Malaysia is growing as one of the fastest regions to promote localized venture capital firm. Despite Malaysia’s internal efforts, Venture capital is still considered as an emerging industry on the country. Funded mostly by the government, the local Small scale and medium scale venture capital firms have to rely heavily on the Foreign Direct Investment for their promotion and profit. With competition from Asian giants, China and India, Malaysia is putting up a brave front in ensuring that local venture capital firms to get enough resources to breathe and live in an era of competitive marketing and business propaganda.
Current Developments in Malaysian Market
Growing at a respectable pace, Venture capital firms in local Malaysian region have seen major changes ever since the allotment of funds to Malaysia Venture Capital Management. With the advent of Information Technology and the league of BPO’s and KPO’s, US$131 million was pumped into the Malaysian market in 2001. Again in the Financial Year of 2002-2003, 20 million US dollars was billed against the name of MIMOS. MIMOS is a research and development (R&D) organization which is fully government-owned. Specializing in the areas of ICT and microelectronics, MIMOS paved the way for Malaysia’s own venture capital firm ownership program. Subsequent to this deal, another 500 million US dollars had been allotted to Kumpulan Modal Perdana and other non- ICT investments to promote the growth of venture capitalists in local Malaysian economic zone. Government backed the efforts with airy tax incentive programs that exempted the local venture capitalists from the payment of income tax. Income tax slashed was with respect to the capital earned as statutory income on all sources of incomes. This did not apply to other income sources like the interest income earned from savings or fixed deposits and profits from Shariah-based deposits.
The materialization of independent local venture capital firms in Malaysia is a strong indication that the market is open to challenge. Largely funded by governmental organizations, Malaysia has remained reserved for local capital venture firms. Outsourcing from western powers and on-shoring within Malaysia has raised the private equity share in FDI as well.
Private equity is broadly categorized under division as:
1. venture/seed capital
2. growth capital
3. leveraged buyouts