Speed bumps ahead as Malaysian state investors grapple with startup funding

Malaysia’s institutional investors are gearing up to fulfill their mandate to invest in startups and tech firms.

Prime Minister Anwar Ibrahim gave the mandate as part of the government’s high-tech push. These state-owned entities are some of the largest investors in the country, and two of them have already answered the call by launching their own funds.

Sovereign wealth fund Khazanah Nasional is the most matured among state-owned financial institutions when it comes to startup investments. / Photo credit: Khazanah Nasional

These firms – also known as government-linked investment companies (GLICs) – typically are conservative in nature, as they are either unit trusts or pension funds. But some of them have already been setting aside small sums, roughly 1% of assets allocated, for tech investments.

But that doesn’t mean that local startups can expect things to change anytime soon, as we found gaps between policy and practice.

‘Notoriously slow and difficult’

Despite these GLICs being deployed to invest in startups, meaning greater funding sources, there are some nuances.

For starters, all these funds report to the prime minister and finance minister in one way or another. Both officials sit on the board of Khazanah Nasional and Permodalan Nasional – two of Malaysia’s state-owned investors – while the other GLICs report to the finance minister as per the law.

In today’s context, Prime Minister Anwar is also the finance minister, but he has appointed another finance minister, Amir Hamzah Azizan, to assist him in running the ministry, including evaluating startup investments.

Another official key to the government’s tech policy is Economic Affairs Minister Rafizi Ramli, who has been pushing for greater investments into startups.

Given the leadership structure of these GLICs, policies of the day will have a bearing on how and where these firms invest. One of the sticking points with Malaysian GLICs, as compared to Singapore’s Temasek, is that they’re guided by affirmative action policies.

This includes a heavy concentration on local startups – more importantly, on those led by bumiputera entrepreneurs.

Malaysia’s Retirement Fund Inc. (KWAP) is an investor in Indonesian startup eFishery. / Photo credit: eFishery.

The term “bumiputera,” translated as sons of the soil, refers to the Malays, the country’s majority ethnic group.

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