15 April 2021
The news that Grab Holdings Inc. is to be listed on the United States’ Nasdaq was received in somber mood from its incubator country, Malaysia. This is billed as the one which gets away.
But then again, what is the big fuss about this Grab, which started in Malaysia and received one of its earliest funding from Cradle Fund Sdn. Bhd. To put it in good perspective, Grab is a decacorn. What is a decacorn then? Decacorn is defined as a startup company which has a current valuation of over USD 10 billion. Grab is valued just slightly below USD 40 billion. And to shed more lights, there are only 18 decacorns in the world today. For comparison, Grab is valued twice as much as Maybank, the largest company in Malaysia at USD 20 billion. Mind you, Maybank is 61 year-old, Grab however was formed in 2012.
This has become more than a fuss then. It is an epic loss to the Malaysia. How does a company incubated by a subsidiary of Mof Inc, moved its operation to Singapore, grow a lot bigger and then suddenly wants to be listed in United States. Why not get listed on KLSE. Why not even on SGX.
The issue at hand is more complicated than a matter of Malaysia’s loss, Singapore’s gains. The real issue is that Malaysia lacks the ecosystem to allow Grab to reach its potential. If Grab had remained in Malaysia, its growth would have been be stunted. The favorable ecosystem with the right mix of Capital, Talent, Incentives and Regulations must be present, or else companies will migrate in similar fashion talents will migrate from smaller towns to bigger towns to fulfil their potentials.
Malaysia capital market is growing but in a very conservative and traditional way. Cradle Fund Sdn. Bhd. may have provided one of the earliest funding to Grab when it was known as My Teksi. But as Grab grows, it even outgrows the Cradle Fund itself. Grab is technology based company, meaning it is doing business in the digital world. Beyond Cradle Fund, there is no bank in Malaysia which are sophisticated enough to fully comprehend Grab’s potential. SME Corp and SME Bank may come to mind, with their role to provide loans for the Small and Medium enterprises to grow and prosper. Unfortunately, these financial institutions deal with more brick and mortar business then perhaps what the Government want them to do. SME Bank lends based on collaterals, not based on ideas and potentials. In certain cases SME Banks required more than 50% collateral to approve a loan. SME Bank is not helping any small medium enterprises to grow. They actually choked the business.
The rest of traditional bank is more or less the same. Collateral lending is what they called it. So if a company grows its business beyond what Cradle Fund can handle, there are high probability that it cannot grow further since traditional banks will not lend them. The only choice would be to seek financing outside Malaysia.
This is another issue that requires immediate soul searching and far reaching solution. But this has to be done with the realization of where we are now first, and equally important how did we get here. The truth is that we are not producing adequate talents for this digital age. Adequate means in term of quantity and quality that can feed the desired economic growth. Why did Grab moved to Singapore, because there were deeper talent pools in Singapore.
So how did we get here? Our education system gets us here. A good education system will produce good talents and vice versa. Our education system requires rejuvenation with changing times and era. In this Digital Age, our education system will need to be recalibrated to meet future demands. The system must change in order to produce tech-graduates of high calibre or bankers who can understand beyond collateral lending.
INCENTIVES AND REGULATIONS
Incentives refers to taxation structure or rather how attractive our taxes are compared to our competitors. Incentives also include tax allowance and holidays that can make Malaysia more competitive compared to others.
Regulation on the other hand refers to the ease of doing business, low bureaucracy and corruptions and overall government support to get the business going. These two areas do not require major operation as Malaysia is already quite competitive.
The last item that may require a little clarification is perhaps the fundamentals of Malaysia Capital Market. Grab is valued at about USD 40 billion. For this floatation exercise to be successful, Grab has be listed on the stock exchange that is adequately huge, vibrant and with unlimited pools of sophisticated investors. Malaysia has a long way to go to get to that level. Singapore is also not there yet. Nasdaq is the sole suitor.
Grab is not the case of the one which got away. Grab is actually a symptom of what is lacking in this country. It provides a fresh invigorating perspective that Malaysians are talented and capable of developing tech business into decacorns. It also reminds us that if we do not address our capital and talents inadequacies urgently, this unfortunate story will repeat. Likewise we must continuously improve our incentives and regulations to keep, attract and retain good businesses in the country.
Dato Mohamed Farid Zawawi
AMPT Bersatu/ Ketua Bahagian Kota Bharu