Funding Galore for Start-Ups and Hi-Tech SMEs

The steps announced by the Malaysian Government to revive the economy which has been ravaged by the outbreak of the Covid-19 pandemic gathered momentum this week with the launch of two initiatives for start-ups and high-tech small-medium enterprises.
 
Dana Penjana Nasional
 
On 14 December 2020, the Finance Minister of Malaysia launched the Dana Penjana Nasional (‘DPN’) through Penjana Kapital Sdn Bhd of an investment fund with a target allocation of RM1.2 billion.1  DPN is one of the initiatives announced by the Prime Minister of Malaysia on 5 June 2020 as part of the Short-Term Economic Recovery Plan (June to December 2020).
 
The DPN is a matching fund-of-funds programme where eight selected venture capital fund managers have committed to raise RM600 million of funding to be invested in Malaysian start-ups. The remaining RM600 million will be funded by the Malaysian Government on a one-to-one matching basis.
 
According to the Finance Minister, eight venture capital fund managers were selected from 51 applicants.  The DPN fund is subdivided into four sub-funds2 and the venture capital fund managers for the respective stages are as follows: 
 
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According to the Government, the venture capital fund managers have indicated that they could raise RM370 million of additional funding to achieve a total fund size of RM1.57 billion.

The targeted core sectors for investments include fintech, edutech, agritech, mobility and artificial intelligence.
 
High Tech Facility – National Investment Aspirations
 
On 15 December 2020, Bank Negara Malaysia (‘BNM’) issued a media release to announce the establishment of the RM1 billion High Tech Facility – National Investment Aspirations (‘HTF-NIA’)  
 
The HTF-NIA was announced during the Malaysian Budget 20213 on 6 November 2020 to provide assistance to high-tech and innovation-driven small and medium enterprises (‘SMEs’) affected by the Covid-19 pandemic.

According to the BNM media release, eligible SMEs include:
 
  • SMEs in the advanced manufacturing and services sectors that are best aligned to national strategic goals embedded in the National Investment Aspirations4 (NIAs), including for example, businesses in the electrical and electronics, aerospace, pharmaceutical and research and development driven firms that support the development of emerging technologies; and
  • SME project participants in key Government programmes involved in research, development and innovation for critical technologies identified under national blueprints, such as IR4.0-related technologies5, green technology and biotechnology.
Brief details of the facilities that are available to eligible SMEs are as follows:​
 
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Appendix 1 of BNM’s media release contains further details of the facilities and eligibility criteria while Appendix 2 of the said media release sets out a list of thirty financial institutions to whom applications for the facilities may be submitted.
 
Comment
 
It is hoped that the funding under the DPN and HTF-NIA initiatives will help cash-strapped start-ups and SMEs in the high-technology and innovation-driven sectors survive the economic downturn caused by the Covid-19 pandemic and on a wider perspective, help Malaysia achieve its aspirations under the NIA, in particular to increase the high value and knowledge-based jobs available within the country.
 

1 ‘Boost from Penjana Kapital’; StarBiz; 15 December 2020.
2 The Short-Term Economic Recovery Plan envisaged a fifth sub-fund, an Opportunistic Fund for e-sports and healthcare etc. but this was omitted from the funds announced during the launch.
3 See Paragraph 147 of the Malaysian Budget 2021 Speech.
4 The National Investment Aspirations are the overarching strategic development objectives to increase economic complexity, create high value jobs, extend domestic industry linkages and develop new and existing clusters (see pp 41-42 of ‘Securing Future Growth Through Quality Investments’ in BNM Economic & Monetary Review 2019.)
5 According to the BNM media release, these technologies include blockchain, artificial intelligence (AI), big data analytics, internet of things (IoT), additive manufacturing (3D/4D/5D/6D printing), cybersecurity, system integrators, augmented reality, advanced materials, drones and manufacturing systems, as well as bioscience technology and neurotechnology.