KL International Venture Capital Symposium 2011

By Wednesday October 12th, 2011 No Comments
1.            I am delighted to be here with all of you today for the KL International Venture Capital Symposium 2011 – and I would like first of all to take the opportunity to congratulate the Ministry of Finance and Malaysian Technology Development Corporation for organising such an impressive gathering of practitioners and thought leaders in venture capital, entrepreneurship and technology development from across the world.
2.            This symposium provides a timely opportunity for us to come together to consider how we can best transform the way that we approach new ventures, especially in the field of high technology – an ethos that is very much in line with Malaysia’s aspiration to move into the innovation-led economy.
The Evolution of Malaysia’s Economic Structure
Ladies and Gentlemen,
3.            Let me share with you at the outset a little bit of background. Malaysia as a country is blessed with rich natural resources. Throughout our history, many nations have been attracted to do business here as, indeed, many have prospered.
4.            Beginning with spice trades during the Malacca sultanate, and later followed by the discovery of tin, the planting of rubber and oil palm and then later, during the 20th century, the discovery of petroleum and natural gas, our country has been firmly on the trade map for the past half a millennium.
5.            In the 70s and 80s, Malaysia’s economy was further boosted by our manufacturing capability in the electrical and electronics field. This enabled the country to manifest itself as one of the Asian Tigers, attracting billions of dollars in foreign direct investments (FDIs) – especially in the 90s after rebounding strongly from the late 80’s recession.
6.            So with its strategic geographical position, good physical infrastructure and not least, law and order, doing business in Malaysia has long been a sound proposition – but going forward we cannot rest on our laurels. History of course is full of lessons about how countries blessed with natural resources but lacking in law and order and entrepreneurial spirit turned out to be failed economies.
7.            Countries labeled as model nations in the 50s and 60s are now struggling for economic survival and relevance. The same fate befell nations left behind in the acquisition of technology and education and, in many cases, the rich minerals beneath their soil and the fertile lands above could not prevent their downfall.
8.            On the other hand, nations facing a bleak future only half a century ago, with practically no natural resources and written off as economic failures, were able to transform themselves over the passage of time, remaining relevant throughout the years and taking their place among the most prosperous nations in the world.
9.            Countries like Japan, Korea and Taiwan are today some of the most technologically advanced nations in the world has ever seen – and as we all know, technology, access to capital and entrepreneurship has played a big part in that.
Development of Venture Capital in Malaysia
Ladies and Gentlemen,
10.         The first venture capital company in Malaysia was established back in 1984, when the Singapore-based South East Asian Venture Investment set up Malaysian Ventures with a fund size of approximately RM13.8 million. The Malaysian venture capital industry has grown since then, servicing companies for whom financing through direct bank lending or the equity or debt market is hard to obtain.
11.         In Malaysia, as in other developing economies, a high technology start-up, especially one with a technology that is nascent but nevertheless novel, probably does not fit conventional lending criteria. In addition, investment rating systems may not qualify for financial support from either conventional funding or large corporations and there is only so much that the Government and its Venture Capital and funding agencies like MTDC, Malaysia Venture Capital Management Berhad  and Malaysia Debt Ventures Berhad can do in such circumstances.
Understanding the New Economy – Venture Capital
Ladies and Gentlemen,
12.         Even until recently, large corporations have felt safer doing what they know best and that is perhaps understandable. Financiers fund what has worked in the past and that is, again, perfectly sensible. Taking risks in the new economy without road maps and variables that fit their credit and investment criteria is seen by many as a step too far. Most technology companies, try as they may, do not fit into the conventional funding criteria – so should the funders start trying harder to understand the new economy and the real risk factors involved?
13.         Financiers and venture capitalists must come forward to invest in businesses that involve in high technology sectors – including but not limited to ICT, nanotechnology, life sciences, renewable energy and oil and gas which we have recognized as an engine of economic growth.
14.         The capital market has also benefited from venture capital as investee or VC-backed companies are listed on the local stock exchange, which provides a potentially lucrative exit for the venture capitalists once the companies that they have backed are up and running. Venture capitalists provide the pipeline to the stock exchange, creating a capital market with a greater depth and breadth.
“Risk Taking – A Paradigm Shift”
Ladies and Gentlemen,
15.         The theme chosen by this symposium – “Risk Taking: A Paradigm Shift” – reflects the need not to avoid but to understand and engage with the issue of risk. This is by no means easy, given the dynamics of market and technology, but only once we understand risk can we work to transform this understanding into on-the-ground opportunities. This is true in the good times and it is just as true in challenging times.
16.         Once again, the global economy is facing serious uncertainties. Some businesses will do worse than others but, in the long run, those that are most adaptable will succeed and prosper.
17.         In view of those uncertainties there is an urgent need for us to gain insights into what is best for our respective businesses, how to remain relevant in the market and how best to stay one step ahead of the competition.
The Need for Innovation in Transforming Malaysia
Ladies and Gentlemen,
18.         Malaysia, with its strength in natural resources and bio-diversity, is well-positioned to make a smooth transition into the new economy. With a diverse economic base, we need to encourage an innovative approach to utilize these resources fully and generate a higher income for the country.
19.         Innovation stretches from the ideas stage right up until after-sales service. It is not only limited to science and technology, it is about the entire eco-system – the systems and procedures that run the full length of the business chain.
20.         It is important to develop a culture that embraces innovation. Just look at how much life has changed with the creation of iPhones and iPads by Steve Jobs. Where would we be without such innovations?
21.         There are opportunities to innovate at every level of the supply chain. Through innovation, processes can improve and increase the yield of products. These improvements in turn will generate more wealth, thus creating more high income jobs along the line.
22.         We also need to broaden our mind by not limiting ourselves in doing things from scratch.  Adopting open innovation could speed up the process in bringing products to the market for commercialisation.
Private Sector to Drive Malaysia’s Economic Transformation Programme
Ladies and Gentlemen,
23.         Through Malaysia’s Economic Transformation Programme, the Government has put in place the policies we need to put the country on a firm footing in the new economy. Malaysia operates a fully-liberalised economy with policies to attract highly talented knowledge workers and the right infrastructure and incentives for setting up technology-based businesses.
24.         But these efforts are simply the catalyst to ensure that the playing field is set for the real players – large corporations, entrepreneurs, research institutions and universities and, not least, the financiers.
25.         The private sector is the real player in terms of driving economic growth, and venture capital is one of the key catalysts of innovation in the business world.
26.         While we have seen some players embracing technology development – through start-ups and private sector collaborations with research institutions and universities as well as supported by grants from Government agencies – we have yet to witness a deep and broad involvement from large corporations and financial institutions.
Islamic Venture Capital – Leveraging on Malaysia’s Strength in Islamic Finance
Ladies and Gentlemen,
27.         Malaysia is one of the leading global players in Islamic finance. We have been continuously developing our Shariah capabilities and expertise, including in Islamic Venture Capital.
28.         Islamic Venture Capital is still at a very embryonic stage, but there is huge potential for Islamic finance and Shariah-based instruments and mechanisms in promoting venture capital.
29.         Islamic financing concepts like the Mudharabah (profit-sharing), Musharakah (partnership) and Wakalah (agency) are the most commonly applied to venture capital, but Islamic venture capital could be very interesting to investors who are experts in specific sectors and industries. By raising awareness and increasing understanding of Islamic finance, investors are more likely to risk their capital by investing in specific business opportunities.
Ladies and Gentlemen,
30.         We will witness today the signing of a Memorandum of Understanding (MoU) between the Malaysian Technology Development Corporation (MTDC) and the Indonesian Investment Agency (IIA)  for the establishment of a new regional fund to cater to the increasing financing needs of technology-based companies in our region. MTDC will also be signing MoUs with Export-Import Bank of Malaysia Berhad (EXIM Bank) on the collaboration for Green-Lane Policy Companies for exportation activities as well as with Northern Corridor Implementation Authority (NCIA) on NCIA-MTDC Symbiosis 2011 Program.
31.         So this symposium is not the end but rather the beginning of even greater collaborations in the future. I would like to personally welcome all technology investments in Malaysia and I assure you that the Government will continue to provide the infrastructure and incentives to ensure that we remain one of the top destinations for technology-based investments.
32.         On that note, thank you once again to all involved in making this symposium such a success – and an event that I hope will be a significant catalyst to help smooth Malaysia’s transformation into the new economy.
Thank you.
Wabillahitaufik Walhidayah Wassalamualaikum Warahmatuallhi Wabarakatuh.

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