Malaysia's Super Corridor -2: Cos With MDC Status

While businesspeople are generally supportive of Tan Sri Othman, they complain privately that some other MDC officials are inexperienced and arrogant -- traits that put off some companies looking to set up shop here. Tan Sri Othman doesn't dispute such criticism. He says the agency has started training staffers on how to handle clients, acknowledging that foreign companies "have so many choices, they can go and invest somewhere else." Tan Sri Othman also says the MDC is "at a stage where you need new blood," but says that he will stay at its helm for at least another two years.

The MDC's oft-cited gauge of progress is the growing number of companies with Multimedia Super Corridor status -- 362 at last count, of which about 60% are small and midsized Malaysian companies. Such companies have to promise they will conduct research-and-development activities within the corridor. In return, they enjoy perks, including a 10-year exemption from corporate taxes, the right to bid for contracts to provide infrastructure, hardware and software for government offices, schools and hospitals, and the freedom to bring in foreign computer programmers with a minimum of red tape.

But since the MDC is also the agency that confers super corridor status, the number of concerns qualifying is hardly an objective measure of the project's success. Of the 362 companies, 46 haven't started operations, while a number are dormant, according to the MDC.

In a survey of 209 super corridor companies conducted in April, the MDC concluded that these companies collectively will have invested a total of 1.8 billion ringgit ($473.7 million) by 2001. "On a global scale, it's just not significant," says one industry analyst.

A new Malaysian stock exchange, modeled after the Nasdaq Stock Market, is supposed to attract high-tech start-ups, but that hasn't caught on either. After 17 months, the Malaysia Exchange of Securities Dealing and Automated Quotation, known as Mesdaq, has just two listings. At Internet networking functions around Kuala Lumpur these days, start-up companies talk instead of raising funds in Singapore or Hong Kong.

Still, the MDC likes to promote the fact that world technology titans continue to show interest in the super corridor. At the MDC's annual meeting of its international advisory panel earlier this month, 29 members including Mr. Shih, Mr. Capellas, Silicon Graphics Inc. Chairman and Chief Executive Bob Bishop, Fujitsu Ltd. Chairman Tadashi Sekizawa and Sun Microsystems Inc. Chief Scientist John Gage sat down with Dr. Mahathir in Cyberjaya. Behind closed doors, the advisers told the prime minister that Malaysia needs to do more international marketing and to churn out more skilled workers, including specialized lawyers and accountants to support the tech industry.

But the continued foreign interest hasn't translated into big investments. Bill Gates, also a member of the advisory panel, didn't make it to the meeting, but he swung through a week later to open a new center for training software developers in Cyberjaya. Mr. Gates said the corridor had the greatest "scale and commitment" of similar initiatives he'd seen outside the U.S. He likened the potential synergies of the Multimedia University and Cyberjaya to that of Stanford University and Silicon Valley. Microsoft pledged to invest 10 million ringgit in the next five years to work with the university to train developers.

Yet the size of Microsoft's Malaysian investment is miniscule compared with what the software giant is investing elsewhere. In India, Mr. Gates's next stop after Malaysia, he said Microsoft would invest $50 million in the next three years at its development center in Hyderabad. In Cambridge, England, Microsoft is setting up a $80 million research lab.

So what do critics think the Malaysian government should be doing? Some say it's time for the MDC to let the private sector to play a bigger role, particularly in kicking in venture capital. In neighboring Singapore, for example, while the government has set up a $1 billion venture capital fund, it's leaving investing decisions to professional venture capitalists, including some from Silicon Valley.

But in Malaysia, traditional venture capitalists are more used to funding manufacturing companies and have been slow to put money in technology start-ups. So have risk-averse banks.

As a result, the MDC's venture capital subsidiary has wound up in a key funding role for local concerns. The unit, MSC Venture Corp. Sdn. Bhd., launched a 120 million ringgit fund in June 1999. MSC Venture has since disbursed 20 million ringgit to seven companies. Critics complain that's too slow.

Tan Sri Othman says the blame is misplaced. He says many of the Malaysian start-ups seeking money have weak management teams and inadequate business plans. And he dismisses the possibility of farming part of the funds to professional venture capitalists, saying that would be "completely abdicating (our) role."

--- A Place to Grow Companies with Multimedia Super Corridor status: 1997 1998 1999 Current Malaysian 46 101 176 218 Foreign 48 96 124 144 Total 94 197 300 362 Growth in high-tech employment: -- 5,700 new jobs created between 1997 and 1999 -- 1,600 new jobs in 2000 -- Projected 35,000 new jobs by 2005 Estimated investment by Multimedia Super Corridor companies by 2001: $474 million Projected investment by companies by 2005: $5.3 billion Source: Multimedia Development Corp.

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