New investments in MSC Malaysia companies down

KUALA LUMPUR: Total new investments attracted by companies under MSC Malaysia – the country’s national ICT development initiative – fell by RM3.5 billion in 2016, from RM19.8 billion in 2015.

New investors pumped in about RM6.43 billion last year compared with the RM4.56 billion in 2015. Existing investors, however, contributed only RM9.84 billion last year, while their contribution in 2015 was RM15.2 billion.

Revenue of MSC companies grew by 40% to RM47.1 billion from RM42.1 billion in 2016.

Officials of Malaysia Digital Economy Corp (MDEC) – the government-owned agency that oversees MSC Malaysia – declined to comment on the drop in new investments.

MDEC CEO Yasmin Mahmood said the key focus areas will continue to drive investments in 2017. The key focus areas – Internet of Things, cloud and data centre, big data analytics, security and e-commerce – contributed RM3.7 billion to total export sales last year.

Total export sales rose by 18% to RM19.1 billion from RM16.2 billion.
“It is encouraging to see positive growth across all clusters. Not only did the Creative Content and Technology cluster exceed the RM 1 billion mark, Infotech’s growth surpassed the Global Business Services(GBS) cluster with 26% growth, recording the highest contribution to growth yet,”
Yasmin said at a press conference on MSC’s 2016 performance.

Infotech’s export sales amounted to RM4.1 billion in 2015, and GBS RM11.14 billion.

In 2015, foreign-owned MSC companies in Malaysia anchored export sales by 79% with RM12.7 billion, and Malaysian-owned firms 19% with RM3 billion.

However, Yasmin said, Malaysian companies showed growth in export sales by 21% in 2016.

Citing the global economic conditions, Yasmin said she is cautiously optimistic about 2017.

“We are living in a very challenging environment with many dynamics playing simultaneously but in the technology sector there is a general softness in the overall economic landscape of the world, but the growth engines in this sector are many, so I think the key strategy for us is to ensure that we start switching on the engines.

“We are looking at expanding our geography of focus. We always have the US, which is very strong in investments, and although we will continue to look at companies there, we are also looking at expanding into the UK, which has potential growth for us, and Japan.”

Malaysian companies are exporting to Singapore, Germany, the Netherlands and the UK, other than to the US.

According to Yasmin, there are several companies in different stages of growth which are able to generate more than RM100 million in revenue.

However, a local company quoted as an example of one that has achieved RM100 million revenue, N2N Connect Bhd, posted revenue of only RM41.82 million for the financial year ended Dec 31, 2016, according to Bursa Malaysia data.

MSC is looking at taking things a step further by growing companies that will be able to evolve from RM100 million revenue to RM500 million and eventually cross the billion ringgit mark, which it dubs as the “billionaire tech club”.

This, Yasmin said, requires a strong foothold in the global market.

As at 2015, there were 3,881 MSC-status companies, since inception in 1996, of which only 2,878 were still active.