Entrepreneurship: The Rising

A review of history clearly depicts that the climbing of the ladder was not easy.

The ruling of Malaya by the British colonialist back then set the stage for segregated economies (Figure 1.2). It is known that the Indians were brought in to work in rubber plantations, whereas the Chinese were employed at tin mines or given trading rights to become shopkeepers and petty traders. The Malays were confined mainly to the agriculture sector. Upon independence in 1957, the three major ethnic groups agreed that the Malays would be granted special rights in order to elevate their status and create an equitable society.

1.1

Figure 1.2: Segregated economy during British colonial in Malaya

However, the growing discontent about economic inequalities sparked off racial riot on 13 May 1969. The riot paved the way for the institution of the New Economic Plan (NEP) in 1970. This plan focused on Bumiputera ownership and partnership, improvement of Bumiputera participation in high income occupation and subsequently, reducing the income gaps. Fundamentally, NEP became the driving force towards the formation of the Bumiputera entrepreneur community.

The NEP was eventually replaced with the New Development Policy (NDP). The policy further strengthened the government endeavour in promoting entrepreneurial development programmes. The establishment of the Bumiputera Commercial and Industry Community (BCIC) and National Entrepreneurs Corporation (NEC) facilitated the nurturing of Bumiputera entrepreneurs. Since then, numerous new policies and support mechanisms have been developed for Bumiputera entrepreneurs specifically and non-Bumiputera entrepreneurs generally.

Figure 1.3: Malaysian Technology Development Corporation (MTDC) was established in 1992

Source: http://www.mtdc.com.my/

Malay: Agriculture Chinese: Tin Indian: Rubber

In 1992, the Malaysian Technology Development Corporation (MTDC) was established to augment the technical capabilities of entrepreneurs by offering risk capital for promising ventures and also technical advice (Figure 1.3).

Subsequently, the setting up of the Ministry of Entrepreneur Cooperative Development (MECD) in 1995 was one of the most significant steps taken by the government to support entrepreneurial initiatives. The MECD was established to foster cooperation between Bumiputera and non-Bumiputera entrepreneurs in strategic business besides coordinating entrepreneurial activities in general.

From 1971 to late 1990s, Malaysia has transformed from a producer of raw materials into an emerging multi-sector economy, with strong reliance on exports. However, the global economic downturn in 1997 strongly affected the Malaysian economy. The Growth Domestic Products (GDP) increased by only 0.3 percent during the slump and 46,643 workers were retrenched from July 1997 to June 1998. Understanding the predicament of high unemployment rate at that time, the government arranged special assistance and support systems to encourage entrepreneurship as an alternative source of income among the retrenched workers.

MTDC set up five incubators in the country with collaboration of universities to facilitate entrepreneurial start-ups in 1998. In addition, the Malaysian government through the Multimedia Development Corporation (MDC), set up the MSC venture capital company to provide financial assistance and advice to information technology start ups. As time went by, more effort was put in place to promote entrepreneurial activities. Since the inception of the Second Industrial Plan, the Third Outline Perspective Plan (OPP3), the Eighth Malaysia Plan up to the recent Ninth Malaysia Plan (2006-2010), various forms of support system were derived in order to encourage entrepreneurial activities in emerging sectors such as agriculture, manufacturing, information and communications technology.

To date, there are 12 ministries and 40 government agencies that shoulder the responsibility of developing small and medium enterprises (Utusan Malaysia, 2007). These agencies provide support such as financial assistance, advice and training programs to facilitate the development of SMEs. A total of 190 programmes are currently in place to support these development initiatives. For instance, Development Financial Institutions (DFIs) were developed to provide financing for strategic activities as stated above. In 2005 alone, a total of RM47.5 billion was allocated for financing purposes ă a 50 percent increase since 2000.

The Role of Small and Medium Enterprise Bank

SME Bank (Figure 1.4) was introduced in 2005 to ease the financial burden of start-ups and to assist start-ups in propelling themselves forward in the domestic and international market. The Malaysia Venture Capitalist Association (MVCA) provides financial assistance for all stages of funding. Bank Pembangunan Malaysia Bhd was assigned the responsibility of financing capital intensive and high technology industries, maritime and infrastructure. Additionally, women entrepreneurship has been promoted intensively, with the establishment of bodies such as the National Association of Women Entrepreneurs of Malaysia (NAWEM). Essentially, with the Ninth Malaysia Plan, the government is moving at full speed to promote entrepreneurship and achieve „Thrust 1: to move the economy up the value chain.‰

Figure 1.4: The main building of SME bank in Kuala Lumpur

Entrepreneurship in Malaysia has come a long way. There are a vast number of industries that hold great potential as a fertile ground for new ventures. The next section briefly lists potential industries in Malaysia that are favourable to new start-ups.

Table 1.1 below is a summary of the arising of entrepreneurships in Malaysia.

Table 1.1: The Rise of Entrepreneurship in Malaysia

Date Plan / Action

Before 1957 British colonial rule of Malaya set the stage for segregated economy

• Indians = rubber plantations.

• Chinese = tin mines.

• Malays = agriculture sector.

1957 Malaysia Independent

• Malays are granted special rights.

May 13, 1969 Racial Riots

1970 New Economic Plan (NEP)

• Bumiputera ownership.

After 1970 Replaced NEP with New Development Policy (NDP)

• Bumiputera Commercial and Industry Community (BCIC).

• National Entrepreneurs Corporation (NEC).

1992 Setting up of Malaysian Technology Development Corporation (MTDC).

1995 Formation of Ministry of Entrepreneur Development (MED).

1997 - 1998 Global economic downturn:

• GDP increased only 0.3 percent.

• 44,643 workers were retrenched.

1998 MTDC set up five incubators in the country with collaboration of universities.

MDC set up the MSC Venture Capital Company.

2005 SME Bank was introduced.

2007 12 ministries and 40 government agencies responsible for developing small and medium enterprises