Malaysian entrepreneurs not exploiting country’s infrastructure to build digital Islamic economy – DagangHalal CEO

Photo credit: KUALA LUMPUR, MALAYSIA - DEC 3, 2010: An unidentified artist showcases a digital sketching of a concept car during Kuala Lumpur International Motor Show on December 8, 2010 / Pistolseven / Shutterstock.com

Today's buzzword in the Islamic economy is “technology.” New software and web concepts give birth to new startups and new jobs every week, making the Internet and digital innovations key ingredients for the growth of any sector.

Against this backdrop, Malaysia is embarking on an ambitious attempt to become a tech-based, high-income economy by 2020. However, retaining talent and finding funding or financing remain major hurdles, limiting the potential for Malaysia’s Small and Medium Enterprises (SMEs), which make up 91 percent of all businesses in the country.

Although Malaysia’s digital economy is still nascent, the country has built a good foundation for tech entrepreneurship. This includes infrastructure and government initiatives to accelerate development.

In comparison to neighboring countries such as Thailand or Indonesia, Malaysia has relatively high broadband penetration, at around 68 percent of the population. It has attractive tax breaks for startups, as well as government grants like the Cradle Investment Programme and the Enterprise Innovation Fund. The nation also has a multilingual and relatively low-cost workforce for digital entrepreneurs to tap.

“Despite the infrastructure being in place to successfully build the digital Islamic economy, players are not leveraging [this] enough for their businesses,” said Mohamed Hazli Mohamed Hussain, the group CEO of DagangHalal, Malaysia’s pioneering e-commerce platform and one of the world’s largest online marketplaces for B2B trading of halal products and services.

SKILLS GAPS

When it comes to taking a business online, a working knowledge of how to run an Internet or digital company is essential. According to Mohamed Hussain, Malaysia’s SMEs lack key know-how in tech and skills and therefore face high costs if they choose to enter the digital economy.

“General awareness and promotion, building capacity and capability as well as [providing] incentives [to] lower the cost of adopting ICT (information and communication technologies) are important to address the gap,” he said. 

In the web-savvy era, it is not enough to just have talent and energy if you want to go digital. Mohamed Hussain advocates calculated risk-taking, saying Malaysian entrepreneurs will often do their best to embrace the digital economy as a key business pillar, only to see it all unravel in a competitive and uncertain global market.

Mohamed Hussain’s advice to Malaysian entrepreneurs is to first look to low-hanging fruits and not immediately attempt to re-invent the wheel. “It is important to contribute to an existing product or service, rather than invent a new product,” he said.

WHERE’S THE SHARIAH-COMPLIANT FUNDING?

Money, especially in the form of Shariah-compliant funding or financing, remains the major impediment for growth of the digital Islamic economy in Malaysia.

However, there have been encouraging developments in venture capital to support the growth of the digital economy.

Last year, U.S.-based VC firm 500 Startups joined with the Malaysian government’s MaGIC accelerator, which calls itself “the largest program in Southeast Asia to grow a community of regionally-focused startups,” to build a startup growth program.

Meanwhile, Malaysia’s largest VC company Malaysia Venture Capital Management Berhad (MAVCAP) partnered with China-based Gobi Partners to create a $50 million fund to help startups in Southeast Asia and China.

POTENTIAL

Finance, halal food, travel, media, pharmaceuticals and cosmetics are all promising sectors for digital startups and have potential to become driving forces of the nation’s Islamic Economy.

The Chief Economist of a Malaysian banking group, who preferred to remain anonymous, said the digital Islamic economy in Malaysia remained largely untapped. “The talent and infrastructure as well as government support make the country an emerging hotbed for Islamic tech startups,” he said. “Online services, especially concerning food, fashion, travel and apps, have a significant need for investment and do offer growth potential.”

DagangHalal’s Mohamed Hussain said, “We are at the stage where the [Malaysian] government is [going] all out to ensure the national digital economy (grows). Islamic businesses are especially lifted up together with the development.”

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