TeAM urges tax incentives for corporates, review of bankruptcy laws
By A. Asohan November 13, 2013
- TeAM’s Policy Institute embarks on study to map the venture capital value chain in Malaysia
- Also pushing for a slew of incentives to spur entrepreneurship and support the ecosystem
THE Technopreneurs Association of Malaysia (TeAM), through its Policy Institute (TeAM-PI), is in discussions with the relevant government agencies to get the Malaysian Government to review existing bankruptcy laws in a bid to spur entrepreneurship.
It is also in discussions to get the Government to extend the tax exemption that was rolled out for angel investors in April to include similar incentives for corporate venture capital (VC) funds, and has launched a ‘Venture Capital Value Chain Study & Survey.’
The study aims to obtain information on the VC ecosystem that would help TeAM-PI and relevant stakeholders, including the Government, to formulate policies and administrative procedures that could help boost the industry, according to the association.
Finally, TeAM-PI will continue discussions with the Multimedia Development Corporation (MDeC) and others to review the location requirements for Multimedia Super Corridor or MSC Malaysia status, which MDeC oversees.
To be granted MSC Malaysia status and therefore eligible for its benefits, which include a 10-year tax break and fewer hassles in hiring skilled foreign workers, companies have to be located within designated ‘cybercities’ or ‘cybercentres.’
TeAM-PI believes it has a compelling case after gathering shocking statistics on the cost to be located within such areas, where rental prices are above the market average – ranging from a ‘mere’ 22% to a whopping 118% more.
“The rental at KLCC (the Kuala Lumpur City Centre), compared with similar buildings nearby, can be from 85% to 118% higher. There is actually a huge premium that people are paying for MSC Malaysia status,” said TeAM-PI director Dr V. Sivapalan.
“What is the financial impact? For a 2,000 sq ft space, what you will have to pay extra just because you’re in an MSC-designated building is anything from RM2,000 to RM3,000 per month, even in an area like Puchong [in Kuala Lumpur], for which you can hire an extra person or two,” he told a briefing to TeAM members on Nov 12.
In KLCC, it ranges from an additional RM11,000 to RM13,000 per month. “Who’s benefitting from this? The 30 or companies which own the buildings, but this at the expense of the 2,000 or so MSC Malaysia status companies,” he added.
[RM1 = US$0.31]
TeAM-PI is asking for the full liberalisation of the relocation requirements for MSC Malaysia status small and medium enterprises (SMEs).
“We acknowledge that there must be some conditions for MDeC to this, so we’re pushing this for SMEs – because they’re the ones most impacted and which can least afford such premium rentals,” Sivapalan (pic) said.
In terms of what constitutes an SME, TeAM-PI is relying on the new definition proposed by government agency SME Corp which goes into effect Jan 1, 2014: Sales turnover not exceeding RM20 million; or full-time employees not exceeding 75 workers.
“This new definition covers about 95% of MSC Malaysia status companies,” Sivapalan said, adding that TeAM-PI has had meetings over the issue with the top brass at MDeC, including its chief executive officer Badlisham Ghazali.
Part of the argument that TeAM-PI is making is that circumstances have changed since the MSC was launched in 1996.
For instance, at that time, it may have made sense to relocate to a specific site for the guarantee of a ‘world-class infrastructure,’ one of the promises in the 10-point Bill of Guarantees of MSC Malaysia. However, with the widespread availability of broadband Internet access today, this requirement does not make sense.
“Also, after more than 17 years, only eight states have designated cyber-cities and cyber-centres areas – there are none yet in Sabah, Sarawak, Kelantan, Terengganu, Negeri Sembilan and Perlis,” Sivapalan said, adding that companies from those states were at a severe disadvantage.
He also that TeAM-PI is aware of the ‘handshake with the Government,’ which was the reason MDeC’s Badlisham cited for the location-specific requirement, where in return for enjoying the facilities and services that the Bill of Guarantees promises, “you need to share data with me, work on what you say you are working on, and you have to be contactable,” he told DNA in an interview earlier this year.
“Yes, we’re aware of this ‘handshake,’ but let’s see how far we can push this,” Sivapalan said, adding that TeAM is also optimistic that the issue would get a fair hearing from the newly-minted Minister of Communications and Multimedia, Ahmad Shabery Cheek, under whose portfolio this falls.
A TeAM survey had nearly 94% of the 110 respondents saying that if they had a choice, they would rather not relocate to an MSC-designated location, and 95% said they would support TeAM in its efforts to get this full liberalisation.
Next page: Mapping the venture capital landscape, and corporate tax incentives