After the first cabinet meeting since taking over as the seventh Prime Minister of Malaysia on 10th May, Dr. Mahathir Mohamad announced that he would be disbanding/abolishing several government-run agencies, including Malaysian Global Innovation and Creativity Centre (MaGIC). The announcement caused jitters within the startup industry.
As the news hit the internet, MaGIC came out with a statement saying the agency is not abolished yet and it is business as usual for now. “Yesterday, the Prime Minister said that the review of all government agencies is still underway. He mentioned that final decisions would be made once this review was concluded and that some but not all of the agencies under review will be disbanded. We are watching the situation closely and waiting for further updates. In the meantime, it is business as usual for us at MaGIC as we continue our work to create a vibrant, open and collaborative entrepreneurship ecosystem in Malaysia that helps to nurture and inspire entrepreneurial talent as well as helping corporates better connect and innovate with the startup community around them,” it said in the statement.
The panic caused by PM’s unexpected announcement is understandable; MaGIC has been a backbone of the startup ecosystem for the last four-plus years. Since its entry into the scene in October 2013, more than 78,000 students, aspiring entrepreneurs, entrepreneurs and impact-driven enterprises have benefitted from a variety of its programs, workshops, conferences, community events, and its resource platform. This includes both home-grown entrepreneurs from Malaysia, as well as those from beyond the borders.
Close to 900 startups have participated in its various initiatives, including its signature accelerator programmes that cater to both entrepreneurs and social entrepreneurs of all growth stages, as well as its collaborative platforms such as MaGIC Activate, and IDEA Social Procurement programme. Graduates of its programmes, including Easy Parcel, Katsana, Borderpass, and Flexiroam, have collectively raised more than US$95 million in just 24 months after joining the programmes. On top of that, MaGIC has seen several small exits through trade sales.
While a final decision on MaGIC’s abolition is pending, the announcement has sparked a huge debate among netizens and industry observers. When we posted a report about the PM’s announcement last Thursday on Facebook, several users hailed it as a good move saying it should have been abolished earlier, with one user even alleging that MaGIC is extending more favours to Malaysian startups with foreign shareholders.
At the same time, several others who e27 spoke to opined that that if MaGIC is abolished, Malaysia will lose an inclusive player, which has been instrumental in giving second- and third-tier startups second chances at becoming first tier and more investable startups.
While the opinions are sharply divided, the truth is that the abolition of MaGIC will have little impact on the startup scene in the country.
Here is why:
1. The ecosystem is big enough to sustain on its own
The Malaysian startups industry has been growing tremendously for the past three to four years. While there is no denying that government programmes such as MaGIC have contributed to the growth of the ecosystem, it is no longer depending on a single player. Several hundreds of startups have already benefitted from incubation and accelerator programmes run by corporates and other private players.
In other words, Malaysian startups now have multiple avenues to get mentorship, training and investments, as the ecosystem now has a good mix of private incubators, angel investors, VCs, and equity crowdfunding platforms (EPFs).
Another key advantage is the country’s fast-growing internet population. Close to 70 per cent of Malaysia’s 31 million population have access to internet, an added plus for startups and entrepreneurs looking to scale faster.
2. Elimination of ‘grantepreneurs’, corruption
If you look at countries in Asia, private sector is more serious and competitive than the government sector. History shows that government agencies are more susceptible to corruption and favouritism, while the private sector has little room for wrongdoing when it comes to startups. The coming of more private players will further boost the ecosystem and in turn the economy.
Apart from that, reducing overlaps in government agencies is likely to help eliminate grantepreneurs (entrepreneurs hopping from agencies to agencies for grants, instead of building business) and promote the rise of startups, which are competitive and tough, and therefore more sustainable. We may be able to see serious startups raise their game, and work harder to compete in the market. The serious private players in the ecosystem may do a little bit better, especially those who have experience in developing entrepreneurs.
3-A strong neighbourhood
Malaysia’s close proximity to Singapore is another advantage for startups. Singapore has long been one of the most favourite destinations for international startups, thanks to its favourable tax regime and sops. While Malaysia follows a protectionist approach, the startup activities in the city-state will have a spill-over effect on the country. Singapore has too many VCs but too few startups. So ecosystem players are now looking beyond the borders to countries like Malaysia and Indonesia for deploying capital.
It is not just Singapore, but faraway countries like China are also looking to Malaysia to have a footprint. Internet behemoths like Alibaba has already signed a memorandum of understanding (MoU) with the government and the Hangzhou Municipal Government to facilitate cross-border e-commerce trade between the two digital hubs.
In March this year, Beijing-based incubator TusStar signed a Memorandum of Understanding with Malaysia’s Selangor Accelerator Programme 2018 (SAP2018) to host top 10 startups from the accelerator in China’s Tsinghua University.
As the technology grew, startups and entrepreneurs in Malaysia, or for any Asian countries for that matter, now have multiple avenues to kickstart and grow their business. The shutdown or abolition of a single entity will not and should not adversely affect the ecosystem. Malaysian startups are no longer looking to scale up regionally, as it limits their scope of expansion and are therefore looking to partner with foreign players and investors in their quest to become another Unicorn like Grab.
And so long as there is a strong private ecosystem, startups have nothing to worry.
Image Credit: MaGIC