By Digital News Asia April 6, 2020
- 40% of startups expected to fold starting from June if not given helping hand
- Digital ecosystem created 80k full time jobs in Malaysia between 2008-2016
Future Digital, the think tank arm of the National Tech Association of Malaysia (Pikom), believes that the proposed US$57.4 billion (RM250 billion) Second Stimulus Package announced by the Malaysian Government to cushion the negative impact of Covid-19 should also cover the local technology startup community.
Future Digital is chaired by Ganesh Kumar Bangah, PIKOM’s immediate past chairman, who serves as a focal point for policy research and advocacy for Malaysia’s digital and tech industry.
“Future Digital is an independent and inclusive voice not only to the industry, but also to the government on policy and programmes,” said Ganesh in a statement issued by Pikom. He added that, if assistance were not rendered to the local startup community, some 40% percent of startups and social enterprises are expected to fold from June this year.
Pointing to a March survey by the Malaysian Global and Innovation Centre (MaGIC) which indicated that less than 3% of startups would survive if the Covid-19 pandemic drags on for the next 12 months, Ganesh notes, “The current stimulus provides little or no help for technology startups.” “These technology startups do not qualify for most loans as most are less than a year old without a track record and do not meet the minimum staffing count required. Should the Movement Control Order be extended for a few more weeks, it would be difficult for many of these companies to survive as they may have insufficient cashflow,” he adds.
Future Digital is recommending for the Government to help technology startups and provide immediate and medium term liquidity and funding to them.
Recommendations put forth by Future Digital are:
- To allocate US$45.9 million (RM200 million) from the allocated RM4.5 Billion announced to assist SMEs under the current Stimulus Package to fund technology startups. [RM1=US$0.23]
- Allocate this RM200 million in funding to funding agencies Malaysia Venture Capital Management Bhd (Mavcap) and Malaysia Debt Ventures (MDV) which can work with other government agencies such as Malaysia Digital Economy Corporation (MDEC) and MaGIC to disburse the funds as these agencies have a strong community of tech startups.
- The funding agencies should also work with private funding entities such as venture capitalists, angel investors and crowdfunding platforms. These government funds should be provided on a matching basis to companies that are able to raise funding from these private funding entities.
- The funding could be provided to the companies in the form of more innovative instruments such as convertible notes which can be innovated in Bank Negara Malaysia (BNM)’s sandbox.
- Government should continue to encourage private sector investments into technology companies and startups by providing matching investments and/or partial guarantees to Malaysian investors investing into Malaysian startups.
According to the Department of Statistics, Malaysia’s digital economy contributed 18.5% of GDP worth a total of RM267 billion in 2018. For e-commerce alone, its contribution to GDP was 8%. “The Malaysian startup ecosystem contributed a total of RM3.4 billion to the nation’s GDP from 2008 to 2016 and is projected to reach RM30.8 billion by 2030, giving it a significant role in nation-building,” said Ganesh.
“Within the same period, the digital ecosystem had also created 80,600 new full time jobs, attracted investment of RM1.3 billion in private and foreign funds and produced permanent recurring income effects on the economy,” he added.
Meanwhile PIKOM chairman Danny Lee adds: “By helping these companies through the above measures, it would ease the burden of employers in order for them to sustain their business. This ecosystem needs to survive through this difficult period so that it can continue providing employment while flourishing as a strategic engine of growth for Malaysia,” he added.