1. Cabaran
dan Peluang
dalam E-Dagang
E-Commerce Strategic Directions For Malaysia
With emphasis on:
“Bridging the technopreneurs in need of capital
and investors looking for high returns”
Dewan Perniagaan Melayu Malaysia Pulau Pinang
18 November 2000
2. AGENDA
1 Observations – Global Industry Trends &
Developments
E-Commerce & The way it works
2 Towards The Ideal Environment
The EC Framework
3 EC Challenges
Venture Capital
4 Venture Capital In Malaysia
An Overview
3. TECHNOLOGY ADOPTION RATES
Television Electricity
(1926) (1873)
100
Radio
(1905) Telephone
Percentage of ownership
(1876)
80
VCR
(1952) Automobile
(1886)
60
PC
40 (1975)
PC
(1975)
20
Internet
(1975)
0 20 40 60 80 100 120
Years since introduction
Network Services Executive Summit, USA
4. INTERNATIONAL INDUSTRY TRENDS AND
DEVELOPMENTS
Main observations emerge from
a survey of international developments
Some markets are now approaching the point of critical mass
Global leaders in virtually all industry sectors are quickly
implementing EC capabilities
Countries wishing to participate strongly on the supply side of EC
have to define strategies relative to global market leader, the US
New start-ups, entrepreneurial new firms, are shaping
the world of Electronic Commerce
5. THE E-WORLD
For a country to be internationally competitive, there is little alternative
for governments and business but to operate within an environment
competitive with the major economic powers.
United Kingdom
Canada Ireland Germany
United States of America Japan
India
Singapore
Australia
New Zealand
6. ONLINE USERS WORLDWIDE
Region Users %
(millions)
Asia/Pacific 89.68 23.7%
80% of the world’s
Africa 3.11 0.8% population live in
this region
Latin America 15.26 4.0%
Middle East 2.40 0.6%
Canada & USA 161.31 42.7% 70.7% of the
online users
Europe 105.89 28.0% worldwide are
from the west.
World Total: 377.65 1
As of September 2000
“While the world has 6 billion people,
Source: Various; Methodology – NUA Internet Surveys
there are only 0.8 billion phone lines.
Over 80% of the world has yet to make
http://www.nua.ie/surveys/how_many_online/index.html a phone call, let alone surf the web.”
7. E-COMMERCE?
There are many definitions for E-Commerce.
Examples:
“The electronic exchange of information goods,
services and payments”
but underneath the surface E-Commerce is also:
…the digitization of information
...Internetworking of human ingenuity creating
a new socio-economic transformation
…propelled by BRAINS instead of BRAWN
…driven off by both technology push and
business pull
…the foundation of a new economic order
Nations need to identify clusters for industrial
development and reposition themselves to be at
the centre of the virtual marketspace…
8. HOW DOES AN ELECTRONIC MARKET
WORK?
USER PROFIILE
USER
1. Buyer logs on 2. Buyer 3. Buyer 4. Buyer PREFERENCING
SYSTEM
7. Buyer
to the marketplace searches for selects orders pays for
product product product product
PURCHASE ORDER PAYMENT
HOMEPAGE CATALOGS
ORDER INFORMATION OPTIONS
CONTENT DYNAMIC TRANSACTION TRANSACTION
SERVER PUBLISHING PROCESSING 6. Seller PROCESSING
SERVER confirms
In some systems, 5. Purchase order
Content can 8. Payment
sellers can update be generated order sent to information
their own product dynamically seller sent to bank
information. based on
In others, a central user profile. DATABASE DATABASE
administrator does INTEGRATION INTEGRATION
that job.
Some systems
12. Product also list 11. Product SELLER
received shipped DATABASE
advertising, news SYSTEM
and specials
SELLER’S BANK BANK BUYER’S BANK
10. Credit approved 9. Credit checked
Source: Modified from Copyright April 28, 1997, by ComputerWorld, Inc.
Farmingham, MA 01701
9. E-BUSINESS ADOPTION CURVE
High Short-Term Strategies Long-Term Strategies
Unassisted E-Business
Selling
Integrated Tech-Enabled
Web Store Relationship Mgmt. Supply Chain
Management
Collaborative
Extranets
Interactive
Business Channel Master
Marketing Extranets
Value
Web Storefront
& E-Catalog Procurement
Automation Community
Extranets
B2C Customer
Web Brochures
B2B Self-Service
Short-Term Projects Operations Automation
Low Time to Implement High
Source: GartnerGroup, B2B vs. B2C Paths to E-commerce Success
10. FIVE (5) REQUIREMENTS FOR EFFECTIVE
PARTICIPATION
PRECONDITIONS FOR PARTICIPATION IN GLOBAL E-COMMERCE
GOOD BANDWIDTH
FULFILMENT SYSTEMS AND LOGISTICS
EFFICIENT AND TRUSTED PAYMENT SYSTEMS
STABLE AND SUPPORTIVE INSTITUTIONAL ENVIRONMENT
USER FRIENDLY, AFFORDABLE ACCESS DEVICES & INTERFACES
11. THE EIGHT PILLARS FOR COMPETITIVENESS
QUALITY TRUSTED
IP MARKET BRAND PRODUCTS SERVICE
INNOVATION CONTENT PROTECTION DISTRIBUTION ACCESS IDENTITY & SERVICES INTERFACES
The EIGHT PILLARS FOR COMPETITIVENESS represent the core
requirements for firms to participate competitively in
Electronic Trade and the Supply Side of E-commerce
12. THE IDEAL ENVIRONMENT
E-COMMERCE FRAMEWORK
B Q T
I D M R U R
A U
I P I A A L S
N C S R N I &
N T I
O P T K D T
E N
O N R R E Y S
E D T
V T O I T I
P R E
A E T B D S R
R V
T N E U A E O I E F
I T C T C N D C R A
O T I C T U E V C
N I O E I C S I E
S C S
O N S T T
N S Y E
S
GOOD BANDWIDTH
EFFICIENT AND TRUSTED PAYMENT SYSTEMS
FULFILMENT SYSTEMS AND LOGISTICS
USER FRIENDLY, AFFORDABLE ACCESS DEVICES & INTERFACES
STABLE AND SUPPORTIVE INSTITUTIONAL ENVIRONMENT
13. SERVICE PROVIDERS IN MALAYSIA
Network Services Operator Mobile ISP
Telekom Malaysia Atur450 / Mobifon
TMnet
www.telekom.com.my TM Touch (PCN)
Time Telecommunications ADAM (PCN) TimeDotCom
www.time.com.my
Celcom ART900 / Celcom GSM
Celcom Internet
www.celcom.com.my & ETACS
Digi Telecommunications
www.digi.com.my Digi1800 (PCN) DigiNet
Maxis Communications MaxisMobile (GSM)
www.maxis.com.my
Jaring (MIMOS)
Source: Ministry of Energy, Communications & Multimedia
14. MALAYSIAN INTERNET ECONOMY
4.50 Total Internet Users (m)
3.91 • Internet Users
4.00 Total Revenue/Year (US$b)
3.63 1.89 million in 2000
3.50 growing to 3.91 million
3.23
in 2004.
3.00 2.72
2.50
• Internet Devices
1.06 million in 2000 to
2.00 1.89 3.14 million devices in
2004
1.50 1.27
1.00 • E-Commerce
0.58 Total Revenue from US$
0.44
0.50 426 million in 2000 to
US$3 billion in 2004
0.00
1997 1998 1999 2000 2001 2002 2003 2004
Source: IDC -- Internet Market Forecast For Malaysia
15. NATIONAL DIGITAL DIVIDE SCENARIO
Out of 22+ million people in the country, only 1.89 million are expected to be
Internet users. PC penetration lies at mere 11% and Internet penetration has
reach only 6% of the population. Would there be problems for Malaysia??
Northern
14% 5%
Eastern
Sabah
7%
Central 56%
11%
Southern
Concentration of Internet Sarawak
users in Malaysia. 7%
Source: Ministry of Energy, Communications and Multimedia / TMnet / Jaring Dec.1999)
16. ECONOMIC ACTIVITIES
Gross Domestic Product by State (1998)
RM million in 1978 prices
Perlis RM783
Kedah RM6,285 Kelantan RM2,892
Penang RM9,920
Trengganu RM9,374
Perak RM 10,891
Wilayah RM16,880 Pahang RM5,973
Selangor RM26,061 Sabah RM8,647
N.Sembilan RM4,470
Melaka RM3,422
Johor RM15,293
Sarawak RM10,293
Source: 7MP
17. PEOPLE PER PC (1999)
India 352
Indonesia 132
PR China 98 GROSS NATIONAL PRODUCT (GNP) PER CAPITAL
Thailand 2960
Philippines 86
Thailand 37 Malaysia 4,370
Malaysia 11 Korea 10610
Taiwan 7 Hong Kong 24290
Korea 6 Singapore 30550
Hong Kong 4
New Zealand 15720
Singapore 3
Australia 20090
New Zealand 3
USA 28020
Australia 2
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
USA 1.5
0 50 100 150 200 250 300 350 400
18. TOP TRADING PARTNERS - 1999
TOP 10 in 1999
1. USA
Malaysia’s Top-10 major trading partners contributed 77% of the total
2. Singapore RM308.6b gross export earnings.
3. Japan
4. Netherlands
5. Taiwan
6. Hong Kong
7. UK Netherlands
8. Thailand 5.1%
9. Korea - Rep. UK 3.8%
10. China USA
21.9% Japan 11.6%
China 2.7% R. Korea 3.0%
Taiwan 4.5%
Hong Kong 4.5%
Thailand 3.3%
Singapore 16.5%
LATEST:Malaysia’s Top-3 trading partners, the USA, Japan and Singapore. The
three countries collectively contribute for about half (50.8%) of Malaysia’s trade
during January – March 2000.
Source: Department of Statistics / Note: "% share" is share of total exports
19. CHALLENGES (MALAYSIA)
Build Critical Mass
Build Trust on the Web
Attracting Inbound Consumers
Policy and Regulatory Framework
Organization Transformation
20. BUILD CRITICAL MASS
Increase internet penetration
Increase access devices penetration
Improve telecommunication infrastructure
Improve tariff and network access
21. BUILD TRUST ON THE WEB
Security
Privacy of information
Electronic payment systems
Improve fulfillment services
Building awareness & skills
25. ORGANISATION TRANSFORMATION –
VENTURE FUNDING
Objective/Outcome: Develop Venture Capital and IPO markets to aid
innovative companies
• Provide Incentives to attract Venture Fund companies to invest in early
stage growth companies.
• Provide tax concessions to encourage inward investment from foreign
Venture Capitalists e.g. the granting of MSC status.
• Promote and market technopreneurs and start-up companies to potential
venture capitalists.
• Create sufficient pool of technopreneurs to build up critical mass for viable
venture capital investments
• Review existing IPO markets for technology companies such as Mesdaq in
order to attract more IPO’s within Malaysia
26. SOURCES OF CAPITAL
Where money can come from:
• Funds from personal savings (from friends and relatives) –
“Bootstraps”
• “Angels” rich people with money to get start-ups rolling and help
preparing for next-round funding from VCs.
• Raise your money from Venture Capitals – “Classics”
• Raise money from suppliers and business partners – “Creative”
• The “Hybrid” start-ups, get seed money from mixture of angels,
venture firms, and corporations
• Other unconventional sources of funding.
“You never have enough money, things always take twice
as long to do as you think”
27. WHAT VCs COMMONLY LOOK FOR?
The Economic Laws that govern a start-up:
• ROI – return on investment
• looking at the “multiple” – how many times the value of one share
invested rises by the time the initial public offering (IPO) is done.
• true % annual (percentage per annum) ROI
• Cash Flow (“burn-rate”)
• The IPO (initial public offering) – “holy grail”
• Liquidity (“exit strategy”) is everything for the Venture Capitalists
– converting the investors’ shares into cash.
28. FROM IDEA TO IPO
The Idea Founders’ Commitment Resignation
Create Business Plan Getting People Seed Capital
Cash-in Capital & Incorporation Launch 1st Product
Raising Working Capital The IPO
29. VENTURE CAPITAL TO SUPPORT GROWTH
MALAYSIAN GOVERNMENT
Internet Devices • All EPF members are allowed to make
5.00
Internet Users 4,000 withdrawals for computer purchase.
Internet Commerce • 1,262 computer laboratories will be
4.00 established in rural schools
• New computers given by companies to
3,000
their employees are exempted from
income tax
Million
3.00
US$Million
• Government employees will be allowed
2,000 to apply for computer loans once every
2.00 5-years.
• Contributions in cash and in kind to
1,000 projects promoting information and
1.00 communication technology (ICT) will
be allowed as tax deductions.
• RM500 million venture capital fund to
be established as an alternative source
1999 2000 2001 2002 2003 2004
Source: IDC -- Internet Market Forecast For Malaysia of capital financing for ICT
Source: Budget 2001
30. OVERVIEW OF VENTURE CAPITAL IN
MALAYSIA
Greenfield industry with tremendous potential for growth.
To date venture capital has been in the area of contract
manufacturing, plastic molding, tool and die machining, agro-
technology and information technology.
• Malaysian Venture Capital Association (MVCA)
(Website: www.mvca.org.my)
Mission: To promote and develop venture capital industry in
Malaysia
– Formed on 27 February 1995
– Started 13 founding members (currently 33 members)
31. VC IN MALAYSIA (OVERVIEW)
• Malaysian Technology Development Corporation (MTDC)
(Website: www.mtdc.com.my)
– first corporate venture capital in the country
– they do deals within the manufacturing arena with a view of
acquiring high tech companies for incubation and development
in Malaysia.
– they have set-up a number of funds such as
• Sumber Modal Satu - Fund targeted at Bumiputra
entrepreneurs
• Scheme for Women entrepreneurs
32. VC IN MALAYSIA (OVERVIEW)
• MSC Venture Corporation (MVC)
(Website: www.mdc.com.my/mscvc)
The first VC to be wholly focused at information technology and
multimedia ventures. Covering everything from dot.coms ,“clicks
and mortars” to technology companies
• Incorporated on 8 February 1999
• Wholly-owned subsidiary of the Multimedia Development
Corporation (MDC)
• Launched our first fund Venture One Sdn Bhd on 28 June 99
33. VC IN MALAYSIA (OVERVIEW)
• MSC Venture Corporation (MVC)
Fund size: US$30 million (RM120 million)
• Life of fund: 10 years
• Announced first investment on 17th February 2000
• To date: 4 companies
• (1) GO2020 MSC dot com – www.go2020.com.my
providing electronic commerce engine
• (2) VMS Technology – VoIP solutions provider
• (3) Interbase (auction site) – www.lelong.com.my
(4) VOL Asia – www.volasia.com
Online Service Provider focused on Asian content
34. INVESTMENT STRATEGIES
Country Focus: Malaysia
Investment Size: RM1-5 million (USD300k – 1m)
Minority stake
Maintain balanced portfolio of start-up, growth and pre-IPO
companies
Co-invest with other VCs
Provide support and assistance - promotions, international
marketing, fund raising
Exit strategy via IPO or sale to strategic investors
35. MSC -- A CONDUCIVE ENVIRONMENT TO
CATALYZE E-COMMERCE
Source of knowledge workers
Good Venture Funding
Flagship to Kick Start MSC Initiative
Cyber Law for E-Commerce
Grants to Encourage R&D
Environment to Incubate for
High Bandwidth Infrastructure
Technopreneurs