Country overview – Malaysia

Malaysia overview

Quick Summary:

  • The Global Startup Ecosystem Report 2020 placed Malaysia in the top 10 performing emerging eco-systems in the world.
  • In the World Bank’s ‘Doing Business Report 2020’, Malaysia ranked 12th globally in terms of the Ease of Doing Business, the second-highest score in Southeast Asia (after Singapore).
  • It has a particularly strong fintech and gaming industry.
  • In 2019, Malaysian startups raised a total of USD 226 million, with approximately USD 99 million of that going into early-stage funding.
  • Malaysia was one of the first Southeast Asian countries to develop a special economic zone for high-tech businesses.
  • A number of strong government policies are aimed at developing start-ups, building the digital economy and mitigating the consequences of COVID-19.

Malaysia at a glance:

Population: 31.95 million
Capital: Kuala Lumpur
Languages: Malay (official national language), English (widely spoken), Mandarin, Tamil, and others
Average cost of living:

  • Rent: USD 577/month (1-bedroom apartment in Kuala Lumpur)
  • Living costs: USD 466/month

Pros

Cons

  • Low-cost, high-quality local services and talent.

  • Fast-track visas for entrepreneurs.

  • Strong government funding for start-ups.

  • Favourable business laws.

  • Flexible banking system.

  • Easy access to regional markets

  • Relatively low levels of innovation.

  • Some levels of corruption in politics and business.

  • Corporate income tax rate one of the highest in Asia at 24%.

  • Number of start-ups valued over USD 100 million low compared to similar ecosystems.

Why Malaysia: 

Malaysia is one of Asia’s most exciting and emerging ecosystems for start-ups, placed in the top 10 for emerging markets around the world. While the start-up ecosystem is still in its early days, strong government support and heavy investment has contributed to the sector’s rapid growth. As a result, Malaysia is starting to become the home of some of the world’s most successful start-ups, such as Grab, a ‘marketplace app’ widely used in the region.

Malaysia is also known for its strong education programme. Consequently, there are many highly qualified workers available at a low cost. For example, a software engineer’s average salary is USD 12,700 in comparison to the global average of USD 42,100. Furthermore, a third of its population are urban and have access to 4G, mobiles and the internet, beneficial for tech-orientated, web-based start-ups.

The country has the following accolades to boast:

  • Ranked 12th globally and 2nd in Southeast Asia in terms of Ease of Doing Business.
  • Ranked 2nd in terms of trade and connectivity within Southeast Asia according to the DHL Global Connectedness Index 2019
  • 5th most attractive emerging market in the world according to Bloomberg 2018

Singapore and Malaysia also have strong trade agreements, which makes it easy for businesses to expand and find clients in both countries, providing access to one of the world’s wealthiest and most stable countries.

Government Programs:

The Malaysian Investment Development Authority (MIDA) is the country’s investment promotion agency. They promote the attractiveness of Malaysia as an investment destination for a wide range of manufacturing and service industries, and also provide support and guidance to interested investors and companies.

One of the biggest reasons behind Malaysia’s recent success is the aggressive and supportive government policies. This is evident from the government’s Budget 2020, which focuses on initiatives to boost digital entrepreneurship. The start-up ecosystem is supported by the MDEC (Malaysia Digital Economy Corporation), whose policies include:

  • Its Global Growth Acceleration Division assists with start-ups’ fundraising needs. Initiatives include partnering with equity crowdfunding (ECF) and P2P platforms, M&A workshops, and start-up-investor business matching with the KK-Fund, an Asia-focused VC. From 2016 to 2020, this Division has brought in over a USD 1 billion worth of contracts.
  • The Global Acceleration and Innovation Network program, which has helped over 130 companies generate over USD 1 billion in revenue since 2015.
  • Malaysia Digital Hub funds local co-working spaces to enable start-ups to unlock their potential. There are 7 of these in the country supporting over 400 start-ups. This is essentially a replication of the Silicon Valley ecosystem.
  • The Malaysia Tech Entrepreneur Program offers a 1-year pass for New Entrepreneurs and a 5-year pass for Established Entrepreneurs.
  • The Corporate Innovation program encourages local corporations to invest in local startups, so far working with 66 corporate partners including Huawei and Microsoft.

Other government programmes include:

  • Cradle Investment Programme 300 offers early-stage funding to entrepreneurs, and has funded over 1,000 early-stage tech companies.
  • The government launched the Malaysian Global Innovation and Creativity Centre programme (MaGIC) to support the growth of entrepreneurship in Malaysia and drive the sustainable ecosystem. It has worked with 1,552 start-ups generating a value of over USD 458 million.
  • The Companies Act of 2016 creates a favourable business environment. Benefits include low costs to launch business, less paperwork and lower operating costs.

(Credit to Rohan Shah.)

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