TeAM White Paper & Action Plan - Fostering Technopreneurship

Technopreneurs Association of Malaysia – Detailed Action Plan

Fostering A Sustainable Environment

For Technopreneurship In Malaysia

A Detailed Action Plan
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Prepared & Submitted by

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Table of contents

INTRODUCTION.............................................................................................................. 4
Section 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 ........................................................ 14
Section 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 ........................................... 21
Section 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

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Section 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 ..................................................................................................... 49

Section 5 - CONCLUSION ..........................................................................................50

Appendix 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 .................. 55

Appendix B – Technopreneur Development Grant Scheme ............................57

Appendix C – TeAM Information & Protem Council ...........................................59

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INTRODUCTION

Following 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 recent
meeting with MIGHT (Malaysian Industry-Government Group on High Technology) and
presentation to the joint NEAC (National Economic Action Council) – MIGHT Dialogue,
TeAM has drawn up this Detailed Recommendations and Action Plan to be submitted
to 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 – Infrastructure

This detailed recommendations and action plan document and the White Paper
submitted prior to this are the result of approximately 1000 man hours of work carried
out 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 funding
of ICT companies in the new economy. We specifically outline an overview of the issues
facing Technopreneurs especially at the seed stage of development. We then follow this
up with detailed examples of various schemes both as grants, loans and investments for
companies at various stages of development.

Section two deals with Marketing of Malaysian ICT products and services both locally
and overseas. Many Malaysian companies have difficulty in selling their software and
services both locally and overseas due to various reasons such as lack of experience
and poor perception of Malaysian ICT products and services. This section suggests how
the government may be able to introduce some initiatives to kick-start the export of
Malaysian ICT products and increase the purchase of Malaysian ICT products and
services locally.

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Section three deals with the very real problem of Technopeneurship Development in
Malaysia. Since the ICT startup culture is still very new in Malaysia the government has
a significant role to play as a catalyst for the development but needs to work with the
private 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 and
these relate to the level of readiness of the physical infrastructure for Malaysia to be at
the forefront of the ICT industry.

We have been very specific in many of our recommendations and have gone to the
extent of devising various schemes and programs to ensure that these are very practical
and workable solutions. While we are proud of the initial results of the MSC our
constructive insights into the various “ problem areas” must be viewed in the context of
our overwhelming desire to be competitive in the Global arena.

TeAM is prepared to work with the Authorities in the implementation of these proposals
and in ensuring the success of the New Economy in Malaysia.

It is our desire that with the implementation of many of these recommendations, a critical
mass of Technopreneurs is created and the products and services of these companies
as well as the Companies themselves are recognized as being World Class.

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Section 1 - FUNDING IN THE NEW ECONOMY

1.1 Objectives and Current Status

The current status of Funding in the New Economy is not satisfactory and this is proven
in the many grouses of Technopreneurs who have not been able to adequately fund
their ventures and also based on the fact that there are very few successful ICT
companies in Malaysia compared to companies in Singapore, Korea, Hong Kong and
China.

The Government recognises that there needs to be substantial change in funding ICT
ventures and has provided RM 500 million as venture capital funds and has announced
a further RM 1.9 billion as debt financing. However, the rate of disbursement and
consequently the success of ICT ventures are negligible.

Since it is the policy of the Government to ensure that Malaysia completes a successful
transformation from the production economy (p-economy) to the knowledge economy (k-
economy), the avenue of Funding needs to be given greater attention and funds
provided on a fast-track and successful basis to ensure the success of this policy and
also that of the MSC

The objective of this section is to provide key proposals and suggestions to ensure that
Malaysia regains the lead in the k -economy a progresses at a faster pace towards
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realisation of the k-economy.

1.2 The Key Thrust of the Proposals

We propose a series of action plans and recommendations for all parties involved in ICT
including government agencies, private sector corporations, not-for-profit organisations
especially TeAM and finally Technopreneurs.

These action plans specify exactly what needs to be done on a micro basis to ensure the
success of the Government’s policy and the transformation of the ICT industry into a
bustling, profitable and successful industry.

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1.3 The Seven Key Areas

1.3.1 Build a Pool of Angel Investors

Many successful US and European technology companies have often started their
ventures by being funded by Angels - primarily wealthy individuals and corporations -
who invest in Seed and Early stage companies and who provide them with enough
capital 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 be
addressed urgently. Although the Government has provided tax incentives for Angel
investments, such incentives need to be reassessed and refined to make them more
effective 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.

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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 the
business itself but rather rely on collateral and personal guarantees.

To minimize the risk exposure and encourage Banks to lend to the ICT sector, we need
to have a specific CGC for Technology companies (CGC-T). This may be a part of the
current existing structure of the CGC in Malaysia.


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).

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1.3.3 Banking Sector

The Banking sector in Malaysia is far too risk averse and generally does not provide
financing for Technology companies. Thus, while there is a large pool of funds within the
banking system, very little is provided for Technology companies because of the
perceived higher risks in technology. Without bank financing for working capital and
equipment purchase, the cost of financing a technology business is very high in
Malaysia and it retards the growth of the ICT sector.

The CGC-T will help to minimise the risk, but more can be done.


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-
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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 Grants

Government Grants are an excellent method of funding next generation technology,
R&D and D&D (Design & Development) proposals especially for Seed and Early Stage
companies.

The Malaysian Government has recognized this fact and has provided numerous grant
schemes 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 in
developing excellent Malaysian products and companies.

According to a report by Bank Negara, only 25% of some RM 2.2 billion of available
funds in 1999 had been disbursed. Clearly the budgeted funds from the government are
not reaching Malaysian Technopreneurs.

It should be noted that in a recent survey conducted by TeAM of the various agencies
and schemes, only a few listed the extent of their funds or the current disbursement
data.

We believe that the key reasons for the lack of utilization of funds are as follows:

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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 for
technology firms.


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.

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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) scheme

An example of a proposed new grant scheme called “Technopreneur Development
Grant Scheme (TDGS)” is attached in Appendix B.

1.3.5 Incubators

The MDC (through its Technopreneur Development Flagship) will be setting up a
Network of Incubators to “incubate” more ICT companies. However many Incubators
globally have failed to develop successful companies and neither have Malaysian
Incubators. Incubation is a very good idea but besides providing space and
infrastructure, Incubators need to provide management expertise, services and also
funds for Technology companies.

Seed and Early Stage companies generally do not need much capital to start their
business, even less if Incubators provide other amenities. Thus the Government must
allocate some funds (either as an allocation, grant or soft loan) for Incubators to in turn
fund these promising companies.


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.

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6. 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 companies

8. 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.

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1.3.6 Venture Capital

Although the Government has provided plenty of funds for Venture Capital investing
either through MSC Venture Corporation and MavCap, or via Bank Negara to Maybank
Ventures and Commerce Ventures, not all of these companies have invested sufficiently
fast or have only invested in minimal risk companies and thus technology investments
have not been maximised.

Although MavCap has only recently been set-up and must be given a chance to invest, it
must be remembered that the RM 500 million was allocated in October 2000 and it has
taken more than 14 months for the organization to be set-up. Much time has been lost in
that period and MavCap must thus speed up its investment and disbursement.

Also most of these companies who have been allocated Government funds are still very
risk averse in their investment and are sometimes more cautious than even foreign
Venture Capitalists. Since the Government provides the funds, the Government must
encourage these companies to accept a higher risk and invest the money or lose the
funds in the process.


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.

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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 schemes
and the investment criteria in Appendix A of this document.

1.3.7 IPO on a Malaysian Exchange & MESDAQ

One of the preferred exit strategies for an Investor (VC or Angel Investor) is a listing on a
viable Stock Exchange. Thus the creation of MESDAQ in meeting the needs of the
market was admirable, but the many restrictions on MESDAQ and the lack of trading
and liquidity has been a disappointment to the industry. Hence one potential avenue of
raising funds is out of reach of Technopreneurs and the preferred exit mechanism for
Investors has been lost.

As such, it is much more difficult to encourage Angel investments and VC investors have
an additional risk to consider. Thus MESDAQ must be sorted out immediately for the
greater good of the ICT industry.


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)

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4. 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;

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Section 2 - MARKETING SUPPORT

2.1- Marketing Emerging Malaysian Companies
TeAM has also identified several key areas to focus on helping Malaysian ICT
companies market themselves better. Technology is only half the story with the other
half being effective marketing of the products and services.

One of the key weaknesses of the ICT industry in Malaysia is the marketing and
promotion of Malaysian products and services both by the Malaysian government and by
the companies themselves. India has been a powerhouse in its offerings globally and to
compete effectively, we need the assistance of the extensive resources of the
Government.

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
Sector

2.1.1 Role of Government

The government has to play a key role in positioning Malaysia as a strong exporter of
technology similar to the Manufacturing sector. TeAM envisions that a stronger approach
to market and promote Malaysian technology companies to the world will be required to
make this a reality.

2.1.2 Current Situation

Initial positive signs are currently underway for example MATRADE has recently
prepared exhibition venue bookings at ICT exhibitions and had invited local ICT
companies to exhibit. There is a need to accelerate this activity to more countries and
regions 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 the
board with the exceptio n of the MDC. However, MDC’s objective to promote Malaysian
ICT 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 ICT
sector. This entity should focus on marketing Malaysian ICT and not be distracted by the
overall development of the MSC.

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2.1.3 Proposed Solutions

A) The formation of “MyTechTrade” or “TechTrade” (Malaysian
Technology Trade Development Corporation)

To be set up in a similar fashion as MATRADE under an established organization like
MITI, 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 to
leverage on their existing network and offices worldwide. It will also offer training to
MATRADE and MITI’s officers on the extent of technology development in Malaysia to
assist them to promote Malaysian companies. Malaysian technology companies will be
invited to complement trade delegations, shows and exhibitions that are already
planned. The organization will also publish a newsletter on the technologies available to
be distributed to all Malaysian Trade Offices and Embassies globally.

We propose that special funds be allocated from the Government to run this organization
with coordination and collaboration with Multimedia Development Corporation, the
respective Ministries and TeAM.

It will organize trade missions, participate in exhibitions, conferences and networking
sessions in foreign countries to promote Malaysian companies.

It will also match-make Malaysian companies with the local partners in each country to
facilitate joint ventures and collaborative efforts with their partners.

It should also be able to share resources like research materials, databases and sales
leads 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 Malaysian
companies. We propose special newsletters be sent to them monthly to update them on
the developments of the technology industry in Malaysia

Additionally, a website for these officials to keep updated on the latest developments are
also proposed. They will be trained on how to match companies with partners and
potential customers. Training can be done by TechTrade, MDC, TeAM and other related
ICT organizations.

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C) Directory of ICT Companies

TechTrade must also maintain and publish a directory of Malaysian ICT companies for
all to use and to search. This should be both in the form of a website and physical
booklet for all to access easily. This directory will be distributed and marketed via all
trade offices and embassies globally. The current website maintained by MDC called
MDC Access should also be adequately promoted overseas as it is currently being
underutilized or utilised by foreign companies as an entry point into Malaysia to offer
their services in Malaysia. Other third party websites can work in collaboration to
integrate the database and content to the website used by Government officials.

The maintenance of such a database should be coordinated amongst several agencies
and validated to ensure accuracy and data integrity. TeAM can coordinate this effort.

D) Marketing Resource Centers

We propose that the Government drives and funds the initiative to create a marketing
resource center for each technology market in the world. (Similar to Small Business
Administration Centers in the US)

This marketing resource center identifies contacts, channels and customs of a particular
market and will be extremely useful to Malaysian companies exploring abroad. It will
also have a database of companies or be able to point to sources of these databases to
assist Malaysian companies as they venture into new markets.

A list of consultants in each of these markets must also be identified to coordinate and
create the resource center initially and these consultants will be retained to assist
Technopreneurs when the need arises. The Technopreneurs will be charged a
reasonable and contracted rate for consultation.

As an extension, the marketing resource center could also provide pooled services like
small office space and tele-support facilities in each of the larger markets of the world. It
does not make sense to have 10 different customer support centers in the US operated
by 10 different Malaysian companies. This could be done via collaborative efforts from
these 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, the
center MUST be managed by people who have sufficient knowledge base not only in
ICT but also domain expertise in specific sectors and industries.

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2.1.4 Key Benefits

The initiatives mentioned above represents a stronger assault in marketing Malaysian
ICT companies abroad in the global markets. Not only targeted at the big developed
markets, TechTrade can also open new opportunities in emerging markets for Malaysia.

We must replicate the success of the initiatives undertaken in the manufacturing sector
and position Malaysia to export to the world as focusing on our own market will not be
sufficient 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 companies

2.2 Reaching out to the World – Selling Malaysian Technology


Malaysia needs to intensify the promotion of its Technology companies to the world.
Here, the Government plays an important part to assist and encourage companies to
reach out to the world.


The present representation at the world’s largest technology trade fairs by Malaysian
companies can be characterized as “insignificant” despite initial positive action
undertaken by MATRADE. Besides “Malaysian Pavilions” showcasing small companies,
the companies often are lost in the sea of competitors and do not stand out. Based on
the cost of participation at these shows, we are often reduced to handing out brochures
and projector slideshow when others have extensive range of props, demo appliances
and even hospitality booths to reach out and grab attention.

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a) Global Tech/ICT exhibitions

Traditionally Malaysian representation at these big shows are not impactful. Participants
who are interested to go to these shows under the Malaysian delegation are often not
committed 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 of
interest.

As such, we propose that the TechTrade organization be the master coordinator for
companies interested in participating. They will serve as a consultant to advise on the
booth location, booking process, showcase, booth design and promotions package to
assist these companies do a better job at these shows. They will also be advised on
how 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 of
expenditure the companies are willing to make through a matching scheme. We propose
a minimum Ringgit for Ringgit matching scheme.

TechTrade will appoint Coordinators as consultants to assist Malaysian Technology
Companies with marketing consultancy as to how to manage the booth and ensure
success. Many Malaysian companies simply don’t have the ability to attract attention
and follow up and close on leads efficiently in a large show.

b) Malaysian Tech Show

To assist the smaller companies in Malaysia who may not be able to afford to participate
in large exhibitions, TechTrade should create a technology show to be based in
Malaysia. This event to be sponsored by the Government or Malaysian companies and
organized by TeAM will be open to all TeAM members, MSC Status companies and
other Malaysian ICT companies and will be marketed to all Malaysian Corporations and
SMEs.

TeAM will market this show globally with hopes that one day the event could be
ASEAN’s largest technology showcase that is held in Malaysia annually. This will then
allow Malaysia to attract the best minds to Malaysia with hopes of spurring partnerships
and strong cooperation between technology companies in the region.

This show will be differentiated from current Shows and are not primarily intended for the
general public as a computer/PC show but as a specifically targeted business ICT Show
for Corporations, SMIs and SMEs and other technology companies. It will comprise
exhibitors in software, ICT products and services, emerging technology, R&D and D&D
and other similar technologies.

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2.2.4 Key Benefits

The key benefit for Malaysian companies with these initiatives will allow them to market
themselves better. Most technology companies like Intel, Microsoft are not only
excellent in their technology but possess marketing capabilities that are amongst the
best. Marketing budgets are exploding in a more global marketplace today as we
compete globally. A major role by the Government in this respect will be a tremendous
assistance to Malaysian ICT companies.


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 Malaysian


Besides marketing to the world, initiatives to promote and encourage Malaysians to use
and purchase Malaysian Technologies must be encouraged. The government must start
leading by example as well as launch initiatives to achieve this.

It is pertinent to note that recently YB Dato’ Seri Rafidah Aziz, the Minister of
International Trade and Industry (MITI) called for all sectors to use the ‘Malaysia First’ in
awarding contracts by the Government and private sector companies. TeAM fully
supports this initiative and hereby proposes the following key thrusts in the promotion of
local ICT product and services.


It must be noted that currently even government agencies and large Malaysian
companies prefer using imported software and applications. We need to understand the
reasons for this and the extent of foreign solutions versus local software usage in
Malaysia.

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a) Incentives for Using Local Software and other ICT products and services by
Malaysian companies

Objective: To encourage the use of IT in business by SMIs and SMEs and to assist local
companies in building their ICT businesses locally. The government needs to set up a
SIRIM like body for certification and accreditation of companies that develop their
software in Malaysia (see item (b)). It is often difficult to distinguish resellers who
customize software that are imported for their clients from the truly local software
companies.

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 the
following: -

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 training

b) Neutral Certification Body for Software & Services

SIRIM or a new body (NewOrg) to be formed for this purpose. We propose that this
body uses an international standard like CMM (Capability Maturity Model developed by
the Carnegie Mellon University) to certify companies and offers certification services at
subsidised rates based on GRANTs from the Government. This will ensure some quality
standards in local software development.

c) Market Research on Software/Service Technology Spending on foreign
software and services

By 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 from
leaving the country. This should be done by an independent research company and
some criteria and guidelines set in determining what constitutes local software and
services.

22


We propose MDC take up the coordination of this research task, as it would serve as a
good benchmark for the purpose of measuring the ROIs of promoting locally developed
software 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 a
period of time (e.g. 5 years), and costs savings can be calculated based on the ‘national
savings’ to Malaysia.

d) National Advertising Campaign

Developing a National Advertising campaign to promote the use of locally developed
software and services (similar to the Buy Malaysian campaign). This campaign should
create a sense of value towards using local solutions and will build confidence in local
Technopreneurs and local software and services.

2.3.4 Key Benefits

Before we can sell to others we must show them that we use our own products. This is
the strongest marketing pitch to the world. We believe that by buying and using local
software, we can assist in driving improvements as well as providing the essential
revenues for Malaysian companies to develop further.

Further understanding of this is also elaborated in the next section on Technopreneur
Development.


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.’

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Section 3 - TECHOPRENEUR DEVELOPMENT

3.1 Overall Strategy

This section outlines the detailed recommendations and action plan for Technopreneur
Development (TD) in Malaysia.

Technopreneur Development will have 5 key thrusts or macro
recommendations with each key thrust having a series of action plans
and recommended government agencies, private sector involvement
and key requirements, including financials; and specific KPIs

The Key Thrusts of Technopreneur Development include: -

Government Policy on Private Sector Development

An analysis of the Government’s involvement in the private sector and how it participates
in the economy in relation to ICT. Areas of concern for TeAM are business activities
where t e Government is competing directly against the local private sector and an
h
analysis on Government procurement projects, especially on the MSC Flagship projects,
in fostering the partnership between private sector and the Government.

Technopreneur Development Program

A program to assist Technopreneurs in developing their business with support services
for example business plan writing, HR management, financial reporting and other
management skills. A strategy to tap into the existing strengths and expertise of
community players such as other Technopreneurs, institutions and private sector
companies.

Increasing the demand for ICT products and services in Malaysia

Malaysia’s local ICT demand for products and services is still lagging behind its
counterparts. Malaysia’s GDP cannot claim a 1% of IT spending as compared to
Singapore's 3%, South Korea's 2%, Australia 3.4% and US 8%. The year 2000 B2C
market in Malaysia (from leading Research houses like IDC, eMarketer and Gartner)
records only 24% of Singapore's RM2.4 billion market (despite our population being 7
times larger than Singapore’s), while the B2B market is only 5% of Korea's B2B market.

Such low local demand will hamper the country’s objective of becoming a Knowledge
society and the growth of Technopreneurs due to small local demand to support
products and services by Technopreneurs.

This thrust will provide recommendations on areas of increasing demand by private
sector organizations, SMEs and increasing the growth of B2C.

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Increasing the number of Technopreneurs

There is a need to increase the number of Technopreneurs from secondary and higher
level education institutions; and also from the professional and working environment.
Recommendations will be made to implement an action plan to fundamentally increase
the pool of Technopreneurs from the above sources.

Showcase of leading Technopreneur Companies

Due to the ‘catch-up’ game of Malaysia’s New Economy, an immediate initiative is
needed to identify existing pioneers and package them to become regional players.
Recommendations will be made to establish key local Technopreneur companies to
become regional players in the shortest time frame possible.

3.2 Government Policy on Private Sector Development

3.2.1 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 sector


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

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3.2.3 Possible solutions

A. Modify MDC’s mandate

Modify MDC’s mandate so that it does not have to become a self-sustaining and profit
generating entity. This will enable it to better serve the Techneupreneurs it was
established to nurture.
Identification and subsequently divestment, of all government initiatives that directly
compete with private sector companies either by;

1. MBO
2. Trade sale
3. Listing
4. Closure/ Windup of Operations

The above are the possible action plans that can be undertaken for other Government
sectors as well.

B. Award of government ICT contracts

Award of government ICT contracts should be broader based and the number of
companies awarded contracts should be increased dramatically. The focus should be on
SME’s that actually have done similar projects before and/or have people in the project
team that have the competency and the know how from previous project
implementations, to execute the proposals submitted.
The award of small size Government contracts of lesser than RM500,000 should be
given to SMEs in the ICT industry. For example in the construction industry, this will be
similar to new government initiative to award contracts to Class D, E and F contractors
directly instead of the traditional practice of awarding contracts to the class A contractor
who 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 as
a consortium working together with larger and smaller ICT companies.

C. Registry of local software vendors

While the Government has plans to set up a Registry of Local Software Vendors under
e-perolehan, this should be extended as a reference point for private Malaysian
companies 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 in
more detail.

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D. Study on the Government’s participation in the Economy

An study is needed to analyze the Government’s involvement in the Economy. The
objective of this study is to understand and identify sectors where the Government can
reevaluate its role by being a facilitator rather than directly competing with the local
private sector. The objective of the study is to streamline national resources to facilitate
the growth of the national economy.

It is proposed that the Economic Planning Unit (EPU) or the National Economic Action
Council (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.


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

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3.3 Technopreneur Development Program

3.3.1 The different stages of development of the Technopreneur
Venture

The Technopreneur venture goes through multiple stages of development. Originating
from the Technopreneur itself, many venture ideas can be formulated. The stages of
development is as follows:-

Pre-Idea

A stage where a Technopreneur has a few ideas for a venture but has not started on any
initiative to progress on any of the ideas. This is natural for example many
Technopreneurs from educational institutions (student or academic personnel) who are
in the initial stages of experimenting and researching on the numerous ideas.

Idea

The next stage of development is when the Technopreneurs have identified a particular
venture 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 service

Seed

The initiation of organizational structure or legal entity to operate and mange the venture
will commence this stage of development. Normally the founding shareholders will form
a core management team or top management. No revenue or very minimal revenue with
slow growth is evident at this stage of development

Start-up

This stage marks the higher evolution of the venture where a management team will
have support functions such as finance, administration and a proper marketing
department.

Revenue will experience high growth exceeding CAGR of 20% and existing capacities of
the venture will reach maximization, which will mark the commencement of the next
stage – Expansionary.

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Expansionary

As in its name, this stage symbolizes the high expanded stage of the company where
head counts, capacity (technical and supportive roles) will greatly expand to meet with
high growth of demand.

This stage will be characterized by multiple cycles where the venture expands to
different levels such as a solution development company expanding from a domestic
market to a regional market and so forth.

Pre-IPO

The venture has reached a level of viability and accepted market levels to be floated in a
market bourse with minimal accepted regulations and market qualifications such as
underwriting and etc.

3.3.2 The critical needs of a venture: Different needs for different
stages

The different stages that a venture undergoes require different types of support. Critical
to 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 the
way.,

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The table below depicts the different type of support needed by a venture.

SUPPORT NEEDED AT DIFFERENT STAGES OF THE TECHNOPRENEUR VENTURE

Stages Duration Funding Non-Funding
Pre-Idea 6 months 1. Market research
2. Networking and industry
peer support
3. Counseling

Idea 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 product
Seed 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

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Stages Duration Funding Non-Funding
Start-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 network
Expansionary 2 years 1. VC Funding u top 1. International expansion
RM15 million support
2. Grants for a. International Market
International or research
foreign market
presence
Pre-IPO 1 year 1. VC and/ or 1. Listing support
mezzanine financing
2. Strategic action plan
a. Government
b. Strategic marketing
acquisition plan

The above funding and non-funding support outlined in the table above are assistance
needed by third parties. Expertise and capabilities that have been internally developed
are not outlined in the above table.

3.4 Technopreneur Online Database

Recommend the development of a Technopreneurs on-line portal (TOP) to meet the
following 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.

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The online portal will work in collaboration and in alliance with other online presence of
associations, community web sites and content/e-commerce driven web-sites. It is
important here to emphasize that the on-line portal shall be a non-profit entity and will
not compete with other industry players.

Such a portal has also been currently conceptualized or implemented (although not in
totality) by the Multimedia Development Corporation (MDC) via MDC Access, Ministry of
Entrepreneur Development, Ministry of International Trade and Industry, MESDAQ via
MeNet and private companies such as Skali, FirstFloor capital and others.

A Technopreneur registered at the site must have one or more ventures or may be
working on a few ventures, which may be eligible for the Technopreneur Development
Grant as elaborated in the next section.

TOP will remain a strategic element to the management and operations of the said Grant
Scheme.

3.5 Unsuccessful ventures

It is natural that certain ventures initiated by the Technopreneur will not graduate and fail
to graduate to the next level. Such ventures will undergo an embargo period that will
later be published as 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 will
benefit the community at large and provide a platform for other Technopreneurs to learn
from these failed ventures.

Intellectual Property (IP) will remain the property of the Technopreneur.

3.6 The School of Technopreneurship

As part of the TDG Grant, Technopreneurs will be required to undergo training at
certified continuing educational institutions to enhance their management skills.

It is known that Technopreneurs require further training in the areas of management and
it is proposed that eligible candidates applying for the TDG are required to undergo
training 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 institutions
including management associations will provide a list of courses that will provide
adequate 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 will
enhance the possibility of producing more Globally competitive Technopreneurs.

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3.7 Key Performance Indicators (KPIs)

It is recommended that the Technopreneur’s Development Program have the following
KPIs: -

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

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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 Singapore's 3%, South Korea's 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% 270.6
Singapore 12.5 383.80 4.2 3.27% 2,985.7
S. Korea 46.7 2,420.00 47.5 1.93% 983.2
Australia 52.4 1,535.20 19.2 3.42% 2,731.3
USA 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 Singapore's RM2.4 billion
market. Malaysia’s B2B market is only 5% of Korea's B2B market.

Country B2C B2B
(RM million) (RM million)

Malaysia 596 894
Singapore 2,457 193,200
S. Korea 760 16,720
Australia 1,140 10,555
USA 152,000 400,000
Source: IDC, Ministry of Telecommunications and IT
Singapore, eMarketer, Gartner

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3.8.2 The Key proposed thrusts

The proposed key thrusts to the recommendations in increasing demand for ICT
products are as follows:-

Local conglomerates or Anchor movers

The identification and strategic action plan of large local companies to use ICT thus
having a direct impact on Malaysia’s GDP. Large conglomerates are significant in this
strategy due to their buying power, which will encourage their supply partner to also use
ICT.

SMEs

SMEs are a vital component to Malaysia’s competitiveness and the use of ICT by the
SMEs will in turn sharpen the competitiveness of Malaysia’s economy. Recent studies
have highlighted that SMEs in Malaysia are still lagging behind their foreign counterparts
in the use of ICT.

Consumer Internet or B2C Market

Although there has been much exposure to B2B and B2C commerce yet there is little
expansion in this particular market. As indicated in the previous sections the B2C market
in Malaysia is still lagging. This thrust will concentrate on findings that w relate to
ill
recommendations to the development of the B2C market.

3.8.2.1 Local conglomerates or Anchor movers

Create an impact on the national GDP.

This thrust is designed to have key anchor local large companies in the key sectors of
the industry. T strategy calls for the adoption of ICT by large corporations in the
he
following 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


The identification of 4 to 5 companies within each sector that control more than 50% of
the market share and that are leaders of their particular sector, thus having the impact
on the national economy and also encouraging its supply and client partners to adopt
ICT.

For example in construction the companies identified are YTL, Gamuda, UEM, Renong,
Road Builder, MTD and IJM.

A . Incentive to anchor movers

It is recommended that as an incentive to the Anchor movers double deduction or one
year tax relief on expenditure spent on ICT or related services is needed to mobilize
them to use ICT in their value and supply chain. The expenditure must not only include
hardware 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 training

The above is an integral part of any E-commerce or E-Business transaction which will
maximize the benefits to anchor movers. Emphasis should be given to local
Technopreneur companies.

B. Affordable to the SMEs i.e. the partners

It is important to highlight that investment in ICT technology must be technology
independent 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 host
technology in the Anchor mover company. Such investment by the SMEs must not be a
capital cost and burden to them and the technology must be available in the market by
bureau service providers or ISPs at very competitive market prices.

The current move to Rosetta Net as endorsed by the Government is commendable and
should act as a catalyst for further enhancements in the use of technology by SMEs.

36


C. International readiness

The completion and investment by the Anchor companies would ultimately allow its
operations to be scalable to capture foreign markets, for example a unit trust company
with the ready portal and back end integration can duplicate such capability in another
foreign 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 is
made to promote such activities by allowing further tax relief for revenue recognized
from such online or ICT strategies that are from local sources as well.

3.8.2.2 SMEs

SMEs remain an important element in boosting ICT demand in Malaysia. However many
surveys and research have pointed out that despite heavy inducements by the
Government, SMEs are slow in adopting ICT.

Figures point out that approximately 30% are using e -commerce or e -business where
the majority of this 30% are basic e -mail users. It is estimated that only 17% use the
Internet for its daily operations such as marketing or customer relations management.
These figures fare poorly compared to the 80% ratio of SMEs in developed companies
that use E-commerce or E-Business. It is obvious that such laggards in the SME
community 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 is
important to note that such SME strategies augur well with implementation strategies
outlined for Anchor movers in Section 3.9.2.1

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3.8.2.3 Consumer Internet or B2C Market

Although there has been substantial publicity on B2B and B2C commerce, the growth of
this particular market is not proportionate to the growth of the ICT generally. As indicated
in the previous section the B2C market in Malaysia is still lagging behind others in the
region.

The following issues need to be reconsidered and the recommendations adopted: -

a) Internet Users Statistics – the case of reporting the wrong statistics

Press statements by both the private and public sectors state that there are
approximately 1 to 1.5 million Internet subscribers in Malaysia. Although such statistics
are true, the correct measurement should be Internet users and NOT Internet
subscribers.

It is important to note that the RM8 Report produced by the Government recently
highlighted the correct usage of Internet users at 4 million

At 4 million, Malaysia’s Internet population is 18% as opposed to the usage of Internet
subscribers of 1 million or 4.5% of the overall population. The difference in percentage
figures has significant impact in the overall perception of B2C viability.

It is recommended that all public statements use Internet users as opposed to Internet
subscribers and that a yearly survey be conducted and endorsed by the Ministry of
Energy, Post and Multimedia.

b) Synergy with housing developers

In order to ensure greater Internet penetration and the use of e-commerce, it is
recommended that a national initiative be undertaken to require all property developers
to equip homes with computers or any other Internet devices, email facilities, broadband
access and a township portal.

Again as an inducement to property developers, tax relief incentives should be given to
property developers to implement such measures.

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c) Affirmative Persuasion Strategies

To leapfrog B2C Commerce in Malaysia, force mechanisms should be implemented to
encourage individuals to transact using on-line payments. An example of such an area is
in Bill payments for e.g. : -

§ Tax payments including land taxes etc.
§ Payment of fines such as traffic violations

A more detailed study requires to be undertaken to ascertain the buying habits of the
community. Such implementation should only be implemented with the necessary
support services such as debit payment systems like Maybank2u debit system and
should be implemented gradually in phases.

d) Other Barriers to B2C

Other barriers such as Payment Gateway systems and quality of Internet Access are
elaborated in Section 4 below. The rectification of some of these issues will
fundamentally enhance Consumer Internet and the B2C market in the country.

3.8.3 Key performance Indicators

It 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

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3.9 Increasing the number of Technopreneurs

There is a need to increase the number of Technopreneurs from secondary and higher
level education institutions; and also from the professional and working environment.
Recommendations will be made to implement an action plan to fundamentally increase
the 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 different
way. As such, there is no one overall body that can effectively spur members of all
industries to adopt ICT into their business processes. Rather, we believe that bodies that
are industry or community specific have a better idea and focus on specific industries
and thereby can create programs that are relevant and effective to their respective
members and constituents.

At the same time, we recognize that the key driver of a long-term trend to make
Technopreneurship a driver of our country’s economy is through the inculcation of these
values at an early stage, particularly when our population is still in school. Generally
speaking, the people most influenced by role models will be those who are younger and
there 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 can
go a long way toward incubating this kind of favourable attitude toward innovation and
Technopreneurship, particularly in the ICT sector.

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3.10 Showcase of leading Technopreneur Companies

Malaysia requires a showcase of leading Technopreneur companies. These examples
are 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 Malaysian
Technopreneurs.

Identification of leading local pioneer Technopreneur companies

There is a need to identify at least 10 companies owned or managed by local
Technopreneurs, which are not only successful companies but also leaders in their
respective fields.

Flotation of the leading Technopreneur companies

It is further recommended that these Technopreneur companies be listed over a period
of 12 months with the support of the Government.

To ensure the success of the flotation the strategic support of the Government is needed
especially in the use of the companies’ services and regional expansion.

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Section 4 - MSC - INFRASTRUCTURE

4.1 Introduction

In light of TeAM’s white paper recommendations, we saw the MDC and infrastructure in
general as two of the areas which could be tweaked in order to provide vastly enhanced
growth incentives for the local ICT industry.

In considering this question, we found that there were four sub-areas of concern among
technopreneurs. 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.

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3) 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.

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4.2 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 the
subsidies can be made up through an incremental increase in the incomes of
infrastructure providers.

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4.3 QUALITY OF SERVICE

We would also like to highlight three qualitative issues and the solutions to the
issues that arise in the current telecommunication environment.

4.3.1 Better Quality of service by Telco and ISP providers, especially
in Point of Interconnection (POI).

There should be strict adherence to Global best practices, which stipulates minimal
percentage of faults in the POI, thus allowing superior interconnection communication
(data, voice and others) between two or more Telco's and ISPs. Enforcement on these
matters by the Communication and Multimedia Commission must be rigid with hefty
penalties to defaulting parties.

It is further recommended to make it mandatory as to allow two or more Telcos or ISPs
to 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 with
another 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 Telco
fees collected by Telco A.

It is understood that the above has already been practiced to a certain degree in
Malaysia but the absence of a ‘Mandatory’ requirement promotes the failure of such
arrangement.

Current problems are evident where a building which has subscribed to a particular
Telco cannot interconnect to another Telco due to red tape, bureaucracy or
plain non-competitive practices adopted by the other Telco.

Again it is very significant to highlight that enforcement of such practices is paramount to
this success.

4.3.2 Provision of service to Value Added Service (VAS) providers

All Telco and Internet infra providers must adhere to a certain best practice to such
provision to VAS providers giving a certain time period for activation and certain level of
Service Level Agreements (SLA). Again enforcement is very important.

It is evident through numerous complains by VAS providers that certain Telco's
implement unwarranted red tape and bureaucracy in order to implement non-competitive
business practices because the VAS are competing against the Telco's in the VAS
service provision.

Again Mandatory requirement for Telcos to allow VAS to Interconnect holds substantial
importance.

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4.3.3 Peering

Currently Internet access connection (partly due to the problems of the POI as illustrated
above) between ISPs is required to be enhanced. For example a TMnet user will
experience slow connection to access a website hosted on a Jaring or Maxis
infrastructure. The reason is because the peering between Telco's and ISPs are small
and sometimes traffic has to be diverted overseas and return back to Malaysia, due to
the congestion.

It is recommended that the government ensure the enhancing of peering arrangements
between the ISPs and Telco's would be needed to ensure Malaysia achieves the
knowledge Economy status.

Due to the substantial lead of TMNet as the dominant ISP in the country, special
attention should be given to peering arrangements between TMNet and the other ISPs in
the country.

4.4 Extending MSC benefits to ICT companies

In order to effectively stimulate local and foreign investment through the use of the MSC
schemes, we would propose the following steps be taken:

1) Extending all tax and financial incentives contained in the MSC Bill of Guarantees to
all newly-formed ICT-focused companies, regardless of their location, upon registration
with either the MDC or the Ministry of Energy, Communications and Multimedia. The tax
incentive given to companies should be for 2 years. The net financial result of this
measure will be negligible since most companies do not make a profit in their first two
years. Upon completion of the 2 years these companies can then choose to become a
full MSC Status company.

2) In addition, all incentives related to foreign ownership and work permits should also
be granted to these companies provided that they locate themselves in an incubator
area or receive express permission from the Ministry or the MDC to that extent. In order
to safeguard the integrity of the measure, all companies that are majority foreign-owned
should be requested to place a RM3000 bond with the government for every foreign
non-director subject to a company audit to be completed in the 12th month of their
operations. 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-local
directors to divest their shares.

3) In order to continue to encourage ICT companies to locate themselves in the MSC
cybercities, the entire Bill of Guarantees should be maintained for those companies
located in the cybercities. A condition that will be required of any company not located
in the cybercities is that they must locate their data centres in Malaysia. This is really
the heart of the MSC initiative in an age where companies can locate themselves with
ease in a virtual space.

46

TeAM White Paper & Action Plan - Fostering Technopreneurship

TeAM White Paper & Action Plan - Fostering Technopreneurship

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