“KL20: Malaysian Moonshot” by Shaun Kua
The recent Fashion Valet saga highlights, for better and for worse, government involvement in the local startup scene.
The current marquee policy for startups is KL20. It was launched to much fanfare in April and is supplemented by the Malaysia Startup Ecosystem Roadmap (SUPER) 2021-2030. These policies aspire to turn Malaysia into a top 20 global startup ecosystem by 2030, centred on a KL-Selangor Innovation Belt.
Picture: Chang Lih Kang
Policy Approach
KL20 & SUPER’s ambition deserves credit. This is probably the first time the Malaysian government has articulated a specific aspiration to compete globally as a startup hub. This contrasts with startups being a mere element or even by-product of broader industrial, SME, digital or innovation policy in the past.
Launched by Minister of Economy Rafizi Ramli, it suggests a whole-of-government approach, involving wide coordination of other Ministries & agencies. It seeks to “dismantle” “administrative bureaucracy”, to address one of the most common criticisms of Malaysian startup policy initiatives & institutions.
Picture: Chang Lih Kang
The Moonshot
As an emerging ecosystem, Kuala Lumpur’s effective ranking by the oft-cited Startup Genome has fluctuated between the 30th-70th position globally since 2020. Achieving KL20 thus requires leapfrogging, at the very least, 10-20 other cities.
While rankings may be a useful (but abstract) heuristic for policymakers, equally or even more meaningful would be a general sense of excitement that KL has “arrived” and is in the same league as top 20 cities such as Seattle, Berlin & Shanghai.
To keep things real, the “vibes” should be backed by actual skin-in-the-game by founders, funders & acquirers – new startups, deals & exits.
Picture: Chang Lih Kang
Per KL20, all this must happen by 2030. The KL20 Summit in April was reasonably well-attended by international leaders and left local players cautiously optimistic. But, for those in founder mode, it’s been more than 6 months and 6 months is a long time.
KL20 thus requires a step-change in pace. To risk a trite reminder: other startup cities are not standing still either.
We need a “moonshot” sense of purpose like that that enabled the first manned lunar missions. On May 25, 1961, President John F. Kennedy proposed to Congress for the US to be first to land a man on the Moon “before the decade is out”. At that point, NASA had not even sent an astronaut into orbit.
The technological challenge of the Apollo program was thought so immense that a joint US-Soviet mission was seriously considered, at the height of the Cold War no less. Ultimately, it would take the combined effort of over 400,000 people and over 20,000 firms and universities to land Neil Armstrong and Buzz Aldrin on the Moon on July 20, 1969.
In the same spirit, KL20 & SUPER must deliver – if not quick wins – deep & meaningful progress.
Policy Initiatives
The Ministry of Science, Technology & Innovation (MOSTI) under Minister YB Chang Lih Kang’s leadership will be critical throughout the next 5 years. Key agencies such as MRANTI, MIGHT & Cradle, are under MOSTI’s purview.
2 of the 14 key initiatives under KL20 – MyStartup Single Window & the Executive Digital Leadership programme – have already been launched. Another 7 are in implementation.
Over 3,900 startups have been identified under MyStartup Single Window. 22.9% are involved in the Internet of Things (IoT), 14.2% in e-commerce, 12.2% in fintech and 7.6% in AI or big data analytics.
A glance at the rankings targeted by SUPER – the International Institute for Management Development (IMD) World Competitiveness Ranking & World Intellectual Property Organization (WIPO) Global Innovation Index – shows some improvements since 2020.
As for SUPER’s research & development targets, the gross domestic expenditure on R&D (GERD) seems on track to be 2.5% of GDP by 2025, but the volume of patent registrations seems
behind. The recent Malaysia Science Endowment (MSE) with an allocation of RM170 million should de-risk private sector investment in R&D via matching grants.
Budget 2025 tabled on October 14 announced over RM2 billion of funds for Khazanah, KWAP & Cradle to invest in startups, the former indirectly through a Funds-of-Funds model and the latter directly for early-stage startups.
If this is successfully directed towards early-stage startups, this can contribute substantially towards SUPER’s target of increasing early-stage funding to 0.3-0.4% of GDP in 2030, equivalent to an estimated RM 10+ billion.
Public Opinion
The Fashion Valet saga is a reminder that startup policy is not the sole domain of technocrats. Ordinary Malaysians do care about and have reasonable intuitions about the proper distribution of risk between government, funder and founder. They should not be condescended to.
Far from retreating from or scaling-down KL20 for fear of adverse public opinion, the government ought to double-down on relentless execution, transparency & win-win partnerships with other ecosystem players.
Even if the moonshot misses the moon, we will still land among the stars. The Apollo program generated over 1,800 spin-off products & technologies as of 2015. While the year-to-year startup ecosystem rankings matter, effective & real implementation of KL20 will regardless have many positive spillovers on Malaysian economy & society. The key is delivering on the Prime
Minister’s promise, during the launch of KL20, of a “clean break with the past”.
Shaun is the founder of Mersawa Associates (mersawa.my), a political & public sector services firm, and Institut Merbau (merbau.my), a think-tank studying complex systems & phenomena in Southeast Asia.
