Yang Berhormat Datuk Dr Awang Adek Hussin, Deputy Minister of Finance

Tan Sri-Tan Sri, Dato-Dato

Distinguished guests,

Members of the media

Ladies and gentlemen,

Introduction

I am honored and privileged to be here to deliver the opening address at this second Islamic Venture Capital and Private Equity Conference 2009. The key themes to be discussed and deliberated for this conference will be the possibilities and issues pertaining to sourcing Islamic investments and forging cross border partnerships amidst the global economic crisis.

May I congratulate the organizers, Malaysian Venture Capital and Private Equity Association (MVCA) and Islamic Banking Finance Institute of Malaysia for organizing this annual conference. I was informed that this conference is made possible due to the overwhelming support and encouraging attendance during the inaugural event last year.

Origins and Importance of VC industry

The first venture capital company in Malaysia was established in 1984, when the Singapore-based South East Asian Venture Investment (SEAVI) set up Malaysian Ventures with a fund size of approximately RM13.8 million. Since then, the Malaysian venture capital industry has grown in providing financing to companies where direct bank lending or financing through the equity or debt market is hard to obtain.

Venture capital activity is now recognized not only as an engine of economic growth. It stimulates new business activities leading to the creation of new companies and increasing employment level while acting as a catalyst towards greater innovation in science and technology.

The capital market has also benefited from venture capital as investee or VC-backed  companies are listed on the local stock exchange which serves as an exit for the venture capitalists. Venture capitalists provide the pipeline to the stock exchange, creating a capital market with greater depth and breadth.

Commitment and support from the Government

Ladies and Gentlemen,

The Malaysian venture capital industry is indeed privileged to have received immense support from the Government. As at the end of 2008, RM2.2 billion was sourced from the government which represented about 48% of the total funds under management by the industry. Funding from the government has been prevalent at each stage of the funding spectrum i.e. from the pre-seed right up to late stage as administered by various Ministries and government-backed venture capital companies.

Apart from funding, the government also set up the Malaysian Venture Capital Development Council (MVCDC) in January 2005 under the chairmanship of the SC.  With Council members drawn from both the public and private sectors; its main task includes advising the government on overall development of the VC industry and to facilitate greater co-ordination of strategies and initiatives relating to the VC industry.

Complementing the efforts, the government also accorded attractive tax incentives for VC industry players.  Budget 2009 granted a five-year tax exemption on venture capital companies investing at least 30% of their funds in seed, start-up or early stage financing. 

Performance of the VC industry

Let me share with you the performance of the Malaysian VC industry thus far.  Funds under management as at the end of 2008 has grown by 38% to RM4.57 billion from RM3.308 billion in 2007, of which 48% are funds committed by the government agencies.  

During the year, a total of 134 investee companies received funding amounting to RM477 million.  The year 2008 saw the entrance of Japan Asia Investment Co. (JAIC), one or the largest venture capital company in Japan, making its entry as the first foreign venture capital corporation (VCC) registered with the SC.  We also saw the launching of Musharaka Venture as the first Islamic venture capital fund in Malaysia following the release of the Guidelines and Best Practices of Islamic Venture Capital in May 2008.

I am pleased to announce that information on venture capital industry performance, venture capital companies and management companies, the regulatory framework, tax incentives etc are now compiled into a first edition of the Venture Capital and Private Equity Directory 2009.  This directory, will serve as a single reference point to create the much-needed awareness among industry players from both the venture capitalist and entrepreneurial side on the various requirements, benefits and funding availabilities that currently exist in the VC & PE market.  Indeed, greater awareness is key to the creation of more venture capital activities, as well as the entry of new talent and skills which will drive greater vibrancy into the industry.  

Moving towards innovation economy

Ladies and gentlemen,

The government’s commitment to move the economy up the value chain is clearly reflected under the Ninth Malaysia Plan where efforts will be intensified to generate new sources of wealth in technology and knowledge-intensive sectors.

In this regard, access to financing, including venture capital financing for SMEs is crucial.  The venture capitalists play an important role not only in funding but also in inculcating excellence, high performance culture and good corporate governance in start-up companies, to position Malaysia as a preferred destination for investments in ICT services and facilities and biotechnology. 

We have seen many success stories such as Job Street Corporation Bhd, mTouche Technology Bhd, e-pay Asia Limited, Green Packet Bhd as proofs that venture capitalists are equipped to identify revolutionary and strategic technologies that put Malaysia’s success stories prominently on the world map. This is from envisioning tomorrow’s needs, identifying and acquiring the necessary technologies today and improving them to meet the ever-changing market demand tomorrow.

Science and Societal well-being in the Islamic world

Ladies and gentlemen,

We would all agree that venture capital concepts and Islamic finance was already embedded in the business of the Muslim community even in the early days.  

The activities of venture capitalist was not only crucial in spurring business activities in the Muslim community but was also the means for greater advancements in knowledge. It was widely known that support of powerful benefactors became a vital element for the development of science across the Muslim empire. In the early 11th century, the Fatimid ruler al-Hakim invited the renowned mathematician and physicist Alhazen to teach in his court, greeting him in person at the gates of Cairo, an extraordinary honor that gave a tremendous boost to the prestige of science in Egypt.  This is merely an example but one which resulted in the birth of renown Muslim scientists and scholars in key areas of mathematics, science and medicine in the period between 8th and 14th century who have all led the Islamic Golden Age in science. 

Unfortunately it is claimed by some quarters that the Muslim ummah today have fallen behind. A study by academics at the International Islamic University Malaysia showed that OIC countries have 8.5 scientists, engineers, and technicians per 1000 population, compared with a world average of 40.7, and 139.3 for countries of the Organisation for Economic Co-operation and Development.  Forty-six Muslim countries contributed 1.17% of the world’s science literature, whereas 1.66% came from India alone and 1.48% from Spain.  Twenty Arab countries contributed 0.55%, compared with 0.89% by Israel alone^[1]

Muslim leaders today have realized that economic growth flow from technology, and have called for speedy scientific development and a knowledge-based society. With that, funding for science and education has grown sharply in recent years, as it should be.  In this, the VC’s contribution in terms of funding and its role as a catalyst for innovation is crucial not only for the Muslim ummah but for Malaysia as a whole.