Why Malaysia’s government should avoid direct investments in startups

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Hello reader,

“Nanny state.” “Benevolent dictatorship.” “Authoritarian.”

These are some of the terms used to describe or criticize Singapore’s government. For some time now, people have felt like its regulations might be too intrusive or harsh, such as when it bans some things outright.

It’s funny because it seems like the long-term effects of these policies is to make ordinary citizens become more or even too reliant on them. There’s been cases where people call the police to deal with mundane issues like inconsiderate neighbors, for instance.

In some ways, it’s a good sign because it shows that public services are reliable enough for the common Singaporean.

On the other hand, overreliance is never a good thing. This appears to be the case with the relationship between Malaysia’s government and the country’s startups. The solution? The government should wash its hands off most direct investments in startups, according to an insider. Our featured premium story explores why.

Today we look at:

• Why Malaysia’s government should stop directly investing in startups
• Why TikTok is deleting millions of videos from Indonesia
• Other newsy highlights such as Alibaba pumping US$353 million into Lazada and Byju’s goal of hitting overall profitability in the June quarter.

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Why can’t we be friends?

Image credit: Timmy Loen

The government investing directly in its country’s startups seems to be a noble idea. After all, which government wouldn’t want to support the local tech scene as much as possible? While that might be the case in Malaysia, there are several pitfalls stemming from this arrangement.

• No one man: With Khazanah, Malaysia’s sovereign fund, part of the issue is that its chairman is also the country’s prime minister. This means that if the sitting prime minister isn’t interested in investing into startups, then the fund won’t do much in that area.
• Moving the needle: According to an anonymous insider who spoke to Tech in Asia, Malaysia should look at investing in young fund managers. Ideally, the government would just allocate a small sum to those fund managers, with subsequent funding dependent on performance.
• Where to come in: Our insider source also said the government should focus on setting policy and reducing friction. If there are cases for direct investment, it should be in extremely deep tech sectors where commercial funding is difficult to get, like defense-related endeavors, for example.

Read more: Malaysia’s government shouldn’t directly invest in startups, says insider

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