened with first disbursement to be made within 30 days of completion of documentation. 12. All Grant payments to be made within 30 days of submission of claim. 10
    • Technopreneurs Association of Malaysia – Detailed Action Plan 13. Initial disbursements to be at least 30% of grant on an Advance basis not on a claimable basis. This will assist the company in starting the project faster. 14. Disbursement mode to be standardized for all Government Grants. Not the “u pay first and I reimburse later” concept. Grants can be paid via the ‘one-stop’ agency to suppliers directly.1.3.4.1 Technopreneur Development Grant (TDG) schemeAn example of a proposed new grant scheme called “Technopreneur DevelopmentGrant Scheme (TDGS)” is attached in Appendix B.1.3.5 IncubatorsThe MDC (through its Technopreneur Development Flagship) will be setting up aNetwork of Incubators to “incubate” more ICT companies. However many Incubatorsglobally have failed to develop successful companies and neither have MalaysianIncubators. Incubation is a very good idea but besides providing space andinfrastructure, Incubators need to provide management expertise, services and alsofunds for Technology companies.Seed and Early Stage companies generally do not need much capital to start theirbusiness, even less if Incubators provide other amenities. Thus the Government mustallocate some funds (either as an allocation, grant or soft loan) for Incubators to in turnfund these promising companies.Our Proposals are as follows: - 1. Provide seed capital of RM 50,000 to RM 200,000 for promising start-ups that situate themselves within designated incubators 2. Provide incentives for investment in Incubators recognizing the fact that Incubators will not yield returns for long periods of time. An example would be an immediate tax deduction for investment into an MSC status incubator. 3. Other incentives are a Tax holiday for up to 7 years for the Incubators (similar to MSC Status but for a minimum of 7 years) 4. Allow Incubators to raise funds outside Malaysia without restrictions. 5. Provide cheap land especially next to or within Universities to enable Incubators to build facilities. 11
    • Technopreneurs Association of Malaysia – Detailed Action Plan6. Allow University Faculty and Post Graduate Fellows and Researchers to work within such Incubators part of the time and earn a fee from the Companies or become shareholders in the ventures without restriction from University guidelines.7. Provide Grants to Incubators to fund Incubatee companies8. Allow Universities to provide Grants to the Incubators or Incubatee companies.9. Recognise that in a virtual ICT environment, there should not be too much stress on the physical infrastructure, but more on the overall value added service that an incubator provides. Thus an Incubator must provide such services as expertise in Marketing, Sales, Business Development, Secretarial, Mentoring programs with Successful Technopreneurs, contacts within corporations and Government to encourage business development, Patent registration and other legal assistance, Advertising, Promotions and Public Relations assistance and Financial Management assistance among others.10. Incubators must be managed by Technopreneurs with a successful track record and with other qualified and experienced business people, not by Bureaucrats, ex-Civil Servants or Academics. The purpose of an incubator is to create successful business entities and this cannot be done without management who have experience in business.11. Encourage promising graduates of universities to start a business in an Incubator as an alternative to a “professional” job. This can be done if there is sufficient assistance like funds and adequate guidance of experienced Technopreneurs.12. Reallocate VC funds managed by Government supported VCs to early stage investments co-managed by incubators. Allow a business model structure that will benefit Incubators, VCs, the Government and Technopreneurs. 12
    • Technopreneurs Association of Malaysia – Detailed Action Plan1.3.6 Venture CapitalAlthough the Government has provided plenty of funds for Venture Capital investingeither through MSC Venture Corporation and MavCap, or via Bank Negara to MaybankVentures and Commerce Ventures, not all of these companies have invested sufficientlyfast or have only invested in minimal risk companies and thus technology investmentshave not been maximised.Although MavCap has only recently been set-up and must be given a chance to invest, itmust be remembered that the RM 500 million was allocated in October 2000 and it hastaken more than 14 months for the organization to be set-up. Much time has been lost inthat period and MavCap must thus speed up its investment and disbursement.Also most of these companies who have been allocated Government funds are still veryrisk averse in their investment and are sometimes more cautious than even foreignVenture Capitalists. Since the Government provides the funds, the Government mustencourage these companies to accept a higher risk and invest the money or lose thefunds in the process.Our Proposals are as follows: - 1. All government supported VC firms (MavCap, MSC Ventures, Maybank Ventures, Commerce Ventures, etc) to inform Technopreneurs on details of type of investments being sourced i.e. If software, what type of software, if technology, what type of technology, etc. 2. Details must include the amounts available for each stage of funding (min/max, etc) 3. Details must include exactly what they are looking for so that Technopreneurs are clear on what needs to be done & if they will qualify for such funding. 4. Decision timeframes to be reduced to maximum of 3 months with a guaranteed decision timeframe being committed upon submission of completed documentation. 5. A minimum sum must be committed to seed and early stage Companies with a clear definition of such stage made known to the public. Alternatively the definitions in this document under the Technopreneur Development section can be used. 6. A minimum of 30% of each fund must be invested each year so that there is no delay in investment. Unutilized funds to be reallocated to other VCs. 13
    • Technopreneurs Association of Malaysia – Detailed Action Plan 7. More funds must be distributed to other VC funds, especially those with a track record of investments. A wider distribution will ensure better investment potential. The current outsourcing of RM 100 million to 4 VC firms under the MAVCAP funds is a positive step and should be further accelerated in the medium term. 8. Requirements to qualify as a VCC need revisiting as current laws make it difficult for qualified individuals to set up Venture Capital companies. The SC guidelines on Venture Capital may also need to be relaxed. 9. The government, being the provider of funds, should allow for some investment failures, much like a bank provides for “bad loans”; i.e. the pressure on the investment agencies to perform has caused these agencies to be extra conservative.We have taken the liberty of including a number of venture capital investment schemesand the investment criteria in Appendix A of this document.1.3.7 IPO on a Malaysian Exchange & MESDAQOne of the preferred exit strategies for an Investor (VC or Angel Investor) is a listing on aviable Stock Exchange. Thus the creation of MESDAQ in meeting the needs of themarket was admirable, but the many restrictions on MESDAQ and the lack of tradingand liquidity has been a disappointment to the industry. Hence one potential avenue ofraising funds is out of reach of Technopreneurs and the preferred exit mechanism forInvestors has been lost.As such, it is much more difficult to encourage Angel investments and VC investors havean additional risk to consider. Thus MESDAQ must be sorted out immediately for thegreater good of the ICT industry.Our Proposals are as follows: - 1. MESDAQ and KLSE signed an MOU in June 2001 to consolidate the stock markets. This process of consolidation must be accelerated so that MESDAQ’s visibility and the trading issues of MESDAQ may be quickly addressed. Further delay will be damaging to technology investments, as MESDAQ is the primary IPO exit route for technology investors in Malaysia. 2. As part of the consolidation exercise, MESDAQ must be incorporated into the current MASA screen to improve the liquidity & trading of MESDAQ stocks. MESDAQ stocks must be tradable by ALL stockbrokers in Malaysia just like any other KLSE stock. 3. MESDAQ must however be able to maintain its current listing criteria and requirements (subject to our suggested amendments below) 14
    • Technopreneurs Association of Malaysia – Detailed Action Plan4. The total listing approval timeframe (including approval of the Securities Commission) must be shortened to a maximum of 6 months.5. MESDAQ listing rules must be streamlined so that ease of listing and compliance with continuing listing obligations on MESDAQ are comparable to the rules of other bourses in the region such as SESDAQ Singapore & GEM Hong Kong. The restrictions which should be removed or modified for technology listings include:- ♦ removing compliance with the NDP until such time as MESDAQ has captured a significant number of technology listings; ♦ modifying the public spread requirement to 500,000 shares or at least 15% total issued share capital to be in the hands of at least 500 shareholders to enhance flexibility. Current rules require that at least 25% but not more than 49% should be in public hands with a total minimum of 200 public shareholders. ♦ removing the paid-up capital requirement of RM 2 million ♦ allowing secondary listings on MESDAQ, and primary listings here be allowed secondary listings on other bourses. ♦ removing the requirement that 50% of funds raised be used within Malaysia, and the requirement that at least 50% of the applicant’s assets and operations are situated within Malaysia. Although the Company can request a review of these requirements, the additional administrative work involved and the possibility of a rejection is not desirable. This is detrimental to the need to regionalise & globalise the ICT sector; 15
    • Technopreneurs Association of Malaysia – Detailed Action PlanSection 2 - MARKETING SUPPORT2.1- Marketing Emerging Malaysian CompaniesTeAM has also identified several key areas to focus on helping Malaysian ICTcompanies market themselves better. Technology is only half the story with the otherhalf being effective marketing of the products and services.One of the key weaknesses of the ICT industry in Malaysia is the marketing andpromotion of Malaysian products and services both by the Malaysian government and bythe companies themselves. India has been a powerhouse in its offerings globally and tocompete effectively, we need the assistance of the extensive resources of theGovernment.The following areas have been identified as the key to the success of the ICT industry : 1. Promoting Malaysian Technology Abroad 2. Replicating Malaysia’s Manufacturing Success Story for the Technology Sector2.1.1 Role of GovernmentThe government has to play a key role in positioning Malaysia as a strong exporter oftechnology similar to the Manufacturing sector. TeAM envisions that a stronger approachto market and promote Malaysian technology companies to the world will be required tomake this a reality.2.1.2 Current SituationInitial positive signs are currently underway for example MATRADE has recentlyprepared exhibition venue bookings at ICT exhibitions and had invited local ICTcompanies to exhibit. There is a need to accelerate this activity to more countries andregions and also to broaden the impact and to cover more Malaysian ICT companies.There is no institution set up to promote Malaysian technology companies across theboard with the exceptio n of the MDC. However, MDC’s objective to promote MalaysianICT companies is diluted by its primary objective to manage and developed the MSC.We propose that a separate entity or division should be set up to focus solely on the ICTsector. This entity should focus on marketing Malaysian ICT and not be distracted by theoverall development of the MSC. 16
    • Technopreneurs Association of Malaysia – Detailed Action Plan2.1.3 Proposed SolutionsA) The formation of “MyTechTrade” or “TechTrade” (MalaysianTechnology Trade Development Corporation)To be set up in a similar fashion as MATRADE under an established organization likeMITI, this technology trade development corporation will undertake activities to promote,advertise and sell Malaysian technology products worldwide especially ICT.This organization will work closely with existing trade organizations like MATRADE toleverage on their existing network and offices worldwide. It will also offer training toMATRADE and MITI’s officers on the extent of technology development in Malaysia toassist them to promote Malaysian companies. Malaysian technology companies will beinvited to complement trade delegations, shows and exhibitions that are alreadyplanned. The organization will also publish a newsletter on the technologies available tobe distributed to all Malaysian Trade Offices and Embassies globally.We propose that special funds be allocated from the Government to run this organizationwith coordination and collaboration with Multimedia Development Corporation, therespective Ministries and TeAM.It will organize trade missions, participate in exhibitions, conferences and networkingsessions in foreign countries to promote Malaysian companies.It will also match-make Malaysian companies with the local partners in each country tofacilitate joint ventures and collaborative efforts with their partners.It should also be able to share resources like research materials, databases and salesleads and tenders globally with all the respective Malaysian technology companies.B) Training of MATRADE Officials about Malaysian Technology.In the interim, MATRADE Officials must have adequate information about Malaysiancompanies. We propose special newsletters be sent to them monthly to update them onthe developments of the technology industry in MalaysiaAdditionally, a website for these officials to keep updated on the latest developments arealso proposed. They will be trained on how to match companies with partners andpotential customers. Training can be done by TechTrade, MDC, TeAM and other relatedICT organizations. 17
    • Technopreneurs Association of Malaysia – Detailed Action PlanC) Directory of ICT CompaniesTechTrade must also maintain and publish a directory of Malaysian ICT companies forall to use and to search. This should be both in the form of a website and physicalbooklet for all to access easily. This directory will be distributed and marketed via alltrade offices and embassies globally. The current website maintained by MDC calledMDC Access should also be adequately promoted overseas as it is currently beingunderutilized or utilised by foreign companies as an entry point into Malaysia to offertheir services in Malaysia. Other third party websites can work in collaboration tointegrate the database and content to the website used by Government officials.The maintenance of such a database should be coordinated amongst several agenciesand validated to ensure accuracy and data integrity. TeAM can coordinate this effort.D) Marketing Resource CentersWe propose that the Government drives and funds the initiative to create a marketingresource center for each technology market in the world. (Similar to Small BusinessAdministration Centers in the US)This marketing resource center identifies contacts, channels and customs of a particularmarket and will be extremely useful to Malaysian companies exploring abroad. It willalso have a database of companies or be able to point to sources of these databases toassist Malaysian companies as they venture into new markets.A list of consultants in each of these markets must also be identified to coordinate andcreate the resource center initially and these consultants will be retained to assistTechnopreneurs when the need arises. The Technopreneurs will be charged areasonable and contracted rate for consultation.As an extension, the marketing resource center could also provide pooled services likesmall office space and tele-support facilities in each of the larger markets of the world. Itdoes not make sense to have 10 different customer support centers in the US operatedby 10 different Malaysian companies. This could be done via collaborative efforts fromthese marketing centers around the world’s largest markets for technology.This could be extended from the MDC Access that was set up by MDC. However, thecenter MUST be managed by people who have sufficient knowledge base not only inICT but also domain expertise in specific sectors and industries. 18
    • Technopreneurs Association of Malaysia – Detailed Action Plan2.1.4 Key BenefitsThe initiatives mentioned above represents a stronger assault in marketing MalaysianICT companies abroad in the global markets. Not only targeted at the big developedmarkets, TechTrade can also open new opportunities in emerging markets for Malaysia.We must replicate the success of the initiatives undertaken in the manufacturing sectorand position Malaysia to export to the world as focusing on our own market will not besufficient to make us thrive.2.1.5 Key Performance Indicators 1. Number of Malaysian Companies Exporting their technology. 2. Extent of sales as a percentage of Malaysian Technology companies. 3. Number of recognized Malaysian brand names in foreign markets 4. Number of leads and projects secured by Malaysian technology companies2.2 Reaching out to the World – Selling Malaysian Technology2.2.1 Role of GovernmentMalaysia needs to intensify the promotion of its Technology companies to the world.Here, the Government plays an important part to assist and encourage companies toreach out to the world.2.2.2 Current SituationThe present representation at the world’s largest technology trade fairs by Malaysiancompanies can be characterized as “insignificant” despite initial positive actionundertaken by MATRADE. Besides “Malaysian Pavilions” showcasing small companies,the companies often are lost in the sea of competitors and do not stand out. Based onthe cost of participation at these shows, we are often reduced to handing out brochuresand projector slideshow when others have extensive range of props, demo appliancesand even hospitality booths to reach out and grab attention. 19
    • Technopreneurs Association of Malaysia – Detailed Action Plan2.2.3 Proposed Solutionsa) Global Tech/ICT exhibitionsTraditionally Malaysian representation at these big shows are not impactful. Participantswho are interested to go to these shows under the Malaysian delegation are often notcommitted fully to the show but somehow are interested in the free/subsidized booth.Booths are also bunched up and not spread according to the particular technology ofinterest.As such, we propose that the TechTrade organization be the master coordinator forcompanies interested in participating. They will serve as a consultant to advise on thebooth location, booking process, showcase, booth design and promotions package toassist these companies do a better job at these shows. They will also be advised onhow to follow up on leads at the show and close on potential deals that come by.TechTrade will also manage a show grant from the Government based on the extent ofexpenditure the companies are willing to make through a matching scheme. We proposea minimum Ringgit for Ringgit matching scheme.TechTrade will appoint Coordinators as consultants to assist Malaysian TechnologyCompanies with marketing consultancy as to how to manage the booth and ensuresuccess. Many Malaysian companies simply don’t have the ability to attract attentionand follow up and close on leads efficiently in a large show.b) Malaysian Tech ShowTo assist the smaller companies in Malaysia who may not be able to afford to participatein large exhibitions, TechTrade should create a technology show to be based inMalaysia. This event to be sponsored by the Government or Malaysian companies andorganized by TeAM will be open to all TeAM members, MSC Status companies andother Malaysian ICT companies and will be marketed to all Malaysian Corporations andSMEs.TeAM will market this show globally with hopes that one day the event could beASEAN’s largest technology showcase that is held in Malaysia annually. This will thenallow Malaysia to attract the best minds to Malaysia with hopes of spurring partnershipsand strong cooperation between technology companies in the region.This show will be differentiated from current Shows and are not primarily intended for thegeneral public as a computer/PC show but as a specifically targeted business ICT Showfor Corporations, SMIs and SMEs and other technology companies. It will compriseexhibitors in software, ICT products and services, emerging technology, R&D and D&Dand other similar technologies. 20
    • Technopreneurs Association of Malaysia – Detailed Action Plan2.2.4 Key BenefitsThe key benefit for Malaysian companies with these initiatives will allow them to marketthemselves better. Most technology companies like Intel, Microsoft are not onlyexcellent in their technology but possess marketing capabilities that are amongst thebest. Marketing budgets are exploding in a more global marketplace today as wecompete globally. A major role by the Government in this respect will be a tremendousassistance to Malaysian ICT companies.2.2.5 Key Performance Indicators 1. More “Impactful” Malaysian representation at large trade shows. 2. A successfully promoted tradeshow based in Malaysia, which will attract strong representation from Malaysian companies and visitors from the region. Eventually secure interest from other companies in the region to participate at our show. 3. A more direct a pproach to ‘selling and marketing’ local software and services (rather than just through exhibitions). (E.g. sponsorships or contributions from corporations are directly converted into software and services during exhibitions).2.3 Acceptance and Recognition - Buy & Use Malaysian2.3.1 Role of GovernmentBesides marketing to the world, initiatives to promote and encourage Malaysians to useand purchase Malaysian Technologies must be encouraged. The government must startleading by example as well as launch initiatives to achieve this.It is pertinent to note that recently YB Dato’ Seri Rafidah Aziz, the Minister ofInternational Trade and Industry (MITI) called for all sectors to use the ‘Malaysia First’ inawarding contracts by the Government and private sector companies. TeAM fullysupports this initiative and hereby proposes the following key thrusts in the promotion oflocal ICT product and services.2.3.2 Current SituationIt must be noted that currently even government agencies and large Malaysiancompanies prefer using imported software and applications. We need to understand thereasons for this and the extent of foreign solutions versus local software usage inMalaysia. 21
    • Technopreneurs Association of Malaysia – Detailed Action Plan2.3.3 Proposed Solutionsa) Incentives for Using Local Software and other ICT products and services byMalaysian companiesObjective: To encourage the use of IT in business by SMIs and SMEs and to assist localcompanies in building their ICT businesses locally. The government needs to set up aSIRIM like body for certification and accreditation of companies that develop theirsoftware in Malaysia (see item (b)). It is often difficult to distinguish resellers whocustomize software that are imported for their clients from the truly local softwarecompanies.Some incentives by the Government to develop the usage of local software are: § Offer double tax deduction to SMIs for using local software products & services § Offer Ringgit for Ringgit grants for using local software/services § Increase the threshold of the current SMIDEC grant to RM 200,000 per SMI (rather than just RM10,000).The above should not be limited to software but other related ICT services such as thefollowing: - v integration, v hosting (inclusive of other managed services), v security, v networks (internal and external) v wireless capability v consultancy v design; and v trainingb) Neutral Certification Body for Software & ServicesSIRIM or a new body (NewOrg) to be formed for this purpose. We propose that thisbody uses an international standard like CMM (Capability Maturity Model developed bythe Carnegie Mellon University) to certify companies and offers certification services atsubsidised rates based on GRANTs from the Government. This will ensure some qualitystandards in local software development.c) Market Research on Software/Service Technology Spending on foreignsoftware and servicesBy having some research on value of software and services spent on foreign suppliers,we can gauge and benchmark how successful or how much monies can be curbed fromleaving the country. This should be done by an independent research company andsome criteria and guidelines set in determining what constitutes local software andservices. 22
    • Technopreneurs Association of Malaysia – Detailed Action PlanWe propose MDC take up the coordination of this research task, as it would serve as agood benchmark for the purpose of measuring the ROIs of promoting locally developedsoftware and services. The research can be segmented into key industries and services(including government departments).Once some form of measures can be established, a target or goal can be set over aperiod of time (e.g. 5 years), and costs savings can be calculated based on the ‘nationalsavings’ to Malaysia.d) National Advertising CampaignDeveloping a National Advertising campaign to promote the use of locally developedsoftware and services (similar to the Buy Malaysian campaign). This campaign shouldcreate a sense of value towards using local solutions and will build confidence in localTechnopreneurs and local software and services.2.3.4 Key BenefitsBefore we can sell to others we must show them that we use our own products. This isthe strongest marketing pitch to the world. We believe that by buying and using localsoftware, we can assist in driving improvements as well as providing the essentialrevenues for Malaysian companies to develop further.Further understanding of this is also elaborated in the next section on TechnopreneurDevelopment.2.3.5 Key Performance Indicators 1. Number of Malaysian software companies that have strong clientele of Malaysian companies. 2. Number of Malaysia software companies with local and global recognition. 3. Number of Malaysian companies taking advantage of the tax incentives to use local software and the amount involved. 4. National savings based on ‘local software’ usage when compared to ‘foreign software.’ 23
    • Technopreneurs Association of Malaysia – Detailed Action PlanSection 3 - TECHOPRENEUR DEVELOPMENT3.1 Overall StrategyThis section outlines the detailed recommendations and action plan for TechnopreneurDevelopment (TD) in Malaysia.Technopreneur Development will have 5 key thrusts or macrorecommendations with each key thrust having a series of action plansand recommended government agencies, private sector involvementand key requirements, including financials; and specific KPIsThe Key Thrusts of Technopreneur Development include: -Government Policy on Private Sector DevelopmentAn analysis of the Government’s involvement in the private sector and how it participatesin the economy in relation to ICT. Areas of concern for TeAM are business activitieswhere t e Government is competing directly against the local private sector and an hanalysis on Government procurement projects, especially on the MSC Flagship projects,in fostering the partnership between private sector and the Government.Technopreneur Development ProgramA program to assist Technopreneurs in developing their business with support servicesfor example business plan writing, HR management, financial reporting and othermanagement skills. A strategy to tap into the existing strengths and expertise ofcommunity players such as other Technopreneurs, institutions and private sectorcompanies.Increasing the demand for ICT products and services in MalaysiaMalaysia’s local ICT demand for products and services is still lagging behind itscounterparts. Malaysia’s GDP cannot claim a 1% of IT spending as compared toSingapores 3%, South Koreas 2%, Australia 3.4% and US 8%. The year 2000 B2Cmarket in Malaysia (from leading Research houses like IDC, eMarketer and Gartner)records only 24% of Singapores RM2.4 billion market (despite our population being 7times larger than Singapore’s), while the B2B market is only 5% of Koreas B2B market.Such low local demand will hamper the country’s objective of becoming a Knowledgesociety and the growth of Technopreneurs due to small local demand to supportproducts and services by Technopreneurs.This thrust will provide recommendations on areas of increasing demand by privatesector organizations, SMEs and increasing the growth of B2C. 24
    • Technopreneurs Association of Malaysia – Detailed Action PlanIncreasing the number of TechnopreneursThere is a need to increase the number of Technopreneurs from secondary and higherlevel education institutions; and also from the professional and working environment.Recommendations will be made to implement an action plan to fundamentally increasethe pool of Technopreneurs from the above sources.Showcase of leading Technopreneur CompaniesDue to the ‘catch-up’ game of Malaysia’s New Economy, an immediate initiative isneeded to identify existing pioneers and package them to become regional players.Recommendations will be made to establish key local Technopreneur companies tobecome regional players in the shortest time frame possible.3.2 Government Policy on Private Sector Development3.2.1 Role of government 1. Catalyst for the development of new services and the industry 2. Provision of services that may be cost effective or profitable if provided by the private sector3.2.2 Current Situation 1. Several government agency initiatives are in direct competition to private sector companies e.g. Knowledge Worker Exchange (KWX) under MDC. 2. Contract award of future MSC flagship projects to companies could be more broad based, and should be awarded to companies with the “know-how” rather than the “know who” 3. Not a lot of local software solutions have been procured by the government 25
    • Technopreneurs Association of Malaysia – Detailed Action Plan3.2.3 Possible solutionsA. Modify MDC’s mandateModify MDC’s mandate so that it does not have to become a self-sustaining and profitgenerating entity. This will enable it to better serve the Techneupreneurs it wasestablished to nurture.Identification and subsequently divestment, of all government initiatives that directlycompete with private sector companies either by; 1. MBO 2. Trade sale 3. Listing 4. Closure/ Windup of OperationsThe above are the possible action plans that can be undertaken for other Governmentsectors as well.B. Award of government ICT contractsAward of government ICT contracts should be broader based and the number ofcompanies awarded contracts should be increased dramatically. The focus should be onSME’s that actually have done similar projects before and/or have people in the projectteam that have the competency and the know how from previous projectimplementations, to execute the proposals submitted.The award of small size Government contracts of lesser than RM500,000 should begiven to SMEs in the ICT industry. For example in the construction industry, this will besimilar to new government initiative to award contracts to Class D, E and F contractorsdirectly instead of the traditional practice of awarding contracts to the class A contractorwho takes a margin and subcontracts projects down the value chain.For larger projects SME initiatives should be in place to allow/encourage them to bid asa consortium working together with larger and smaller ICT companies.C. Registry of local software vendorsWhile the Government has plans to set up a Registry of Local Software Vendors undere-perolehan, this should be extended as a reference point for private Malaysiancompanies and foreign companies to access information on Malaysian ICT companies.MDC Access should also be integrated into this Registry.This should be promoted in a more aggressive manner; 1. Overseas, to potential software purchasers and resellers 2. Locally, to potential software purchasers as well as local software companies(Note: Point 2.1.3 (C) in the marketing section of this paper discusses these issues inmore detail. 26
    • Technopreneurs Association of Malaysia – Detailed Action PlanD. Study on the Government’s participation in the EconomyAn study is needed to analyze the Government’s involvement in the Economy. Theobjective of this study is to understand and identify sectors where the Government canreevaluate its role by being a facilitator rather than directly competing with the localprivate sector. The objective of the study is to streamline national resources to facilitatethe growth of the national economy.It is proposed that the Economic Planning Unit (EPU) or the National Economic ActionCouncil (NEAC) should undertake this study.3.2.4 Key Benefits § Maximizing national efficiency by allocating efficient private sector resources to project works thus reducing Government spending § Accelerated Development of SME Technopreneurs as the government projects will offset the slowdown in the private sector. § A dramatic increase in the critical mass of ICT entrepreneurs and companies in Malaysia § Better optimization of resources in the Government where needed. Government resources will be realigned to meet more strategic national development undertakings.3.2.5 Key Performance Indicators 1. Identify competing ventures by 1st March 2002 2. Specific Target dates for divestment of competing ventures with a target completing date of 31st December 2002. 3. No of new companies awarded government ICT contracts increased by 50%. Focus should be on SME’s. Target date for achieving this goal shall be 31st December 2002 27
    • Technopreneurs Association of Malaysia – Detailed Action Plan3.3 Technopreneur Development Program3.3.1 The different stages of development of the TechnopreneurVentureThe Technopreneur venture goes through multiple stages of development. Originatingfrom the Technopreneur itself, many venture ideas can be formulated. The stages ofdevelopment is as follows:-Pre-IdeaA stage where a Technopreneur has a few ideas for a venture but has not started on anyinitiative to progress on any of the ideas. This is natural for example manyTechnopreneurs from educational institutions (student or academic personnel) who arein the initial stages of experimenting and researching on the numerous ideas.IdeaThe next stage of development is when the Technopreneurs have identified a particularventure and have taken concrete steps to produce the following functions:- v Business Plan, together with detailed market research v Proof of Concept v Alpha to Commercial product or serviceSeedThe initiation of organizational structure or legal entity to operate and mange the venturewill commence this stage of development. Normally the founding shareholders will forma core management team or top management. No revenue or very minimal revenue withslow growth is evident at this stage of developmentStart-upThis stage marks the higher evolution of the venture where a management team willhave support functions such as finance, administration and a proper marketingdepartment.Revenue will experience high growth exceeding CAGR of 20% and existing capacities ofthe venture will reach maximization, which will mark the commencement of the nextstage – Expansionary. 28
    • Technopreneurs Association of Malaysia – Detailed Action PlanExpansionaryAs in its name, this stage symbolizes the high expanded stage of the company wherehead counts, capacity (technical and supportive roles) will greatly expand to meet withhigh growth of demand.This stage will be characterized by multiple cycles where the venture expands todifferent levels such as a solution development company expanding from a domesticmarket to a regional market and so forth.Pre-IPOThe venture has reached a level of viability and accepted market levels to be floated in amarket bourse with minimal accepted regulations and market qualifications such asunderwriting and etc.3.3.2 The critical needs of a venture: Different needs for differentstagesThe different stages that a venture undergoes require different types of support. Criticalto this is the type of funding in all stages of development. The road today is often long,windy and difficult but our recommendations propose solutions at every step of theway., 29
    • Technopreneurs Association of Malaysia – Detailed Action PlanThe table below depicts the different type of support needed by a venture.SUPPORT NEEDED AT DIFFERENT STAGES OF THE TECHNOPRENEUR VENTUREStages Duration Funding Non-FundingPre-Idea 6 months 1. Market research 2. Networking and industry peer support 3. CounselingIdea 9 months 1. Grants for Proof of 1. Detailed Market Concept research, including product differentiation, financial analysis and competitive strategies a. Amount RM50k to 2. Technical, editorial and RM100k application support b. Duration: 9 months 3. Project Management c. Purpose: To develop 4. Physical location Business Plan and Proof of concept 2. Grant for Alpha, beta 5. Equipment access and commercial product a. Amount: Up to RM1 6. Management training million b. Purpose: To develop Commercial productSeed 1 to 1 ½ years 1. VC funding o up to 1. f Corporate and secretarial RM1.5 million support 2. Financial advisory services 3. Networking and industry peer support 4. Advertising and marketing a. Advisory and consultancy b. Bulk media buying 5. Training and HR Development 6. Business Development and partnership 30
    • Technopreneurs Association of Malaysia – Detailed Action PlanStages Duration Funding Non-FundingStart-up 3 years 1. VC funding of up to 1. Talent and HR recruiting RM3 million 2. Grants for next 2. Advertising and generation marketing technology 3. Grants for a. International linkage and International or market research foreign market presence b. Bulk media buying 3. Business Development and partnership 4. Marketing networkExpansionary 2 years 1. VC Funding u top 1. International expansion RM15 million support 2. Grants for a. International Market International or research foreign market presencePre-IPO 1 year 1. VC and/ or 1. Listing support mezzanine financing 2. Strategic action plan a. Government b. Strategic marketing acquisition planThe above funding and non-funding support outlined in the table above are assistanceneeded by third parties. Expertise and capabilities that have been internally developedare not outlined in the above table.3.4 Technopreneur Online DatabaseRecommend the development of a Technopreneurs on-line portal (TOP) to meet thefollowing objective:- Ø To register an inventory of Technopreneurs in Malaysia with their skills and ventures; Ø To promote collaborative technopreneurship where a symbiotic program is instilled to assist a technopreneur from the skills, knowledge and experience from another technopreneur; Ø To effectively monitor and manage Technopreneurs and their ventures Ø An online application for the relevant grants that assist the growth of ventures Ø A source to seek VCs, angels and other funders Ø A source for market and business development collaboration, including foreign linkage. 31
    • Technopreneurs Association of Malaysia – Detailed Action PlanThe online portal will work in collaboration and in alliance with other online presence ofassociations, community web sites and content/e-commerce driven web-sites. It isimportant here to emphasize that the on-line portal shall be a non-profit entity and willnot compete with other industry players.Such a portal has also been currently conceptualized or implemented (although not intotality) by the Multimedia Development Corporation (MDC) via MDC Access, Ministry ofEntrepreneur Development, Ministry of International Trade and Industry, MESDAQ viaMeNet and private companies such as Skali, FirstFloor capital and others.A Technopreneur registered at the site must have one or more ventures or may beworking on a few ventures, which may be eligible for the Technopreneur DevelopmentGrant as elaborated in the next section.TOP will remain a strategic element to the management and operations of the said GrantScheme.3.5 Unsuccessful venturesIt is natural that certain ventures initiated by the Technopreneur will not graduate and failto graduate to the next level. Such ventures will undergo an embargo period that willlater be published as a public domain for the community to learn and to capitalizefurther.This concept of taking ventures into the public domain is termed as ‘recycling’ and willbenefit the community at large and provide a platform for other Technopreneurs to learnfrom these failed ventures.Intellectual Property (IP) will remain the property of the Technopreneur.3.6 The School of TechnopreneurshipAs part of the TDG Grant, Technopreneurs will be required to undergo training atcertified continuing educational institutions to enhance their management skills.It is known that Technopreneurs require further training in the areas of management andit is proposed that eligible candidates applying for the TDG are required to undergotraining and subscribe to relevant courses in business administration, HR, marketing,financial planning, etc. The fees for these courses will be paid via the TDG.A review of the related courses offered by both private and public educational institutionsincluding management associations will provide a list of courses that will provideadequate training to Technopreneurs.The above will provide a further boost to the local educational institutions.The training is designed to provide Technopreneurs with management skills that willenhance the possibility of producing more Globally competitive Technopreneurs. 32
    • Technopreneurs Association of Malaysia – Detailed Action Plan3.7 Key Performance Indicators (KPIs)It is recommended that the Technopreneur’s Development Program have the followingKPIs: - 1. Time taken to approve and disburse Grants. 2. No. of ventures approved under the Grant Schemes 3. No. of Technopreneurs registered at TOP 4. No of ventures of Technopreneurs 5. Skills per Technopreneur 6. No. of ventures funded and graduated to seed level 7. No. of failed ventures or ventures not getting funded. 8. No. of ventures continued after failure 9. No. of active Technopreneurs (time span) 10. Average age of Technopreneurs 11. No. of collaborations undertaken between Technopreneurs 12. No. of foreign or international marketing/ business development collaborations 13. Revenue of ventures from foreign sources 33
    • Technopreneurs Association of Malaysia – Detailed Action Plan 3.8 Increasing the demand for ICT products and services in Malaysia 3.8.1 The current state of affairs Malaysia’s ICT spending is relatively low and not adequate to support a thriving local community of Technopreneurs. The low demand of ICT in the domestic market also restricts the growth of Technopreneurs and their ventures, which ultimately will marginalize the country’s objective in producing World Class Technopreneurs. As indicated in the table below, Malaysia’s local ICT demand for products and services in 2000 is still lagging behind its counterparts. Malaysia’s GDP has yet to reach 1% of IT spending as compared to Singapores 3%, South Koreas 2%, Australia 3.4% and US 8%. % of IT Spending IT Spending Country IT Spending GDP Population over GDP per capita (RM billion) (RM billion) (million)Malaysia 5.9 885.40 21.8 0.67% 270.6Singapore 12.5 383.80 4.2 3.27% 2,985.7S. Korea 46.7 2,420.00 47.5 1.93% 983.2Australia 52.4 1,535.20 19.2 3.42% 2,731.3USA 2,918.0 36,461.00 281.4 8.00% 10,369.6 Another indication is Malaysia’s 2000 B2C and B2B market (from leading Research houses like IDC, eMarketer and Gartner) records a 24% of Singapores RM2.4 billion market. Malaysia’s B2B market is only 5% of Koreas B2B market. Country B2C B2B (RM million) (RM million)Malaysia 596 894Singapore 2,457 193,200S. Korea 760 16,720Australia 1,140 10,555USA 152,000 400,000Source: IDC, Ministry of Telecommunications and ITSingapore, eMarketer, Gartner 34
    • Technopreneurs Association of Malaysia – Detailed Action Plan3.8.2 The Key proposed thrustsThe proposed key thrusts to the recommendations in increasing demand for ICTproducts are as follows:-Local conglomerates or Anchor moversThe identification and strategic action plan of large local companies to use ICT thushaving a direct impact on Malaysia’s GDP. Large conglomerates are significant in thisstrategy due to their buying power, which will encourage their supply partner to also useICT.SMEsSMEs are a vital component to Malaysia’s competitiveness and the use of ICT by theSMEs will in turn sharpen the competitiveness of Malaysia’s economy. Recent studieshave highlighted that SMEs in Malaysia are still lagging behind their foreign counterpartsin the use of ICT.Consumer Internet or B2C MarketAlthough there has been much exposure to B2B and B2C commerce yet there is littleexpansion in this particular market. As indicated in the previous sections the B2C marketin Malaysia is still lagging. This thrust will concentrate on findings that w relate to illrecommendations to the development of the B2C market.3.8.2.1 Local conglomerates or Anchor moversCreate an impact on the national GDP.This thrust is designed to have key anchor local large companies in the key sectors ofthe industry. T strategy calls for the adoption of ICT by large corporations in the hefollowing sectors:- v Education v Construction an/or property development v Automobile v Plantation or Agriculture based products v Finance – Unit Trusts, Stock broking, Banking, Insurance, etc v Electronics and Electrical v Textile & Garments v Furniture & Wood based industries v Hospitality & Tourism v Healthcare v Consumer or retail products v Logistics and transportation, etc 35
    • Technopreneurs Association of Malaysia – Detailed Action PlanThe identification of 4 to 5 companies within each sector that control more than 50% ofthe market share and that are leaders of their particular sector, thus having the impacton the national economy and also encouraging its supply and client partners to adoptICT.For example in construction the companies identified are YTL, Gamuda, UEM, Renong,Road Builder, MTD and IJM.A . Incentive to anchor moversIt is recommended that as an incentive to the Anchor movers double deduction or oneyear tax relief on expenditure spent on ICT or related services is needed to mobilizethem to use ICT in their value and supply chain. The expenditure must not only includehardware and related software but also the following:- v integration, v hosting, v security, v networks (internal and external) v wireless capability v consultancy v design; and v trainingThe above is an integral part of any E-commerce or E-Business transaction which willmaximize the benefits to anchor movers. Emphasis should be given to localTechnopreneur companies.B. Affordable to the SMEs i.e. the partnersIt is important to highlight that investment in ICT technology must be technologyindependent and technology invested by the anchor movers must allow its SME partners(including its distributor and suppliers) to invest in ICT and integrate with the hosttechnology in the Anchor mover company. Such investment by the SMEs must not be acapital cost and burden to them and the technology must be available in the market bybureau service providers or ISPs at very competitive market prices.The current move to Rosetta Net as endorsed by the Government is commendable andshould act as a catalyst for further enhancements in the use of technology by SMEs. 36
    • Technopreneurs Association of Malaysia – Detailed Action PlanC. International readinessThe completion and investment by the Anchor companies would ultimately allow itsoperations to be scalable to capture foreign markets, for example a unit trust companywith the ready portal and back end integration can duplicate such capability in anotherforeign country.The proposal in Budget 2002 providing a tax of only 10% for foreign sales via e-commerce is a step in the right direction. It is recommended that further inducement ismade to promote such activities by allowing further tax relief for revenue recognizedfrom such online or ICT strategies that are from local sources as well.3.8.2.2 SMEsSMEs remain an important element in boosting ICT demand in Malaysia. However manysurveys and research have pointed out that despite heavy inducements by theGovernment, SMEs are slow in adopting ICT.Figures point out that approximately 30% are using e -commerce or e -business wherethe majority of this 30% are basic e -mail users. It is estimated that only 17% use theInternet for its daily operations such as marketing or customer relations management.These figures fare poorly compared to the 80% ratio of SMEs in developed companiesthat use E-commerce or E-Business. It is obvious that such laggards in the SMEcommunity are affecting Malaysia’s competitiveness.It is proposed that the following strategies be undertaken: - Ø Identify new economy S MEs or SMEs that are most palatable to the use of E- commerce or E-Business. Provide incentives and strategic, targeted Public Relations initiatives to educate the public on the benefits of ICT and on the implementation issues. Ø Micro strategize with sectorial divisions i.e. construction, textiles, automobile, etc. and offer the relevant e-commerce services in accordance to sectorial characteristics and business rules. Ø Enhance the continued education and training via sectorial associations Ø Provide the ‘buffet of E-commerce services’ from complex applications like procurement or Portal Content Management System (CMS) to simple services such as E-mail systems. It is important to provide such ‘buffet’ via bureau service providers than the normal approach of purchase and install. This will ensure that the SMEs have many options in initiating e-Business within their companies from and can select to start small with a Portal to market their products to adopting complex applications like ERP and SCM.All relevant agencies and Ministries should adopt the following broad strategies. It isimportant to note that such SME strategies augur well with implementation strategiesoutlined for Anchor movers in Section 3.9.2.1 37
    • Technopreneurs Association of Malaysia – Detailed Action Plan3.8.2.3 Consumer Internet or B2C MarketAlthough there has been substantial publicity on B2B and B2C commerce, the growth ofthis particular market is not proportionate to the growth of the ICT generally. As indicatedin the previous section the B2C market in Malaysia is still lagging behind others in theregion.The following issues need to be reconsidered and the recommendations adopted: -a) Internet Users Statistics – the case of reporting the wrong statisticsPress statements by both the private and public sectors state that there areapproximately 1 to 1.5 million Internet subscribers in Malaysia. Although such statisticsare true, the correct measurement should be Internet users and NOT Internetsubscribers.It is important to note that the RM8 Report produced by the Government recentlyhighlighted the correct usage of Internet users at 4 millionAt 4 million, Malaysia’s Internet population is 18% as opposed to the usage of Internetsubscribers of 1 million or 4.5% of the overall population. The difference in percentagefigures has significant impact in the overall perception of B2C viability.It is recommended that all public statements use Internet users as opposed to Internetsubscribers and that a yearly survey be conducted and endorsed by the Ministry ofEnergy, Post and Multimedia.b) Synergy with housing developersIn order to ensure greater Internet penetration and the use of e-commerce, it isrecommended that a national initiative be undertaken to require all property developersto equip homes with computers or any other Internet devices, email facilities, broadbandaccess and a township portal.Again as an inducement to property developers, tax relief incentives should be given toproperty developers to implement such measures. 38
    • Technopreneurs Association of Malaysia – Detailed Action Planc) Affirmative Persuasion StrategiesTo leapfrog B2C Commerce in Malaysia, force mechanisms should be implemented toencourage individuals to transact using on-line payments. An example of such an area isin Bill payments for e.g. : - § Tax payments including land taxes etc. § Payment of fines such as traffic violationsA more detailed study requires to be undertaken to ascertain the buying habits of thecommunity. Such implementation should only be implemented with the necessarysupport services such as debit payment systems like Maybank2u debit system andshould be implemented gradually in phases.d) Other Barriers to B2COther barriers such as Payment Gateway systems and quality of Internet Access areelaborated in Section 4 below. The rectification of some of these issues willfundamentally enhance Consumer Internet and the B2C market in the country.3.8.3 Key performance IndicatorsIt is proposed that the following KPIs be considered: - 1. Value of B2C Commerce and its growth rate. 2. Value of B2B Commerce and its growth rate and breakdown by sectors 3. Internet subscribers 4. Internet users 5. Quality of Internet access. A yearly survey to be conducted 6. Number of homes having Internet devices 7. IT spending and IT spending as a portion of GDP 8. Survey on the number of merchants on-line and percentage of revenue derived from on-line business 9. Survey on the adoption of ICT by SMEs by sectors 10. Survey on large conglomerates (by sectors) adopting ICT, including revenue derived 11. Malaysia’s competitive ranking against other countries 12. Malaysia’s e-Business readiness ranking 39
    • Technopreneurs Association of Malaysia – Detailed Action Plan3.9 Increasing the number of TechnopreneursThere is a need to increase the number of Technopreneurs from secondary and higherlevel education institutions; and also from the professional and working environment.Recommendations will be made to implement an action plan to fundamentally increasethe pool of Technopreneurs from the above sources.Our recommendations include: 1) Holding venture competitions in each state with sufficient prize money so that the winners will be able to use the money as seed capital to start their business 2) Technopreneurship clubs should also be started in secondary schools, colleges and universities to foster the risk taking culture at this level. We propose that the government allocate RM 14 million per year, providing RM 1 million per state (plus the KL Federal Territory), per year. 3) Mentoring programs with existing Technopreneurs could also be set up together with the school or universities. This will take existing internship programs a step further whereby the educational institutions would arrange for their students to actually receive talks and seminars from people in the ICT sector on an ongoing basis. This will be similar to initiatives that Business schools routinely do particularly in the US.The purpose of doing this is that ICT cuts across just about every industry in a differentway. As such, there is no one overall body that can effectively spur members of allindustries to adopt ICT into their business processes. Rather, we believe that bodies thatare industry or community specific have a better idea and focus on specific industriesand thereby can create programs that are relevant and effective to their respectivemembers and constituents.At the same time, we recognize that the key driver of a long-term trend to makeTechnopreneurship a driver of our country’s economy is through the inculcation of thesevalues at an early stage, particularly when our population is still in school. Generallyspeaking, the people most influenced by role models will be those who are younger andthere is a tremendous amount of potential present in the education system at this time.We believe that by supporting groups who can effectively reach out to students, we cango a long way toward incubating this kind of favourable attitude toward innovation andTechnopreneurship, particularly in the ICT sector. 40
    • Technopreneurs Association of Malaysia – Detailed Action Plan3.10 Showcase of leading Technopreneur CompaniesMalaysia requires a showcase of leading Technopreneur companies. These examplesare needed to provide an indication that Malaysia’s New Economy is thriving. In addition,the provision of the showcase will also be a morale booster for MalaysianTechnopreneurs.Identification of leading local pioneer Technopreneur companiesThere is a need to identify at least 10 companies owned or managed by localTechnopreneurs, which are not only successful companies but also leaders in theirrespective fields.Flotation of the leading Technopreneur companiesIt is further recommended that these Technopreneur companies be listed over a periodof 12 months with the support of the Government.To ensure the success of the flotation the strategic support of the Government is neededespecially in the use of the companies’ services and regional expansion. 41
    • Technopreneurs Association of Malaysia – Detailed Action PlanSection 4 - MSC - INFRASTRUCTURE4.1 IntroductionIn light of TeAM’s white paper recommendations, we saw the MDC and infrastructure ingeneral as two of the areas which could be tweaked in order to provide vastly enhancedgrowth incentives for the local ICT industry.In considering this question, we found that there were four sub-areas of concern amongtechnopreneurs. These included: 1) Lack of a mass market access to faster and more reliable internet connections. This is having the effect of reducing the incentive for businesses in the country to utilize the internet for key business processes, reducing innovation in the area of content development and acting as a disincentive for foreign investment into Malaysia. 2) Development of the new Technopreneur flagship, it was felt that the MSC and the various financial measures available through it should be more focused on creating a group of successful Technopreneurs. This would reduce the rate of failure in the industry which is often brought about by poor management and marketing as opposed to poor idea generation. 42
    • Technopreneurs Association of Malaysia – Detailed Action Plan3) Opening up the benefits of MSC status in order to spur the industry. It is felt by many that there are many good ICT companies that are not being addressed by the MSC status. This is particularly true of new start-ups who might not be ready to satisfy all of the criteria for MSC status. Many of these new businesses operate on very tight budgets or may even be home-based at the onset meaning that they cannot afford, nor is it effective for them to immediately move into the MSC cybercities. Nonetheless, the MSC initiative is a very good one in attracting investors into the industry and in that way, we should attempt to find any means possible to capitalize on the benefits that are already being extended in order to spur the overall industry regardless of location. At the same time, we understand that settlement of the cybercities is a priority of government and we should find ways to encourage people to move rather than forcing them to do so irrespective of individual business concerns.4) MEPS and the Existing System of Accepting Paymen ts. It is felt by many that the disincentives and hassles that have been built into the financial system are actually having a vastly detrimental impact on the advancement of the local e- commerce system. As such, we should attempt to streamline and simplify the processes required for Technopreneurs, and business in general, to adopt e - commerce as an incremental advancement in their business.5) Retail Merchants also need to be persuaded to adopt e-commerce and the streamlining of the existing Payments Systems as well as the education of Retail Merchants is necessary for the success of e-commerce. 43
    • Technopreneurs Association of Malaysia – Detailed Action Plan4.2 Connectivity In order to develop the local market for ICT products and to increase the efficiency of MDC’s and other departments’ marketing efforts to attract foreign and local investment in the ICT and information industries, the government should encourage the development of Internet connectivity services, particularly the use of broadband. Affordable Broadband connectivity is likely to increase the int ensity of Internet usage. As such, we would propose that the government extend the following measures: 1) The government should consider extending either a tax deduction or a subsidy on the use of broadband connections for businesses. 2) The government should encourage property owners and property developers to install data infrastructure in their real estate by providing a tax deduction or suitable subsidy. This should cover both wireless and broadband infrastructure. The impact of creating this incentive is that it would instantly provide more business owners with access to faster connections thereby spurring the business community in general to adopt the Internet as their primary platform for doing business. 3) The government could consider granting licens es to locally owned businesses interested in providing broadband services, thereby increasing competition with and among Telco providers. This market -based solution will greatly spur the growth of broadband as witnessed in the United States 4) Finally, as Internet connectivity is the backbone of an Internet economy, the government should provide research grants for new technology related to data infrastructure.The net financial impact of these measures will be negligible as the lost taxes due to thesubsidies can be made up through an incremental increase in the incomes ofinfrastructure providers. 44
    • Technopreneurs Association of Malaysia – Detailed Action Plan4.3 QUALITY OF SERVICEWe would also like to highlight three qualitative issues and the solutions to theissues that arise in the current telecommunication environment.4.3.1 Better Quality of service by Telco and ISP providers, especiallyin Point of Interconnection (POI).There should be strict adherence to Global best practices, which stipulates minimalpercentage of faults in the POI, thus allowing superior interconnection communication(data, voice and others) between two or more Telcos and ISPs. Enforcement on thesematters by the Communication and Multimedia Commission must be rigid with heftypenalties to defaulting parties.It is further recommended to make it mandatory as to allow two or more Telcos or ISPsto connect between each other at all Point of Interconnections (POIs). For example,Telco A that has recently secured a customer in Ipoh is allowed to interconnect withanother Telco (Telco B) due to Telco B’s infrastructure in Ipoh being readily available.Telco B’s will be compensated for the use of its Infrastructure by the sharing of the Telcofees collected by Telco A.It is understood that the above has already been practiced to a certain degree inMalaysia but the absence of a ‘Mandatory’ requirement promotes the failure of sucharrangement.Current problems are evident where a building which has subscribed to a particularTelco cannot interconnect to another Telco due to red tape, bureaucracy orplain non-competitive practices adopted by the other Telco.Again it is very significant to highlight that enforcement of such practices is paramount tothis success.4.3.2 Provision of service to Value Added Service (VAS) providersAll Telco and Internet infra providers must adhere to a certain best practice to suchprovision to VAS providers giving a certain time period for activation and certain level ofService Level Agreements (SLA). Again enforcement is very important.It is evident through numerous complains by VAS providers that certain Telcosimplement unwarranted red tape and bureaucracy in order to implement non-competitivebusiness practices because the VAS are competing against the Telcos in the VASservice provision.Again Mandatory requirement for Telcos to allow VAS to Interconnect holds substantialimportance. 45
    • Technopreneurs Association of Malaysia – Detailed Action Plan4.3.3 PeeringCurrently Internet access connection (partly due to the problems of the POI as illustratedabove) between ISPs is required to be enhanced. For example a TMnet user willexperience slow connection to access a website hosted on a Jaring or Maxisinfrastructure. The reason is because the peering between Telcos and ISPs are smalland sometimes traffic has to be diverted overseas and return back to Malaysia, due tothe congestion.It is recommended that the government ensure the enhancing of peering arrangementsbetween the ISPs and Telcos would be needed to ensure Malaysia achieves theknowledge Economy status.Due to the substantial lead of TMNet as the dominant ISP in the country, specialattention should be given to peering arrangements between TMNet and the other ISPs inthe country.4.4 Extending MSC benefits to ICT companiesIn order to effectively stimulate local and foreign investment through the use of the MSCschemes, we would propose the following steps be taken:1) Extending all tax and financial incentives contained in the MSC Bill of Guarantees toall newly-formed ICT-focused companies, regardless of their location, upon registrationwith either the MDC or the Ministry of Energy, Communications and Multimedia. The taxincentive given to companies should be for 2 years. The net financial result of thismeasure will be negligible since most companies do not make a profit in their first twoyears. Upon completion of the 2 years these companies can then choose to become afull MSC Status company.2) In addition, all incentives related to foreign ownership and work permits should alsobe granted to these companies provided that they locate themselves in an incubatorarea or receive express permission from the Ministry or the MDC to that extent. In orderto safeguard the integrity of the measure, all companies that are majority foreign-ownedshould be requested to place a RM3000 bond with the government for every foreignnon-director subject to a company audit to be completed in the 12th month of theiroperations. Should the company fail to have business operations in their intended role,the government may retroactively rescind this right and force the company’s non-localdirectors to divest their shares.3) In order to continue to encourage ICT companies to locate themselves in the MSCcybercities, the entire Bill of Guarantees should be maintained for those companieslocated in the cybercities. A condition that will be required of any company not locatedin the cybercities is that they must locate their data centres in Malaysia. This is reallythe heart of the MSC initiative in an age where companies can locate themselves withease in a virtual space. 46
    • Technopreneurs Association of Malaysia – Detailed Action Plan4.5 Reorientation of Electronic Payment MechanismsDuring the 2002 Budget speech, the Prime Minister alluded to a reduction in taxes onincome generated from online sales of goods and services through e-commerce. TeAMconsiders this as an excellent starting point to addressing the relative inactivity of the e-commerce sector in this country.However, of more grave issue is the fact that mechanisms for small and mediumbusinesses to take advantage of the use of e -commerce are largely inaccessible. Wesee three elements that drive this inaccessibility.1) Most local banks make obtaining a merchant account for e-commerce unwieldy atbest, requiring companies to deposit RM100, 000 of cash as a Fixed Deposit beforereceiving Merchant Accounts from the acquiring banks.2) The fact that there is only one Authorised processing authority is also detrimental tothe e-commerce. We propose the addition of two other organisations licensed to providethis service3) Due to the current SET system utilized by MEPS, the transaction time is taking longerthan the normal International standards. The problem is further enhanced due to the lackof bandwidth and quality of service by ISPs and Telcos. Such long time to approveonline transactions cripples the growth of B2C development in Malaysia.To remedy these problems, we would suggest the following possible solutions: 1) Creating Lower Barriers of Entry to Obtaining Merchant Accounts If banks are to continue imposing rigidly high requirements on new e-commerce merchants for the provision of a new e-commerce merchant account, the Government should consider allocating funds to the private sector through the banking system to allow qualified merchants with bridge financing equal to the required initial transaction requirements (ie: up to RM100,000) so as to ensure that merchants can obtain an e-commerce account with relatively little hassle. This would be particularly helpful for small and medium enterprises. Another option to the allocation of such financing would be to allow NGO and associations to organize the merchant accounts on behalf of its members. In other words, as an example, SMIDEC could arrange to have an umbrella account for all of its merchants and allow them to immediately put their businesses online with the same merchant account. 47
    • Technopreneurs Association of Malaysia – Detailed Action Plan2) The need to have more than one national payment systemCurrently MEPS is the only authorized national payments system. Bureau serviceproviders such as GHL, Camtech and Skali are required to connect to MEPS andMEPS in turn connects to the banks.To induce positive competition and quality of service, it is recommended that at leastanother two other national payment gateway systems be licensed. This policy shouldbe reviewed every two years to ensure that the required quality of service issufficient.A further recommendation is that all three payment clearing service providers shouldhave the facility of accepting debit account payment systems in addition to creditcard transaction facilities. This will depend on all Banks allowing the three nationalpayment clearing service providers to provide debit account payments.The wide use of debit account payment services will accelerate demand for onlinetransactions due to the reduction of fraud and risks to merchants and banks. 48
    • Technopreneurs Association of Malaysia – Detailed Action Plan4.5 Retail MerchantsThe other side to the coin in the B2C Market is the retail merchant. The following aresome barriers to the lack of retail merchants offering services and products online: - Ø Quality of Internet access is poor Ø Quality of the national payment systems are inadequate. Ø Education and understanding on the use of e-commerce by retail merchants Ø Difficulties in acquiring Merchant Identification for e-commerce transactions Ø Lack of e -commerce demand in the local market to sustain any e -commerce developments Ø Fraud and Security issuesWhile some of the above barriers have been addressed above there is also the need toeducate Retail Merchants.The proposed recommendations are as follows:-1) To boost B2C, traditional brand names or existing household brand names should beencouraged to use e-Commerce and allow online transactions of their goods or services.This is because it is natural that the consumer has more faith and loyalty in brands orestablishments that they recognize and trust.2) Education on fraud and best practice, including the use of Digital Certificates, forsecurity management is also necessary.3) It is recommended that under the Ministry of Domestic Trade the same SME strategyoutlined in section 3.9.2.2 be implemented in conjunction with Anchor mover strategiesoutlined in section 3.9.2.1.4) It is recommended that an informative community portal be established to provideadvise and guidance to retail merchants. 49
    • Technopreneurs Association of Malaysia – Detailed Action PlanSection 5 - CONCLUSIONThe proposals above have been structured to meet all the fundamental requirements ofTechnopreneurs. Many of the suggestions can be implemented on a fast-track basis andshould be done urgently.If this need is not met in Malaysia, one of two things will happen. • Either many local ICT companies will fail and it will be detrimental to the industry as a whole and to the Government’s policy of creating a k-economy in Malaysia or; • Many Malaysian companies will seek greener pastures elsewhere and this will continue the brain drain currently faced by Malaysia and will lead to a slower economic growth in future.TeAM is prepared to work with the Authorities in the implementation of these proposalsand in ensuring the success of the New Economy in Malaysia. We are confident that ourproposals will lead to Malaysia regaining the lead in the New Economy but the closecooperation between industry and government is necessary for this to work. 50
    • Technopreneurs Association of Malaysia – Detailed Action PlanAppendix A – Possible Funding & Incentive Schemes1. Government Technopreneur Investment Incentive Scheme (GTII)ObjectiveMalaysia is progressing towards being a knowledge-based economy. High-tech start-upsare important to the vitality of a knowledge-based economy. However, investments intohigh-tech start-ups are generally risky due to the dynamic nature of their businesses. Toencourage investment into such high-tech start-ups, the Government is prepared to co-share the risk with the investors by introducing the Technopreneur Investment Incentive.The Technopreneur Investment Incentive aims to ease the difficulty faced by high-techstart-ups in obtaining capital investment in their initial phase of growth by providinginvestors of qualifying start-ups with loss insurance for their investments into these start-ups.Qualified technopreneur start-ups will be given GTII Status by Government The start-upcan then issue Certificates to its investors up to a maximum investment of RM3million.Investors with valid certificates are entitled to deduct their loss amount against theirtaxable income.Technopreneurial Start-upA technopreneurial start-up should fulfill the following basic criteria to be qualified and/orretain its qualified status: 1. It is an unlisted company in its initial years of existence with a paid-up capital of at least RM10,000; 2. It should primarily be in the initial stage of developing or exploiting new technology in relation to a specific product, process or service, in a high growth sector. This is identified as pre-idea, idea, seed and start-up stage of Venture stage development as described earlier. 3. It is incorporated in Malaysia (there is no restriction on the ownership profile of the company) and conducts the qualifying technopreneurial start-up activity wholly or mainly in Malaysia; 51
    • Technopreneurs Association of Malaysia – Detailed Action Plan 4. A start-up company can be granted the approved technopreneurial start-up status for at most 5 years. During this period, it must continue to satisfy the qualifying conditions. There would not be any renewal or extension of the status to the same company. If the company wishes to embark on a new qualifying technopreneur activity, it would need to set up a new entity. The qualifying status will lapse under one of the following conditions: v Company goes for public listing; v Total amount of investment raised under GTII exceeds RM3million; v after a maximum period of 5 years; v the company breaches the conditions stipulated under the GTII Terms & Conditions(To be defined); v the status is revoked by the Government.Investment v Investment must satisfy the following criteria to be qualified: 1. An investor can be an individual or a company. Individual includes the Technopreneur who founded the technopreneurial start-up, his relatives and employees who purchase shares from the technopreneurial start-up at market price (exclude share allocation to employees and shares obtained by exercising employee stock options). A start-up can issue certificates to its investors up to a maximum investment of RM3million. 2. Investment must be in the form of purchase of new ordinary or preference share capital in the qualifying technopreneurial start-up and NOT replacement capital NOR debt instruments (e.g. convertible loans). 3. There must be no condition in the shares that would eliminate the investors risk. 4. Share must be issued, and acquired by the investor within the period when the technopreneurial start-up is enjoying the approved status. 5. Any Losses incurred in the investment will be recognised under this Scheme provided that the sale of the qualified shares is between the start of 2nd year and end of 6th year from the date of purchase of the shares. 6. Each investment must be at least RM10,000 to qualify.Investor BenefitsAn investor is entitled to deduct his loss incurred under GTII against his taxable incomefor the same year in which the sale takes place. The investor will be able to benefit fromdeclaring a reduced taxable income. In the event where the investors income for thatyear is less than the loss incurred from the sale of the qualified share, the remaining lossamount may be carried forward indefinitely to be offset against future income. Theinvestor will need to submit to IRD the Letter of Certification in the tax filing process asproof that he is a qualified investor under the GTII. 52
    • Technopreneurs Association of Malaysia – Detailed Action Plan2. Idea and Seed Development Scheme (ISDS)The Idea and Seed Development Scheme (ISDS) aims to provide equity financing forstartups in the idea and seed stage of enterprise formation. It is proposed that this sub-fund is managed by Incubators/ accelerators that can provide the necessary supportservices to the companies. The Incubators will do the analyzing and have the ability toinvest in the venture as a matching investment, drawing from the principle funds handledby MAVCAP and other VCs like Mayban Ventures, Commerce Asset Ventures etcFor every Ringgit raised from 3rd party private investor(s) by the company, theIncubators will match a Ringgit (for cash injections only), up to a maximum sum of RM500,000. Both the managing organization and the 3rd party investors will take equitystakes in the company, the percentage of which will be in proportion to their respectiveRinggit amount of investment.Objective of the SchemeThe objective of the SDS is to foster Technopreneurship and innovation activities inMalaysia through matching financing by the government.Funding PrincipleThe scheme encourages private sector investments in innovative idea and seed-stagecompanies as a means to stimulate Technopreneurship in Malaysia.The startup and its 3rd party investor(s) jointly apply to any of the incubators for co-funding. If the application is successful, Incubators will match the 3rd party investorsinvestment and take an equity interest in the company.Amount of FundingThe fund will match a Ringgit for every 3rd party private sector cash injection, up to amaximum sum of RM500,000. The minimum investment by the 3rd party investor(s)shall be RM75,000.Qualifying CompanyFor the purpose of this scheme, the qualifying company is defined as any legal entitythat meets the criteria of idea and seed as described herein. The company should beengaged in the development of new or better products, processes and applications.Innovation can be in the form of technology and/or business models.The company must be incorporated in Malaysia and would be carrying out its coreactivities in Malaysia. E.g. if the company globalises, the HQ functions and the highestvalue added functions, like intellectual property and top management, should all residein Malaysia. 53
    • Technopreneurs Association of Malaysia – Detailed Action PlanQualifying Business ActivitiesThe business activities of the startup companies shall have the following characteristics: 1. Substantial innovative or intellectual content; 2. High growth potential; and 3. Scalability for both the local and international marketDisbursementsUpon approval by Incubators, the fund will be disbursed in the form of paid up capital in2 equal tranches. The first tranche will be paid out upon receipt by Incubators ofdocumentary proof that the 3rd party investor(s) has invested his share of equityfinancing.The 2nd tranche will be paid out when the company has met milestones set by thecompany in the investor evaluation form. The milestones should be fixed some 6 to 18months after the project commencement.DivestmentIncubators shall exit from the investment at the earliest of the following: 1. Initial Public Offering of the company; or 2. Sales, merger or acquisition of the company ; or 3. Such time when a third party cash offer is received by the Incubator for the purchase of its shares prior to the 5th anniversary of its investment in the company; or 4. If the above exit points have not occurred at the end of the 5 years, the Incubator will review the exit strategies. If it chooses to divest completely, the shares will be offered to other 3rd party investors, the founder(s) and other existing shareholders in proportion to their shareholding or in any other fair and equitable manner.However the Incubator reserves the right to choose its exit strategy.Transfer of SharesShould any of the shareholders (founder shareholders and 3rd party investor) wish todivest their investment, they must first make an offer to the remaining shareholders,subject to the terms of the investment agreement. They may only approach anotherexternal investor(s) if the existing shareholders have declined to participate. 54
    • Technopreneurs Association of Malaysia – Detailed Action Plan3. Government Venture Capital Investment Support For Mature StartupsDescriptionVenture Capital Investment Support for Start-ups is a program to directly co-invest intoearly stage promising and strategic companies that are based in Malaysia. Theobjective is to play a catalytic role in drawing investments into earlier stage start-ups bylowering the mental barrier through lower risk exposure. This scheme differs from theearlier Startup Development Scheme in that the amounts involved are larger and thecompanies targeted under this scheme are more mature companies.This scheme is a government investment scheme. It will invest in a company with aminimum leverage factor of RM1 investment for RM2 of private investment. Thegovernment will follow the valuation of the startup company by the private investorsproviding the matching 2 times equity money. This is to ensure that market forces arenot distorted.The investment amount is capped at RM1 million and the holding company of thegovernment will not become the largest single shareholder in the company and will notinvest in a company on its own for this scheme.ObjectiveThe primary aim of the fund is to directly co-invest into early stage promising andstrategic companies that are based or linked to Malaysia. The objectives of the fund arethree-fold:a) to develop an environment that will bring forth a critical mass of promising start-upcompanies in the early stage;b) to play a catalytic role in drawing investments into earlier start-up companies; andc) draw in start-up companies that are s trategic in nature to Malaysia.Eligible investment 1. In the early stage of company development 2. In a fast growing technology sector (technology based, export oriented and Intellectual Property-centric) 55
    • Technopreneurs Association of Malaysia – Detailed Action PlanEligible InvestorsVenture Capitalists, Corporate, Business Angels, Family, FriendsDue DiligenceConducted by both relevant government nominees/agencies and the private investors.Subsequent to the investment, the government will require the company to submit half-yearly reports and management accounts. Annual audited accounts are to be submittedas well. Relevant government nominees/agencies will act as observers at Boardmeetings although it reserves the right to appoint a director to the Board.Funding principlesCo-investment basis (RM 1 government investment for every RM 2 private investment)Maximum of RM 1 million per investment.Benefits to Private InvestorsRisk is reduced with the co-investment schemeBenefits to TechnopreneursAccess to private investors expertise in management and business network.Access to the government’s full value-chain of support at various stages of their growth,including networks of investors, technology providers, potential customers, thegovernment agencies and professional service providers. 56
    • Technopreneurs Association of Malaysia – Detailed Action PlanAppendix B – Technopreneur Development Grant SchemeThe Technopreneur Development Grant Scheme (TDGS) is critically needed to ensurethe success of the ICT industry. TDGS is designed to assist Technopreneurs in the ideastage of the Technopreneurs’ venture because currently investors are not investingcapital to assist Technopreneurs in the areas of business plan development, training,proof of concept and beta product development stage. TDGS acts as a provider of suchcapital due to the failure of the market to provide funds at this stage of development. Asreported in Bank Negara’s 2000 Annual Report, seed capital and other early stageinvestment accounted for only 11% of total VC investments.It is proposed that RM150 million is needed over the Rancangan Malaysia 8 (RM8)period, which can assist more than 1,000 Technopreneurs.Assessing AgencyIt is proposed that a ‘One-Stop’ agency be appointed under the Government toadminister the Grant. The appointed agency must ensure that minimal red tape andbureaucracy is practiced in the administration of the Grant.Symbiotic nature of the GrantThe purpose of the Grant is to finance and provide necessary capital for Business Plan(including financial analysis and detailed market research), proof of concept and betadesign, which in this case are called ‘Deliverables’.Technopreneurs would have to appoint fellow Technopreneurs for the abovedeliverables, for example a Technopreneur wanting to develop a community portal mayappoint another fellow Technopreneur to conduct the beta design and the approval ofthe Grant will only be approved to Technopreneurs that have engaged anotherTechnopreneur registered at TOP (as mentioned above).This symbiotic mechanism allows further capital spin-off benefits to otherTechnopreneurs thus creating a ‘chain effect’ of the benefits. 57
    • Technopreneurs Association of Malaysia – Detailed Action PlanEligibility and management of the GrantEligibility and management of the Grant is proposed to be as follows: - 1. Eligibility to a Malaysian, Permanent Resident or a foreigner Technopreneur with a legal work permit 2. A Technopreneur who has an idea or managing a venture that has the intention to develop the idea. 3. The venture must relate to technology related fields 4. The Technopreneur must provide details on the purpose of the grant and to appoint another fellow registered Technopreneur to conduct the Deliverables 5. Ventures that have received capital from the Grant must graduate within 9 months. 6. Deliverables that are related to market research and industry information that will be beneficial to the community at large shall be available to the Public at TOP.Enhancing the speed of grant disbursementMany obstacles still remain in the administration and disbursement of the Grants. TheOne-Stop agency managing the Grant must practice a liberal approach to thedisbursement with strict adherence to pre-determined processes and best practice timeframe for the disbursement.Such best practices will require an online enhancement to the management of the Grant,Technopreneurs and their ventures, which will also encompass the objective of TOP.TOP in turn will also work in conjunction with other on-line websites to ensure thecapture of the critical mass of the Technopreneur community.Unsuccessful ventures under TDGIt is natural that certain ventures initiated by the Technopreneur will fail to graduate tothe next level. Such ventures will undergo an embargo period that will later be publishedas a public domain for the community to learn and to capitalize further.This concept of taking ventures into the public domain is termed as ‘recycling’ and willbenefit the community at large and provide a platform for other Technopreneurs to learnfrom these failed ventures. The One-Stop agency can provide such information forpublication on TOP.Intellectual Property (IP) will remain the property of the Technopreneur. 58
    • Technopreneurs Association of Malaysia – Detailed Action PlanAppendix C – TeAM Information & Protem CouncilTeAMThe Technopreneurs Association of MalaysiaAddress: Suite 4.02, 4th Floor, Wisma Central, Jalan Ampang, 50450 Kuala LumpurURL: www.team.net.myContact: Sivapalan Vivekarajah Tel: 03-2166 9190 Email: vsiva@3Capital.comCOUNCIL MEMBERSSIVAPALAN VIVEKARAJAHSiva is the CEO of 3Capital.com Sdn Bhd the first Malaysian Venture Capital and IPOconsultant focused on the ICT industry. He is also the Senior Partner and Founder ofVentura Management a leading Corporate Consultancy in Kuala Lumpur.He is a qualified Chartered Secretary and holds an Honours Degree in Law from theUniversity of London. He also obtained his MBA with Distinction from the University ofHull, UK in 1998.A serial Entrepreneur, he has been an Entrepreneur since the age of 24 in a variety ofindustries including Consultancy, Manufacturing, Trading and Finance.He is a columnist with the New Straits Times with a column entitled "New Economy" andis a sought after speaker on the Conference circuit.He is the Founder of the Technopreneurs Association of Malaysia and is presently itsProtem President.CHRISTOPHER CHANChris, 34, founded TMS (The Media Shoppe Sdn Bhd) when he returned from the USAin 1996. With over RM6M in paid up capital and a workforce of 40 knowledge workers,TMS has presense in Singapore, Hong Kong, and the US. Chris had architect awardwinning products like tmsPUBLISHER that is used by clients all over the world. Chrisalso won the ICT Entrepreneur of the Year (2001) Pikom Computimes Award.Chris holds a Bachelor of Music from the University of Central Arkansas, USA, andcurrently is serving as protem Vice president for TeAM (Technoprepreneurs Associationof Malaysia) 59
    • Technopreneurs Association of Malaysia – Detailed Action PlanTENGKU FARITH RITHAUDDEENTengku Farith is responsible for the strategic vision, overall management and leadershipof Skali. With more than 8 years of management and business experience, Farith drivesthe growth of the company. His career began with Commerce International MerchantBankers (CIMB) in the Corporate Finance division. He was a key team member in theCorporate Finance and Capital Market divisions.Throughout his career at CIMB, Farith established relationships with various investmentbankers, analysts, researchers, venture capitalists and private investors, and wasinvolved in corporate advisory services for Penang Port, agencies under the Ministry ofRural Development and KPJ Healthcare Bhd.Prior to joining Skali as its President, Tengku Farith led a team to turn around a localmanufacturing company involved in the building materials industry. In his 4 years asCEO of this company, he earned valuable experience in managing the day-to-day andhands-on operations of two factories employing 160 employees. Tengku Farith obtainedhis Bachelor of Arts in Economics from Carleton University in Ottawa, Canada in 1992.Tengku Farith sits on the advisory board of many organizations including Venture 2001Business Plan competition, Malay Chamber of Commerce and is one of the foundingmembers of the New Economy Forum.Tengku Farith has recently been selected for the World Economic Forum’s 100 GlobalLeaders for Tomorrow for the Year 2002.BRIAN FERNANDEZBrian Fernandez,31, holds a Bachelor in Economics from Murdoch University in WesternAustralia. He is the CEO of Qusol Sdn Bhd a company focusing on softwaredevelopment and the provision of consultants to companies on a project basis. Inaddition he is also the founder of Justcarsnbikes an automotive e-business.Prior to becoming a Technopreneur, he was previously employed as the Manager ofBusiness Development & Strategy with AIZ Information Services, an IT subsidiary of theZuellig Group, a Swiss multinational employing over 18,000 people in the Asia-Pacificregion. He joined AIZ in 1996 as its 4th employee as the Assistant Marketing Managerand contributed to the development and marketing of its insurance and healthcaresoftware solutions. During the 4 year period, he assisted the Regional Managing Directorand the AIZ team in setting up additional operations in Singapore and the Philippinesand was involved in the early stages of its European Expansion. 60
    • Technopreneurs Association of Malaysia – Detailed Action PlanPREMESH CHANDRANPrem is the Chief Executive Officer of Malaysiakini.com.He qualified in Physics and obtained a Masters Degree in International Relations fromthe University of Sydney. Prior to heading Malaysiakini, he served as the ResearchOfficer of the Malaysian Trades Union Congress and as a Senior Writer with the Sun.At TeAM, Premesh coordinates the working group on the MSC and infrastructure.TEOH JUI HONGJui Hong is a marketing consultant and copywriter, currently serving as the Partner atPhische/Company, an Advertising and Marketing Communications agency focusing onputting practical marketing ideas into action using digital tools.He began his career at Arthur Andersen Business Consulting, where he helped clientsimprove business processes and implement strategic analytical systems. He later joinedInnovate Content Pte Ltd, a subsidiary of Singapore-listed Singatronics Ltd., as VicePresident of Business Architecture. He helped drive the companys marketing strategy,developed new market opportunities and managed corporate communications andmedia relations.Jui Hong has worked with clients such as Hong Leong Group, MIMOS, OSRAMSemiconductor (formerly known as Siemens Semiconductor), Pantai Medical Hospital,Universiti Putra Malaysia and Crabtree & Evelyn.Jui Hong is an alumnus of Monash University, Australia, having graduated with aBachelor of Commerce and a Bachelor of Business Systems. His academicachievements have been recognized with the admission into the Golden Key HonorSociety, Monash Chapter.MATTHEW MENDELSOHNMatthew is the Managing Director of Backpack Asia Sdn. Bhd., a travel content housefor the budget travel industry. He holds an M.A. from the Fletcher School of Law andDiplomacy (Tufts University) in Boston, US. Among his first papers was on the potentialimpact of the MSC on Malaysias economic development (written 1997). 61
    • Technopreneurs Association of Malaysia – Detailed Action PlanJEFF P.L. LEONGJeff, is a Malaysian Advocate and Solicitor with an Honours Degree in Law from theNational University of Singapore. He is a member of the Malaysian Bar, Law Society ofSingapore, Law Association for Asia and the Pacific (LAWASIA) and also the LawSociety, England and Wales.A Fulbright scholar, he is the Senior Partner of Messrs Jeff Leong, Poon & Wong,Malaysia.He specialises in among others, Cyberlaws, Technology and E-Commerce Contracts.In TEAM he is heading the Legal and Technical Committee.KHOO BOO HOCKBoo Hock is the CEO of Splotz Sdn Bhd, a marketing organisation providing consultancyand services in both traditional marketing and eMarketing arenas. Hisprevious experiences in management positions with Intel, Rating Agency MalaysiaBerhad and MSC Venture Corporation Sdn Bhd form a strong platform inunderstanding the needs of entrepreneurs, technology, funding andinvestment and marketing. Boo Hock holds a BSc in Information Systems and an MBA.FAN KUAN WENGKuan, is CEO of INNOVEIGHT Sdn Bhd a firm that assists technology companiesdevelop their corporate strategies, refocus and prioritizes product, roadmaps, streamlineoperations and raise funds.Prior to INNOVEIGHT, Kuan served as Chief Analyst at MSC Venture Corporation, aventure fund for Information and Communications Technologies (‘ICT’).Kuan started his career in Australia at a Big Five ac counting firm in the areas of auditand IT consulting. Later, he joined a leading Malaysian telecommunications companyand then expanded his sphere of experience by working in corporate finance andtreasury for a tier-1 merchant bank. Kuan’s last position at the bank was as Head ofCapital Markets, dealing with money market instruments and debt securities.Kuan holds Bachelor degrees in Economics (Accounting) and Computer Science (Hons).He is a Chartered Accountant of Australia, member of the Malaysian Institute ofAccountants and registered treasury dealer with the Financial Markets Association ofMalaysia. Kuan is also a regular speaker at industry conferences and events. 62
    • Technopreneurs Association of Malaysia – Detailed Action PlanROY EMERSONRoy is the CEO of Worldsites Malaysia ands had mire than 25 years of experience inbusiness. Prior to Worldsites Malaysia, as CEO ; he managed several large multinational subsidiary companies in the Telecommunications and New Media industries.These companies included British Telecom PLC, Deutsche Telekom AG and BellAtlantic Inc.CHONG SEE MINGSeeMing is currently the head of Communications atJobStreet.com. She spearheads all public relations effort encompassing areas like media, universities as well as community relations. She has a Bachelor ofBusiness degree from Monash University, Australia. She hasover 6 years experience in the IT industry. She is a long-term committeemember with Malaysian Nature Society Selangor Branch, a pro-temcouncil member with TeAM- Technoprenuers Association of Malaysia and co- founderof WORD UP! Kuala Lumpurs most exciting gathering for writersFARIZ ALIFariz has an MBA in Finance (University of Iowa), BA Economics & BusinessAdministration (Knox,Illinois) with a strong emphasis on IT and Computer ProgrammingHe has 16 years of experience in Merchant Banking -- Areas of expertise range fromcorporate finance, mergers & acquisitions, technology investment advisory andvaluations to corporate restructuring His last held position before forming First FloorCapital was Head of the e-Business Division Arab-Malaysian Merchant Bank 63