Business: Forget Infrastructure. It's the Software, Stupid!

What Malaysia needs in order to get the Internet buzz

July 18, 2000
Web posted at 5:00 p.m. Hong Kong time, 5:00 a.m. EDT

During a recent trip to Kuala Lumpur, I was bombarded with questions on the New Economy and the Internet. You see, many Malaysians reading foreign print media or switching on CNN or CNBC these days hear little else but soundbites about Internet, e-commerce, broadband or bandwith. There is a feeling, among some Malaysians, that while the rest of Asia is on the fast track to e-heaven, Malaysia is moving a bit too slowly along a bumpy dirt road. My dinner conversation with former Deputy Prime Minister Musa Hitam one night quickly turned toward the topic of Malaysia's very own Multi-media Super Corridor or the MSC. The night before I had dined with two other former Malaysian cabinet ministers and both had asked about the software boom in India, wondering aloud what was going on with the much-heralded MSC. Other business executives, journalists and professionals I met during my trip all somehow veered discussions away from country's convoluted politics to Internet and e-commerce.

The frustration of ex-politicians like Musa and my business-executive friends in Kuala Lumpur is that while Malaysia under Prime Minister Mahathir Mohamad had taken the lead by first articulating the need for a wired society, it has gone nowhere since then. Indeed when Dr. Mahathir first proposed the Multi-media Super Corridor, many neighboring Asian countries just watched in awe. In articulating the concept, Malaysia was streets ahead of its time and way ahead of any other country in the region. But now five years later, Malaysia is a laggard in the Internet, in e-commerce and in the race towards a wired society. Per capita Internet usage barely matches much poorer Thailand. Malaysia is one of the last Asian countries to roll out broadband services (Okay, I am not counting really dirt-poor Asian nations like Myanmar, Laos and Cambodia etc.). What went wrong?

First, for those who have never heard of the Multi-Media Super Corridor, here's a recap. Back in 1995, Ohmae Kenichi, the Japanese author, management consultant and part-time adviser to Mahathir, was running for Governor of Tokyo. Ohmae-san had come up with an incredible idea to lift Japan's depression-hit economy out of the rut and to position the country toward becoming the most technologically advanced society in the world. Ohmae proposed that Japan build a wired corridor -- called The Corridor -- from Yokohama port to downtown Tokyo. The idea was pooh-poohed in Japan and Ohmae's candidacy remained in trouble until the final days of the campaign.

That's when Malaysian Premier Dr. Mahathir came calling. During a brief official visit, Mahathir asked to see his old friend Ohmae who took time from his campaigning to meet with him. Mahathir, the consummate politician, told Ohmae the grim reality -- that he would lose the election because he was running his campaign like an academic, not a politician. But when he was finished advising on elections, Mahathir told his Japanese friend to come to K.L. and tell him more about this corridor thing. Ohmae, as predicted, lost the election, took a brief holiday, then went to Kuala Lumpur. There he sold Mahathir the Yokohama-Tokyo corridor idea. Mahathir Malaysianized the idea, renamed it the MSC, and proposed running it from the new K.L. International Airport to the City Center's Petronas Towers -- two of the most expensive infrastructure projects undertaken before the Crisis.

Mahathir had first met Ohmae (who has written books like The End of the Nation State and The Borderless World) in the late '70s when he was Malaysia's Deputy PM and Minister for Trade and Industry and Ohmae, then a consultant for McKinsey & Co., was doing work for the Malaysian government on industrialization. After he took over as PM, Mahathir got advice from Ohmae on the nation's heavy industries. Malaysia Proton Saga, Perwaja Steel and Heavy Industries Corporation of Malaysia or HICOM were all born out of advisory studies that Ohmae did.

So much for the history lesson. Clearly, MSC has become just another infrastructure project. There is Cyberjaya, which was suppose to house the world's top Internet researchers and dotcommers but now looks like a underutilized industrial park. Sure, there are 2.5 to 10 gigabytes of optical fiber backbone partially ready, complete with the ATM switches and high capacity fiber links to U.S., Europe and Japan -- but there is very little traffic going through those cables.

While the infrastructure, the highways, the buildings, the Cyber-this and Cyber-that are all in place, the software is missing. And so is the buzz. Malaysian dotcom companies are heading not to the state-of-art spanking new Cyberjaya but to the renovated 80-year old shophouses near Singapore's Chinatown. Malaysian dotcom companies are applying for listing not on the specially-for-MSC Mesdaq bourse, but on the Singapore exchange or Hong Kong's new Growth Enterprise Market (GEM). In two years, only one company has listed on Mesdaq, whereas Hong Kong's GEM, which started in December, already has over 40 companies. Indeed, the market capitalization of Internet companies in Hong Kong alone exceeds the entire market of all the companies -- old and New Economy -- listed in Malaysia.

When the MSC was first announced, Mahathir named Microsoft's Bill Gates, Oracle's Larry Ellison, Sun Microsystems' Scott McNealy and other tech gurus to a council of advisers. Many initially sang Malaysia's praises. But since 1997 most of them have visited neighboring countries several times, but deliberately bypa#sed Malaysia. Many had vowed that Malaysia would be their regional headquarters. But they maintain three or four times as many high-level staff in Singapore, Hong Kong and Sydney than in K.L. True, most of them have applied for MSC status and other tax concessions that Malaysia has dished out. But no major global IT company is using the MSC as the centrepiece of its Asian strategy. None.

Malaysia doesn't have the Internet buzz; it doesn't have the people. Its top web designers sip drinks in Mohamad Sultan in Singapore, its top investment banking talent has fled to Hong Kong's Lan Kwai Fong, its top software talent is in Silicon Valley. Unlike Singapore, which has made the effort to import thousands of software engineers from India, and Hong Kong which has encouraged thousands from mainland China, Malaysia still maintains huge immigration barriers for software engineers. One leading IT-service company executive in Singapore told me recently that it took three weeks for him to get four of his engineers from Bangalore to Kuala Lumpur because of the red tape. In Singapore, one phone call to Info-Comm Development Authority or IDA would have done the trick and gotten him permission to bring in 50 engineers on the next flight.

If the country were producing enough local talent, Malaysia would be fine. But it is short of tens thousands of software engineers. It needs to import them, pay them top dollar and dole out incentives to keep them. Singapore is giving the software engineers from Bangalore permanent resident status and citizenship. Malaysia has no such plan. It's important to remember that in the Internet game, time is very precious.

What else does Malaysia need to catch up? It needs more deregulation and competition. Until four months ago, it had just two ISPs (Internet Service Providers), Telekom and Jaring. Now there are four. Australia, which has a smaller population base, has 900 ISPs and Hong Kong has about 50. Too few ISPs mean not enough competition, and that means the quality of access is poor and charges are high. Until a few weeks ago, Malaysia had no broadband service, though Telekom has just begun to roll it out. Korea has two million broadband customers and is adding several hundred thousand a month. Hong Kong, Taiwan, Singapore are rolling out broadband as if there was no tommorow. Even when the infrastructure and the hardware are in place, Malaysia needs to remember that the MSC will succeed (or fail) on software, people and minimal regulation. You see, these dotcommers are funny bunch. They don't like rules. They seem to think success about breaking the rules.