The Malaysian Global Innovation and Creativity Centre (MaGIC) received a much-needed boost from the recently-tabled Budget 2015 for one of its soon-to-be-launched programmes.

On Oct 10, Malaysian Prime Minister Najib Razak, also the Finance Minister, announced plans to make the country the location of choice for startups in the region.

“To attract more expatriate entrepreneurs establish startups in Malaysia, the paid-up capital for startups is set at RM75,000.

“Eligible expatriate startups entrepreneurs will be given a work pass for one year,” he said in his Budget 2015 speech in Parliament, without revealing additional information.

It turns out that these incentives only apply to those in the MaGIC Accelerator Programme (MAP), which is expected to be launched in the first half of 2015.

These measures and incentives were part of MaGIC chief executive officer Cheryl Yeoh’s proposals to the Prime Minister, she told Digital News Asia (DNA) via email.

Yeoh also said that the RM75,000 paid-up capital requirement was the minimum required capital for global entrepreneurs to qualify for the work pass.

“The MaGIC team is still in the process of working out the finer programme details, but global entrepreneurs who can enjoy this benefit will have to be accepted into MAP that we are launching in the first half of 2015.

“More details will be announced early next year,” she said.

Will they bite the carrot?

Under Malaysia’s current regulations, should an expatriate want to work in Malaysia, the company he is attached to has to have a minimum paid-up capital of RM500,000 if it’s a 100 per cent foreign-owned company, or RM350,000 if it has a mix of local and foreign ownership.

Such requirements may make potential foreign investors, businessmen and entrepreneurs think twice about setting up base here. More importantly, it may make them feel not welcome, industry pundits have said.

MaGIC’s Yeoh is optimistic that the incentive will attract global entrepreneurs to set up their business in Malaysia, as she is confident that the country is one of the better, if not the best, location for entrepreneurs targeting the South-East Asian market and its population of 600 million.

She said Malaysia can be positioned as a preferred destination for startups for various reasons: The fact that the most Malaysians are able to speak in English; the lower cost of living (compared with Singapore); and the relatively tech-savvy and social users.

“It also has a lot of hidden gems and talent — most of the region’s best tech IPOs (initial public offerings) or highest-valued [Internet] companies come from Malaysia.

“We also have attractive policies for startups, such as the MSC Malaysia status that allows startups to run tax-free for up to 10 years,” she said, referring to the Multimedia Super Corridor project which aims to develop the ICT industry in the country.

“MAP will also include other packages and programmes that would make it very attractive for any startup to apply. We’re not ready to reveal any details about this yet, so unfortunately, everyone will have to wait until January 2015,” she added.

Yeoh isn’t the only one who believes in Malaysia’s potential. Many global companies and entrepreneurs have based their South-East Asian headquarters or hub in the country.

Japan’s Hajime Hirose, chief executive officer and cofounder of consumer mobile app developer BuzzElement Sdn Bhd, said that he selected Kuala Lumpur (KL) as his company’s base for many reasons, including the growing startup scene in KL, the advanced communications infrastructure, a pro-business government, talent availability, and others.

“I see KL as a gateway to the 600-million South-East Asian market,” Hirose said when contacted by DNA.

Improve ecosystem visibility

Technopreneurs Association of Malaysia’s Policy Institute (TeAM-PI) director Dr V. Sivapalan believes that MaGIC’s programme, which is based on the successful Startup Chile programme, has the right ingredients to be a success.

“Entrepreneurs will go to places where they are wanted and appreciated. Chile wanted them, Singapore wants them, and certainly America has always encouraged a diversity of talent and skills,” he said.

“With this programme, we are also showing the world that we want entrepreneurs and this alone is a good start. The availability of government support, funding, talent and an active ecosystem will attract them,” Sivapalan said.

Cradle Fund Sdn Bhd chief executive officer Nazrin Hassan said that MaGIC’s programme could improve the country’s tech startup ecosystem’s visibility.

“The common lament is that the Malaysian ecosystem is more developed and does far more than many other ecosystems in the world, yet our ecosystem visibility (and international diversity) is sometimes far poorer than in our less developed neighbours.

“Most foreign entrepreneurs who come to Malaysia are usually pleasantly surprised at the level of support for the ecosystem here, especially by the Government. They need to be here to understand the value that Malaysia represents as a startup hub.

“So, the move is a good first step and I can foresee that a more diverse ecosystem – filled with both local and foreign players — will help with fundraising from external venture capitalists abroad, and help Malaysian startups gain market access into other new markets.

“It’s a game-changing move,” Nazrin added.

‘Motivates’ local entrepreneurs too

TeAM-PI’s Sivapalan said that MAP could in some ways “drive local entrepreneurs to work harder,” and this in turn will benefit the ecosystem as a whole.

“Most of our entrepreneurs are too comfortable and complacent. They take too long to build their products, take their own sweet time in getting customers in, and often don’t hustle and do the grunt work to scale fast.

“This programme is now making them worried about the competition that may enter the market. This additional foreign competition in their own backyard is now forcing them to focus more on their business and start thinking about doing things faster and better,” he said.

Still, more needed

Malaysia Venture Capital Bhd chief executive officer Jamaludin Bujang believes that more can be done to improve Malaysia’s attractiveness when comes to the tech startup ecosystem.

“Malaysia is already among the favourite place to start a business, despite having a relatively small domestic market. I think less bureaucracy is one way to attract expatriate entrepreneurs, in addition to the availability of funds and good transportation infrastructure,” said Jamaludin.

Cradle’s Nazrin agrees that attracting global entrepreneurs is a “good first move.” However, he highlighted that it is also vital to address the needs of these expatriate startups to grow in Malaysia.

“Their challenge will be the same as any of our local startups – they will be fighting for talent, angel funding, venture capital, startup know-how, local and regional market access.

“[They would need] ecosystem support and a community (driven by the private sector) that is active and supportive of collaboration and growth,” said Nazrin.

“We need to minimise red tape for them, as some of them are likely to come from more developed ecosystems where registration approvals take hours or days, and not weeks.

“We also need to assimilate them into the local ecosystem, accelerate their learning on how things work here, and make available to them some of the government support like funding and market access support,” he added.

Nazrin said that once global entrepreneurs find the ecosystem here a welcome, fair and supportive one, it would create a domino effect.

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