Malaysia wants to farm unicorns. It’s going to fail

Dan Lain-Lain (Malay for “and others”) is a weekly column by TIA journalist Emmanuel Samarathisa that dissects the goings-on in the Malaysia tech scene but with a heavy mix of current affairs, policy and politics. Click here to read past articles.

Malaysia will table its federal budget tomorrow. It’s going to be closely watched since it’s the first test for the country’s new government.

Malaysian Prime Minister Anwar Ibrahim (centre, dark blue suit) attending a virtual meeting with tech and startup founders on February 9. / Pic credit: Prime Minister’s Office

I have written about expectations, and I won’t rehash them here. But just as I hit publish last week after talking about the lack of goodies for the startup and tech space, Malaysia’s Prime Minister Anwar Ibrahim announced that his government would pump more than a billion ringgit (US$225 million) into “innovative” and “high-growth” startups.

The money won’t come directly out of public coffers. Instead, the government will order the country’s state-owned institutional investors, such as sovereign wealth fund Khazanah and pensions pot Employees Provident Fund, to pony up the cash.

Anwar said this after a February 9 meeting with the who’s who of Malaysia’s tech scene – including the chiefs of Aerodyne and Carsome.

The nexus of business and politics

Malaysia’s state-owned financial institutions form a complex web that deserves an explainer of its own. But, for this article, all you need to know is that the government controls a few institutional financiers, known as government-linked investment companies (GLICs).

They deploy public funds — directly or indirectly — into investments deemed to be important to national or strategic interests.

“Directly” means that the money comes from the government through annual budget allocations. “Indirectly” refers to a variety of other sources – for example, unit trust investments or forced savings, where private sector workers have to contribute a certain sum of their salary to a pension pot.

How does the government control these entities? Simple: Each institution has its respective act that legally dictates it to report to the finance minister. Alternatively,the finance ministry acts as an owner via a golden share.

The owner of a golden share is enormously powerful. Regardless of whether that entity is listed or not, the government has the right to veto decisions like board appointments, as dictated in the shareholder’s agreement.

For what it’s worth, tech institutions or agencies, such as the Malaysia Digital Economy Corporation, Cradle, Mavcap, and even fund of funds Penjana Kapital, all have the finance ministry as a golden shareholder.

To digress a little, all this is because of the so-called nexus of business and politics in the country, where both somehow converge. That’s why these agencies fear a change in management or leadership when there’s a regime change. The post of finance minister is, after all, a political one.

To greener pastures?

Anyway, this idea of marshaling government-linked investment companies (GLICs) to invest in startups isn’t new.

Going down to the ground

No shortcuts or hacks