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MSC still lacks venture caps and talent push

September 07, 2000
URL: http://www.zdnetasia.com/news/dailynews/story/0,2000010021,20068560,00.htm

More capital and talent necessary for the success of Malaysia's MSC project.

Cyberjaya -- Malaysia still needs to speed up efforts to draw risk capital and grow more talent for its high-tech zone, the Multimedia Super Corridor (MSC), if it hopes to emulate the Silicon Valley.

This was the early consensus of some of top executives of global technology companies gathered here for a three-day high-powered international advisory panel meeting.

"I would like the venture capitalist industry to become more popular here and hope the government can provide more incentives to encourage it," Acer Group chairman Stan Shih told ZDNetAsia.

The founder of Taiwanese computer giant said Malaysia should consider a similar move to that of Taiwanese government that started a venture capital fund in 1984, which offered 20 percent tax deduction for every dollar invested.

Shih expressed skepticism of local enterprises' commitment to New Economy-styled ventures that the MSC hopes to promote. "I made an offer for a US$20 million venture fund last year specifically for the MSC, but there were no takers," he said. Shih's proposed fund had a caveat that it would only be set up if a local partner could fork out half the expense.

"The commitment of local companies is key. Multinationals may invest in the project but it is the new startups that are crucial. I believe the younger generation is ready to participate, but they need support from the private sector," he said.

Acer has just set up a US$260 million fund called IP Fund One under its VC arm for Internet startups with the Government of Singapore Investment Corporation, the Singapore Economic Development Board and Nomura Securities of Japan.

Shih said at least half of that will be earmarked for Asia Pacific companies, while the other half will be invested in the US. "We are in the process of evaluating investments here through the Singapore fund," he said.

Shih said he was impressed with the overall broad vision of the project, but emphasised the need to quickly move into niche areas by leveraging on foreign partnerships or purchase new technologies outright.

"Technology is global, applications are local. Identify an innovative application you can excel in and form a research team that will pull in the talent to make it happen, then market it to the region and the world. The team must be ahead of the curve, and very competitive to put the MSC on the map," he said.

Capital & talent key factors
Panel member Professor William Miller said growing talent and attracting VCs were central to the project's success, but risk capital was a very American phenomenon.

"Not many countries outside the US have experience with venture capital. And Silicon Valley VCs are not coming to Asia possibly because the opportunities are still growing over there," said the Stanford University academic who hosted the first panel meeting held at the university in 1997.

Malaysia has been struggling to draw VCs to invest in local MSC companies, which comprise over half of the 350 companies that have invested in the project so far.

The Multimedia Development Corporation that oversees the development project set up its own RM120 million MSC Venture One fund last year after US venture capitalists spurned overtures to come to Malaysia.

But the fund has been criticised for being government-owned and slow in dispensing the cash. MDC officials have blamed poor business plans among applicants for the glacial process.

Miller said Malaysia faces serious competition to attract VCs from the likes of Taiwan, Japan, Korea, Singapore and Israel. "Malaysia is probably behind many of these countries but it's never too late. You have to start somewhere. The Silicon Valley took over 100 years to get where it is today. Taiwan took 30 years to emulate the Valley culture. I think Malaysia may get there more rapidly. It's good there is an emphasis in the MSC on education. You don't get talent overnight."

Miller said he was "optimistic" that various pockets of entrepreneurship will eventually spring up in the MSC.

Another panel member Ben Verwaayen, vice chairman of Lucent Technologies said he was impressed with the developments so far. "Malaysia needs to focus on education because knowledge and skills is what the New Economy is all about. It is also encouraging to see the discussion centred on how to attract risk money, particularly for small and medium enterprises," he said.

Lucent has invested US$15 million in the set up of GSM and 3G research lab within the MSC.

Verwaayen dismissed criticisms that Malaysia's MSC has become a laggard compared to other regional technology hubs. "In some aspects it has been slow, and in some aspects it has been fast. I think it's important to understand this is not going to be a smooth ride. It's a bumpy ride all the way," he said.

Prominent attendees present
Attendees to this year's panel meeting included former Apple CEO Gilbert Amelio and current managing partner of venture cap Beneventure Capital, SGI CEO Bob Bishop, Madge Networks chairman Robert Madge, NEC chairman emeritus Tadahiro Sekimoto and Fujitsu chairman Tadashi Sekizawa.

Only 12 members of the 44-member panel showed up for this year's meeting, while 17 others sent representatives. Notable exceptions were Microsoft chairman, Bill Gates, IBM chairman Louis Gerstner, Oracle chairman Larry Ellison, Softbank CEO Masayoshi Son, Sun Microsystems Scott McNealy, British Telecom CEO Peter Bonfield, Ericsson chairman Lars Ramqvist and Motorola chairman Chris Galvin.

The panel was set up in 1997 and meets annually to provide personal advise to the Prime Minister Dr Mahathir Mohamad and his government on the strategic direction of the multi-billion ringgit project.

Malaysia's MSC project, currently in its fifth year, is a 750 sq km zone south of capital Kuala Lumpur that Malaysia hopes of becoming a global research center and focal point for knowledge workers to develop innovative technology products and services.

Julian Matthews is ZDnetAsia's correspondent in Malaysia