According to the Malaysia Startup Ecosystem Roadmap (SUPER) 2021-2030: SUPERcharging The Way to Our Shared Future, the Ministry of Science, Technology and Innovation (MOSTI) aims to support the creation and growth of Malaysian startups at every stage to enable the country to reach its goal of becoming a leading and successful global startup hub by 2030.
SUPER was developed by examining the Malaysian startup ecosystem, checking its strengths and weaknesses, consulting with stakeholders, and comparing the business landscape to high-performing ones. Aside from becoming a global startup hub, YB Dato’ Sri Dr Adham bin Baba, the Minister of MOSTI, said the plan was to generate 5,000 startups by 2025, five of which would be unicorns—companies with a billion-dollar valuation.
How government initiatives are bolstering the rise of homegrown startups in Malaysia
Moreover, SUPER intends to increase Malaysia’s Gross Domestic Product (GDP). Between 2008-2016, the startup ecosystem contributed RM 3.4 billion to the GDP and created 80,600 jobs. Projections indicate the startup scene will increase tenfold, contributing RM 30.8 billion to the GDP by 2030 and creating high-value jobs.
Challenges for the Malaysian government and the startup ecosystem
Malaysia’s government and government-linked investment companies (GLICs) announced plans to invest USD 211 million to boost local startups, matching private investor contributions. Nevertheless, the country faced many challenges in strengthening its startup landscape.
The primary challenge remains the need for adequate private-sector funding. While the government has multiple funding programs designed to fund startups—for example, the Malaysian Technology Development Corporation (MTDC)—the private sector has been lagging, especially in providing late-stage startup funding.
Secondly, the regulations and policies need constant updating to maintain a healthy, nurturing environment for startups. For example, lacking local and foreign talent with the required skills may force companies to look overseas. Companies may need to rely on a limited talent pool if the rules and regulations do not accept these realities and make allowances.
Thirdly, new businesses need more experience to manage operations, recruit qualified staff, sell products and services effectively, and access funding. As such, they cannot survive for long. Additionally, they may need help accessing cross-border markets to boost their sales.
Finally, global challenges always find a way of affecting markets in various regions. The Malaysian market has had to deal with the effects of global inflation, rising costs of energy and production, and geopolitical tensions between America and China in the South China Sea.
Steps to solidify Malaysia as a startup hub
According to Datuk Zainal Abidin bin Abu Hassan, Secretary General of MOSTI, SUPER provides a roadmap that will bring “shared prosperity, as well as produce digital-minded citizens who are also passionate about entrepreneurship”. This new entrepreneurial spirit will bode well for creating innovative Malaysian startups that can bring essential solutions to the country.
The country can take several steps to boost its startup ecosystem. Firstly, it needs to make it easier for local and foreign investors to pump funds into new businesses. They can do this by changing some of the policies regarding the monetary backing of startups, offering incentives and subsidies, and making the country a top destination for investment.
The country must also improve its infrastructure and connectivity to benefit pre-existing and new companies. For instance, the development of 5G infrastructure in Malaysia bodes well, and with 97.6% of the population using smartphones at the beginning of 2023, startups need to tap into this high rate of mobile internet use to offer services and products and earn revenue.
It is also crucial for the Association of Southeast Asian Nations (ASEAN) to cope with talent shortages and improve recruitment. There is much demand for tech experts, yet very few are available. Countries have been making an effort to retrain or upskill workers to bridge that talent gap, but there is still a long way to go to address the talent deficit in the market.
A fourth step the country is taking is implementing the Malaysia National Energy Transition Roadmap (NETR), which seeks to accelerate the energy transition in the country toward using renewable energy and preserving the environment. It is known for supporting the manufacture of electric vehicles, and this may inspire more tech-savvy people to start businesses that can help with these solutions.
A stronger, more resilient Malaysia in the making
Sustainable approaches to offering services and creating products will make Malaysia stronger. Governments, experts, and other stakeholders should guide startups in establishing and smoothly operating their environmental, social, and governance policies while supporting a switch to a green economy.
Lastly, economic integration in ASEAN can play a role in boosting startups in Malaysia. For example, improving trade agreements can help the fluidity of the movement of goods and access to skilled talent.
With a clear vision and vital steps defined in advance, the Malaysian startup ecosystem can become a leading startup hub in ASEAN and establish itself beyond the Asia Pacific (APAC) region.