Transformation of Malaysia’s VC industry

TECHNOLOGY has and continues to rapidly change and transform businesses, government. social and economic landscape.

The World Economic Forum (WEF) had spotlighted in May 12, 2022, that start-ups are a catalyst for economic growth both globally and locally. The value that start-ups create is nearly on par with the GDP of a Group of Seven (G-7) economy and the amount of start-up funding in 2021 surpassed US$600 billion, shattering funding records. The number of unicorns is well past the 1,000 mark and growing exponentially.

In recognition that technology based businesses are contributing significantly to economic growth and national prosperity, governments worldwide are according priority to offer support and financing to this critical group of businesses.

The Malaysian government is strengthening venture capital (VC) financing and support for start-ups and tech-based businesses via major initiatives; Malaysia Venture Capital Roadmap (MVCR) and KL20 Summit 2024.

A Flashback to the Mid 1980s-2016

The Malaysian VC industry was established in 1984 with the formation of Malaysian Ventures Sdn Bhd. Between 2001 and 2008, various VC guidelines were introduced to facilitate industry growth.
Office of the Science Advisor (OSA), PM’s Department-1984

In 1984, a Science Advisor’s post was created in the Prime Minister’s (PM) Department. Tan Sri Dr Omar Abdul Rahman was the first appointee to the post till he retired in 2001. Dr Omar was instrumental initiating a number of national programmes for enhancing research and development (R&D) funding, for commercialisation of the results of research and for the overall improvement of the national science and technology management processes.

MIGHT-1993

Under the leadership of the Science Advisor, Dr Omar established Malaysian-industry Govt Group for High-Technology (MIGHT) under then the Office of Science Advisor, PM’s Department strengthening public private partnership for enhancing Malaysia’s high-tech ecosystem.

Following from strategic initiatives to consolidate R&D funding, it was observed that commercialisation of technology had faced challenges in seeking suitable funding to support technology-based businesses, thus strategies were developed to introduce innovation in financing to spur technological innovation.

MIGHT Consultation 1997 themed “Financing of High-Tech Industries in Malaysia” in March 1997

Recognising the urgent need to introduce innovation in financing to spur technological innovation including new models of financing to support and grow tech based businesses, MIGHT, Office of Science Advisor, PM’s Department had organised a MIGHT Consultation 1997 themed “Financing of High-Tech Industries in Malaysia” in March 1997 to provide an avenue for key stakeholders including government, private sector representatives from industry and finance sector, academics and technopreneurs to identify issues and factors that impedes the growth of technology driven businesses in Malaysia.

Then Minister of Finance, now Malaysia’s 10th PM, Datuk Seri Anwar Ibrahim had delivered a keynote speech at this event with international and national presenters providing a global and national overview of the current issues, challenges as well as best practices pertaining to the financing of technology-based businesses.

Life-cycle of a firm and stages of financing


Report on Enhancing VC Financing in Malaysia Outlining Recommendations to Support and Promote VC Financing in Malaysia-April 1999

Further consultations with additional stakeholders were conducted following from this event which culminated in the Report on Enhancing Venture Capital Financing in Malaysia, dated April 1999 which was submitted to the Ministry of Finance (MOF).

I was honoured to serve as chairman of the Drafting Committee of this Report Outcome of the Report — First large quantum RM500 million allocated for VC Financing-Budget 2000 announced in October 1999.

The above report dated April 1999 had highlighted the critical need for additional VC funding to further support tech-based businesses. Budget 2000 announced in October 1999, had allocated RM500 million for Malaysia’s VC industry.

Bank Negara outlined that special funds were allocated for Malaysia’s VC industry; RM200 million was launched to finance high-tech projects. Bank Industri Malaysia Bhd was restructured to become Bank Industri dan Teknologi Malaysia Bhd and is managing the fund and two VC funds for high-tech projects of RM150 million were launched. BNM channelled RM100 million each to Maybank Ventures Capital Comp Sdn Bhd and Commerce Technology Ventures Sdn Bhd. These two companies contributed another RM50 million each. Total funds available for start-up companies amounted to RM300 million.

Additionally as the then Multimedia Development Corp (MDC), now known as MDEC, was formed to support and promote ICT and multimedia companies, a RM120 million fund, MSC Venture One, was launched by the Malaysian Development Corp Sdn Bhd (MDC) to provide VC financing to IT and multimedia companies.

Malaysia’s 10-Year Financial Sector Masterplan 2001-2010 launched in March 2001

Several recommendations from this report was accepted by the MOF which were incorporated into Malaysia’s 10-Year Financial Sector Masterplan 2001-2010 launched in March 2001 setting the direction for amongst others VC financing in Malaysia for the next decade.

Second Quantum of RM500m Allocated for VC Financing and the Establishment of MAVCAP-Budget 2001 announced in October 2000

The MOF had reported in its Economic Report 2001/2002 that a VC fund amounting to RM500 million has been channelled to the newly established Malaysia Venture Capital Management Bhd (MAVCAP) to provide venture capital financing for high-tech companies in line with the strategy to develop innopreneurs and technopreneurs.

Establishment of MVCDC in 2005

The Securities Commission (SC) had outlined that in 2005, the Malaysian Venture Capital and Private Equity Development Council (MVCDC), chaired by the SC was established to deliberate issues and formulate recommendations pertaining to the VC/PE ecosystem. Membership of the council includes both public and private sector representatives, which facilitates the development of holistic policy proposals.

VC/PE Task Force was Set Up in Late 2016

Under the auspices of MVCDC, an industry-led VC/PE Task Force set up in late 2016, with the SC as the secretariat had explored various approaches to stimulate the mobilisation of the nation’s savings pool in financing innovation via VC/PE investments. Recommendations from the task force and MVCDC which were adopted by the Economic Council (EC) and announced in Budget 2018.

Fast Forward to 4 Decades Later-2024

April 1, 2024, had ushered in a watershed moment for Malaysia’s VC industry with the launch of Malaysia’s Venture Capital Roadmap (MVCR) 2022-2030 by Science, Technology and Innovation (MOSTI) Minister Chang Lih Kang.

MAVCAP CEO Shahril Anas Hassan Aziz had dovetailed that the roadmap presents 10% of efforts and that 90% would be needed for its execution.

Chang highlighted that the MVCR outlines three key strategies including i) Improving Ease of Doing Business; ii) Improving Funding Accessibility and iii) Elevating Talent Pool to foster a thriving VC landscape that nurtures entrepreneurship, fuels innovation and drives sustainable growth.

He also shared the government’s quest for Malaysia to attain a rank of the top 10 VC and PE Country Attractive by 2030 and beyond.

MAVCAP COO Noor Amy Ismail offered an overview of the Roadmap’s 11 interventions including enhancing cross-border capital flow, alignment of off shore and on shore tax incentives and increasing exit options.

MAVCAP had highlighted that it aims to nearly double its current RM758 million VC fund to RM1.4 billion growing the VC contribution to Malaysia’s GDP from 0.19% to 0.35%.

As chairman of Drafting Committee of the Report on Enhancing VC Financing in Malaysia1999, it is with great interest that I follow the progress and development of VC/PE in Malaysia, including the launch of the MVCR and wish to offer the following recommendations for the government of Malaysia to further strengthen our nation’s VC/PE.

Malaysia aspires to attain the rank of top 10 VC & PE country attractive by 2030 and beyond — pic source: MVCAP

Recommendations for Malaysia’s Govt

Select the Best Entity to Promote and Enhance Malaysia’s PE and VC

1. In Malaysia’s 10-Year Financial Sector Masterplan launched in 2001, one of the key recommendations called for the establishment of a one-stop centre to strengthen Malaysia’s VC landscape.
In 1999, MIGHT was instrumental in pioneering strategic initiatives to develop Malaysia’s VC industry. When MAVCAP was established in 2001, it was mandated to develop the nation’s venture capital sector.

In 2016, MVCDC established to deliberate issues and formulate recommendations pertaining to the VC/PE ecosystem had set up a task force in 2016 to provide recommendations to enhance innovation via VC/PE investments.

And recently as announced in the Budget 2024, Khazanah Nasional has been tasked to spearhead the strengthening of the local VC ecosystem in collaboration with VC agencies such as Penjana Kapital and MAVCAP.

Thus there has been several initiatives by a variety organisations and/or structures set up or tasked with enhancing Malaysia’s VC/PE industry.

In view that Chang had shared Malaysia’s aspiration to reach top 10 of VC/PE country attractiveness, it is imperative the government reviews international structures, organisations and or committees that have been set up for this purpose, in particular by the present top 10 VC/PE country attractiveness nations to identify the best model, structure or organisation for Malaysia to reach the desired ranking position.

2. In view of the critical need to offer a comprehensive range of financing to support tech based businesses, from early phase, to expansion phase and right up to later stages and IPO, it is imperative the government shift its focus from just strengthening VC financing, but instead to review the entire life cycle of tech-based business development and strive to strategise and strengthen other key financing sources including among others business angel financing, crowdfunding, private equity as well as debt financing of loans for targeted tech businesses including but not limited to IT, life sciences, drone tech and AI.

3. As the Ministry of Economy under Rafizi Ramli is putting great efforts to support start-ups through several initiative including the upcoming KL20 Summit 2024, cooperation among key ministries and private sectors could be better coordinated via a suitable organisational structure including the Special Advisory Committee to the MOF steered by Tan Sri Hassan Marican.

A Sub Committee or Task Force on Innovation in Financing to accelerate tech business development could be formed to ensure comprehensive suite of financing is available for tech businesses throughout their business life cycle to further support and spur Malaysia’s economic growth and prosperity.


Sheriffah Noor Khamseah Al-Idid Datuk Syed Ahmad Idid
Innovation & Nuclear Advocate
Alumna, Imperial College, University of London, United Kingdom
Chairman Drafting Committee of Report on Enhancing Venture Capital Industry in Malaysia