Malaysian Technology News
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By Julian Matthews

October 27, 2000

Malaysian Budget Seeks To Bring Back Brains and Attract VCs


Malaysia is seeking to draw back skilled Malaysians abroad and "the best brains from Bangalore to California" to give wings to its high-tech ambitions.

"We need a pool of the best talents from at home and abroad. Efforts need to be undertaken to hire the best brains regardless of race and nationality, from Bangalore to California. This is a step towards creating a world-class workforce," said Finance Minister Daim Zainuddin today.

He was tabling the national 2001 budget in parliament, which included various new proposals for Malaysia to play catch-up with rival tech-savvy Asian countries.

A garland of incentives was profferred for the many bright Malaysians abroad who wish to return. These included permanent residence status to foreign-born spouses and children of Malaysians within six months of their return, exemption of import duty on all personal belongings including two cars, and a tax exemption on remitted income from abroad for up to two years.

Malaysian students tend to stay in their host countries after graduating and talented staff in Malaysian-based multinationals are often snapped up for foreign assignments. Analysts have often pointed out that the key factor slowing Malaysia's participation in the New Economy was the lack of talent.

Daim called for a review of the implementation of Malaysia's Multimedia Super Corridor (MSC), a Silicon Valley-styled high-tech zone, south of the capital that was aimed at bringing in the talent. Into its fifth year, the multi-billion ringgit project is without a single visible success story.

He suggested that opportunities could be given to younger tech-savvy individuals to bolster the lack of expertise within the ranks of the MSC's promoter and developer Multimedia Development Corporation.

Daim also called for the set up another venture capital (VC) fund worth RM500 million (about US$132 million), similar to one set up last year, and was willing to have the management of the fund "outsourced" to speed up its use.

"Where necessary, the government is prepared to acquire new technologies through the acquisition of equity in foreign companies," he said.

The offer was an about-turn from Daim, who recently rebuked the private sector for appealing for hand-outs from government, and suggests the government's urgency to get in on the high-stakes risk-capital game.

Daim also proposed a new one-stop agency under his Ministry to grow and develop the non-existent VC industry locally.

To encourage angel investing, tax deductions would be given for the sum invested in seed capital and first stage financing of start-ups, with the caveat that investors not be allowed to divest shares in the venture company until after it was listed.

Malaysia also plans to liberalize listing requirements on high-tech exchange Mesdaq, which after a year and a half has only attracted two companies. The sore point with potential investors is a rule insisting that 70 per cent of listing proceeds be re-invested within the country, which Daim said will be changed.

The budget also was aimed at raising PC-literacy and the poor PC penetration rate among Malaysians.

The government will extend computer loans to employees every five years, while private companies can take tax deductions on new computer purchases for their employees.

Malaysian workers contributing to the Employees Provident Fund (EPF), a pension fund usually reserved for housing, will be allowed to make withdrawals for the purchase of computers.

Daim also promised to build 2,200 computer laboratories for schools nation-wide consisting between 12 and 43 computers each, with priority to those in rural areas.

Malaysia's proposed 2001 budget of RM91.05 billion (US$24b) will register a deficit of 4.9 percent of Gross National Product. The economy has all but recovered from the Asian financial crisis of two years ago when its gross domestic product (GDP) hit a low 7.4 percent contraction in 1998. In 1999 growth climbed back up to 5.8 percent, and Daim is projecting 7.5 per cent growth this year, and 7 percent growth in 2001.

Daim, who was the architect for Malaysia's capital controls that stemmed the slide during the crisis, said one of the last vestiges of the policy, a 10 percent exit levy on profits repatriated by short-term portfolio funds, will be scrapped.

He added, however, that Malaysia's ringgit peg of 3.8 to US$1 will remain because of its stabilizing effect on foreign investors.

The full budget speech and latest Malaysian Economic Report is available at the Finance Ministry Web site.

Published in Newsbytes

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