Saturday November 21, 2009

Ambitious plans to propel Malaysia to the forefront of ICT

By RISEN JAYASEELAN

IN the push towards high income status, parallels can be drawn from the country’s past efforts at nurturing technology-based industries. And questions need to be asked if those efforts had borne much fruit.

From the 1970s, Malaysia, particularly states like Penang, had experienced foreign investments concentrated on chip manufacturing, mainly testing and assembly of microchips for electronic products such as computers.

Datuk Badlisham Ghazali ... ‘The MSC bill of guarantees alone has done a lot.’

That, in turn, led to high employment levels and, to some extent, enhanced the income level of people like engineers.

Going back to as far as the mid-1980s, the Government had already foreseen the bleak future of chip manufacturing as Malaysia’s low-cost base would soon be overtaken by countries like China. The foresight was spot on and so the Government had then embarked on helping the country move into the higher end of the industry.

One of the plans was to create an organisation called Mimos (Malaysian Institute Of Microelectronic Systems) to help research into how Malaysia could create and design its own micro chips. But after many years and millions invested, there still isn’t a significant chip design industry in Malaysia. And many jobs have indeed been lost when the chip manufactures had left to lower cost countries, as predicted.

Then in 1996, Malaysia embarked on an even more ambitious plan, that of the Multimedia Super Corridor (MSC), aimed at creating a world class ICT hub.

About 13 years on and while the MSC has some statistics to show its achievements, some detractors question whether the technology industry would have been better served by pouring more resources into the education industry.

“Just look at India. Government involvement has been minimal in building the technology industry. But they have had a vibrant education system. Once you have highly qualified and well trained people coming out, the market will take care of itself,” points out one industry observer who declined to be quoted.

A crucial element of the MSC is an operational company called Multimedia Development Corp (MDeC), which was tasked with, among other things, nurturing start ups, funding them and even playing the role of match maker to help the small companies grow their customer base. Overall, MDeC’s role is to help the MSC goals to be realised.

Return on investment

But did all those efforts give the country a sufficient return on investment?

Is it unclear how much has been spent on the MSC, but it has run into billions of ringgit by some estimates, considering that it involved putting up infrastructure at Cyberjaya and not to mention the setting up and running costs of MDeC.

MDeC’s CEO Datuk Badlisham Ghazali says he does not know the total amount of money spent on the MSC but says that part of its success can be seen from the following figures:

·There are more than 2,000 MSC status companies today. These companies generated more than RM21.8bil revenue in 2008 and generated more than 92,201 jobs in that year alone.

·A significant amount of that revenue was from exports of goods and services. And MSC companies employ around 90,000 knowledge workers.

MDeC also lays claim to creating a conducive environment for multinationals to set up their internal outsourcing operations in Cyberjaya. Indeed, Cyberjaya today is well known for its back-end IT support centres run by multinationals such as Shell, DHL, HSBC, IBM and BMW.

Badlisham points out that this BPO (business process outsourcing) push has resulted in lots of jobs, not just for the IT trained but also for accountants, tax, oil and gas and legal experts as the multinationals keep growing their outsourcing centres. “The average salary of people in the outsourcing industry here used to be around RM1,400. Today its around RM4,500,” he says.

It is indeed hard to dispute these facts. But would those companies – both the local MSC companies and the MNC outsourcing ones – have existed even without the MSC push?

“I think not. The MSC bill of guarantees alone has done a lot,” says Badlisham.

MSC’s bill of guarantees promises high speed telecommunications services at Cyberjaya and other designated zones. Financial incentives in the form of tax allowances and waiver of import duties on multimedia equipment have also helped. MSC companies are also given a lot of leeway to bring in foreign experts to work for them.

However since its launch, the MSC has yet to produce a world-class company like India has. Others point out that Malaysia still loses out to countries like Vietnam in some aspects of the IT industry.

Badlisham says in the case of India, it took them a long time before they managed to create a giant like Infosys. “Malaysia is trying to fast track that and the MSC is helping companies along the way.”

When compared to Vietnam, Badlisham points out that Malaysia has a list of homegrown companies in the technology space that Vietnam does not. MDeC has a list of 120 or so home-grown MSC status companies that are profitable, with revenues of not less than RM15mil and derive at least 30% of their revenue from exports.

These companies also utilise at least 5% of their revenues for research and development and about half of their employees are knowledge workers.

“This is a far cry from what the IT industry was before the MSC. Then you had a couple of companies working as technology implementors at best, although most were reselling and supporting foreign vendors,” he says.

MSC companies registered a total of close to 1,400 intellectual properties in 2008, a 74% jump from the previous year.

A key obstacle in the technology space, however, remains the lack of qualified personnel. CEOs often complain about the lack of quality among fresh graduates.

Indeed, the lack of human resources features high in the list of factors that foreign companies look at when deciding to venture into markets like Malaysia.

Badlisham acknowledges the problem but says MDeC has made inroads into solving it. MDeC does this by bringing modules and syllabuses into local public and private universities based on feedback from the industry.

Still, those are short-term measures.

And one wonders if a full-blown focus on enhancing the quality of our universities would have done just as much as a concerted effort like the MSC. A key problem remains the lack of meritocracy from entry levels to how faculty is chosen and retained.

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