KL20 – Flash in the pan or paradigm shift?

 

KL20 – spearheaded by our minister of economy Rafizi Ramili – was a glitzy and glamorous tour de force of Malaysian showmanship. It attempted to woo foreign investors and founders alike by showcasing Malaysia’s vibrancy and hospitality.

However, as we well know, Malaysia isn’t without its share of issues. This is reflected in the general sentiment of the Malaysian population, with many being pessimistic about the direction the country is heading in, as a recent Ipsos Malaysia poll showed.

However, if there is any one thing that can fix this, it’s an across-the-board increase in wages. And there’s only one way for this to happen – we need highly profitable companies to be domiciled in Malaysia.

Case in point – no cohort of companies are as profitable as Silicon Valley stalwarts Apple, Google, Nvidia, Tesla and Meta. Thanks to this, they pay their employees the most of any industry in the world.

A fresh graduate who joins Google earns a whopping RM73,000 (US$15,000) per month. This is many times the US average, which is around RM17,600 (US$3,600). Let’s not even go to what the average salary of a fresh graduate here in Malaysia is.

Why this incredible pay discrepancy? Because tech companies – especially those which are quasi-monopolies – enjoy profit margins that put companies in every other industry to shame. And thanks to this, they can afford to pay their employees handsomely.

So what’s the point, you ask? The point is, the only way we’re going to turn our national fate and the sentiment of the masses around is by either birthing or attracting highly profitable tech companies – preferably monopolies in their respective industries.

And KL20 might just be the spark that makes this happen.

Rafizi has been clear on his goal for KL20. It’s not meant to be a one-time vanity event, but rather, in his own words: “KL20 represents our ambition to bring Malaysia to [be one of] the top 20 start-up ecosystems in the world. The KL20 Action Plan outlines new initiatives that will accelerate the critical areas of a start-up ecosystem — capital, talent, and the quality of start-ups.”

This is the kind of all-of-government effort that has a fighting chance of bearing fruit. But it’s no easy feat to become a top-20 start-up ecosystem in the world. After all, previous government efforts such as the Multimedia Super Corridor (MSC), Cyberjaya and Technology Park Malaysia (TPM) have tried to make KL a start-up hub, only to come up woefully short.

How can we ensure that it’s different this time? By following in the footsteps of an unlikely country – Ireland.

I know what you’re thinking. Ireland isn’t home to any groundbreaking companies. You’re right, but they’ve got something up their sleeve that’s made Dublin, the capital of Ireland, exceedingly wealthy.

Home to the European headquarters of Silicon Valley tech giants Apple, Meta, Google, AirBnB and X (formerly Twitter), the epicentre of Dublin has now been dubbed Silicon Docks. Thanks to Ireland housing these cash cows, it is set to reap a budget surplus of RM 51 billion this year – a sizable 3.5% of national income. This number is set to more than double by 2026.

Ireland’s secret to attracting these tech giants? A very low corporate tax rate of 12.5% – which now accounts for 25% of all tax revenue, compared with less than 10% across Europe. In contrast, Malaysia has almost double the corporate tax rate of Ireland at 24%.

In fact, to sweeten the deal even further, Ireland allowed Apple – formerly the largest company in the world – to only pay a minuscule 0.005% in corporate tax. This might seem foolish, but while most countries were playing checkers, Ireland was playing chess.

Sure, they haven’t maximised the amount of corporate taxes they could have received, but thanks to this sweetheart deal, they managed to attract almost all the largest tech players in the world. And once the tech giants set up shop, they started hiring thousands of Irish people, upskilling them and paying them above-average salaries.

Moving forward, other companies would be compelled to set up a branch in Ireland not just due to their irresistible corporate tax rate but also due to the density of tech talent that’s already been nurtured by the tech giants who are domiciled there.

This is exactly how we can catch up to the San Franciscos, Shenzhens and Singapores of the world – by creating an environment enticing enough to attract tech giants, because once they do, they would transfer their invaluable technology and knowledge to Malaysians.

Their above-average pay will help increase our standard of living and upskill our population, which will eventually set us up to pioneer new cutting edge technologies, turning KL into a bona fide startup hub. - FMT

The writer can be contacted at kathirgugan@protonmail.com.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.