Malaysia takes off into cyberspace?

Mohammed Hassan

Safar 25, 1418 1997-07-01

South-East Asia

by Mohammed Hassan (South-East Asia, Crescent International Vol. 26, No. 9, Safar, 1418)

Malaysia has launched its audacious bid to capitalise on the growing possibilities offered by the emergence of information superhighways. In a series of high-level presentations Prime Minister Dr Mahathir Mohammed has started to woo key participants to the Multimedia Super-Corridor (MSC).

MSC is a 750 sq km strip of land south of Kuala Lumpur, aimed at attracting software firms, electronic publishers, telecommunication specialists and other multimedia ventures. Generous investment incentives, such as a 10-year tax holiday and new cyberlaws to protect intellectual property are also planned.

One of the key features of Cyberjaya (the Malay acronym for the proposed Cybercity) is going to be the “Virtual University” to foster research. In addition adjacent to Cyberjaya, it is planned to have Putrajaya, the new administrative capital of the country. A 2.5-10 gigabit per second fibre-optic network will link every building in the MSC. Malaysian officials say they want to experiment with paperless government in Putrajaya. In the high-level roadshows in the USA and Europe, Dr Mahathir has tried to rope in some of the leading firms. The Multimedia Development Agency (MDA), the government agency responsible for the project, claims that 41 companies have already committed themselves to investing in the MSC, including Intel, Siemens, BT and Mitsubishi Corporation. In addition, the CEOs of Microsoft, Sun Micro Systems and Oracle, amongst others, have agreed to sit on the advisory panel for the MSC.

The Malaysians hope that lure of lucrative contracts for Putrajaya and possibility of further work in Malaysia itself will entice a number of leading edge companies to invest in Cyberjaya. This in turn will offer the country an opportunity to attract enough “knowledge workers” to create a critical mass for a self-propelling process to take off. Malaysia can then become the hub of the “Silicon Valley” type developments in the Asia-Pacific region. It is with this in mind that the country is projecting to invest some US$8-10 billion in the project and also offer extremely liberal terms for “knowledge workers” to come and work in the country.

Malaysia’s bid is indeed audacious and has taken its intended audience by a storm. The road shows have been well attended by key people in the industry. However, whether Malaysia can pull off the gamble is open to question. With Taiwan, Korea, Singapore and Hong Kong, amongst others, vying for similar programmes, there is stiff competition for the scarce pool of “knowledge workers” fundamental to creating the vital critical mass for the success of the MSC.

Secondly, with its ambitious development projects, Malaysia is reaching a funding limit. Recently, the funding of the massive Bakun Dam project had to be guaranteed by the government despite earlier confidence in raising private finance. The poor take up on the rights issue of Ekran, the lead company managing the Bakun Dam, clouds the funding scenario even further. There are other projects totalling US$20 billion in the pipeline. With the slowdown in exports, the country’s persistent current account deficit will again be a cause of concern to the investors and will affect Malaysia’s credit rating.

Even if these were overcome, the biggest worry is that the project is totally reliant on foreign know-how being successfully transferred. Here, although the country is a leading manufacturer of semi-conductors and automobiles, its capacity to produce the key value added components like semi-conductor design, wafer fabrication and critical engine components has been lagging behind. The requisite base of skilled “knowledge workers” is still not in place. For a leading edge enterprise like the MSC, these shortcomings will be even more telling.

To judge what is required, one only has to note that only three weeks ago Microsott Corporation announced plans to set up a research facility in Cambridge, UK. The UK is perhaps the leading country in electronics related developments after the USA. The danger is that some companies may be tempted to exploit the investment incentives without setting up the permanent R&D bases that Malaysia is seeking. These could just be satellite operations, easily closed when economic conditions deteriorate.

The present team at the helm of Malaysia has been in power long enough to remember that this is exactly what happened in the semiconductor manufacture operations during the last down tum. Malaysia’s dilemma is that with Vietnam, Philippines, India, Pakistan and Bangladesh rapidly opening their economies, the cost economies will drive the assembly type operations to these locations.

The country needs to create value generating businesses to maintain its growth rate and attain its target of developed country status by the year 2020 (‘Vision 2020’). For this, whilst initiatives like the MSC are vital, development of world class local educational institutions is also vital. Here, unfortunately, the slow and painstaking route to nurturing the existing universities has been diluted in favour of private initiatives. These have started to deliver quick fixes with minimal investment. Their output in terms of the calibre of “knowledge workers” required is at best mediocre. This priority has to be urgently reversed and the short time window the country has got put to effective use to create the local basis for a MSC type venture.

Malaysia has indeed shown a credible record of economic growth over the last ten years. It now needs to move to the phase of a slightly mature economic growth in the face of rising competition from other opening economies. In this connection, it needs to pay much more attention to solid manpower and educational infrastructure developments at home. Without these, ambitious projects like the MSC are unlikely to bear the desired results.

Courtesy: The Muslim News, London.

Muslimedia - July 1-15, 1997