new economic model and its impact on ict, biotech & green industries conducted by dr.v.sivapalan...

NEW ECONOMIC MODEL AND ITS IMPACT ON ICT, BIOTECH

& GREEN INDUSTRIES

Conducted by Dr.V.SivapalanTeAM Adviser29th April 2010

Dialogue session

Professional Development

TeAM Profile

EXCO MEMBERS:President: Ms. Koh Lee ChingDeputy President I: Dato’ Dr. Rajen M.Deputy President II: En. Nazrin HassanHon. Secretary: Mr. Premesh

ChandranHon. Treasurer: Mr. Daniel

Cerventus

Community Developme

nt Think Tank & Voice for local Technopreneu

rs

Technopreneurs Association of Malaysia 2010.All Rights Reserved.


TeAM’s representation in various government committees

MAJLIS INOVASI NEGARA (NIC)

JAWATANKUASA TINDAKAN PENYELARASAN INOVASI NEGARA (JTPIN)

J/KUASA KECIL TEKNOLOGI

MOSTI

J/KUASA KECIL PEMBIAYAAN

MOF

J/KUASA KECIL SME/TEKNOPRENEUR

SMIDEC

NATIONAL IT COUNCIL (NITC)

GOVERNMENT GRANT APPROVAL COMMITTEES

MDeC Pre-Seed; MDeC MGS;

Cradle

Highlights of sections in New Economic Model that affect

ICT, Biotech & Green industries


2.2.2 Doing business in Malaysia is still too difficult

“…The country is becoming less attractive as an investment destination. Institutional structures, processes and policies also contribute to the difficulty of doing business in Malaysia. Furthermore, entrepreneurs have identified issues such as inconsistent government policies, corruption, tax regime, labour policy and inflation as the main impediments for establishing businesses in Malaysia.”


3.3 Malaysia should lead the global green revolution

"Malaysia should embrace a leadership role in green technology and become a strategic niche player in high value green industries and services that play to our competitive advantages. The commercialisation of our natural biodiversity into high-value products and services will be a major national challenge. But it is also an excellent avenue for partnership between the private and the public sectors."


5.5.5 Attracting technologically capable firms

"The focus for the government in the future should be on developing a supportive environment for innovation and risk-taking and providing firms the opportunities to develop higher valued products for new markets."


6.3.3 SRI 3: Creating a competitive domestic economy

Subsidies, price controls and a myriad of distortion-creating incentives will be phased out.

Build entrepreneurship- Revamp the seed and venture capital funds to support budding entrepreneurs- Simplify bankruptcy laws pertaining to companies and individuals to promote vibrant entrepreneurship- Provide financial and technical support for SMEs and micro businesses, to move them up the value chain


6.3.5 SRI 5: Transparent and market-friendly affirmative action

Create market friendly affirmative action- Use transparent procedures and criteria- Use affirmative action as a means to promote building of capacity and capability


6.3.6 SRI 6: Building the knowledge base and infrastructure

Create an ecosystem for entrepreneurship- Easing entry and exit of firms as well as high skilled workers- Revamp the seed and venture capital funds to support budding entrepreneurs- Simplify bankruptcy laws pertaining to companies and individuals to promote vibrant entrepreneurship- Harness Web-based expertise and industry networks


6.3.6 SRI 6: Building the knowledge base and infrastructure (continued)

Promote an environment for innovation- Improve access to specialised skills- Ensure protection of intellectual property rights- Incentivise firms to embrace technology and move up the value chain- Enforce strict adherence to global standards and benchmarks- Fostering R&D links between the institutions of higher learning and the private sector- Align R&D to national growth objectives particularly in innovative and hi-tech fields- Open access to funding to competition among researchers- Ensure public procurement supports local innovation


6.3.8 SRI 8: Ensuring sustainability of growth

Facilitate bank lending and financing for ‘green investment’- Develop banking capacity to assess credit approvals for green investment using non-collateral based criteria- Support green technology investment with greater emphasis on venture capital funds


Appendix 3: Targeted actions needed for promoting microenterprises and SMEs

Small segments: - Current situation: Need for incubation, Lack access to financing, Lack entrepreneurial skills, Poor management/marketing skills, Low networking presence, Poor ICT usage- Possible approach: Provide office space, Skills development, including financial training, Credit guarantee schemes, Schemes to help raise productivity through upgrading, Linkages and exposure to opportunities with local firms and MNCs through effective networking



(continued)

Medium segments:- Current situation: Need training, Need capacity building, Not fully exploiting ICT, Poor growth strategies, Lack financing, Low technology, Low networking- Possible approach: Skills training, Build inter-firm linkages, especially with large firms, to provide opportunities for market and product expansion, Encourage adoption of ICT applications, Encourage more technology, innovation and R&D


Discussion

Based on NEM recommendations

Formulate a policy paper

Present to NEAC & other authorities as recommendations from TeAM

2.2.2 Doing business in Malaysia is still too difficult

“…The country is becoming less attractive as an investment destination. Institutional structures, processes and policies also contribute to the difficulty of doing business in Malaysia. Furthermore, entrepreneurs have identified issues such as inconsistent government policies, corruption, tax regime, labour policy and inflation as the main impediments for establishing businesses in Malaysia.”


Discussion Topics

Institutional Structure VC structure too rigid. Govt funds considered as a loan & not an

investment. Makes it difficult for them to invest. Needs to change Encourage Pension Funds to invest in VC. Even a 0.1% allocation will

amount to more than RM1 bil in new funds Grant & funding mechanism & organizations are under wrong

management. Creative Content fund under Bank Simpanan terribly managed SME Bank also not the right organization to manage soft loans Soft loans & grants should be managed by specific agency e.g MDeC to

manage all ICT incl. Creative Content; Cradle to manage ICT, Bio, Green & others; MDV to manage ICT & others for project financing; BiotechCorp to manage all Biotech & Green

These agencies have the experience & expertise to manage funds better Banks don’t have the knowledge base & experience

More ….

Discussion Topics

Policy Making Needs to be market driven & not policy, politics or institution

driven Govt needs to engage with industry & market players before

instituting policies that impact on industry E.g. New policy to convert grants to soft-loans can have long-term &

fundamental impact on innovation & entrepreneurship yet this is being done by govt without consultation and independent of industry

Policies should be created to meet industry needs as outlined by industry organisations & players Currently govt creates policies that are not needed by industry or

goes against industry recommendations. This is a sure recipe for failure

More …

Discussion Topics

Inconsistent Policies Policies should match market needs & policy directions

E.g. Govt encourages brain gain programs yet getting visas for educated & expert personnel is difficult and then their spouses are not given work permits

Govt has a Malaysia My Second Home (MM2H) program for ‘retirees’ to make this their home but they contribute little to the economy, yet young professionals who are significant contributors to the economy and the value chain cannot get residency in Malaysia

Govt encourages entrepreneurship but bankruptcy laws are very strict and is virtually a “life sentence” without automatic discharge. This discourages risk taking, one key element of entrepreneurship

More …

Discussion Topics

Corruption is inherent & does not foster a competitive industry sector Common knowledge that Govt ICT contracts are given to favored

parties without proper tenders who then “farm” out said contracts to the “real” ICT providers who do 99% of the work but only get 50 to 60% of contract sum, often just enough to give them a small profit margin or even a loss if there are problems - often related to cash flow issues because the main-con uses up the disbursements for non-contract related expenses.

The result: Most Govt related ICT work is not completed or badly done The money paid is lost because of leakages Retenders are often common leading to even more money needed for

the project, hence wastage of public funds Benefits of the project are delayed

Discussion Topics

Corruption is inherent & does not foster a competitive industry sector

Recommendations All projects above RM50k to be on open tender All companies to be allowed to tender direct without middleman Companies to be shortlisted on merit – experience & expertise Evaluation panel names to be revealed on Internet for transparency Decisions on awards to be transparent Any Co that fails to complete work both Directors & shareholders to be

placed on blacklist All tender awards to be posted on the Internet for transparency

5.5.5 Attracting technologically capable firms

"The focus for the government in the future should be on developing a supportive environment for innovation and risk-taking and providing firms the opportunities to develop higher valued products for new markets."


Discussion Topics

What is a “supportive environment for innovation & risk taking”?

What “opportunities to develop higher value products” do we need?

What are these “new markets”

More …

6.3.3 SRI 3: Creating a competitive domestic economy

Subsidies, price controls and a myriad of distortion-creating incentives will be phased out.

Build entrepreneurship- Revamp the seed and venture capital funds to support budding entrepreneurs- Simplify bankruptcy laws pertaining to companies and individuals to promote vibrant entrepreneurship- Provide financial and technical support for SMEs and micro businesses, to move them up the value chain


Discussion

Build entrepreneurship- Revamp the seed and venture capital funds to support budding entrepreneurs Latest revamp for RMK10? Converting grants to soft loans is a disaster

waiting to happen. No more risk taking & no more innovation & R&D. Instead we need to structure a more appropriate set of funds for the

lifecycle of the entrepreneurial firm: Idea stage – RM100k & below - Angels Pre-Seed – RM150k (Grant bec of high risk) Seed (commercialization) – RM500k to RM1 mil (conditional Grant, still risky

but not as high) Growth/Expansion – RM3 – 5 mil (VC & Soft loans) Mezzanine & mature – RM5 mil & over (VC & Soft loans)


Discussion

Build entrepreneurship- Simplify bankruptcy laws pertaining to companies and individuals to promote vibrant entrepreneurship Need to simplify bankruptcy laws esp. if soft loans are part of funding

equation Current laws 5 years & still no automatic release Can be a “life sentence” just for taking an entrepreneurial risk Limits risk-taking & entrepreneurship Propose follow mature economies

UK, Holland, Australia & NZ – 3 years automatic US no formal period but generally less than 3 years Canada – 9 months Proposal for Malaysia – maximum 3 years, then automatic discharge


Discussion

Build entrepreneurship- Provide financial and technical support for SMEs and micro businesses, to move them up the value chain

What kind of support?


6.3.5 SRI 5: Transparent and market-friendly affirmative action



Discussion


What procedures? How to build capacity/capability?Follow tender process discussed earlier?


6.3.6 SRI 6: Building the knowledge base and infrastructure

Create an ecosystem for entrepreneurship- Easing entry and exit of firms as well as high skilled workers- Revamp the seed and venture capital funds to support budding entrepreneurs- Simplify bankruptcy laws pertaining to companies and individuals to promote vibrant entrepreneurship- Harness Web-based expertise and industry networks


Discussion

Create an ecosystem for entrepreneurship- Easing entry and exit of firms as well as high skilled workers MSC Status & Bionexus already provides for this Skilled worker benefits should be extended to all high-value,

innovative Cos – but benchmarks necessary SME Corp creating new 1-InnoCERT companies with

additional benefits Any others?


Discussion

Create an ecosystem for entrepreneurship- Revamp the seed and venture capital funds to support budding entrepreneurs- Simplify bankruptcy laws pertaining to companies and individuals to promote vibrant entrepreneurship

Discussed.


Discussion

Create an ecosystem for entrepreneurship- Harness Web-based expertise and industry networks We have

What else can be done?


6.3.6 SRI 6: Building the knowledge base and infrastructure (continued)

Promote an environment for innovation- Improve access to specialised skills- Ensure protection of intellectual property rights- Incentivise firms to embrace technology and move up the value chain- Enforce strict adherence to global standards and benchmarks- Fostering R&D links between the institutions of higher learning and the private sector- Align R&D to national growth objectives particularly in innovative and hi-tech fields- Open access to funding to competition among researchers- Ensure public procurement supports local innovation


Discussion

Promote an environment for innovation- Improve access to specialised skills What sort of skills? What kind of access do you need? Immigration & Visa rules to be changed. Easy entry & PR for skilled personnel? Better than

MM2H!

- Ensure protection of intellectual property rights Laws are fine, needs better enforcement Who should enforce?

- Incentivise firms to embrace technology and move up the value chain What kind of incentives? How to get more SMEs to embrace technology? How can Govt or Govt policy help? Carrot & Stick approach: Double tax benefits, grants for tech adoption, etc and No more

cheap foreign labor! More …


Discussion

Promote an environment for innovation- Enforce strict adherence to global standards and benchmarks What global standards? CMMI?

- Fostering R&D links between the institutions of higher learning and the private sector Some initiatives already by MOSTI & MOHE What can TeAM do?

- Align R&D to national growth objectives particularly in innovative and hi-tech fields How? What do we recommend?


Discussion

Promote an environment for innovation- Open access to funding to competition among researchers Isn’t it competitive now? More transparent with industry experts as evaluators R&D grant should have 25% commercialization component

(fosters working relationships bet IHL & private sector). IHL provide R&D, industry commercializes.

- Ensure public procurement supports local innovation How?



Small segments: - Current situation: Need for incubation, Lack access to financing, Lack entrepreneurial skills, Poor management/marketing skills, Low networking presence, Poor ICT usage- Possible approach: Provide office space, Skills development, including financial training, Credit guarantee schemes, Schemes to help raise productivity through upgrading, Linkages and exposure to opportunities with local firms and MNCs through effective networking


Discussion

- Current situation: Need for incubation, Lack access to financing, Lack entrepreneurial skills, Poor management/marketing skills, Low networking presence, Poor ICT usage- Possible approach: Provide office space - done, property play. Need a properly

structured centre not just office space Skills development, including financial training – Lots available

now, need to be better structured to fit needs Credit guarantee schemes - Isn’t it already available? Still

does not help tech Cos with no collateral. Does not work!


Discussion

- Possible approach: Schemes to help raise productivity through upgrading,

How? More incentives? What will work?

Linkages and exposure to opportunities with local firms and MNCs through effective networking Is this effective? Is anyone doing this? Can TeAM do this?



(continued)

Medium segments:- Current situation: Need training, Need capacity building, Not fully exploiting ICT, Poor growth strategies, Lack financing, Low technology, Low networking- Possible approach: Skills training, Build inter-firm linkages, especially with large firms, to provide opportunities for market and product expansion, Encourage adoption of ICT applications, Encourage more technology, innovation and R&D


Discussion

Medium segments:- Current situation: Need training, Need capacity building, Discussed. Needs to be better evaluated to provide whats really

needed.

- Possible approach: Skills training - discussed Build inter-firm linkages, especially with large firms, to provide

opportunities for market and product expansion – TeAM market access, ADeX. Need to do more? What?

Encourage adoption of ICT applications – Its not like we have not been trying! What more can be done? Policy initiatives? What?

Encourage more technology, innovation and R&D – How?


3.3 Malaysia should lead the global green revolution

"Malaysia should embrace a leadership role in green technology and become a strategic niche player in high value green industries and services that play to our competitive advantages. The commercialisation of our natural biodiversity into high-value products and services will be a major national challenge. But it is also an excellent avenue for partnership between the private and the public sectors."


Discussion

Embrace a leadership role in green technology and become a strategic niche player in high value green industries and services that play to our competitive advantages.

How? What should we focus on? Do we have competitive advantages?


6.3.8 SRI 8: Ensuring sustainability of growth

Facilitate bank lending and financing for ‘green investment’- Develop banking capacity to assess credit approvals for green investment using non-collateral based criteria- Support green technology investment with greater emphasis on venture capital funds


Discussion

Facilitate bank lending and financing for ‘green investment’- Develop banking capacity to assess credit approvals for green investment using non-collateral based criteria

Short answer – banks have zero expertise Better done with a Special Purpose vehicle like MDV


Discussion

- Support green technology investment with greater emphasis on venture capital funds

If there is money to be made, VCs will be there We need to show them the money Industry needs to grow first Start with grants & Seed/commercialization funding


Discussion Topics

Any more proposals or recommendations for NEM?

Summary

Prepare draft proposal Put up on TeAM website, invite comments, suggestions Present to NEAC & Govt

Deadline 21st May 2010 to go on TeAM website 1 week for comments Then present to Govt

Thank You

Further info contact: Wing Yew

Email: [email protected]

new economic model and its impact on ict, biotech & green industries conducted by dr.v.sivapalan...

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