Budget 2013 boost for angels and IP monetization
By Karamjit Singh September 28, 2012
- Policy change to allow investments to be offset against income set to spur more angel investments
- IP valuation model to be created with US$65mil boost from Malaysia Debt Ventures
THERE was no specific funding support for the ICT sector in the 2013 Budget proposed by Malaysian Prime Minister Datuk Seri Najib Tun Razak, aside from the RM150 million (US$48.8 million) allocated to create 100 internet centers with high speed broadband for Malaysians to access. The funding will come via industry regulator the Malaysian Communications and Multimedia Commission or MCMC.
Those only zeroing on new funds or grants announced for the sector would then have missed a critical policy announcement from the Prime Minister: “... the Government proposes that a deduction equal to the amount of investment made by an angel investor in a venture company be allowed to be set off against all his income.”
This policy change illustrates the point MOL Global Group CEO Ganesh Kumar Bangah made recently week when speaking at the inaugural DNA-TeAM Disrupt series. "Policy change affects the entire sector and helps everybody, versus projects just which help a few," he had argued, making his point that the Government could do more by doing less and being very strategic about where it gets involved in helping entrepreneurs.
This policy change announced by Najib is certainly expected to have a big impact as it now means that the Government is the one taking the risk when individuals make angel investments in companies because if those investments fail, the individual will be able to offset the losses they made against any tax they need to pay in future.
To be sure, the details and limits to be offset against income will be hashed out in the months ahead but it is a policy change that is much welcome.
Digital News Asia (DNA) readers may recall that this was also one of the key suggestions to come out of the Cradle Fund Sdn Bhd sponsored Asian Business Angels Forum held this past May in Kuala Lumpur. A speaker, who spent 25 years researching the subject in the UK, said that Malaysia should look into creating business angel networks and introducing tax incentives to help develop the entrepreneurial and start-up space.
Datuk Badlisham Ghazali (pic), chief executive officer of Multimedia Development Corporation Berhad (MDeC), the national ICT custodian and lead agency, says, "It will certainly be a boon to innovators in the country."
Those still judging the Budget by the financial goodies dished out will at least have the RM1 billion (US$325.5 million) Domestic Investment Strategic Fund to be pleased about. To be managed by the Malaysian Investment Development Authority (Mida), the fund aims to leverage on outsourcing opportunities and intensify technology acquisitions by Malaysian-owned companies.
Badlisham calls this, "another fabulous incentive. This will serve as a boost to MDeC’s efforts in developing Malaysia into a regional hub for shared services and outsourcing."
Another key announcement that will eventually make a big difference to the ecosystem in Malaysia is the intention to create a valuation model that will enable Intellectual Property Rights to be valued as well as used as collateral to obtain financing from financial institutions.
Two initiatives will underpin this. An Intellectual Property Financing Fund scheme amounting to RM200 million (US$65 million) will be created. The scheme will be offered through Malaysian Debt Ventures Bhd helmed by chief executive officer Zubir Ansori .
The Government will provide a 2% interest rate subsidy and a guarantee of 50% of the IPR value through the Credit Guarantee Corporation Malaysia Bhd. The rest will have to be borne by banks.
Anticipating the strong demand this will create for highly skilled intellectual property evaluators, RM19 million (US$6.2 million) has been set aside for training programs conducted by the Intellectual Property Corporation of Malaysia (MyIPO). There is also the intention to create an intellectual property right market platform. Again, details will be sharpened in the next few months.
As with the Budget almost every year, the important role of universities was recognized too. A number of R&D efforts involving universities and targeting high-impact research in strategic fields such as nanotechnology, automotive, biotechnology and aerospace was highlighted. To support this effort, the Government will allocate RM600 million (US$195 million) to five research universities.
There was the usual skills upgrading and graduate employability grants available and a few other initiatives.
More on all this in our follow-on reports on Monday, and with a special Face-Off commentary by DNA's Karamjit Singh and A Asohan. Watch out for that!