What role does MDeC play in the development of the Malaysian economy?
GHAZALI: The government set up our organization to help drive greater participation and production of ICT within the country. I believe that this element helps spur greater productivity, creativity, and innovation. MDeC is quite unique because it acts as a separate agency within the government. MDeC has played a vital role in the development of the ICT industry in Malaysia. From 1996 to 2003, we focused on the establishment of Cyberjaya, Malaysia’s ICT hub and corridor. As a result, today there are over 23 cyber cities and cyber centers in Malaysia. From 2003 to 2010, we worked on creating economies of scale in the ICT sector. Over this time period our achievements included a contribution of MYR 34.57bn ($11.3bn) to the nation’s GDP and a total of MYR 103.8bn ($32.9bn) in revenues reported by MSC Malaysia companies. In 2011, MSC Malaysia’s revenues exceeded MYR 31.7bn ($10bn), which was an increase of 16% from 2010. Furthermore, last year MSC Malaysia contributed MYR 9.6bn ($3.1bn) to the overall GDP of the country. Since 2007, we have helped create 119,138 high value-added jobs, the majority of which were filled by locals. As a result, I think it is safe to say that you can see substantial growth in the areas of ICT products and services even from a small country like Malaysia.
What are the key challenges that MDeC faces in ensuring that the Open Multimedia Network provides the required bandwidth and quality at globally competitive tariffs? What other challenges is MDeC, and ICT as a whole, currently facing?
GHAZALI: We constantly benchmark what is available across the region because predominately that is where areas of comparisons are looked at. The government has set up other initiatives to ensure that we move beyond what traditional players are doing. These initiatives are geared towards better international connectivity, lending rights, licenses, and competition throughout the country. Furthermore, there are now 4 cellular carriers in Malaysia. There are also 3 wireless access providers and WiMAX services are available. As of the beginning of January 2012, Malaysia’s broadband penetration rate stood at 62.3%. We are also currently in the process of establishing LTE and 4G technologies. As you can see, Malaysia wants to open up its market to ensure that there is competition to drive better rates, as well as provide better services and innovations in telecommunications. Presently, various efforts are being put into place to reduce bandwidth costs. This is being driven by the initiatives described within the Communications Content and Infrastructure National Key Economic Area (NKEA). MDeC is working very closely with various key stakeholders to mitigate this issue. The biggest challenge that we are facing is taking new innovations to market or commercialization. It is at this stage where MDeC comes into play. We want to encourage innovation and meet the natural demands throughout Malaysia. We would like to transform the country. The level of demand will help fuel innovation. We are trying to match entrepreneurs who are both local and foreign. We need to take advantage of those demand generators in order to build solutions for what is required by Malaysia and the rest of the countries throughout the region.
How successful have you been at attracting multinational companies to set up business operations here in Malaysia?
GHAZALI: 60% of the $10bn of total investments in IT software and services were Foreign Direct Investments. I believe we are quite successful in attracting multinational companies because Malaysia provides an enabling environment both in physical infrastructure and capabilities. The recent surveys from Frost & Sullivan and A.T. Kearney project Malaysia as a very attractive country. Malaysia has been the 3rd most attractive country over the last 7 years. These surveys are a testimony to what we have done in order to attract the right types of investments.
What initiatives, actions, or incentives do you currently have in place to attract more investors to come to Malaysia for ICT?
GHAZALI: Malaysia provides a tax element that many countries do not have. For the last 10 years, there has been no tax for those who invest in this country, both foreign and Malaysian. Also, I believe that clear ownership, whether you are in sourcing or funds, is key to generating growth throughout the country. We are also bounded by the terms that are laid out in the MSC Malaysia Bill of Guarantees (BoGs). This bill of guarantees ensures that there will be no censorship of the Internet. This is important because this generation of services and IT require the use of unrestricted Internet access in order to expound the values across its consumer base. These are the types of incentives that we do give in order to appear more attractive. Furthermore, we work hand-in-hand with investors to ensure that these components of attractiveness are present. These components also include improving the required skill set of the talent pool, as well as drawing talent from overseas to Malaysia. We do allow foreign talent to come in and out of Malaysia. This is something that MDeC does for the ICT industry. These are the areas that investors look at when they decide to invest in Malaysia. We are also moving towards ensuring that there are strict compliance requirements put into place with regards to intellectual property patent rights. I think at one stage Malaysia ranks very low. Certain programs have been undertaken by government to ensure that these compliance requirements are enforced.
According to the World Economic Forum’s Global Competitiveness Report, as it moves toward becoming more innovation-driven, Malaysia will need to improve its performance in education and technological readiness. In the latter dimension, the country places a low 44th, with room for improvement in technological adoption by both businesses and the population at large. How can businesses improve technological readiness? In what ways does this deficiency create opportunity?
GHAZALI: Penetration of broadband in the ICT space is still around roughly 60%. In 2012, 62.3% of households have Internet access. However, we do understand that there is room to grow. Our goal is to have 100% penetration by the year of 2020. However, I believe that we will reach this goal much earlier. The issue is that only 18% of our SMEs are extensively using ICT for their businesses. Getting SMEs, who make up 93.3% of our businesses, to adopt technology, has always been one of the biggest challenges. Hence, opportunities include training programs for SMEs geared towards improving IT literacy. While Malaysia’s technological readiness is low in the rankings, we recognize it and we are now implementing programs that are focused on the demand side. We want to look at how we can increase penetration and usability. In the SME space for example, the government is working hand-in-hand with service providers to increase the availability of cloud computing. We are also on our way to setting up wireless networks across all of our 10,000 public schools. This will allow students to access the Internet at their schools. We are trying to kick-start or accelerate the phase of consumption and utilization in Malaysia.
There is certainly room for improvement in the area of funding. There is never enough funding. However, Malaysia has put a lot of effort into improving the situation. The government has been providing funds for ICT and we have been encouraging angel participation. From a VC component, which is riskier, the government has stepped in through its own funding and has created agencies focused on angel VC funding. These agencies facilitate the matching of angel investors with start-ups.
What specific programs and policies are in place to spur the growth of local SMEs and entrepreneurship?
GHAZALI: We started this initiative about 15 years ago. We probably had roughly 300 entrepreneurs who were in the ICT space at the time. Today, we have over 3000 entrepreneurs in the country, both foreign and Malaysian. We encourage entrepreneurs to meet the demands and fill the gaps of specific areas in the ICT sector. We have 29 incubators that we certified and there are a lot more in Malaysia working on these areas. We are also focusing on commercialization. This aspect is being driven by research institutions, as well as universities, and is now structured from a government perspective. We are trying to push new innovations into the hands of entrepreneurs so they can take it to market, based on the current demands and gaps that need to be filled. These are the actions that we are taking to ensure that entrepreneurs are not only created but are also successful.
What do you think the state of funding is right now for start-up ventures? How can it be enhanced or developed further?
GHAZALI: There is certainly room for improvement in the area of funding. There is never enough funding. However, Malaysia has put a lot of effort into improving the situation. The government has been providing funds for ICT and we have been encouraging angel participation. From a VC component, which is riskier, the government has stepped in through its own funding and has created agencies focused on angel VC funding. These agencies facilitate the matching of angel investors with start-ups. They are also looking at commercialization value where the government can step in and push better opportunities for technology to entrepreneurs. Furthermore, we are looking at how we can take on more of the risk as a community and push commercial products out into the market place.