TeAM Recommendations for the New Economic Model

TeAM Recommendations for the New Economic Model

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  Technopreneurs Association ofMalaysia (TeAM) TeAM Recommendations for the New Economic Model 12th May 2010
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  INTRODUCTION This document wasprepared by TeAM following a dialogue with TeAM members on 29th April 2010 and in consultation with TeAM Council as a response to the Government of Malaysia‟s new economic policy the “New Economic Model”. As the Government moves towards formulating new policies and proposals to move the nation towards a “high value, high income” economy, the role of entrepreneurs, specifically Technology Entrepreneurs (Technopreneurs) is of utmost importance and policies must be formulated to foster and enhance their role in helping the nation meet its new goals. As the Association that represents Technopreneurs we are committed towards both assisting the nation in achieving its goals as well as ensuring a viable ecosystem where Technopreneurs can thrive, as their success will lead to national success in achieving the nation‟s objectives and the objectives of the NEM. Rightfully, the NEM recognises the role that entrepreneurs can play in making the NEM a success, but to ensure the growth of the economy, GDP growth and suffuciently high income employment for its citizens in the future, the role of Technopreneurs is critical. Technology and Technopreneurs are the ones that will lead the nations towards a high income, high value economy and hence policies formulated by the Government must be “Market-Driven”, i.e. policies must take cognisence of the market and the needs of Technopreneurs and should not be formulated from a government or policy perspective only. Only by meeting market needs and creating an environment in which Technopreneurship and business can thrive will the ultimate goal of the NEM be met. These recommendations are “market-driven” as they are what members of TeAM believe should be the policies of the NEM so that we can together achieve the ultimate objectives of the NEM and create a thriving and successful Malaysia.
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  These following individualscontributed towards these recommendations: Editor & Lead Contributor: Dr. V. Sivapalan – TeAM Advisor Main Contributors: 1. Ir. Aziz Ismail – Council & Head of Go Global Committee 2. Azlan Yaacob – Hon. Treasurer & Head of TeAM Green 3. Koh Wing Yew – Executive Secretary Contributors, TeAM Council: 1. Ms. Koh Lee Ching – President 2. Dato Dr. M. Rajen – Deputy President 1 & Head of TeAM-Bio 3. Premesh Chandran – Deputy President 2 4. Daniel Cerventus – Hon. Secretary 5. Bernice Low 6. Tham Keng Yew 7. Lu Chen Pin 8. Colin Charles 9. Hazani Hassan 10. Chris Leong Additional Contributions and Advise: Nazrin Hassan – TeAM Advisor For further information please contact: Koh Wing Yew TeAM Executive Secretary Email: [email protected]
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  The following recommendationsare based on the relevant referring sections within the New Economic Model Framework as released on 30th March 2010 by the National Economic Advisory Council (NEAC) 1.0 Institutional Structure Referring Section 2.2.2 Doing business in Malaysia is still too difficult "Malaysia’s place within the Global Competitiveness Index has dropped to 24th in the 2010 report from 21st previously, indicating that the country is becoming less attractive as an investment destination. Institutional structures, processes and policies also contribute to the difficulty of doing business in Malaysia. Furthermore, entrepreneurs have identified issues such as inconsistent government policies, corruption, tax regime, labour policy and inflation as the main impediments for establishing businesses in Malaysia." 1.1 Venture Capital Discussion Institutional Structure: The Venture Capital (VC) structure in Malaysia is too rigid. Malaysia's VC industry is predominantly „controlled‟ by the Malaysian government via funds allocated and managed by entities under the Ministry of Finance or other Ministries. The funds allocated for VC is also provided essentially as a loan and not an investment. This is unlike the funding of the VC industry in other countries. As the management team has to pay back this loan, it is strictly not risk capital and this makes investing a difficult proposition for the VC management team, especially investing in early stage investments which are considered higher risk but provide higher returns as well. Investing in early stage ventures is essential to promote innovation and commercialization of new ventures. Recommendation VCs in Malaysia, such as MAVCAP, need to increase the risk appetite on their investment. To enable them to do this, Government funds should be provided to VCs as “investment funding” and not “loan funding” as it currently is. We recommend that the government convert all its current VC funding to “investment funding” and also change the management structure of the VC management companies by rewarding successful managers with real VC type rewards including the 20% carried interest usually associated with VC management globally. Additionally, the Government should encourage Pension Funds to invest in VCs. Even a 0.1% allocation will amount to more than RM1 billion in new funds. VCs together with
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  industry association, suchas Malaysian Venture Capital and Private Equity Association (MVCA) and TeAM, could guide Kumpulan Wang Simpanan Pekerja (KWSP) and other pension funds in setting up the framework which can achieve VCs investment result, as well as adequate risk management. We recommend that Pension Funds be encouraged to invest in VC funds to further promote the growth of the VC industry in Malaysia. 1.2 Grant & Soft Loan Funding Discussion Grant funding mechanism and organizations are under wrong management. - Creative Content fund under Bank Simpanan not efficiently managed - SME Bank might not be the right organisation to manage soft loans Soft loans and grants should be managed by the specific expert agency. For example Multimedia Development Corporation (MDeC) should be the agency to manage all ICT loans and grants, including Creative Content; Cradle Investment Programme (CIP) to manage ICT, Biotechnology, Green and others related industries; Malaysia Debt Ventures Berhad (MDV) to manage ICT and related industries for project financing; Malaysian Biotechnology Corporation (BiotechCorp) to manage Biotechnology and Green industry. Over the last few years these agencies have developed the required experience and expertise to manage funds better than a traditional bank. Typically banks do not have the knowledge base and experience in non-traditional industries, such as ICT, Biotechnology, and Green. Recommendation We recommend that all grants and soft loans be managed by the respective expert agencies and not by Banks who do not have the required industry experience or expertise. We further recommend that existing soft loans or grants managed by the non-expert agencies or banks be transferred to the expert agencies for better management. Additonally, to ensure that the procesess and procedures are simplified and uncomplicated, we recommend that there be a standardised format within all agencies for grant and soft loan applications. NOTE: Please read Section 4.1 on the Revamp of the Funding Ecosystem for further comments on soft loans.
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  1.3 Policy Makingto be Market Driven Discussion Many policies are not up-to-date, and not in line with the latest events and changes in industry and the society. For example new policies converting grants to soft-loans can have long-term and fundamental impact on innovation and entrepreneurship, yet this is being done without consultation with the affected industry and market players as well as the industry associations and groups. Policies created in this manner without proper consultation with industry or those that are counter to industry recommendations often fail and do not benefit industry or the economy. Recommendation There needs to be market driven and not policy, politics or institution driven policies. The government needs to engage regularly with industry and market players before instituting policies that would impact on industry. Policies should be created to meet industry needs as outlined by industry organisations and players. We recommend that in future all policies that impact on specific industries are only promulgated with full and complete consultation with the affected industry players and associations so that they are indeed market driven and meet the needs of the market to ensure the success of the policy and lead to maximum economic and social benefits. 1.4 Corruption Discussion Corruption is inherent in the technology arena as it is in every other sector and does not foster a competitive industry sector and does not provide maximum benefit to society. Recommendation a) All projects above RM250,000 (Ringgit: Two Hundred and Fifty Thousand) to be awarded by open tender b) All companies to be allowed to tender direct without middleman c) Companies to be shortlisted and tenders awarded on merit, based on experience and expertise only d) Tender selection or evaluation panel members names to be provided on the relevant Ministry’s website for complete transparency e) Decisions on awards to be transparent, with reasons given for successful awards f) All tender awards to be posted on the relevant Ministry website for transparency g) Both directors and shareholders of any company that fails to complete an award to be placed on a blacklist and not be awarded future tenders. This will ensure that all tender awardees perform their part of the contract as failure to do so will lead to no future contracts. This should serve as sufficient deterrent for future tenderers.
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  2.0 Export ofAdded Value Services Referring Section 2.2.3 Our exports are still strong but not generating enough added value "Our exports are still strong but not generating enough value added. The economy is highly dependent on external markets, with an export-to-GDP ratio of 1.2 and a trade-to- GDP ratio of 2.2 in 2008." 2.1 Insufficient Understanding and Assistance for Services Exports Discussion It is accepted wisdom that technology contributes significantly to productivity and adds a higher value to economic growth. A nation can only be considered a developed nation if its services sector contributes significantly, often more than 60%, to its economy. Over the last 15 years Malaysia has embarked on creating a more services driven economy and has been successful in creating a large number of services based companies from the ICT and Biotech sectors. However, despite this many of our agencies are still mired in the old economy mindset and do not provide sufficient or relevant assistance to the services sector players. As examples, in market development the use of new advertising methods like Google Adwords, Google Adsense, Hosting on the Cloud, email marketing etc are the latest methods through which marketing, advertising and branding are done but funding cannot be allocated to these methods because grant providers do not under understand these new methods and hence they are not provided for, even though many of these methods have been around for more than 5 years. TeAM has also started a new initiative called Go Global which aims to take 10 Malaysian companies (as a pilot program) to Silicon Valley, to set up offices there and market our services in the US. The “exhibition” method used for decades in promoting manufactured products does not work for the services sector as a local presence is almost always required before a foreign company will use its services. This is probably the only constructive and successful way to export ICT services yet it took a long time for TeAM to convince the powers that be to support this initiative. This are only two examples, there are many more. Recommendation We recommend that Government needs to be able to adapt to the requirements of the new economy and be flexible in providing assistance when needed by technology companies. Regular consultations with industry organisations and players are a necessary part of
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  creating a highvalue economy but flexibility to adapt to changes and unique needs must also be a part of Ministries and agencies. We also recommend that government agencies regularly consult and collaborate with industry players and associations in rolling out services based assistance and export programmes. 3.0 The Green Revolution Referring Section 3.3 Malaysia should lead the global green revolution "Malaysia should embrace a leadership role in green technology and become a strategic niche player in high value green industries and services that play to our competitive advantages. The commercialisation of our natural biodiversity into high-value products and services will be a major national challenge. But it is also an excellent avenue for partnership between the private and the public sectors." 3.1 Embracing a Green Leadership Role Discussion Embrace a leadership role in green technology and become a strategic niche player in high value green industries and services that play to our competitive advantages.  How? What should we focus on? Do we have competitive advantages? In order to develop technology-based offerings, there are three distinct phases: 1) Research & product/service development 2) Business systems 3) Market development Research & Business Market Product Systems Development Development A strategic niche could be nurtured, if Malaysia would focus in developing an institutional advantage in at least one of these phases, but with a strong controlled linkage with the other two phases. If we take palm oil as a model case in point, Malaysia‟s strength lies in phase 2, a proven track record in business and operational systems. This can be reflected by our varied
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  plantation management models,cultivation systems, human resources and production capabilities. We have inroads in downstream activities that are essential to market development, but this is a challenge with large global corporations controlling oil refinement, finicky international buyers and lobbying groups. Our R&D in palm oil genome is at its infancy, and our ability to produce bio-products from bio-mass is still at a small commercial stage. In parallel, outside Malaysia, other countries are gearing up to become major palm oil producing countries. Indonesia, PNG, West Africa, Central and South America will emerge eventually. While Malaysian companies have reasonable investments in some of these places, any strategic competitive niche would be eroded further as these countries learn and adopt, and even improve on the business systems of upstream management. Recommendation In order to move up the value chain, Malaysian needs to think purposefully in building capability at the transition point of the major phases, and the loop back from phase to phase. We recommend the following: Strategic niche focus area a) Make Malaysia the place of choice for integrating and applying technologies in semantics & bio-informatics, genome research, bio-plants for prototyping & accelerated commercialization backed by world-class IT support infrastructure Research & Business Market Product Development Systems Development Strategic niche focus area c) Malaysia would lead in harnessing all the knowledge in developing a low carbon economy, and by recycling and reusing the resource available Strategic niche focus area b) Ensure that Malaysia continues to be relevant by taking the lead in knowledge management, learning and reapplying findings from phase to phase
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  By focusing inthe transition areas and using palm oil as a model case, we could expect the following tangible outcomes: 1. The development of knowledge, services and products that would improve palm oil yield from a. Genome research b. Developing and harnessing microbial formulations c. Identifying and curtailing plant disease 2. The capacity to develop engineering capability in the building of bio-plants that would be used throughout the world 3. A significant lead in applying green technologies, systems and services in the sustainable cultivation and production of palm oil The same can be applied where Malaysia have a strong say in global development such as natural rubber cultivation. 3.2 Strategic Advantages In areas, where Malaysia does not have any distinct advantage in any of the phases, Malaysia needs to think very carefully on where it could play a strategic role. Areas where green technology would make an immediate impact are: Existing Strategic Advantage Not Found Easily Anywhere Else: 1. Bio-fuel a. Sugar based bio-fuel derived from plants would require major sacrifices in switching palm oil production from food to fuel b. Algae based fuels is a good candidate for Malaysia to consider as the production elements require a warm and stable environment, and instantly makes Malaysia a good candidate for applied research and commercialization 2. Biomass conversion to bio-products a. Focused should be in palm oil, in making the best use for producing bio- fertilizers and bio-based products b. Other crops have potential such as rubber, paddy and cash crops, but limited in scale Limited Strategic Advantage: 3. Green buildings and townships a. Developed countries have taken the lead in certification and design b. Opportunities in modelling for tropical climates c. Reducing air conditioning is key in cooling of buildings 4. Transportation and logistics, switch from fossil fuels to bio-fuels or electricity a. Primarily the domain of airplane, ship, locomotive, major car and vehicle manufacturers b. Battery technology and ancillary systems are key
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  c. Potential inadopting for small townships and industrial areas, requires political will and citizen mindset change 5. ICT, reducing energy use a. Technologies are dominated by US and other major industrial countries b. Areas of using IT in a smarter way to use less power from IT infrastructure 6. Electricity generation (solar, wind, wave, geothermal, nuclear and hydro) a. Malaysian is already the preferred destination for solar manufacturers, however, the challenge (similar to semiconductors in the 80s and 90s) is to provide a value added advantage b. Malaysia should look to increase capability in manufacturing and installing technology capability 7. Organic Waste a. Major source of pollution – municipal solid waste (MSW) issues surround organic waste treatment and source separation issues – political will b. Livestock waste streams – together with MSW, require treatment solutions Areas one and two, is where Malaysia have a strategic advantage and cannot be easily replicated by other countries or corporations. For areas 3, 4, 5, 6 and 7, Malaysia would need to further look for a niche within a niche, to better nurture capabilities. Recommendation Although Malaysia have strategic advantages with regard to palm oil, technology entrepreneurs who have successfully developed and commercialized green technologies feel that plantation companies may not have the natural instinct to lead in green technology development. Plantation companies are slow to embrace change and are comfortable. Some private companies have successfully brought in private equity with carbon funds that have an element of carbon trading as part of the deal structure. These types of solutions are difficult for the technology entrepreneurs to successfully comprehend and implement. Furthermore, expert fund managers in green project development are wary of technologies that are not proven. We recommend that the Malaysian government catalyze a new approach that includes public-private initiatives that would bring innovation and integration models, with both VC-style funding, private equity and other financing solutions. The Malaysian government should also recruit green experts to help put together and execute green technology prototyping and commercialization. TeAM could assist in using its vast network of associates to identify and secure green experts for public-private initiatives. 4.0 Competitive Domestic Economy Referring Section
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  6.3.3 SRI 3:Creating a competitive domestic economy – Subsidies, price controls and a myriad of distortion-creating incentives will be phased out. Build entrepreneurship - Revamp the seed and venture capital funds to support budding entrepreneurs - Simplify bankruptcy laws pertaining to companies and individuals to promote vibrant entrepreneurship - Provide financial and technical support for SMEs and micro businesses, to move them up the value chain 4.1 Revamp Venture Capital Funds Discussion There is a serious need to revamp the seed and venture capital funding ecosystem to better support budding entrepreneurs. We have already made recommendations on the structural issues in relation to the VC industry in Malaysia in Section 1 above. In addition to structural issues, there is also a need to review the current funding ecosystem, not just the VC funding ecosystem, which does not cater to all stages of the business enterprise. Table 1, on the next page, shows the lifecycle stages of the entrepreneurial venture and the type of funds required at each stage. We also indicate in the table the funds that were made available under RMK9 and what should actually be available for the companies. There is a clear “gap” in the funding ecosystem primarily at the early growth (or commercialisation) stage where there is only one source of funding available for these enterprises – Cradle CIP500 and that too was only created in 2010. This lack of funds has held back the growth of entrepreneurial ventures in Malaysia. The billions of Ringgit expended on research and development has created enough patents and prototypes but the lack of funds for commercialisation meant that these patents were not exploited and thus the nation derived no benefit from the billions spent. R&D must be exploited to create economic value like GDP growth, employment and the export of technology products and services. Exploitation of R&D means the commercialisation of patents and prototypes and unless funding is available, there will be no commercialisation and hence no economic value is created. Additionally, in the latest revamp of funding for RMK10 even the existing grants are being converted to soft loans and this will cause serious damage to innovation and R&D. Conceptually, a loan is something that must be paid back and this can only be done when there is revenue. In the pre-seed, startup and especially in the R&D stage, there is no revenue and hence there is no source of funds to repay a loan, even at very low interest. This means the Entrepreneur has to either find a source of funds or more likely will not take the loan and
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  this means therewill be far less R&D being done in Malaysia. This will not augur well for the NEM which is based on an innovative economy and society. Soft loans are suitable for companies at the expansion stage onwards as they will at that time have a source of revenue to repay the loan. In terms of VC funds most of the Government VC funds are very careful with their investments because of the structure of the funds mentioned above and hence take lower risks than VCs should. This also does not foster entrepreneurship. Table 1: The Lifecycle Stages Of The Entrepreneurial Venture Stage & Pre-Seed Stage Early Growth Expansion Stage Mezzanine Mature Stage Requirements Stage Stage Definition The idea stage With a prototype, With successful The expansion is Co is already where small Entrepreneurs start initial successful and mature, amounts of the commercialization the Co. is doing business is funding is commercialization Entrepreneurs raise well with stable and required to build a process additional funds to revenues and while revenues prototype for expand and grow profits. It may and profits are commercialization the business seek a listing on consistent, regionally or a stock exchange there is no globally or there may be longer the a trade sale of potential for the venture. high growth rates. Funding currently R&D grants, Cradle CIP500 Venture Capital, VC, IPO, Private Private Equity, available PreSeed Grants, Soft Loans Equity, Loans Loans Self funding Who provides Mosti, MDeC, Cradle VCs, MDV VC, Public via Private Equity, funding Cradle, Biotech an IPO, Private Banks, MDV Corp, Founders Equity, Banks Recommended: R&D grants, Early stage VC, Venture Capital, VC, IPO, Private Type of funding PreSeed Grants, Angel, Cradle, Corporate Private Equity, Equity, Loans Self funded R&D+C Strategic Loans commercialization investments, Soft funding Loans Recommendation: Mosti, MDeC, Mosti, Angels, VC, GLCs, MDV, VC, Public via Private Who should Cradle, Biotech MDeC, Cradle, Soft Loan via an IPO, Private Equity, Banks, provide funding Corp, Founders Biotech Corp, VC Expert Agencies Equity, Banks MDV
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  Recommendation Grants, seed, venturecapital funds and soft loans need to be restructured based on the lifecycle of the entrepreneurial firm: We recommend the following: a) That R&D grants be maintained and provided for researchers and Entrepreneurs so that the element of risk taking and the creative enterprise be maintained and continued. b) That R&D grant include an element of commercialisation so that the product or prototype that is created via the research can be commercialised to create economic value. We propose that up to 25% of an R&D grant be allowed to be used for commercialisation activities. c) We also propose that the Government maintain the existing Pre-Seed funding under the respective agencies to encourage the formation of entrepreneurial ventures. Funding at this stage should be maintained at RM150,000 per venture. d) However, to ensure that the early growth stage funding gap is filled we propose that the Government provide additional funds for commercialisation of R&D and Pre- seed ventures. We propose a fund size of between RM500,000 to RM 1 million at this stage. This will encourage growth of the venture and enhance the contribution to economic value and employment. e) At the expansion stage we recommend VC funding and soft loans and propose that the soft loans be managed by the respective expert agencies. f) Additonally we recommend that the Government review the policy of converting R&D and PreSeed grants to soft loans as we believe this is a mistake and will seriously affect R&D and risk taking in the country. g) We also recommend that individuals, private sector companies and Government Linked Companies (GLCs) be encouraged to invest in startups by providing double tax benefits for all investments in such enterprises. A measure of control can be exercised by only providing these tax benefits for companies that are MSC or Bionexus Status, Green enterprises certified by the Ministry of Energy, Water and Green Technology or those that are prior recipients of a government sponsored R&D grant, PreSeed or Commercialisation grant (like MdeC and Cradle grants). 4.2 Simplifying Bankruptcy Laws Discussion To promote a vibrant entrepreneurial ecosystem we need to simplify bankruptcy laws pertaining to companies and individuals. This is even more important especially if soft loans are part of the funding equation. The current law provides for a minimum of a 5-year bankruptcy period but with no automatic release. Without an automatic release mechanism
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  and a “cleanslate” thereafter, risk-taking and entrepreneurship will be curtailed as few entrepreneurs will take on the risk of a loan in their venture. For many bankrupt Entrepreneurs the current laws have become a “life sentence” just for taking an entrepreneurial risk. This does not foster Entrepreneurship but instead seriously constrains it. A comparison with the more entrepreneurial nations shows the scale of difference in their bankruptcy laws compared to Malaysia‟s. Country Bankruptcy Period Automatic Discharge Australia/New Zealand 3 years but small Yes bankruptcies can be earlier USA No specific period but Yes generally between 1 and 3 years Holland 3 years Yes UK 3 years Yes Canada 9 months with some Yes conditions (creditors can object with good reason) Recommendation We propose that the bankruptcy laws in Malaysia follow the more entrepreneurial economies such as UK, Holland, Australia & NZ and the USA. Malaysia should change its bankruptcy period to a maximum of 3 years and then an automatic discharge thereon. For bankruptcies for principal amounts owing below RM500,000 we propose a period of 2 years with an automatic discharge thereon. 5.0 Sustainability of Growth of Green Investments Referring Section 6.3.8 SRI 8: Ensuring sustainability of growth Facilitate bank lending and financing for „green investment‟ - Develop banking capacity to assess credit approvals for green investment using non- collateral based criteria
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  - Support greentechnology investment with greater emphasis on venture capital funds Discussion For most green investments there is a tangible benefit in reducing electricity costs. However, electricity is considered „cheap‟ in Malaysia and is controlled, thus the payback period for technology related adoption would naturally be longer. Regardless, fossil fuels are expected to be more expensive and are a diminishing resource. The Kyoto Protocol provides for another source of revenue in the form of carbon credits. Projects under the Kyoto Protocol are termed Clean Development Mechanisms (CDM). The cost of registering CDM and the associated time to do it is quite substantial and requires very capable project design skills not easily available in Malaysia or the region. Although banks can provide financing for green projects, the amount of equity required is still big for most of the local VCs. For example, a composting facility to treat 200 mt of organic waste a day could cost RM 10-30 million depending on complexity and technology used. Banks still require at least a 20:80 equity to debt ratio, and this would mean an equity investment of at least RM 2 million (low-technology solution) to RM 6 million (higher value technology solution). Investment returns need to pass hurdle rates, and a buyback of both the off-take fertilizer and carbon credits is important for a bank to finance projects like this. However, bio-organic fertilizer adoption continues to be challenged by chemical fertilizer producers and is thus a further distortion of the industry. Government must be careful in how environmental projects are regulated, because regulation could kill the nascent CDM industry in Malaysia. This is due to what the UNFCCC termed as additional in-qualifying carbon projects. Recommendation Since banks usually do not have expertise in assessing green investment, hence this is better done with a Special Purpose Vehicle such as MDV. In terms of VC funding, VCs will be there if there is money to be made. The action item is to first show them the money, by starting with grants and seed or commercialisation funding, and the industry needs to grow. Then the VC money will start coming in. In parallel, government should consider a carrot approach so as not to construct regulation that could kill carbon credits. As of today, the government has taken steps to reduce green adoption risks – lending facilities, some credit guarantee and policies. We recommend that the Government set up an investment fund outsourced to fund managers familiar with carbon funding. These can be in the form of joint ventures between Malaysians and foreign fund managerss many of whom can only be found outside
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  of Malaysia andmost probably in London or Hong Kong, the two most established centres for carbon trading and financing. Green funds are becoming more and more prevalent especially with the US administration showing signs of global participation. The funds that are being set up in Hong Kong, London and San Francisco are considerable, especially in the wake of significant government policies to make green mainstream and profitable. The Malaysian government should tap into co- investment opportunities with these funds. However, Malaysian fund managers have very limited understanding for both evaluating green opportunities both technologically or for project development. While looking at importing green investment skills to catalyze the green industry, the government should look at developing capacity in professional development, local engineering skills, bio-tech and ICT integration capabilities, and marrying business integration with green technology effectively. TeAM have an established team in the key technological areas of ICT, Biotech and Green Tech, and through its council members and affiliates could readily assist the government in Green Development at all stages of investments and project development. 6.0 Promotion of Microenterprises and SMEs Referring Section Appendix 3: Targeted actions needed for promoting microenterprises and SMEs Medium segments: - Current situation: Need training, Need capacity building, Not fully exploiting ICT, Poor growth strategies, Lack financing, Low technology, Low networking - Possible approach: Skills training, Build inter-firm linkages, especially with large firms, to provide opportunities for market and product expansion, Encourage adoption of ICT applications, Encourage more technology, innovation and R&D Discussion We agree that more needs to be done to promote the growth of Microenterprises (MEs) and SMEs. Some possible approaches for these two segments are as follows: a) To provide more business skills training b) Build inter-firm linkages, especially with large firms, to provide opportunities for market and product expansion c) Encourage adoption of ICT applications and technologies d) Encourage more technology, innovation and R&D. e) In many government or GLC tenders for ICT solutions, there is a tendency to adopt or utilise foreign products and reject local ICT innovations. This does not assist in the
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  creation of successfulSMEs. There are some barriers including requesting for software source codes when delivering solutions, thereby asking the company to reveal its Intellectual Property and hence its competitive edge. Recommendation We recommend the following: a) That Agencies that provide skills training or fund the provision of such training reevaluate the existing training programs being offereed. Many of the programs are better suited to the old economy especially the manufacturing sector and do not adequately cover the growth industries of ICT, Biotech and Green. The reevaluation should be done together with the relevant expert agencies and industry players and Associations. b) The documentation requirements for training programs should also be revamped to be better aligned with the new sectors. Currently documentation requirements often ask for redundant documents like Council Licences or MIDA certification when such documentation are not required in these new sectors. In many cases MEs and SMEs cannot attend training programs because of the requirement for such documentation. c) That agencies that currently assist these enterprises such as SME Corp and MATRADE realign their ICT, Biotechnology, and Green industry committees, to better align with the market and with the changes taking place in these industries. While these agencies are already engaging with industry we propose a closer engagement framework with the formation of small committees for each of these sectors to formulate strategies and programs that best suit each industry or sector. d) We propose that for government tenders, local enterprises be given greater opportunities to provide home grown technologies and solutions especially where such technologies exist. All things being equal Government should buy Malaysian and should encourage the GLCs to do the same. e) For the private sector, we propose double tax benefits for using locally produced and certified products and services. Hence for ICT products companies that use solutions produced by MSC companies should be given double tax benefits as this will greatly encourage the use of local innovations. f) In Government procurement or tenders it should do away with the requirement that companies submit product source codes when delivering ICT solutions. 7.0 Conclusion TeAM fully supports the formulation of the NEM as this is necessary for the country to remain competitive in a highly sophisticated and globalised world. To compete more
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  effectively we haveto adapt and change. Despite the many years of prosperity most Malaysians remain low income wage earners. The future of the country depends not just on entrepreneurs but more so on Technopreneurs to lead the way. Technopreneurship is the key to the future of the country, towards achieving a high income and high value economy. Government needs to be engaged continuously with industry and academia so that together we can make Malaysia a better place to work and live. TeAM‟s aspiration is to be a partner with the Government in formulating policies that will foster Technopreneurship and help create economic value added and growth. These recommendations are a start as we hope the NEM will adopt our recommendations and that together we will build a beter future for our country.