TikTok, a global music and video platform created in 2016 by Chinese
internet technology company ByteDance, is known in China as Douyin.
Photo: VCG
A Senate subcommittee hearing on Tuesday focused on discussions about the significant risks that short-form social video app TikTok could pose to US national security and citizens' privacy.
The accusations about TikTok are based on the assumption that its parent company ByteDance may hand over personal information of the app's US users to the Chinese government, thus posing huge risks to users and the country. In addition, there are also claims that TikTok censors content. TikTok denies both charges.
TikTok runs its business according to US law, so how can it threaten US national security? Many people believe that the US is using this as an excuse to crack down on this globally successful Chinese social media app. To date, all popular social media platforms have been created by US companies, but TikTok is an exception. It challenges their monopoly and some American elites are uncomfortable about it.
Over the past 12 months, TikTok's app has been downloaded more than 750 million times, compared with 715 million for Facebook, 450 million for Instagram and 300 million for YouTube. Its success has even worried Facebook CEO Mark Zuckerberg and now Facebook is developing a short video sharing application that mimics TikTok.
It's not a good trait for the US to suppress competitors of American companies by political means. Washington has taken extreme measures against Huawei, such as cutting off the supply of some components, a move that cracks down on competitors at the expense of hurting domestic companies. There are signs that TikTok is the next target. What the US is doing is driven by extreme protectionism and runs counter to a free market economy.
Washington elites should think about that. US-developed social networking sites are popular around the world. Any country can use the same concerns US lawmakers have about TikTok to target Facebook, Twitter and Instagram. Without any evidence, if every country conjured up risks to challenge those companies, would the world ever be able to share common applications? If such national security principles were to be promoted globally, US internet giants would suffer the most.
The US internet market is becoming solidified. Americans are supposed to welcome competition from TikTok. China's internet market has changed tremendously in recent years with JD challenging the dominance of Baidu, Alibaba and Tencent, followed by the rise of strong players such as TikTok and PDD, which boost the dynamics of the Chinese internet market. The US shouldn't suppress competition and encourage idleness.
Despite being the strongest country in the world, the US often accuses others of being national security risks. It uses political means to safeguard its existing interests when its technology falls short. But this approach will affect how Americans view modern competition and how American society participates in international competition. In the long run, some American companies may use dishonest practices, not better technology and innovation, in the international marketplace.
The US should carefully study the TikTok phenomenon and learn from it. TikTok has its own algorithm, but it pays close attention to abiding by laws and customs of the countries where it is carrying out business activities. When in Rome, do as the Romans do - this is a universal rule for business activities. All US social media giants have the opportunity to enter the Chinese market if they follow that rule.
We hope the US won't go to extremes. Being open is where US interests lie. Even if they have worries about TikTok, they must exercise restraint. Many people are worried that the US might monitor them through various means every day, but they are restrained and rational. The US has no reason not to do likewise.
Independent moves: Bytedance has become among
the most successful major Chinese tech companies in creating an
international base without the backing of giants Alibaba and Tencent. —
Reuters
US$13bil man: Zhang is the youngest self-made
billionaire in Asia on the Bloomberg index, which tracks the world’s 500
richest people. He is worth US$13bil. — Bloomberg
Prime Minister Tun Dr Mahathir Mohamad giving the comic book to China's President Xi Jinping as a gift. Image via Twitt. leaves with Russian President
Vladimir Putin after the opening ceremony of the Seco
Robot dominates: Ford F150 trucks go through
robots on the assembly line at the Ford Dearborn Truck Plant in
Dearborn, Michigan. Robots are also entering areas such as logistics
warehousing, chemicals and plastics factories and F&B industries. —
AFP
The world’s most powerful leaders are gathering in Japan for meetings that may set the direction for the global economy and make the difference between war and peace in geopolitical hotspots.
Key things to watch include any signs of a breakthrough in U.S.-China trade talks, efforts to stem rising tensions between the Trump administration and Iran, and concrete action to lower emissions and reduce plastic pollution in oceans. Major agenda items include President Donald Trump’s meetings with Russian President Vladimir Putin and German Chancellor Angela Merkel.
China’s President Xi Jinping condemned protectionism and "bullying practices" in a meeting with African leaders ahead of the summit, according to Dai Bing, the foreign ministry’s Director General for African Affairs.
“Any attempt to put one’s own interests first and undermine others’ will not win any popularity,” Xi said, according to Dai.
The comments come a day ahead of Xi’s meeting with U.S. President Donald Trump as the leaders try to resolve their trade war, as well as other major disputes like Huawei and the South China Sea. - Bloomberg
Whether there is an agreement or not, China will defend
its core interests and will focus on doing its own things well. China is
well prepared economically and politically
With
Xi Jinping, Narendra Modi and Vladimir Putin displaying increasing
bonhomie, the United States will have cause to reflect on its recent
trade disputes with ally New Delhi
Activists
say Japan has fallen behind on reducing plastic consumption and is
caving to US pressure to water down language on climate change to
achieve a unanimous statement on the issue.
Asia’s
major economies have become increasingly important at the multilateral
forum, which experts say is an opportunity for the likes of China and
Japan to step into leadership roles formerly dominated by the West.
Chinese
President Xi Jinping and US counterpart Donald Trump are set to meet in
Osaka, Japan on Saturday, with reports that details of a truce are
being drafted.
The
Russian leader faces a whirlwind diplomatic task in Osaka. Iran, Syria
and arms control top his agenda with the US president, while Trump’s
stance on trade has pushed India, China and Russia closer
Tariff
war could ease after G20 meeting between Xi Jinping and Donald Trump in
Osaka, but rivalry over technology and finance may escalate into other
fields.
Washington
hints that access to its spying capabilities could be under threat if
South Korea does not play ball over China’s 5G giant. That leaves Seoul
to weigh the demands of its security ally against those of its top trade
partner.
Hundreds
of companies and industry groups weigh in on impact of proposed tariffs
on around US$300 billion of Chinese products, ahead of Saturday’s
Trump-Xi meeting in Japan.
It gives me great pleasure to attend the 18th Shangri-la Dialogue. I would like to thank Dr. John Chipman for inviting me here and thank the Singapore government, the Ministry of Defense in particular, for the warm hospitality. I would also like to congratulate His Excellency Prime Minister Lee Hsien Loong on his excellent keynote address the other day. This is my first attendance at the Shangri-la Dialogue as China's defense minister. I am here for mutual confidence, cooperation and peace. I am glad to speak on China and International Security Cooperation.
I. Humanity is at a crossroad. Building a community with a shared future for mankind is the right path forward and the trend of the times.
The world today is undergoing profound changes unseen in a century. Destabilizing, uncertain factors and challenges continue to rise. President Xi Jinping's great vision of building a community with a shared future for mankind is the answer to harmonious coexistence of people across the world, the effective solution to global problems and the right path towards world peace and human progress. We take note that the US expounded on its perspective on regional affairs yesterday. We believe that any such perspective should take into account the common security and interests of regional countries. No approaches to regional issues should resort to military blocs, nor should they undermine the interests of others. We hold different views with the US side on several issues, and firmly oppose its wrong words and actions concerning Taiwan and the South China Sea. Now let's think about the following questions:
First, which should we choose, peace and development or conflict and confrontation? Peace and development remain the call of our times and the trend of history. However, global and regional hotspots flare up one after another and the risk of conflict and war persists. What is the cause for regional wars and conflicts, the spread of terrorism, the chaos in the Middle East and the refugee crisis in Europe? Who are behind all these and what is the root cause? These are the questions to be reflected on. Some deliberately create division and hostility, provoke confrontation, meddle with regional affairs, interfere in internal affairs of others, and frequently resort to arms. Whose interests on earth do they serve and whose do they harm?
Second, which should we choose, openness and inclusiveness or isolation and exclusiveness? See the world with an open and inclusive mind, and there will be friends and partners everywhere. See the world with a narrow and exclusive mind, and there are only enemies and adversaries. This is a self-fulfilling prophecy. However, lately we see a growing backlash against globalization and a surge of protectionism. A certain country champions unilateralism, puts its own interests before others, withdraws from international treaties and organizations. Aren't there many countries suffering from the willful infringement and sanctions?
Third, which should we choose, win-win cooperation or zero-sum game? Win-win cooperation makes the pie bigger and brings more benefits to all. However, zero-sum game makes no winner and harms the interests of both sides. Currently, over 150 countries and international organizations have proactively joined China's Belt and Road Initiative (BRI). Not long ago, over 6,000 delegates from 150 countries and 92 international organizations gathered in Beijing for the second Belt and Road Forum for International Cooperation. People can tell what is right.
Fourth, which should we choose, mutual learning among civilizations or arrogance and prejudice? A few days ago, China successfully hosted the Conference on Dialogue of Asian Civilizations. We believe that human civilizations are and should be colorful, equal, inclusive and willing to learn from each other. Not a single civilization should be worshiped or belittled. There are scars and tragedies in the history of human civilization which do not go away, to name only a few, the enslavement of Africans, the expulsion of native American Indians, the colonization in Asia, Africa and Latin America, and the killing of Jewish people. Unfortunately, some people recently pick up the decadent idea of "clash of civilizations". As racist and narrow-minded as it is, this is not right. How can we tolerate such a regress of history?
II. Facing complex and volatile international security situation, the Chinese government and armed forces stay committed to regional and world prosperity and stability.
Those who are familiar with China's modern history must know that the country was once poor and weak and went through enormous misery. The Chinese people know only too well the value of peace and the cruelty and destructiveness of war. Over the years, some have been recklessly hyping up, exaggerating and dramatizing the "China threat theory", partly due to the lack of understanding of China's history, culture and policies, but more likely due to misunderstanding, prejudice, or even a hidden agenda.
China sticks to the path of peaceful development. Such a commitment is underpinned by China's socialist system, the independent foreign policy of peace, and the cultural tradition that values peace and harmony. China shall follow the path of peaceful development, which is a solemn commitment to the people of China and the world. This has been written into the Constitution of the Communist Party of China and the Constitution of the People's Republic of China, thus reaffirmed as the will of the CPC and the state. If this is not even convincing enough for some people, then we don't know what they would believe? Over the past 70 years since the founding of the P.R.C., China has never provoked a war or conflict, nor has it ever invaded another country or taken an inch of land from others. In the future, no matter how strong it becomes, China shall never threaten anyone, seek hegemony or establish spheres of influence. History has proven and will continue to prove that China will not follow the beaten path of big powers seeking hegemony when it grows strong. Hegemony does not conform to China's values and national interests.
China adopts a military strategy of active defense. China's military strategy adheres to the principles of defense, self-defense and post-strike response. It stresses that "we will not attack unless we are attacked, but we will surely counterattack if attacked". China develops its military entirely for self-defense. The purpose is to defend the country and provide the people with a peaceful working environment, and ensure that our people are free from the disasters of war and enjoy a better life. We have never bullied or preyed on others, and we shall not let others bully or prey on us either. China develops its military to cope with security threats. Similar scenario can be found in the past when China had to develop nuclear capabilities of its own under nuclear threat. China's defense expenditure is reasonable and appropriate. China enhances national defense in order to meet the legitimate needs to defend its own security as well as contribute to the world force for peace.
The Chinese military is dedicated to safeguarding national sovereignty, security and development interests. The PLA is the people's force under the leadership of the CPC. The PLA has fought many battles and is not afraid of sacrifice. In face of aggression, coercion or hardships, it has stridden forward from victory to victory. The more severe the pressure and difficulties are, the stronger and braver the Chinese people become. Adversity only brings our nation greater solidarity and strength. As the lyrics of the Chinese national anthem go, "Arise, all those who do not want be enslaved. Let's build the new Great Wall with our flesh and blood." Faced with daunting and complex security challenges, the PLA vows not to yield a single inch of the country's sacred land, but it shall not seize anything from others either. The PLA has no intention to cause anybody trouble, but it is not afraid to face up to troubles. Should anyone risk crossing the bottom line, the PLA will resolutely take action and defeat all enemies.
The Chinese military stays committed to safeguarding regional and world security and stability. China is an active supporter of UN Peacekeeping Operations. It is the largest troop contributor among the permanent members of the UN Security Council and a major contributor of funds. We have established a peacekeeping standby force of 8,000 troops that is ready to be deployed. For years, China has been active in promoting bilateral and multilateral security cooperation. The China-Russia Comprehensive Strategic Partnership of Coordination has been running at a high level. The state-to-state and military-to-military relations between China and the US remain generally stable, despite twists and difficulties. We have strengthened the sense of shared destiny with ASEAN countries, deepened traditional friendship with India, Pakistan and other South Asian countries, maintained peaceful coexistence and good-neighborliness with surrounding countries, and built good relationship with the countries and militaries of Africa and Latin America. In October this year, China will host the 9th Beijing Xiangshan Forum. We welcome defense and military leaders and scholars from all over the world to attend the Forum.
III. While striving for common prosperity in the Asia-Pacific, we must respect the core interests and accommodate the security concerns of all.
China advocates that all countries, big or small, strong or weak, rich or poor, are equal members of the international community. We should respect and accommodate the legitimate security concerns of one another. China understands and respects the sovereignty, independence and territorial integrity of all countries, and supports the social systems and development paths they independently choose. China is not able to progress in isolation from the rest of the world; the world also needs China to prosper. We in China do not covet the interests, nor envy the development, of others. However, we shall never give up our legitimate rights and interests. No country should ever expect China to allow its sovereignty, security and development interests to be infringed upon. As for the recent trade friction started by the US, if the US wants to talk, we will keep the door open. If they want a fight, we will fight till the end. As what the general public of China says these days, "A talk? Welcome. A fight? Ready. Bully us? No way." I would like to further illustrate China's position on a few issues you may be interested in.
First, on Taiwan. The Taiwan question bears on China's sovereignty and territorial integrity. Not a single country in the world would tolerate secession. I visited the US last year. American friends told me that Abraham Lincoln was the greatest American president because he led the country to victory in the Civil War and prevented the secession of the US. The US is indivisible, so is China. China must be and will be reunified. We find no excuse not to do so. If anyone dares to split Taiwan from China, the Chinese military has no choice but to fight at all costs for national unity. Hereby, I have a message for the DPP authorities and the external forces. First, no attempts to split China shall succeed. Second, foreign intervention in the Taiwan question is doomed to failure. We took note that the US side mentioned the Taiwan Relations Acts in yesterday's speech. Is it of Taiwan or the US? Is it a Chinese law or an international law? We can find no justifiable reasons for the US to interfere in the Taiwan question by its domestic law. Third, any underestimation of the PLA's resolve and will is extremely dangerous. We will strive for the prospects of peaceful reunification with utmost sincerity and greatest efforts, but we make no promise to renounce the use of force. Safeguarding national unity is a sacred duty of the PLA. If the PLA cannot even safeguard the unity of our motherland, what do we need it for?
Second, on the South China Sea. The current situation in the South China Sea is improving towards greater stability. It is attributed to the common efforts of the countries in the region. However, there are always people trying to rake in profits by stirring up troubles in the region. Before the Dialogue, I paid a visit to Vietnam and Singapore and reached broad consensus with Gen. Ngo Xuan Lich and Dr. Ng Eng Hen on maintaining the stability in the South China Sea. I have a few questions concerning the issue to discuss with you.
First, who on earth is threatening security and stability in the South China Sea? Over 100,000 ships sail through the South China Sea each year. None has been threatened. The problem, however, is that in recent years some countries outside the region come to the South China Sea to flex muscles, in the name of freedom of navigation. The large-scale force projection and offensive operations in the region are the most serious destabilizing and uncertain factors in the South China Sea.
Second, who would benefit and who would suffer from the chaos in the South China Sea? In case of chaos in the South China Sea, we, the regional countries, are the ones to take the blunt. What are the purposes for certain countries to send military vessels and aircraft all the way from afar to the region? Aren't there enough examples that some big countries intervene in regional affairs, make troubles, walk away and leave a mess behind?
Third, should the stability in the South China Sea be maintained by countries in the region or outside the region? China and ASEAN countries have made positive progress in negotiating the COC. We hope that relevant parties will not underestimate the wisdom and ability of regional countries to properly handle differences and maintain peace. However, we welcome constructive suggestions from all countries.
Fourth, is China's construction on its South China Sea islands and reefs militarization? It is the legitimate rights of a sovereign state to carry out construction on its own territory. China built limited defense facilities on the islands and reefs for self-defense. Where there are threats, there are defenses. In face of heavily armed warships and military aircraft, how can we stay impervious and not build some defense facilities?
Third, on the DPRK nuclear issue. China is committed to denuclearization, peace and stability of the Peninsula and to a negotiated solution through dialogue and consultation. In recent years, the Chinese side has made active efforts in promoting peace talks and played an irreplaceable and constructive role. We hope that the US and the DPRK will accommodate each other's concerns with cool heads and patience, work towards the same goal and resume the dialogue for peace at an early date. The US and the DPRK should follow the dual-track approach and combine denuclearization with the establishment of a peace mechanism. We hope that the international community will positively respond to the legitimate concerns of the DPRK, trigger the reversible clause of the UN Security Council resolutions in due course, push for a declaration on the end of the war, and actively build trust among all parties.
Fourth, on China-US relations. This year marks the 40th anniversary of the establishment of diplomatic ties between China and the US. Despite all the ups and downs, China-US relationship has been steadily growing in the past 40 years. The most valuable lesson we have learned from the 4-decade-long relationship is that cooperation benefits the two sides while confrontation hurts both. Looking forward, the two countries should follow the consensus by the two heads of state and promote a China-US relationship featuring coordination, cooperation and stability. Through continued communication, the militaries of the two countries have agreed on many important issues. First, in terms of implementing the consensus of the heads of state, the two militaries agreed on building their relationship a stabilizer for the overall relations. Second, we agree on maintaining regular communication on the strategic level. The day before yesterday, I had a candid and practical discussion with Acting Secretary of Defense Patrick Shanahan. We reaffirmed the importance of maintaining communication and to develop a constructive military-to-military relationship. Third, in terms of managing risks and preventing conflicts, the two sides recognize that military conflicts or even a war between them would bring disasters to both countries and the world. It takes two to cooperate, but only one to start a fight. We hope that the US side will work with us towards the same goal, follow the principles of non-conflict, non-confrontation, mutual respect and win-win cooperation, and steer the China-US relations in the right direction.
The achievement China has made in the past 70 years since the country was founded is not a windfall or a handout from others. Neither was it made by engaging in military expansion or colonial exploitation. Instead, the country has developed through its people's hard work, wisdom and bravery as well as the win-win cooperation with the world since reform and opening-up. At present, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, China enjoys political stability, social cohesion and steady economic growth. Blessed with peace, harmony, prosperity and good governance, the country is making progress on all fronts. The Chinese people are committed to realizing the Chinese Dream of great national rejuvenation. The Chinese military is ready to work with the armed forces of other Asia-Pacific countries to jointly respond to challenges, promote the building of an Asia-Pacific community with a shared future and safeguard peace and stability in the region.
June 4 marks the 30th anniversary of the Tiananmen Square incident. The Communist Party of China and the Chinese government have determined the nature of the incident. Chinese society has also made a comprehensive summary of it. Dropping the incident thereafter has been aimed at helping the country leave the shadow behind, avoid disputes, and help all Chinese people face the future.
We consider such practice a political success, although some people have criticized it from the perspective of news governance. Merely afflicting China once, the incident has not become a long-term nightmare for the country. Neither has the incident's anniversary ever been placed in the teeth of the storm. It has become a faded historical event, rather than an actual entanglement.
The Chinese government's control of the incident in 1989 has been a watershed marking the differences between China and former Eastern European socialist countries, including the Soviet Union and Yugoslavia. Since the incident, China has successfully become the world's second largest economy, with rapid improvement of people's living standards. The policy of avoiding arguing has served as a contributor to the country's economic take-off.
Today's China obviously has no political conditions to suddenly reproduce the riot of 30 years ago. Chinese society, including its intellectual elite, is now far more mature than it was in 1989. In those years, China's reform was carried out prior to those of the Soviet Union and Eastern European countries. China was completely inexperienced, with an intellectual circle filled with idealism. Chinese society today has seen enough of the political tragedies that occurred in the Soviet Union, Yugoslavia and some Arab countries.
Having become politically mature, we now understand the significance of the country's continuous development through evolutions instead of revolutions. We are also aware of the difficulties and complexity at the practical level.
As a vaccination for the Chinese society, the Tiananmen incident will greatly increase China's immunity against any major political turmoil in the future.
We have noticed that every year around June 4, certain forces outside the Chinese mainland stir up public opinion and attack China. Such forces consist of two groups of people: student leaders and dissidents who fled abroad after 1989, and Western politicians and media outlets.
The first group's understanding of the incident remains fixed in 1989. They refuse to correct their understanding of China's development and the changes that the world has been through. Their interests have been decoupled from the Chinese people and have merged with anti-China forces outside China. Their attitude toward the incident cannot represent those of today's Chinese public.
Western politicians' discussions of the incident are mainly influenced by their countries' relations with China. Due to the deterioration of China-US ties, US officials have launched fierce attacks against China that have focused on the incident since last year. But Chinese people are clear that those officials are not genuinely concerned about Chinese human rights, but are making use of the incident as a diplomatic tool to challenge China.
However, all these noises will have no real impact on Chinese society. The actions of the external forces are completely in vain.
The US offers its commiserations for so-called human
rights violations in China, yet in actions, it has been trampling on
China's human rights for years. It is time for Mr Pompeo and his
colleagues to stop the self-contradictory moves.
KUALA LUMPUR: It looked like the start of semiconductor manufacturers’ nightmare when US President Donald Trump fired another salvo in the escalating US-China trade war by blacklisting China’s mobile phone equipment giant, Huawei Technologies Co Ltd.
The act sent shock waves along the supply chain of the global semiconductor industry, sparking strong sell-offs in semiconductor companies’ shares worldwide. The same was seen in Malaysia, which caused the Bursa Malaysia Technology Index to sink 3.47% on Tuesday — the biggest loser among the indices — led by companies linked to the industry.
But it may not be a losing battle in the long run, at least not for Malaysian companies. The trade diversion that will arise from Huawei’s ban in the US, which effectively cuts off US chipmakers from the supply chain of Huawei — the world’s largest provider of networking gear and the second-largest smartphone vendor — may benefit domestic players here.
Pentamaster Group Bhd co-founder and chairman Chuah Choon Bin told The Edge Financial Daily that he expects the group’s telecommunications segment to see a 20% to 30% decline in sales as a result of Huawei’s blacklisting in the US. The contraction may take away some 18% in total sales it anticipates for the year.
However, Chuah said Pentamaster may also stand to benefit from the ban, as he expects China will become more aggressive in ramping up their product developments in the face of what happened to Huawei.
So, he sees a silver lining for the group in the form of trade diverted from US chip suppliers to those located elsewhere, possibly in Malaysia, where Pentamaster supplies chip tester equipment or automated tester equipment.
As such, Chuah does not expect Pentamaster to be greatly affected by Huawei’s ban in the US. In fact, the eventual tally may show Pentamaster gaining from the situation.
Pentamaster was among the technology counters on Bursa Malaysia that took a beating on Tuesday, following the news on Huawei’s ban.
Its shares sank as much as 29 sen on Tuesday to RM4.05, before easing to settle at RM4.10, down 24 sen or 5.53% at market close. It was one of the top losers in Bursa Malaysia’s Technology Index, which retreated to 30.9 points, dragging the FBM KLCI down 0.1% to close at 1,603.74.
Other semiconductor stocks that were badly hit include: Inari Amertron, which fell 10 sen or 6.67% to RM1.40; Mi Technovation Bhd, which was down 11 sen or 6.43% to RM1.60; Globetronics Technology Bhd, which retreated 10 sen or 5.92% to RM1.59; and Frontken Corp Bhd, which fell eight sen or 5.63% to RM1.34.
Nonetheless, the rebound on Wall Street among semiconductor stocks that were bogged down by fears over the trade war’s ripple effects, raised hope that its peers in Malaysia may follow suit, if the upward trend seen on Tuesday is sustainable.
The share price recovery was fuelled by the temporary 90-day reprieve that was granted to Huawei on Monday. The initial ban was to take effect on May 20. The Philadelphia Semiconductor Index gained 2.1% to end a three-day slump on Tuesday.
“The disruption to (the) supply chain will definitely be negative in the short term,” said an analyst who tracks the semiconductor industry, citing as example people who are considering switching mobile phones after the news that Alphabet Inc’s Google would be cutting off the supply of hardware and selected software services to Huawei once the 90 days is up.
“The trade war seems like breaking the supply chain into two ... this is going to be bad in the short term. But if China cannot get their supply from the US, they are likely to turn inwards ... [or to] countries like Malaysia,” the analyst added.
A Singapore-based fund manager commented that Malaysian tech companies presently do not have much to do with Huawei. But the ban is causing everyone in China to sit up and rethink their supply chain strategy. “In short, no one will believe in the US [anymore]. It is not a reliable and credible supplier. What it means is that it is positive for some of those tech companies in Malaysia that can offer what the Chinese need,” he said.
Some analysts, however, have a more cautious stance, saying it is too early to draw any conclusions on the matter given that it is hard to predict any retaliatory moves the two countries could make.
The lingering concern remains that any slowdown in international trade volume will not augur well for the world economy, including Malaysia. Meanwhile, some have pointed out that the valuation of Malaysian semiconductor stocks are relatively higher compared with elsewhere.
Band together: Entrepreneurs are urged to
build strong communities to have a bigger voice that will enable them to
affect policy that is beneficial to the industry.
Local startup sector gaining ground with stronger investor interest
THE past few years have seen an increase of entrepreneurs in the local tech startup sector. With better access to funding, there is ample opportunity for new business ideas to take off.
But while the number of startups in Malaysia has increased, industry observers say we are merely scratching the surface of where the industry could be.
According to Yusuf Jaffar, programme manager of Global Accelerator Programme from Malaysian Global Innovation & Creativity Centre (MaGIC), there is an estimate of 3,000 startups in Malaysia. Compared to the over 1 million registered enterprises here, startups make up only 0.25% of total companies registered.
In contrast, Singapore has 42,000 startups, making up some 8.88% of companies in the island state.
In the region, South Korea has an estimated 30,000 startups, while Indonesia and India has over 4,700 and 7,700 respectively.
Although the numbers in Indonesia and India look low, Yusuf points out that they have a vibrant startup ecosystem.
“India has 1,200 new startups every year, and this does not include the ones that are failing. These are the ones that are surviving or thriving. This shows vibrancy of ecosystem.
Getting there: Hall says Malaysia’s startup ecosystem is rapidly maturing.
“For Malaysia’s ecosystem to grow, we need to rapidly increase our number of startups. We need more entrepreneurs here and we need more ideas,” he says.
He names four components that are needed for the industry to grow – more startups, capital, markets and talent.
In terms of capital, Yusuf notes that venture capital (VC) penetration in Malaysia is relatively high with 110 VC firms. Statistically, he says, there are a lot of funds available in Malaysia with US$1.75bil in VC funding for the local ecosystem, of which, only 50% has been spent to-date.
However, most of these funds go into funding Series A (US$1mil-US$3mil) and B (US$3mil-US$10mil) rounds, whereby the startups have grown sizably.
According to statistics, only 0.89% of VC capital went into early-stage investment, which amounted to about eight investments last year. In Singapore, 67% of VC funding goes to the early stage.
It is crucial to have adequate funding for early stage investment to ensure that entrepreneurs can tap these funds to grow their ideas.
“We are investing late,” says Yusuf.
In Malaysia, he estimates that the success rate for startups is 20%.
He adds that 90% of the current 242 unicorns – startup company valued at over US$1bil – in the world received VC funding from the get-go, underscoring the importance of VCs in making high-growth companies.
Additionally, the frequency of investments in the local market is low. In 2017, there were only 77 investments made by VCs, or only 2.57% of startups received VC investment. Considering that there are 110 VC firms here, it is small wonder that entrepreneurs feel that there is a lack of funding available in the local market.
Stacking up regionally
Malaysia has often been cited as a country with great potential. We have a fairly well-educated population, infrastructure and a strong economy.
However, the other countries in the region have somehow garnered more interest from investors. Singapore and Indonesia, in particular, have been receiving sizeable investments from VCs. The Indochina region has also been getting a lot of attention in recent times.
And not many from the industry will forget that Malaysia-founded Grab eventually moved to Singapore given the more vibrant ecosystem across the straits.
But Justin Hall, partner at Singapore-based Golden Gate Ventures, says that Malaysia’s startup ecosystem is rapidly maturing.
“As we’re starting to see in other regional countries, Malaysian entrepreneurs are actively seeking to build out platforms and products that appeal to the entire South-East Asia, and not simply the domestic Malaysian market.
“Regional funds are actively looking for and investing in Malaysian-born startups, and I see this trend accelerating as investors look out from Indonesia and Singapore,” says Hall.
Last November, Golden Gate launched its Malaysian office in Kuala Lumpur to solidify its presence here. The firm had already utilised a quarter of its Fund II to invest in early-stage tech companies that are based or operating in Malaysia. It is planning to invest a further RM75mil in Malaysia-based startups.
Smart capital: Ganesh notes that VCs can now pick and choose their investments because there are more startups around. — Bernama
He notes that Malaysia also has a large digital consumer market.
“It bears some striking similarities to other South-East Asian countries in terms of consumptive behaviour such as regulatory bottlenecks in certain industries, and regulatory, infrastructure, and logistical constraints. This means that products and services that resonate with Malaysian consumers and businesses might be easier to localise into other regional markets than, say, companies that specifically appeal to Singaporeans,” he adds.
Hall opines that Malaysian companies are undervalued compared to Indonesia and Singapore, largely due to the sheer amount of capital being invested in the later markets. There were previously also some gaps in founder experience and capability between the markets, but that gap is rapidly closing.
According to Hall, logistics and supply-chain focused startups will come into focus in 2019 as the e-commerce boom starts sizing up in the region.
“We are really only scratching the surface of scalable, efficient, inter-country logistics and supply-chain platforms. We hope to continue finding and investing in the best, most talented entrepreneurs in South-East Asia this year,” he says.
However, Commerce DotAsia Ventures Sdn Bhd executive chairman Ganesh Kumar Bangah notes that the startup frenzy in the region seen a few years ago has cooled off.
“Valuations were very high three to four years ago. I think it has cooled off. There are still some startups who ask for crazy valuations, but they don’t get funded. VCs can now pick and choose because there are so many startups. They don’t compete with each other as much as before.
“It is not like three or four years ago, where a startup can say, ‘if you don’t give me this value, the next guy who comes in will offer me that’. Today, there’s realism in the game.
“There is still a lot of money in the region for the right companies. People are less willing to overpay for them,” he says.
Building the ecosystem
Governments play an important role in developing the startup ecosystem and in creating new markets for the ecosystem.
Yusuf says favourable policy can mobilise funds and help grow the industry.
He cites the example of Singapore, which has allocated S$5bil in matching grants for startups, effectively pouring in S$10bil for the sector. In the US, some US$84bil is invested into VCs annually, with the bulk of these funds coming from pension funds.
Obviously, the funding ecosystem in Malaysia has a long way to go. But developments in the local market such as equity crowdfunding and Leap Market have opened up more funding avenues for startups looking to tap new money. Additionally, more people have shown interest in becoming angel investors, which would help fill the gap in the early-stage financing.
“It is not that there is not enough money in the ecosystem. The case is, there’s not enough intelligent capital at the early stage here. Intelligent money means that these investors have the knowledge to value the startups, and have the ability to give them the add-ons to help them grow.
“We don’t lack capital, we lack intelligent capital at the early stage. We’ve got a lot of people with money and a lot of them want to invest in technology but don’t know how,” notes Ganesh.
Yusuf concurs. The Malaysian ecosystem lacks specialist talents who can run funds. Most of the local VCs are managed by generalists who may not be able to discern startup-specific issues and challenges.
Paving the way: Governments can play an effective role in creating new markets for the ecosystem.
Thus, there is a need to attract more foreign funding and talent to close the gap in the local market.
“Governments also play a big role in market creation. The government needs to put in real money into these specific markets.
“A good example is the “buy social” campaign in the UK where all government procurement contracts have to go to social enterprises. That has led to the UK becoming the epicentre of social enterprises in the world, because the government made that effort and made that pledge.
“So it’s not just about identifying a market, but creating real value in the market. There’s no way an entrepreneur can grow unless the market is created,” says Yusuf.
He notes that 5% of the UK’s GDP now comes from social enterprises.
Yusuf also urges entrepreneurs themselves to be part of the effort in building the local startup ecosystem by creating communities that will enable them to work outside their silos. By working within communities, entrepreneurs will be able to share ideas and collaborate to form better solutions and business models.
“We need to have clusters, where you can get matching of skillset and vision. And these clusters should be connected to other clusters to see how you can build the ecosystem and move the ecosystem forward.
“So build the community. And the importance of building a bigger community is so that you can affect policy in a way that will benefit the industry,” he says.
Dec 10, 2014 ... This is the ninth article in a 10-part tie-up between Metrobiz and the Malaysian
Global Innovation & Creative Centre (MaGIC) to explore startup ...
Dec 17, 2014 ... This is the final article in a 10-part tie-up between Metrobiz and the Malaysian
Global Innovation & Creative Centre (MaGIC) to explore startup ...
