Malaysia’s Own Local Venture Capital Firm

Malaysia is growing as one of the fastest regions to promote localized venture capital firm. Despite Malaysia’s internal

efforts, Venture capital is still considered as an emerging industry on the country. Funded mostly by the government,

the local Small scale and medium scale venture capital firms have to rely heavily on the Foreign Direct Investment for

their promotion and profit. With competition from Asian giants, China and India, Malaysia is putting up a brave front in

ensuring that local venture capital firms to get enough resources to breathe and live in an era of competitive marketing

and business propaganda.

Current Developments in Malaysian Market

Growing at a respectable pace, Venture capital firms in local Malaysian region have seen major changes ever since the

allotment of funds to Malaysia Venture Capital Management. With the advent of Information Technology and the league

of BPO’s and KPO’s, US$131 million was pumped into the Malaysian market in 2001. Again in the Financial Year of 2002-

2003, 20 million US dollars was billed against the name of MIMOS. MIMOS is a research and development (R&D)

organization which is fully government-owned. Specializing in the areas of ICT and microelectronics, MIMOS paved the

way for Malaysia’s own venture capital firm ownership program. Subsequent to this deal, another 500 million US dollars

had been allotted to Kumpulan Modal Perdana and other non- ICT investments to promote the growth of venture

capitalists in local Malaysian economic zone. Government backed the efforts with airy tax incentive programs that

exempted the local venture capitalists from the payment of income tax. Income tax slashed was with respect to the

capital earned as statutory income on all sources of incomes. This did not apply to other income sources like the interest

income earned from savings or fixed deposits and profits from Shariah-based deposits.

Malaysia has always been a heaven for venture capital marketers, as it’s largely dominated by restricted venture capital

players. Japan, Singapore, Hong Kong, Taiwan and Korea still lead way ahead of Malaysia. The materialization of

independent local venture capital firms in Malaysia is a strong indication that the market is open to challenge. Largely

funded by governmental organizations, Malaysia has remained reserved for local capital venture firms. Outsourcing

from western powers and on-shoring within Malaysia has raised the private equity share in FDI as well.

Private equity is broadly categorized under division as:

1. venture/seed capital

2. growth capital

3. leveraged buyouts

Challenges

Government remains the largest fund raiser for local Venture capitalists in Malaysia, accounting for nearly 67% which

comes as a contribution from the domestic private sector entities. Funds received from foreign sources have currently

stands at approximately 44.8 million US Dollars.

The Venture Capital Malaysia is considered to be an alternative source of funds for investment. Still the industry faces

several tribulations marred by the prospect of including the high risk and long-term nature of their investment. Fueled

by speculative knowledge and miscommunication from the industry insiders, the segment is prone to miss more solid

business proposals.

For more information please visit http://www.celadon.asia/