By Sayed Mohammad Reza Yamani Sayed Umar

The Kuala Lumpur 20 (KL20) Summit 2024 was launched last month by Malaysia’s Prime Minister, Datuk Seri Anwar Ibrahim on 22 April 2024. It is a monumental event to attract more startups and investors coming to Malaysia while the global startups are rather gloomy.

In the current scenario, Malaysia is regionally competing with nearby powerhouse like Singapore, Indonesia and Vietnam. The summit was held on two days, 22-23 April 2024 and aimed to establishing a supportive environment for startups with valuable commercial and marketing terms and efficient regulatory procedures.

Meanwhile, this KL20 blueprint is also set to enlarging the bucket of quality startups and talent, attracting more venture capitalists (VCs), improving the ease of doing business and creating a prosperous culture of innovation in Malaysia.

Many experts and business coaches like Kevin Brockland, founder and managing partner of Indelible Ventures, highlighted that Malaysia has a fascinating representative sample market with the variety of cultures and languages as it is a right place to test market of new startup product launches. In the past, Malaysia produced successful startups such as Grab, Merchantrade, Carsome, Iflix, iProperty.com, Aerodyne Group, etc. Malaysia definitely has a right path to establish itself the regional hub for startups.

A faster growth and innovative startups are vital for Malaysia to depart from its previous ‘old’ economy in which traditional business ecosystem like plantation, banking and utilities navigate the economy to the ‘new’ system. The new economy is hence expected to stimulate high-growth and borderless business which lead to higher productivity and value of product. The Malaysia’s Economy Minister, Rafizi Ramli, emphasizes that the thriving startup ecosystem is evolved by the involvement of multiple government agencies that are related to product development and financial support.

The Malaysia’s Economy Ministry, Rafizi Ramli, explained that KL20 is about investments in digital and technology which are profoundly targeting the high level of semiconductor industry, particularly in integrated circuit (IC) design. Moreover, Malaysia reveals its past strength and presence in the worldwide semiconductor supply chain. In the last 10 to 15 years, China has dominantly been a key player in semiconductor industry.

The recent global supply chain is roughly vulnerable due to geopolitical pressures and the post-Covid-19 pandemic. Many international investors, especially China-based and Chinese companies, re-look outside China in order to reduce any risks and sidestep towards geopolitical changes worldwide. Malaysia should grab this opportunity for a perfect place in the global semiconductor industry.

Malaysia is also restructuring its economy as a result of decreasing the government’s coffer coming down from oil and gas (O&G). The depletion of O&G could perhaps be buoyed by uplifting semiconductor industry in order to prevent any headwind and turbulence of fiscal deficit in the aftermath of major impact on the economy. In the meantime, O&G remain to be an important sector of Malaysia’s economy as Malaysia, today, is the second-largest oil producer in Southeast Asia and the world’s third largest exporter of liquified natural gas (LNG).

The semiconductor industry needs to be a priority to support commodities and O&G sectors in Malaysia economy. The growing interest in Malaysia’s semiconductor investment opportunities will be captivating with the support of sufficient human capital, capacity, skills, requirement and knowledge. The availability of capital and skilled manpower has to be harnessed in local market force at the first place.

We have a number of semiconductor industries in Malaysia such as Jabil, Bosch, Western Digital, Intel, AMD, Infineon etc, however, it is often local talent gets lured or opt to work and migrate overseas (diaspora) due to better opportunities in place like Singapore, South Korea or Taiwan. Many skilled and well-trained Malaysian engineers end up working abroad in semiconductor and chip (IC) industries because of limited companies focusing on this area homeward bound.

The 2020 United Nations Department of Economics and Social Affair (UNDESA) report highlighted that the number of Malaysian diasporas is around 1.86 million, which is cited by the Department of Statistics Malaysia (DOSM) in 2022. The main destination countries for the Malaysian diasporas outside Southeast Asia region are Australia, the United Kingdom (UK), the United States of America (US), Canada, New Zealand, China, Japan, India, Germany, etc. Similarly, the report of Organisation for Econmic Cooperation and Development (OECD) 2015/2016 unveiled that the majority of Malaysians working abroad are in the skilled category, who found job in high-tech industries, financial services, education, healthcare.

The Kuala Lumpur 20 is attracting more IC design startups to Malaysia. These startups will hopefully generate more opportunities in IC design locally. The current Anwar Ibrahim’s unity government aim to reverse the brain drain (or perhaps brain gain) and create Malaysia a Southeast Asia hub for semiconductor design and manufacturing. This government efforts will not only provide more high-skilled jobs for Malaysians; however, it will also sustain and balance our economy away from its initial and traditional reliance on oil and gas (O&G).

Last week, the US tech giant, Microsoft recently announced their US$2.2 billion (RM10.45 billion) investment in cloud and artificial intelligence (AI) services over the next four years in Malaysia in order to support Malaysia’s digital transformation. The Microsoft’s cloud and AI infrastructure investment will create AI skilling opportunities for 200,000 Malaysians and support the growth of local’s developer community. The Digital Ministry and Malaysia Digital Economy Corporation (MDEC) extend their appreciation to Microsoft investment in which numerous collaborative initiatives including startup support, talent development, digital adoption for micro, small and medium enterprises (SME) has been partnered and instrumented since 1998.

Malaysia’s government looks forward to continue future collaboration with Microsoft and other technology industries to foster digital talent development, drive innovation, and accelerate Malaysia’s journey towards becoming Southeast Asia hub and Global digital hubs.

_{The author is a Research Fellow at the Ungku Aziz Centre for Development Studies, Universiti Malaya. He may be reached at uacds@um.edu.my. The article was previously published in TwentyTwo13}