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The State of Entrepreneurship in Malaysia

Jonathan Ortmans on April 19, 2010 Source: Policy Dialogue on Entrepreneurship

Today, we start the seven day countdown for the Presidential Summit on Entrepreneurship, and I want to take the opportunity to highlight a nation where entrepreneurship is starting to bloom: Malaysia. Although not yet a start-up economy, the desire for entrepreneurship and innovation are there, along with a growing number of public policies to support them-- a good recipe to put the economy on the entrepreneurial path.

Malaysia’s relatively high entrepreneurialism is reflected in its entrepreneurship and innovation rank by the Legatum Prosperity Index: 28th out of 104 economies. Malaysia’s performance is boosted by a flourishing high-tech industry.  High-tech exports constitute over half of total exports. Moreover, high levels of royalty receipts indicate that Malaysia is able to capitalize on its innovations, according to the Legatum study. Similarly, the World Bank ranks the country 23rd out of 183 economies in the ease of doing business.

While Malaysia’s entrepreneurial success stories are explained by its citizens’ entrepreneurial spirit and determination, the flourishing of young businesses is facilitated by a government that is always looking for ways to advance entrepreneurship through new policies. A report by the Mansfield Foundation mentions the variety of supporting mechanisms that exist for entrepreneurs in Malaysia, including physical infrastructure, business advisory services and access to capital (according to the World Bank, Malaysia is the top country in the ease of getting credit). Perhaps the greatest example of the importance the public sector places on entrepreneurship is the creation of a ‘New Economic Model’ (NEM) for Malaysia where the Prime Minister has made entrepreneurship the key driver of the economy for the next 10 years with special emphasis on innovation and the entrepreneurial drive of its citizens. 

Entrepreneurs recognize the impact of policies and programs on their decisions to take risks. Warisan Global recently conducted a survey on the Malaysian entrepreneurial landscape which showed how pro-entrepreneurship policies and programs impact entrepreneurs’ path. One respondent pointed to the support for technology innovation by both the government and the private sector. He cited the example of MyIdeas, a program that encourages innovation and reaches out to all Malaysians, especially those who are internet-savvy. This respondent also highlighted that the Ministry of Science, Technology and Innovation (MOSTI) recently announced it has granted funding valued at RM157 million to 183 projects for research and development of green technology.

Nonetheless, Malaysia’s entrepreneurial impact has yet to be maximized. The CEO of Warisan Global, Dhakshinamoorthy (Dash), explains that “there is a strong intent by the government to create entrepreneurs – but some of these initiatives are also our weaknesses – they create a dependent mentality and tend to smother the hunger in entrepreneurs.”

Entrepreneurs also point to the need for better education: “Universities need to produce highly competent graduates, be it in technical or non-technical fields,” said one respondent to the survey. Another pointed out that the scarcity of skilled workers “still proves a major obstacle for companies”. In essence, the Malaysian education system needs work like so many around the world in the sense that it has not contributed effectively to create a competitive workforce and failed to produce adequate numbers of competent graduates able to contribute productively to the economy.

In terms of funding, while available, it is not easily obtained for commercialization purposes, according to survey respondents. The small venture capital sector is also seen as risk averse.  And there is another important barrier: government protection of certain industries through licensing and other regulatory requirements. A survey respondent notes that “by creating favored companies with special licenses and concessions (Astro has the sole satellite TV license and thus has a monopoly) it severely curtails entrepreneurship and does not provide customers with the best services that can be offered in a more open competitive environment. By constraining competition they also prevent the growth of stronger more entrepreneurial and innovative companies who can compete more effectively on a global scale.”

To its credit, the Malaysian government recognizes these problems and has begun to address them with the NEM and with initiatives to promote and foster entrepreneurship. Education and skills development have been made a priority, the funding landscape is being restructured to enhance funding but reduce the ‘dependent mentality’, and a Competition Act has been introduced to liberalize the economy and prevent monopolistic and anti-competitive actions by large corporations.   

As a country heavily involved in exporting, Malaysia was hit hard by the global downturn and economic growth has slowed sharply since mid-2008. Perhaps that makes the national “intent” to focus on removing barriers to entrepreneurship and creating incentives for risk-taking a more significant development that will move Malaysia along the road to recovery.

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Jonathan Ortmans is president of the Public Forum Institute, a non-partisan organization dedicated to fostering dialogue on important policy issues. In this capacity, he leads the Policy Dialogue on Entrepreneurship, focused on public policies to promote entrepreneurship in the U.S. and around the world. In addition, he serves as a senior fellow at the Kauffman Foundation.

The author would like to thank Dhakshinamoorthy (Dash), CEO/Director of Warisan Global and Host for Global Entrepreneurship Week in Malaysia, Dr.Sivapalan Vivekarajah of Proficeo Consultants, Ms. Eliza Noordin of Teak Capital and others for their invaluable data and testimonies they have provided about entrepreneurship in Malaysia.

Category:  Global  Tags:  malaysia, warisan global, world bank, psoe

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