Malaysia is rapidly emerging as a key market for startups, thanks to a wide array of government initiatives to transition the country to a digital economy.
As the third largest market in ASEAN, Malaysia has been quietly implementing phenomenal change that has attracted a string of local and international startups as they scale up.
This includes notable Malaysian startups 123rf.com (which has over 89 million royalty-free stock images, vectors, footage and audio clips at stunningly low prices); Grab (a highly successful competitor to Uber); iFlix (the Malaysian Netflix equivalent); HappyFresh (an online grocery app); and Kfit (a valet for the fitness, beauty and spa industry).
In the 2018 Malaysian budget, Prime Minister Najib Razak introduced a slew of initiatives to encourage aspiring entrepreneurs and investment in the sector. This is all part of Malaysia’s shift to the digital economy, which is set to comprise 20 per cent of its economy by 2020.
The initiatives announced with the budget complement the array of programs already in place to push the strategy forward and attract more of the world’s brightest entrepreneurs and startup companies into the market.
Breaking the initiatives down, they fall in the areas of government support, economic development, skilled labour and funding.
In addition to a range of government support programs across key sectors, Malaysia established the MSC (Multimedia Super Corridor) as an early adopter of the Internet age. It was launched as part of the country’s commitment to the advancement of technology infrastructure.
Located near Kuala Lumpur International Airport, the MSC is an area with high-speed internet and well-equipped facilities to entice ICT firms to help build a technology hub.
In recent years, the Malaysian Government also launchedMaGIC (Malaysian Global Innovation and Creativity Centre)andMAVCAP (Malaysia Venture Capital Management Bureau). Both MaGIC and MAVCAP provide domestic and international aspiring entrepreneurs with the necessary support and funding mechanisms for their latest technological innovation.
On the economic development front, the strategy has been to look at both human capital and physical and digital infrastructure to support the ongoing needs of current industry and burgeoning new industries such as e-commerce.
The Malaysian Government partnered with the Alibaba Group in November 2017 to launch the Digital Free Trade Zone (DFTZ), the first of its kind outside China. The DFTZ will comprise an e-fulfilment hub, satellite service hub and e-services platform.
As Malaysia continues to attract many startups and companies to establish local offices, the Malaysian Government has set aside A$19.5 billion for scholarships and education development.
An additional A$138.5 million has also been allocated for teacher training and the creation of 2,000 new smart classrooms.
This provides excellent opportunities for Australia, given our considerable strength in bringing academia, industry and government together in areas such as curriculum development.
Further, with the digital economy in Australia forecast to grow 75 per cent between 2014 and 2020 to A$139 billion, there is considerable opportunity for Australia to play a key role in Malaysia’s continued pivot to the digital economy.
The Securities Commission of Malaysia has also reviewed a number of crowdfunding platforms which are fully regulated as part of the funding initiatives being implemented by the government.
Some of the platforms being regulated and implemented include Equity Crowd Funding, Peer to Peer Funding and Cradle Investment Programme. These regulations and platforms aim to help startups easily access investors to seek funding for their innovations. In less than a year, a total of A$3.2 million has been invested in 14 companies via these crowdfunding platforms.
A recent study by PricewaterhouseCoopers (PwC) found 59 per cent of Malaysian financial institutions are currently working with fintech startups in an effort to differentiate themselves, reduce costs and improve their customer’s experiences.
According to Statista, fintech transactions in Malaysia amounted to A$9.5 billion in 2017 YTD and represented online payments, mobile wallets, financial comparison and retail investment. The transaction value is expected to grow by 21.4 per cent (A$20.7 billion) by 2021.
Opportunities for Australian startups
This is also supported by the Digital Investment Management Framework launched by the Securities Commission of Malaysia in May 2017 to introduce a new robo-advisoryplatform.
Are Australian companies capturing this growth towards mass consumerism in Malaysia and more broadly in the ASEAN region?
As Malaysia continues its journey of adaption to ‘future-proof the local digital ecosystem’ over the ensuing years by driving inclusive adoption of technology, it opens up opportunities for Australian startups to consider Malaysia as a key market in the region.
Austrade Kuala Lumpur is currently running several initiatives with e-commerce platforms and fintech, agtech and venture capital firms to identify opportunities for Australian companies.
Daniel Havas is Austrade Senior Trade & Investment Commissioner, Malaysia and Brunei