Malaysia Venture Capital
The Malaysia venture capital industry is a prime example of the recognition by governments around the world of the vital role of venture capital in growth.
Malaysia is a country that represents how many governments in emerging economies are recognizing how vital venture capital is to growth. The demands of a global market place are making the older traditional ways obsolete. Venture capital is seen as essential in driving growth in the important areas of technology and innovative products and services. Yet, Malaysia is a primarily Islamic country with almost no history of private sector investment. Malaysia venture capital is seen as the path to the future, but how to encourage it locally?
Many parts of the world are opening their doors to foreign investors really playing the global market place for all it is worth. Countries like Malaysia tend to want to see their own citizens become the venture capitalists. Yet, an essential factor is successful venture capital investment is experience and expertise at the top. New venture capital spurred economies are going to have severe growing pains until this talent gap in equalized.
One way to foster local venture capital experience is to encourage joint ventures between western funds and local ones. The trade off is the locals knowledge of the culture and the outsiders knowledge of the reality of equity investment and skill in management. Malaysia has used a different tack to encourage its local investors. There is a ten year hiatus on taxation on venture capital investments. Such a tremendous tax advantage levels the playing field for local venture capital firms and insulates a bit against loss.
This type of tax incentive is a revolutionary way to spur private sector investment, but is needed in Malaysia because there is such a dearth of private investors to serve as third parties for venture capital funds. There simply is no tradition of entrepreneurship in an Islamic country where class gaps were extremely wide. Such a large percentage of the wealth of the country was concentrated in a ruling elite. It takes a much broader base of investor support to fund a viable venture capital market.
Malaysia will continue to develop strategies to spur venture capital growth. They will continue to improve their local stock exchange to facilitate IPO end results for cashing out of deals. They will slowly develop a base of experienced fund managers and work on value added financing networks. They will continue to do all these things because they have no choice. The world, East and West, Islamic or otherwise, is too closely knit in this age of electronic connectivity. A country must stay on the path to venture capital independence or fall dangerously behind the world.