“There are currently about 1,300 active companies with MSC status in the country and MDeC receives 500 to 600 applications every year but there is no ICT giant from Malaysia,” he told StarBiz in a recent interview.
MDeC is mandated by the Government to coordinate, promote and develop the ICT industry through proposals on IT legislation and policies, establishing specific practices and constructing world-class standards for information infrastructure and urban development.
While the ICT sector has increased in capacity over the last decade, it still has much room for growth as contribution from this segment to the country’s gross domestic product is only over 9%.
Saifol said market accessibility was limited by financials as the development of world-class products and bringing them to the global market was an expensive affair.
For example, the cost of setting up offices overseas for an American small and medium enterprise (SME) is about US$500,000, or less than RM2mil, which is not significant on revenue of US$2mil.
But for the Malaysian SME, the same foreign outfit set-up will require US$2mil, or almost RM8mil, which means the SME would have to generate at least RM10mil in sales.
“It’s a substantial amount when the cost is viewed as a percentage of revenue,” Saifol said, adding that many local SMEs were crowded at the border, with no financial stamina to penetrate the world market.
Furthermore, the US population was much larger, hence domestic demand could sustain the enterpreneurs, he said.
There is also the issue of digital divide among SMEs as they lack the structure that large corporations have in terms of the financial capacity, system and processes that will enhance operations and performances.
“SMEs are not leveraging enough on ICT for market research and to improve cost efficiency. Only 25% of SMEs in the country own a server and 11% of SMEs have some form of e-commerce,” Saifol said.
Most entrepreneurs find the investment cost difficult to justify against profitability. Such issue, nonetheless, is not limited to Malaysia alone as many countries, including the United State, face similar challenge.
MDeC helps facilitate the process by organising road shows, workshops and trainings for networking and skills building, as well as provides funds for start-ups.
For example, it has given out 240 pre-seed funds, which amounted to RM150,000 each, to help entrepreneurs bring their ideas from the drawing board to prototypes.
“The allocation is not enough and we need to attract private investors to support the sector,” Saifol said.
To reduce cost, MDEC encourages companies to collaborate with local universities on research and development, or to use “cloud computing”, which refers to virtual server for businesses to expand without having to set up their own infrastructure.
“Malaysia can be a base for cloud computing since the ones used by Malaysians currently are mainly from the region, like South Korea,” Saifol said.
The country was conducive for innovations, given its multi-racial and multi-cultural facet. “Ideas are ample but it costs money and time to develop them into world-class products or services,” he said.
MDeC promotes several areas such as creative multimedia, software and e-solutions, shared services outsourcing (SSO) and bioinformatics.
Saifol said creative multimedia was easier to bring abroad as the development cost was lower.
Malaysia differentiates its SSO from other outsourcing markets by offering services on the higher value chain such as multi-lingual call centres for corporations.
The country already has many good technologies such as Synamatix, whose software and applications help in the analysis of genes to many global institutions like Cancer Research UK, Eli Lilly & Co, Washington University in St Louis and GeneWorks Pty Ltd.
Another Malaysian company, Pulse Group plc, is listed in Britain and offers research process outsourced services in Asia to mainly market research and media firms.
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