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Navigating Southeast Asia’s Tech Frontier: An Interview with GP Bullhound Senior Advisor Shahril Hamdan

Kuala Lumpur, 13 May 2024 - As GP Bullhound gears up to establish a presence in Kuala Lumpur, we sat down with Senior Advisor Shahril Hamdan to gain insights into the region's burgeoning tech landscape. In this interview, Shahril discusses his reflections on the recent KL20 event and illuminates the promising opportunities awaiting the Southeast Asian tech ecosystem.

“Shahril, could you share your insights on the recent KL20 event and its impact on the tech ecosystem in Southeast Asia?”
I believe KL20 – the event and the announcements from more funding dollars to a startup concierge – was a statement of intent from Malaysia to play a leading role in the regional tech ecosystem. It did so by instituting new actions but also being tight about what Malaysia’s unique proposition within the broader ASEAN story is. This hasn’t always been the case – a succinct and self-aware narrative is important so that all players are clear about what it offers, and how it is accretive to the Southeast Asian tech ecosystem.

“Why do you think Malaysia has become a key hub for tech communities in the region? What unique factors contribute to this development?”
First, like a few of our neighbours, we boast a strategic geographic location with easy access to major Asian markets like India, China, and the ASEAN countries, making it an ideal hub for companies aiming to tap into these populous and rapidly growing economies. But what’s slightly special about Malaysia is that its multilingual and multicultural makeup makes this affinity a bit more tangible.

Additionally, we also have a market size of over 30 million that is just about big and diverse enough in terms of wallet sizes, sitting alongside a high quality tech infrastructure, that allows us to be a test-and-launch pad for the broader region. A bonus point: our cost structure across the board means all of this comes at great value for money – there’s an arbitrage play obvious to anyone who looks close enough!

“How does the investment climate in Malaysia compare to other Southeast Asian countries in terms of opportunities for tech investors?”
It plays a complementary role to Singapore’s hyper-urban capital hub and the large markets of Indonesia, Vietnam or the Philippines who are at a different part of the developmental curve. We are gradually learning to be comfortable with what we are, and not try to be what we’re not – I think that’s part of growing up as a country and an ecosystem.

I’ve mentioned the market size and what it can represent – not too small to be relatively inconsequential but not big enough to ever justify a domestic-only approach. That’s a potentially sweet spot for tech founders and investors alike. In terms of regulatory regime, we are suitably friendly with the expected slew of tax incentives and non-fiscal support that builds on the decades-long friendly posture towards trade and investments reflecting Malaysia’s identity as an open economy.

For investors, it is also interesting to note the few globally-significant sectors that Malaysia is already strong in. Its crucial role in the global semiconductor supply chain is well noted. Perhaps less known internationally are Malaysia’s prospect of being a regional trading hub for renewable energy as well as actions already taken in areas like carbon capture utilisation and storage or biomass energy, to say nothing of its leading position in Islamic finance.

Like I said, it’s about owning who we are what what we are good at. We may not be a deep tech champion for example, but we have an abundance of value-generating components, both natural and built over decades, waiting to be leveraged on by parties with solutions grounded in innovation and technology.

“What challenges do you foresee for Malaysia’s tech ecosystem, and what strategies might be implemented to address these issues and sustain growth?”
There are a few. The critical mass and network effect to really stand out as a leading tech ecosystem is far from being achieved. In terms of funding amount, deal flow and concentration of private capital, we are quite behind a couple of our neighbours. In the short term, public-linked capital must step in to fill the space. But that can’t last forever – at some point soon, the ecosystem must find validation through more private capital.

Events like KL20 and the initiatives announced, are meant to catalyse that. In fact, having international tech investors and advisors like GP Bullhound operate in Kuala Lumpur – getting in on the ground floor – is part of that story too. Hence, it’s great to see institutions like KWAP finding creative ways to build novel GP-LP partnerships that benefit the ecosystem as a whole.

We also have issues around talent development and retention. Competition for tech talent is fierce, especially from neighbouring countries like Singapore, which attracts global talent with competitive salaries and high living standards. Earning capacity aside, enhanced visa programmes and the like will help at the margins, but ultimately success breeds success and talent breeds talent. We need to build, fund and support a cluster of tech companies and entrepreneurs while also making our urban centres most liveable and attractive for a global workforce.

When it comes to talent, above all, the founder network is what Malaysia needs to cultivate strongly. They need to feel welcome and supported – and here too, the right balance of government and private sector is needed.

“Can you identify any sectors within technology where Malaysia is particularly strong or shows potential for significant advancement?”
I’ve mentioned a few earlier but let me outline some of them more specifically.

  1. Green Technology and Renewable Energy: Malaysia aims to become a leader in the Asia-Pacific region in renewable energy by 2050, with a strong focus on solar energy, but also in other RE sources like biomass, leveraging on its position as the second largest palm oil producer. The commitment to achieving 70% renewable energy underscores its potential as a centre for innovation in green technologies.
  2. Semiconductor and Manufacturing Automation: Malaysia is strategically positioned in the global semiconductor trade, accounting for about 7% of the market. The country’s manufacturing sector is also advancing through initiatives like the New Industrial Master Plan which embraces Industry 4.0 technologies to enhance automation and manufacturing efficiency.
  3. Islamic Finance: With a top ranking in the Islamic Finance Development Indicator for ten consecutive years, Malaysia is a global leader in the Islamic financial services market. This includes being one of the largest markets for sukuk (Islamic bonds) and Islamic funds under management. Think of Islamic fintech as a huge untapped market globally.
  4. Agricultural Technology: Malaysia is leveraging its status as one of the largest palm oil producers to innovate in agricultural technologies, including the use of drones and IoT to improve farming efficiencies and output, alongside what I mentioned about biomass energy.

“How do you envision the role of international investors in the development of Malaysia’s tech landscape in the coming years?”
Huge. Investors are poised to play a crucial role, acting as catalysts for growth and innovation. But it goes both ways too – I think it’s a great opportunity for international investors to get in early and benefit from what Malaysia has to offer, with strong downside protection too, and while the rest of the market hasn’t quite caught on yet.

A few quick thoughts on what investors’ role might be in the specific case of Malaysia. Needless to say, first is obviously to close the funding gap that I alluded to earlier. But more excitingly, it is about making Malaysian and Southeast Asian enterprises attractive to international capital.

Part of this is the access to global networks and markets which act as growth drivers and which international investors can bring. It’s also about the same international investing community helping founders and local entrepreneurs structure their equity story and business operations, adopting international best practices.

I also see international investors playing a role in helping government think through the regulatory regime and policy landscape to ensure they are responsive to what is occurring around the rest of the world. 

To learn more about GP Bullhound’s investment principles and our Fund VI, visit GP Bullhound’s Fund VI page.

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