Northern Corridor Implementation Agency reaps results of change in business model
Expects to hit its stretch target of RM12 billion in committed investments
WE like to talk about how entrepreneurs change business models and adapt quickly to shifts in markets or upon realizing their assumptions about a market were wrong – but what about when government agencies change models?
That is what happened up north with the Northern Corridor Implementation Agency (NCIA) when Datuk Redza Rafiq took over as CEO in January, 2010.
The NCIA was incorporated in 2008 to manage and oversee Malaysia’s ambitious Northern Corridor Economic Region (NCER) project that aims to deliver economic transformation in the northern states with a focus on agriculture, manufacturing, tourism and logistics.
Redza pins the strong success of the NCIA in bringing in investments and knowledge jobs down to changing its focus (though the finance-trained CEO prefers to use ‘business model’) from one concentrating on physical infrastructure to one based on services.
On the surface, this may not seem earth-shattering, but what the change in focus did was to move the NCIA away from a micro approach of making fixes and patches in infrastructure to an approach combining both the micro and macro to engage with the private sector.
This change focused on encouraging private enterprise to be the driver of progress in a meaningful, sustainable and economically impactful manner.
It thus moved into becoming a facilitator and enabler for the private sector to take the lead in making the economic transformation come true in the northern Malaysian states of Perak, Penang, Kedah and tiny Perlis.
Reflecting on the change in model, Redza says even though the NCIA was a new agency, less than 18 months old when he took over, it still took six him months to change the mindset, bring in service-oriented executives and reorient the agency to one that he now likes to describe as Cepat dan Tepat or Fast and On the Ball.
The numbers speak for themselves – from less than RM1 billion in investments in 2009, to RM6 billion in 2010 and RM9.9 billion in 2011. For 2012, while the initial target was RM10 billion, the strong growth in 2011 saw the target revised to a stretch target of RM12 billion. “We will be close,” smiles Redza.
[RM1 = US$0.33]
Meanwhile the transformation of previously unknown LED maker QAV Sdn Bhd into a thriving central player in the ecosystem in the north is a great example of the impact NCIA has helped catalyze.
According to John See, chief executive officer of QAV Technologies Sdn Bhd, “NCIA helped us grow from an unknown player to a company that everyone recognizes for test and certification. They also helped connect us to a lot of industries which we would not have been able to do ourselves.”
Indeed, typical of a small and medium enterprise, QAV’s founder was reluctant to invest the millions it was going to take to get Energy Star Certification. However, without such certification, LED manufacturers in Malaysia were sending their products to Australia to be certified so that they could then be exported.
“We got ourselves accredited with Standard Malaysia but getting Energy Star Certification was very hard and involved a big investment especially in getting accreditation from ANSI-ACLASS from the United States,” See says.
However, when the need for a National Test and Accreditation LED center was identified under the Pemandu labs as a key part of the electronic and electrical ecosystem that was missing, NCIA zoomed in on QAV as having the right skill set to act as this national LED center and became EPP 10 under the Electronic and Electrical National Key Economic Area (NKEA).
Pemandu is the Performance Management & Delivery Unit of the Prime Minister’s Department tasked with driving the nation’s Economic Transformation Program (ETP).
“We went to see them because all the existing LED players told us they needed a test center in Malaysia to save them time and money, instead of sending their products to Australia to be tested and accredited. On being satisfied that QAV had the right expertise in the space, we extended them a RM10 million loan to get themselves certified,” says Redza.
The certification worked like a charm. According to information supplied by NCIA, QAV became:
The first American National Standards Institute (ANSI) certification lab outside of the United States, thus creating global branding.
Capable of testing and qualifying products as per Energy Star requirements, meeting the strict standards set by the US Department of Environment.
An enabling factor for foreign LED SSL companies to invest in Malaysia because of its capability for local testing and certification services.
An enabler that allowed local LED SSL companies to expand their business and compete in the world market with the cheaper testing cost. To date it is estimated that QAV has helped a total of 17 local manufacturers to gain certification with 70% cost savings. At the same time, it estimates a RM30 million reduction in annual currency outflow for 10 companies which now do not need to send their LED products to Australia for testing.
See even goes so far as to tell Digital News Asia (DNA) that NCIA has been like a mentor to QAV.
“With their presence and support we have more guts to invest and expand. They have also linked us to all the relevant ministries and this has provided us with an excellent launch pad to expand,” he says.
Indeed the RM10 million loan by NCIA to QAV saw the firm invest RM130 million of its own money into turning its facilities into a top-class LED testing facility mainly because it suddenly saw that the entire LED industry in the north wanted to use its facility. This included multinationals like Osram and Philips.
With the captured base it has, QAV is even planning on offering other services too.
Which is why Redza calls the relationship between NCIA and QAV a “game changer.” Using the same enabler approach, he points out that NCIA has also touched other companies in the E&E sector up north.
Up next: Working with the Collaborative Research in Engineering, Science and Technology (CREST) agency and other E&E players