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Why Malaysian companies must expand into ASEAN's US$48 billion pie: MDEC exclusive

AvantiKumar | April 5, 2017
In a Computerworld Malaysia 'Deep Dive' interview, MDEC's Gopi Ganesalingam includes an update on the national GAIN programme announced last year, which pointed to 'an ASEAN pie' worth US$48 billion.

MDEC 2016 Immersion markets map

(Credit: MDEC) - MDEC Immersion markets map

 

  In October last year, national ICT agency Malaysia Digital Economy Corporation (MDEC) officially launched a programme, GAIN, which nudged Malaysian companies towards opportunities in the ASEAN region worth up to US$48 billion.

At that time, I listened to MDEC's vice president of Infotech Industry Development, Norhizam Abdul Kadir telling media that IDC [Asean ICT Market Landscape study] expected the fast -growing Asean ICT market to continue its rapid growth from the current worth of US$42 billion to US$48 billion by 2018. (See - MDEC points Malaysian companies to US$48 billion pie).  

Also present at that launch, IDC Malaysia's country manager Vijay Sundararaman said that IDC would be helping to identify partners and market opportunities. "We have presence in all the Asean markets mentioned. We are trying to help companies scale up and address opportunities in each market. The traditional approach of using events and other 'brick and mortar' strategies to penetrate markets belonged to the 1980s and 1990s and needed to be complemented by the courting approach."

Many industry leaders also conveyed a sense of urgency in their 2017 forecasts to Computerworld Malaysia's roundup.  The year 2020, the national milestone for a developed digital economy, is just around the corner, a few of them told me. (See - What's really in store for Malaysia's IT industry in 2017?)

In this 'deep dive' interview with Computerworld Malaysia, MDEC's vice president for enterprise development, Gopi Ganesalingam, gives a status update on the GAIN programme. I asked him how effective the GAIN (Global Acceleration and innovation Network) programme has so far been in helping Malaysian companies getting more visibility and credibility across the region.

MDEC VP for enterprise development Gopi Ganesalingam

Photo - Malaysia Digital Economy Corporation (MDEC) vice president for enterprise development Gopi Ganesalingam

Entrepreneurs do need to cast their nets wider than just the Malaysian market, for which visibility would be a key component in achieving the goal, opened Ganesalingam.

"The local market is too small for a company to grow big; they have to venture outside," he said. "Visibility is the gain that they most probably appreciate, and you can tell. This visibility is the main reason why MDEC started the Global Acceleration and Innovation Network (GAIN) - and the statistics show that it's working. More deals are getting secured - and so far 2017, we want to scale up all that is working, we want to scale up visibility maybe into the region. We did it in the Association of Southeast Asian Nationas (ASEAN), and I think we need to go beyond ASEAN because it's all about globalisation."

Gopi said that Malaysian companies have been underestimated by many - and that they are proving the critics wrong in so many ways. "There's a lot of talk in the marketplace that Malaysian companies are not good enough in the region, and other remarks to that effect. But if you really look at the entrepreneurship that is happening in Malaysia - despite so many challenges thrown at us, you see a lot of these Malaysian companies doing well in the region," he said, adding that MDEC was working with these companies to further prove the naysayers wrong. "We identify these promising Malaysian tech companies, and we are now showcasing them. Because when you have third-party validation, then there is a lot of credibility given to these companies."

He said that the potential had always been there, and that it was merely a case of not getting the right exposure about their capabilities. "Before this, I think there was nobody really shouting about them. But despite that, you see that between 1998 and 2015, there were 13 initial public offerings (IPOs) done in ASEAN. Out of the 13, six are Malaysian - so just slightly less than 50 percent came from us," he said, adding that GAIN would bring out more of these companies and offer them the means to outperform the competition.

Key areas

Gopi said that GAIN would focus on four key areas to help entrepreneurs: market access; self-improvement; funding; and visibility. "For market access, the first step for these entrepreneurs is, of course, ASEAN. As I said earlier, they have to venture outside - and they are starting to make an impact. I think that we have also seen traction into the US, Japan, the Middle East, and we are beginning to get a lot of traction now into Europe via London. We are working these channels out with these 200-300 companies."

He added that these companies were able to find and grow their own niche areas, and able to hold their own against other tech countries such as India, Japan, and Korea. "Six years ago, we didn't have GAIN - which was only started in 2015 - but you can see that the traction is taking, that it is making a visible impact. Suddenly, you have a lot of tech companies coming to us. So we know that it's working, we can see the numbers - now, it's just a matter of scaling it up."

Gopi stated that MDEC was always on the lookout for companies that can be groomed to take things to the next level. "It's a moving list. Some need drop-offs; some may be bought over; some new ones will come in - the team is watching, and we have our radar open. If they come on to our radar - and they are coming in because of the success stories - we want to ensure that Malaysian tech companies out there know that we have this programme. We want them to talk to us. If we find that they have the potential and we can find the pitch, we will want them to join our programme," he said, adding the programme included courses on providing branding leadership, thought leadership, speaker roles, and national mentorship .

When asked whether Malaysia was a little bit late in achieving these goals, Gopi said, "I wouldn't say that we were late; rather, I would say that we should have intervened a little earlier, and that GAIN should have started a little bit earlier. It's a journey, it's always a journey - but the journey has started. I think the important thing is that we have started, it's now how we accelerate."

On self-improvement, Gopi said that GAIN was the right platform for entrepreneurs to upgrade themselves, not the least because of the way the programme is structured. "These entrepreneurs are quite independent - they know what to do, and they don't need to be hand-held. They just need the platform - and GAIN is the right platform. When they sit on the platform, and we have all these underlying programmes running - what we are giving them is a lot of business approaches. We have in our team mostly entrepreneurs who have run a business before. Me myself, I am an entrepreneur! So, our programmes are very business-like. It's like an entrepreneur running a programme."

In addition, he also talked about talent development that can help companies to improve. "Talent is very crucial, we recognise that. That is one of the reasons why we have introduced computer science to schools - starting this year - for Standard 1, Form 1, and Form 4. Computer science is very crucial for analytical and computational thinking, and we have started implementing it in 10,000 public schools - all sekolah kebangsaan," he said, adding that a lot of tech companies were cooperating with MDEC in taking in graduates not only to train them to think digitally/differently, but also to run courses.

Gopi said that two of the pillars - funding and visibility - went hand in hand in advancing the programme participants. "Of course, for funding, we don't have money to give directly - but we are able to point them in the right direction. And if you look from 2010 till 2016, we had 100 Malaysian tech companies that got funding from either venture capitalists (VCs, at a figure of around 37-40 percent) or mergers and acquisitions, fresh equity, etc. Mind you, these are not grants, these are funds."

"I think that the most important aspect of all this is that it has given these companies visibility, which is what this programme is about. It's creating the perception, the change in the funders, to change the way they are investing," he said. "Traditionally, they tend to invest in brick-and-mortar businesses - but now, they are getting the hang of it, they are getting exposed to what Silicon Valley is doing, and they are getting exposed to what the more mature markets are doing."

Gopi said that the bets that some of the more mature VCs were taking on tech companies are starting to pay off. "They are understanding this - and the fact that they understand what technology is moving is helping out. I think the landscape in Malaysia has changed, and I think that GAIN is helping a lot in effecting this change."

Success stories

He gave the example of two local companies that have had undergone the GAIN programme and seen results: GHL Systems and iPay88. "GHL, as you probably know, is a payment gateway; when you swipe your credit card, the machine in which you swipe will most like be a GHL terminal. Amazingly, they have become the biggest player in ASEAN for this market, they've found their niche. They have been working with us - and clearly, they have benefited."

"And then, there is iPay88, which is an online payment gateway service and solution provider," Gopi said. "If you do online trading, and you want to pay, they are one of the biggest players. And they are amazing! It's a Malaysian company that got Japanese system integration company NTT DATA Corporation to invest in them. NTT DATA - which is a subsidiary of Nippon Telegraph and Telephone (NTT) - found that iPay88 had a certain technology which they are using that actually was far superior than the one being used by the mother company in Japan - so they took that technology back to Japan for implementation! iPay88 has been working with us for the last one-and-a-half to two years - and they have certainly been given third-party validation."

According to GHL System executive director Raj Lorenz, the company has benefitted from being a GAIN company and given it "prominence and coverage in ASEAN. This has helped us a fair bit in being noticed by banks and other players in the payments segment."

Meanwhile, executive director and co-founder of iPay88 group of companies K.L. Chan said that, in a truly disruptive borderless business world, having a truly visionary partner is one of the important key success factor in building a successful enterprise that is truly global and disruptive. MDEC has proven to be that valuable partner to iPay88 and this has enabled iPay88 to achieve new heights both regionally and globally."

"The people representing MDEC are highly successful people with proven track records, both in the corporate world and also as entrepreneurs themselves. CEO Dato Yasmin and her high impact "out of the box" team have created a very effective community of successful companies and its founders to network and share knowledge and experience, said Chan.

iPay88 have gain significant traction in our overseas business expansion plans by tapping into MDEC's network, he said. "MDEC has also encouraged us to continuously introduce disruptive technologies and new business models. At the same, we are appreciative of MDEC's efforts in areas like talent sourcing and management, while also opening doors to government agencies both local and overseas. We are blessed to have such partner like MDEC."

MDEC's Gopi said that these results were exactly what GAIN was aiming for. "This programme aims to promote more of these companies. I think we are all over the place - but if we give them all the right intervention with what GAIN is doing with the four pillars that I spoke to you about, we will see better results."

He said that MDEC wanted to see more companies make a huge impact on the world at large. "What I would like to see - at the very least - is that they've become kings in Asia. I hope they grow, and I would like to see them as global players - but at the very least, kings in Asia. And of course, these newly-minted global behemoths should have their headquarters in Malaysia! Definitely in Malaysia. It has to be."

"In fact, we are already encouraging a lot of foreign companies - look at iflix, they have set up their base here, they are growing their base here, and they just raised another US$90 million (RM399.38 million) recently. iflix is in Mid Valley," said Gopi. "A lot of these companies are being set up in Bangsar South, in Cyberjaya. I think Malaysia is very ripe for firms to set up their headquarters, because we have the proper infrastructure, we have the right price points, we have the right talent; why would you want to pay 40-60 percent more setting up somewhere else - especially if you are going to scale up the business, and you require a large number of people?"

 The importance of competition

 Gopi also said that there was still much that local firms could learn from other countries. "I think that is a continuous game. We always learn from other countries - and I think we also teach other countries. But despite all that, our exports numbers have gone up, our investment numbers have gone up. There is something that we are doing right."

"If you look at the digital economy, you don't just look at Malaysia. The digital economy is anyone with an Internet connection - it's your marketplace. So you shouldn't really concentrate on Malaysia, in that sense. In Malaysia, they can be big - but they would just a big fish in a small pond. We want them to be a big fish in a big pond. So we need to globalise them - and that's what GAIN is all about that: getting their mind-set to think globalisation," he said.

Gopi believes that global demand and opportunities would not be a problem for local entrepreneurs
, who have proven to be surprisingly adaptable. "Look at what Uber is doing - and then see how Grab, a local company, is replicating it. I think it is how creative you are being in the marketplace that will make the difference. I think that the days of the brick-and-mortar are fading, and the big companies are now slowly transforming into these digital companies. At times, it's seamless - and entrepreneurs know how to create that demand. We think that they don't have demand - but somehow, they just know how to create the demand, and confound expectations."

Gopi ended with a comment that the year will see more efforts from MDEC to scale up the successes and sustain the momentum. "The confidence is picking up, knowledge is picking up. I think the ground for VCs, the ground for the people with money has shifted - and they are now looking not at brick-and-mortars but they are looking at tech. And it is our local companies that are the catalyst."

The latest edition of this article can be found at Computerworld Malaysia.

 

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