Kopi Kenangan opens 14 outlets in Malaysia, targets 50 by year-end

Co-founders Edward Tirtanata (left) and James Prananto at the launch of Kopi Kenangan’s first outlet in Kuala Lumpur / Photo credit: Kopi Kenangan

Indonesian coffee chain Kopi Kenangan tells
Tech in Asia
 that it has opened 14 outlets in Malaysia at the time of writing.

The firm’s CEO, Edward Tirnata,
said
 in a May 11 interview with
DealStreetAsia
 that he expected to open 25 stores in Malaysia by July and 50 by year-end.

While Kopi Kenangan’s expansion appears to be slower than expected, the 50-outlet target hasn’t been revised, a company spokesperson said without elaborating.

Kopi Kenangan’s 14 outlets are located around the Klang Valley, which runs across the states of Kuala Lumpur and Selangor. The company doesn’t have any plans at the moment to expand to Sabah and Sarawak, the spokesperson added.

Malaysia is the
first overseas destination
 for the chain, which is known as Kenangan Coffee outside Indonesia.

But the Malaysian coffee space is becoming overheated.
Tech in Asia

reported
 last week that a new Malaysian entrant, Koppiku, launched its first store in Kuala Lumpur. Melissa Lim, Kopi Kenangan’s former strategy manager, is one of Koppiku’s founders.

Kopi Kenangan
joined
 the unicorn club in 2021 after raising US$96 million in its series C funding round, making it Southeast Asia’s first “new retail” F&B unicorn.

The firm has more than 850 stores across 64 cities in Indonesia. It also rolled out new offerings in its home market: bread shop Cerita Roti, chicken wings chain Chigo, and cookie brand Kenangan Manis.

See more:
Malaysia’s coffee scene heats up as foreign players take on local firms


Grab-led GXBank set to commence operations in Malaysia

GXBank CEO Pei Si Lai / Photo credit: GXBank

Grab-led
GXBank
 has secured approvals from the Minister of Finance and Bank Negara Malaysia to begin operating in the country as of September 1. It is the first of
five applicants for digital bank licenses
 in Malaysia to get the green light.

GXBank was formed between a consortium comprising
GXS Bank
 – the Singapore-based digibank from Grab and Singtel – as well as a group of Malaysian investors, including local conglomerate Kuok Group. It aims to provide services to unbanked and underserved individuals as well as MSMEs.

“Our collaboration with consortium partners such as Kuok Group and other industry players will enable us to work hand in hand, leveraging our respective ecosystems to nurture a resilient and financially inclusive Malaysia,” said
Pei Si Lai
, GXBank’s CEO.

The bank plans to beta-test its mobile app internally before rolling it out to the public.

In Singapore, GXS Bank logged almost
US$3 million in deposits
 as of end-2022. The digibank recently
increased
 its maximum deposit amount for savings accounts from S$5,000 (US$3,800) to S$75,000 (US$56,600).

See also:
SG digibank GXS trails Trust in adoption as deposit cap hampers growth

Currency converted from Singapore dollar to US dollar: US$1 = S$1.36.


Can India’s moon landing launch a spacetech funding bonanza?

Welcome to On the Rise! Delivered every Tuesday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in emerging tech. If you’re not a subscriber, get access by
registering here
.

Hey there!

This has to be one of those days when I find myself swelling with pride for my Indian identity.

The recent achievement of India’s lunar landing serves as a tribute to the unsung heroes who quietly contribute to the country’s progress amid the cacophony of today’s media-driven world.

I recall an incident of a
BBC anchor
 once questioning whether a nation grappling with issues like poverty should prioritize space exploration.

We’ve come a long way since then, with venture capitalists and investors now showing heightened interest in India’s spacetech startups. The success of the nation’s lunar mission is likely to further boost investor appetite in the sector.

In this week’s first Big Story, my colleague Lokesh talks about how many spacetech players have been getting attention from potential investors after the Chandrayaan-3 spacecraft landed on the moon. But beyond funding, investors are looking at one more piece to drive the sector ahead.

Speaking of investors, bigwigs like Temasek, Wavemaker Impact, and Bill Gates-backed Breakthrough Energy Ventures are also making their way into the Indian market. However, their focus isn’t on space but rather on Asia’s rice fields.

These industry giants have launched a joint venture called Rize, which is developing a platform that can identify and implement the best practices for reducing greenhouse gas emissions in rice farming.

The litmus test for Rize: crafting a sustainable business framework that balances profitability with economic advantages for farmers.

Lastly, this week’s AI Odyssey analyzes the heated debate between AI-generated art and copyright laws after a US federal judge ruled that AI-created works cannot be granted the same copyright protection as those made by humans.

—
Deepti

THE BIG STORIES

1⃣
Can Chandrayaan-3’s trip to the moon catalyze Indian spacetech funding boom?

Image credit: Timmy Loen

Local spacetech firms see more investor interest after the Indian Space Research Organization’s successful lunar mission but all eyes are now on the country’s space policy.

2⃣
This Temasek-owned agritech firm sows sustainability into rice farming

Image credit: Timmy Loen

Rize is using methods to reduce water consumption and methane in rice cultivation and at the same time looking to build a sustainable business model.

AI ODYSSEY

Promising AI topics we’re noticing

AI is not an artist, says court

Image credit: Timmy Loen

A recent US court ruling stated that AI-created artwork without human involvement is not eligible for copyright protection. It ignited a heated debate over who owns art produced by AI and whether it deserves the same copyright protection as works created by humans.

—
Deepti

FYI

1⃣
Malaysia’s coffee scene heats up as foreign players take on local firms
:
 The specter of Chinese brands looms large as coffee chains duke it out in offering cheap caffeinated beverages.

Image credit: Timmy Loen

2⃣

This Philippines-based VC eyes $25m SEA fund to target startups with ‘can do’ spirit
:
 Kaya Founders has been investing in Southeast Asian startups for the past two years, with majority of its funds going to Philippine firms.

NEWS YOU SHOULD KNOW

Also check out Tech in Asia’s coverage of the emerging tech scene
here

1⃣
Free Fire
 is back in India!
:
 Sea Group’s Garena has launched a localized version of
Free Fire
 in the country. This follows the Indian government’s ban of the original game last year due to data privacy issues.

2⃣
Rivaling OpenAI
:
 AI21 Labs, which builds AI systems for natural language, has raised US$155 million in a series C round from Google, Nvidia, and other investors. Following the round, the OpenAI competitor’s valuation rose to US$1.4 billion.

3⃣
Biofourmis CEO steps down after company laid off 120 staff
:
 Kuldeep Singh Rajput founded the healthtech firm in 2015. Filling his role will be a new CEO office headed by Ben Wanamaker of General Atlantic, one of Biofourmis’ biggest investors.

4⃣
A SPAC-tacular journey
:
 Noco-noco made its market debut on Nasdaq last week after merging with a US blank-check firm. The Singapore-based company’s main product is a battery used in air and land transport that provides improved performance, durability, and heat resistance.

5⃣
Line- and Kakao-backed Web3 gaming firm makes $8m while staying profitable
:
Iskra’s paltform carries Web3 gaming titles across different genres. It also provides studios with resources to help with game development.

That’s it for this edition – we hope you liked it! Do also check out previous issues of the newsletter
here.

See you next week!


Ant Group expands Alipay+ integrations in the Philippines

Photo credit: Ant Group

Ant Group
 has expanded its
Alipay+
 digital payment platform in the Philippines to add support for three new mobile wallets: AlipayHK from Hong Kong, Kakao Pay from South Korea, and Touch ‘n Go eWallet from Malaysia.

Currently merchants in Manila and Cebu, two major cities in the country, accept Alipay+.

This upgrade comes as travelers are returning to the Philippines as part of the post-Covid-19 tourism recovery. According to the Philippines’ Department of Tourism, over
3 million tourists
 have visited the country from January 1 to July 19.

Cherry Huang
, general manager of Alipay+’s offline merchant services, said the company’s focus now is to forge more partnerships and onboard more merchants across the country, particularly small businesses.

See also:
Alibaba’s financial health in 5 charts

Ant Group introduced Alipay+ in 2020 to help businesses expand their supported payment methods. The mobile wallets on the platform are also accepted as payment options in markets such as mainland China, Macao, Singapore, Japan, and South Korea.

Earlier this year, Ant Group expanded the coverage of the same service in
Malaysia
, enabling all 7-Eleven stores there to accept Alipay+ and other mobile wallets in its ecosystem. It has also set up integrations for its mobile wallet ecosystem in
Thailand
.


Even governments aren’t immune to celebrity charms

Sign up for the Daily Newsletter, sent exclusively to our premium subscribers. We break down the big and messy topics of Asia’s tech and startup community.
Get the newsletter in your inbox everyday with a premium subscription
.

Hello reader,

I really dislike celebrity culture, and it can lead to some ridiculous advertising. Sure, Brad Pitt is a really good actor and has enough handsomeness for five guys, but what the heck does he know about coffee? If he hawked a coffee machine brand, why would his opinion mean any more than John Everyman’s?

The vast majority of celebrities shouldn’t be on the pedestals that we, as a society, put them on. The same applies to the tech world – we shouldn’t overhype a partnership just because it’s with a high-profile brand or founder.

Today’s premium piece looks at how much of Malaysia and Indonesia’s agreements with Elon Musk’s Tesla and Starlink can make a real difference, and how much is just unrealistic hot air.

Today we look at:

The governments starry-eyed over for Musk

PDD Holdings’ latest financial figures

Other newsy highlights such as the successful fundraises of a few startups and another one going public on Nasdaq

Premium summary

A little less hype, a little more realism please

Image credit: Timmy Loen

Malaysian Prime Minister Anwar Ibrahim had a virtual meeting with Musk on July 14, claiming that the billionaire would consider investing in the country. But the deal turned out to be the setting up of a Tesla sales and services office in Kuala Lumpur and the licensing approval of Space X’s Starlink in Malaysia.

That’s not great expectation management. Additionally, the deal came at the cost of rare exemptions and concessions… and it might not even make sense for Malaysia.

Starnolink:
 Both Malaysia and Indonesia have publicly stated that the satellite internet service will be a game changer, especially for rural populations. But these rural populations are unlikely to be able to afford Starlink’s setup (US$495) and monthly subscription (US$47.40) costs.

Context:
 The average monthly household income in rural Malaysian states, such as Kelantan, is US$772. Even Sarawak, the country’s largest state with a huge rural population, nets a median household income of US$1,060.

Cheaper EV alternatives:
 In Malaysia, the cheapest Tesla model goes for US$42,858. Compare that to BYD’s Dolphin, which starts at US$21,649.

Read more:
Malaysia, Indonesia overhyped Elon Musk’s Tesla, Starlink

News spotlight

Putting the
duo duo
 in Pinduoduo

Image credit: Timmy Loen

PDD Holdings, the parent firm of Chinese social commerce giant Pinduoduo, reported
a 47% year-on-year growth in its net income
 to US$1.8 billion for the second quarter of 2023.

Order 66:
 The company generated US$7.17 billion in revenue for the June-ended quarter, marking a 66% increase from the same period last year.

Up across the board:
 While revenues from online marketing services rose 50% to US$5.2 billion, revenues from transaction services more than doubled to US$1.97 billion.

This includes expenses:
 PDD’s total operating expenses also went up 41% to US$2 billion. This is mainly due to the increased spending in promotional and advertising activities.

See also:
Why SEA should watch out for Shein’s top rival Temu

Tech in Asia Conference 2023

What if you could pitch to not just one group of investors but several of them all at once?

If you’ve got it in you to share about your startup in front of thousands of people – and stand the chance to win some great cash prizes at the same time – then Tech in Asia’s Startup Arena pitch competition is just the thing for you.

There’s less than a month to go before we close applications, so if you’d like a shot at the grand prize of more than US$10,000 in cash, you can apply for the competition
here
.

Quick bytes

1⃣
US$15 million Sure sounds good

India-based spacetech firm SatSure has
raised US$15 million in its series A round
, consisting of equity capital and venture debt. The round was led by Baring Private Equity Partners India and Promus Ventures.

SatSure will use the fresh funds to launch four high-resolution optical and multispectral satellites by the fourth quarter of 2025. It will also use the capital for product development and expansion of its operations across the Americas and Asia Pacific.

2⃣
On the board

Singapore-based Noco-noco, a decarbonization solutions provider, has
started trading on Nasdaq
 as of Monday, operating under the ticker symbol NCNC.

The firm’s primary product is a battery that incorporates its in-house separator known as X-SEPA. The company said its proprietary tech helps improve the performance, durability, and heat resistance of batteries typically used for air and land mobility.

3⃣
I’m a gamer, where’s my million bucks?

Komet Games, a Singapore-based casual gaming platform, has
bagged US$1 million in pre-seed funding
 from Picus Capital and Creator Collective Capital.

The startup plans to use the funds to expand its team, content, AI tools, and marketing efforts.

4⃣
Qashing in

Qashier, a payments system provider from Singapore, has
secured US$10 million in a series A round
 co-led by Delivery Hero Ventures and IFP Securities.

The funding will help the startup expand geographically, bolster its operations in existing markets, and enhance its product offerings. Besides the city-state, the startup offers its services in Malaysia, Thailand, and the Philippines.


Putting the ‘gov’ in govtech is no mean feat

Sign up for the Daily Newsletter, sent exclusively to our premium subscribers. We break down the big and messy topics of Asia’s tech and startup community.
Get the newsletter in your inbox everyday with a premium subscription
.

Hello reader,

Have you ever been sailing?

From the ages of about 13 to 15, my younger brother and I spent most Sundays with my dad and uncle, learning how to maneuver a dinghy in Larne Lough. It wasn’t plain sailing (I’ll get my coat), but it was mostly fun and we learned a few things.

Our first lesson was figuring out how to turn the dinghy the right way up after capsizing, in case this ever happened to us at sea. Being dumped into the freezing cold water made that one stick for sure.

I also distinctly remember being taught about right of way in the harbor. As my uncle told it, the least maneuverable vessel always has right of way, so almost any boat with an engine had to get out of our way.

The one exception is giant ferries or cargo ships, which are so hard to turn that everyone else has to avoid them.

Governments are much like these large ships – unwieldy and difficult to turn. Perhaps that’s why Malaysia’s efforts to modernize its government using tech are proving so challenging.

Today we look at:

The bumpy road ahead for govtech in Malaysia

Elon Musk’s Starlink having to find a local partner to enter Indonesia

Other newsy highlights such as the US$6 million round of a firm trying to bring fintech to rural Vietnam, and the Singapore expansion plan of Indonesia’s Fore Coffee.

Premium summary

Govtech gridlock

Image credit: Timmy Loen

In recent years, Malaysia has been pushing tech-enabled public sector modernization, or govtech for short, with mixed results.

While there has been some progress in open data and bringing data centers to the country, policy hurdles and political instability have held such efforts back.

Consolidation for the nation:
 Consolidating information technology systems is one area Prime Minister Anwar Ibrahim’s administration is looking to progress in. The country’s 297 independent government databases cost US$1.5 billion annually to maintain and Economic Affairs Minister Rafizi Ramli has been meeting with investors and tech players to discuss the possibility of creating a “single window.”

Unsteady ground:
 The political turmoil the country has faced in recent years threatens to hamstring these govtech efforts, as any large-scale government tech project needs a degree of political stability to work. Malaysia saw three regime changes between 2018 to 2022, and tech firms involved in an overhaul of key migration services appear to have been caught in the crossfire.

Bureaucracy backlog:
 While the government does invest in startups as part of the govtech push, founders say the hoops they have to jump through for funding make it hard to move forward with a project. One common example is a rule that a startup can only hire a skilled worker within a certain salary bracket, usually below market value.

Read more:
The good, the bad, and the ugly of Malaysia’s govtech push

News spotlight

Star turn

Image credit: Timmy Loen

Elon Musk’s Starlink may not enjoy as smooth an entry to Indonesia as the eccentric billionaire may have hoped for.

The country’s Ministry of Communication and Information Technology has said Starlink will have to
partner
 with domestic telecom operators to provide services in the archipelago.

To go far, go together:
 Usman Kansong, the director general of information and public communication at the ministry, told
Bisnis
 that according to local regulations, foreign telecom firms cannot directly serve customers in Indonesia. The likes of HBO and CNN have deals with domestic operators to offer their services in the country.

Foreign threat:
 Local players have been concerned that Musk’s company could disrupt Indonesia’s telco industry and create an imbalanced playing field.

Price points:
 Starlink’s services come at a price of approximately US$200 per month. Indonesian Health Minister Budi Gunadi Sadikin wants to cut that price to around US$50 per month as part of a plan to provide some 3,000 community health centers with better internet connectivity.

See also:
Malaysia, Indonesia overhyped Elon Musk’s Tesla, Starlink

In partnership with

In pursuit of a sustainable and equitable future

As Southeast Asia’s tech ecosystem matures, it’s crucial that it continues to innovate responsibly and sustainably, especially with social and environmental challenges ramping up. Whether you’re a growing startup, a government agency, or a big tech corporation, everyone has a role to play in ensuring that tech is used for good.

This question of “tech for good” was one of the many topics discussed at IMDA’s ATxSummit in June 2023. Panelists dove deep into the question of sustainable digital development, highlighting areas such as the value of private-public sector partnerships, the need for more education efforts, and the role of emerging technologies in sustainability.

The summit also explored many other topics related to tech, such as generative AI. Keep an eye out for next year’s event by following ATxSummit
on LinkedIn
.

Quick bytes

1⃣
Fast finance funding

MFast, a Vietnam-based fintech firm, has
closed
 its US$6 million series A funding round led by Wavemaker Partners. The company helps connect rural customers with reputable financial institutions, helping break their reliance on unsafe deals made on the gray and black markets to get loans.

2⃣
Singapore foray for Fore Coffee

The Indonesia-based coffee chain plans to
open
 at least one branch in Singapore by the fourth quarter of this year. As of August, Fore Coffee has 114 branches in Indonesia and aims to increase that number to 170 by November.

3⃣
Fully charged

Charged Asia, an electric-vehicle (EV) manufacturer from Singapore, has
secured
 US$40 million in investment from Indonesian coal producer Geo Energy Resources. The EV firm offers e-bike rental services as well as direct sales of its bikes and a rent-to-own model.

4⃣
Markato goes to market

Some former Deliveroo and Uber executives have
launched
 Markato, an online wholesale marketplace for independent retailers and buyers. The firm, which will begin operations in Hong Kong, raised a US$5 million seed round in the second quarter of this year from investors like Lightspeed.


Ex-Fave boss Joel Neoh, Pickup Coffee backers invest in Malaysian coffee upstart

Photo credit: Koppiku

Kuala Lumpur-based
Koppiku
 is the newest Malaysian coffee chain and it boasts a roster of prominent angel investors.

Koppiku (which means “my coffee” in Malay) will be launching its maiden store in the upscale Kuala Lumpur suburb of Mont Kiara on September 1. The firm’s major shareholder is Malaysian entrepreneur Rajiv Bhanot, according to company filings.

Bhanot tells
Tech in Asia
 that Koppiku initially plans to expand through company-operated stores as opposed to conventional franchising.

The firm will be pricing its beverages between 5 ringgit (US$1.07) and 9.90 ringgit (US$2.13), excluding substitutions and add-ons, First Move co-founder Audra Pakalnyte tells
Tech in Asia
. First Move, an early-stage fund founded by former Fave executives Joel Neoh and Pakalnyte, is among Koppiku’s pre-seed investors.

This effectively puts the upstart in the same group as other coffee chains making inroads in the country, such as local players ZUS Coffee and Gigi Coffee as well as Indonesia’s Kopi Kenangan.

Koppiku’s other Malaysian investors include Bhanot’s younger brother, Sachin, who heads Prosus Ventures’ Southeast Asian arm; AC Ventures managing partner Hann Yeoh; RHL Ventures co-founder Raja Hamzah Abidin; and Singapore-based VC firm Antifragile Ventures, which is headed by Angelo Lee, the co-founder of Philippines-based grocery platform SariSuki.

Two of Koppiku’s angel investors, Yeoh and Antifragile Ventures, are also backers of Philippine coffee chain Pickup Coffee.

Pakalnyte tells
Tech in Asia
 that First Move invested in Koppiku following the results of a closed-group consumer survey that showed “promising acceptance” of new coffee-chain players entering the Malaysian market.

She added that Koppiku plans to open more outlets throughout the Klang Valley – encompassing Kuala Lumpur and Selangor – later this year but didn’t disclose the targeted number of stores.

See more:
Malaysia’s coffee scene heats up as foreign players take on local firms

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.64 ringgit.


Malaysia’s coffee scene heats up as foreign players take on local firms

A war is brewing in Malaysia. It’s one that involves coffee and the craze is pitting foreign brands against homegrown firms.

First came American coffee chains Starbucks and The Coffee Bean and Tea Leaf (CBTL). But tech-enabled homegrown players started cropping up to tackle Malaysia’s growing middle class by offering premium coffee at a cheaper price.

As these upstarts mushroomed, they caught the attention of foreign players such as Kopi Kenangan, which decided to make Malaysia their port of call for overseas expansion. And looming over all these is the specter of Chinese players like Luckin’ Coffee, which has already set up shop in Singapore.

ZUS Coffee’s first outlet in Binjai / Photo credit: ZUS Coffee

Malaysians love their coffee. Total consumption of the caffeinated beverage grew from 625,000 bags – each weighing 60kg – to 800,000 in 2022,
according
 to market insights provider Statista.

While this figure pales in comparison to that of neighbors like
Thailand
 and
Indonesia
, Malaysia remains hot on the map of coffee companies.

But is there room enough for everyone? “No,” equity analysts covering the food and beverage sector as well as investors backing some of these entities tell
Tech in Asia
.

They cite two reasons. Firstly, Malaysia may have a growing middle class, but the country’s population is relatively small compared to neighbors Indonesia, Thailand, and the Philippines.

Secondly, Malaysia isn’t insulated from externalities such as higher import costs brought about by a weaker ringgit and inflation back home, leading to coffee companies targeting the same group of coffee drinkers.

Luckin’ charm

To understand Malaysia’s premium coffee scene, one needs to dial back to circa 1997, when coffee chains CBTL as well as Starbucks opened their maiden stores in Kuala Lumpur.

The “sell” then was to target the country’s upper-middle class, says a coffee industry insider based in the capital.

To be sure, the country has always had a coffee culture (think Chinese coffee shops). Malaysia also grows its own plants, mainly the liberica variety, but remains a net importer of coffee beans to meet demand.

But the craze for premium coffee truly took off when CBTL and Starbucks landed on Malaysian shores, the insider says.

Between the two, Starbucks stole the limelight because it’s backed by the Berjaya Group, a well-connected family-run conglomerate with a number of listed entities on Bursa Malaysia, the country’s stock exchange.

CBTL only made a comeback recently after a change of hands in ownership, following an acquisition by the Philippines’ Jollibee Foods Corporation in 2019. In May, CBTL
opened
 its 150th store in Malaysia.

Starbucks is the leading coffee chain by store count. / Photo credit: Starbucks Malaysia

In the early 2000s and right through the decade, hipster cafes and specialty coffee houses began dotting not only the capital but other urban states such as Penang.

The draw here is not only the desserts and Instagram-worthy pictures, the insider says, but the specialty beans available for coffee connoisseurs. Some Korean coffee chains such as Coffea Coffee started making their forays into Malaysia as well.

But things really took a different turn from 2017 onward with Chinese-based Luckin’ Coffee. While it has yet to open a store in Malaysia, Luckin’ inspired a class of entrepreneurs to mimic its fast-moving business model.

There were some early failures, says in the insider. But the first tech-enabled upstart to go to market was ZUS Coffee, founded by a group serial entrepreneurs, such as Ian Chua, who exited Hermo, the ecommerce platform they started.

ZUS Coffee established its first store in 2019 in the upper-middle class Binjai suburb of Kuala Lumpur, but it quickly scaled to not only open outlets in major parts of the Klang Valley, but also outside the capital, aiming for the country’s Tier 2 cities and newer townships.

Aside from moving quickly, what gave ZUS Coffee the edge was that it targeted a group of drinkers just below the Starbucks band, the insider says, adding that ZUS Coffee also expanded quickly in states generally ignored by larger brands.

For instance, it opened three outlets between 2021 and 2022 in Perlis, Malaysia’s smallest state that borders Thailand, while Starbucks
opened
 its maiden and only outlet in the state last year.

ZUS Coffee is also profitable, posting an after-tax profit of 3.8 million ringgit (US$816,632) on the back of 86.9 million ringgit (US$18.7 million) in revenue last year, according to the coffee firm’s company filings.

Enter: competition

As ZUS gained traction, other local upstarts began mushrooming across town, such as Gigi Coffee and HWC. Both companies are run by founders who hail from family conglomerates.

Gigi
has
 121 outlets, while HWC
has
 33.

Both, just like ZUS, have ventured outside the Kuala Lumpur bubble. Gigi has also upped its game by stepping into the restaurant business with its American diner concept.

Among these three, ZUS remains in the lead with 270 outlets nationwide. Recently, Filipino billionaire Frank Lao
took up
 a 35% stake in the company, where part of the investments are geared towards expansion in the Philippines.

But all three local coffee companies have been making bullish statements on store growth. And more are jumping on the bandwagon. Former Fave executives Joel Neoh and Audra Pakalnyte have invested in a new tech-enabled coffee company called Koppiku through their early-stage fund, First Move. Koppiku’s maiden store opens on September 1 in the upscale suburb of Mont Kiara.

Foreign players want in too. Japanese conglomerate Marubeni Corporation plans to introduce the Tim Hortons coffee chain in Malaysia this year.

Indonesia’s Kopi Kenangan made Malaysia its first overseas expansion destination and is targeting to open up 50 stores by the end of this year. It’s an ambitious one as at the time of writing, Kopi Kenangan only has
13 outlets
 in Malaysia, all of which are in Kuala Lumpur and nearby Selangor.

But equity analysts mentioned earlier in the article tell
Tech in Asia
 that the lines separating these coffee companies are blurring.

Initially, Starbucks catered to the upper-middle class. These are urban folk, mostly with white-collar jobs and strong spending power.

But Starbucks has been moving into the middle and lower-middle income space, the analysts say, citing the franchise’s Americano beverages, priced at 5 ringgit (US$1.08) per cup – the same range offered by ZUS, Gigi, and others.

Photo credit: Starbucks Malaysia

They also flag that Starbucks has been expanding into newer townships and cities outside Kuala Lumpur – once thought to be the domain of these tech-enabled coffee upstarts.

The coffee chain isn’t slowing down. It has 393 stores and that’s an addition of 14 stores from the previous quarter,
according to
 a note published on August 15 by Maybank Investment Bank analyst Jade Tam.

Hunting for value

Even with Starbucks’ increasing presence in Malaysia, Tam wrote that Berjaya Food wasn’t able to save on raw material cost for its Starbucks stores due to unfavorable currency exchange rates despite lower global coffee bean prices.

She noted that Berjaya Food recently posted weaker topline and bottomline growth for the fourth quarter of this year – which ended June 30 – primarily due a “higher base comparison” from Q4 2022’s pent-up demand and margin compression from high raw material costs.

Lower margins are also being priced in this year and next, according to three Malaysia-based coffee chain owners
Tech in Asia
 spoke to.

So where is the value and is it all about coffee? Two Kuala Lumpur-based investors, who have put money in a number of these tech-enabled upstarts, say that the business model isn’t so much selling quality coffee but more about efficient retail distribution.

The tech aspect of the business is merely a “value add,” they say.

Gigi Coffee’s maiden diner at The Curve shopping mall in Petaling Jaya / Photo Credit: The Curve’s Facebook

They add that two factors make or break operating a coffee chain like ZUS or Gigi: the quantity of beans each purchases and how many coffee cups one can clear per retail outlet.

Coffee beans, while not being a fixed cost, are sizable operational capital and they need to be cleared by a certain date. This is why some tech-enabled chains – such as Indonesia’s Fore – own roasters, enabling the firms to hedge against low sales in their respective outlets.

But the main pitch to invest in such businesses, the duo say, is cost recovery. Based on their experience in running a standalone coffeehouse selling artisanal beans, they expect a two- to three-year timeline to recover investments. The tech-enabled ones pitched a quicker timeline, which was less than a year.

Also, retail businesses with a sizeable presence remain a “sexy” investment for institutional investors, according to analysts
Tech in Asia
 spoke to. They cite the likes of Kuala Lumpur-based private equity firm Creador, which is among
the three largest investors in its category
 in the country.

Newswire
Bloomberg
 recently
reported
 that Creador plans to list three of its investments on the Bursa Malaysia: budget retailer Eco-Shop, bubble tea chain Tealive, and pet food maker Pet World International.

But all of the Malaysian sources agree that things may change should Chinese brands such as Luckin’ and Cotti enter the market. While Malaysian coffee chains have scaled, they can never match the speed of the Chinese firms, one investor warns.

Despite being mired in an accounting scandal, Luckin’ staged a comeback, even
owning more outlets
 than Starbucks in mainland China. Luckin’, as well as Cotti, deploy aggressive marketing tactics, offer generous discounts on drinks, and keep prices of beverages low. Also, Cotti
reportedly
 opened 1,300 stores in five months.

That ability to pivot and scale quickly is something Malaysian coffee companies can’t pull off yet, the sources say.

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.65 ringgit.


Malaysia, Indonesia overhyped Elon Musk’s Tesla, Starlink

Dan Lain-Lain
 (Malay for “and others”) is a weekly column by Tech in Asia journalist Emmanuel Samarathisa that dissects the goings-on in the Malaysia tech scene but with a heavy mix of current affairs, policy, and politics. Click
here
 to read past articles.

We have seen over the past few weeks the extent to which Malaysia and Indonesia have gone to lure Elon Musk and his billions.

Malaysian Prime Minister Anwar Ibrahim (right) in talks with Tesla and SpaceX founder Elon Musk during a July 14 virtual meeting / Photo credit: Anwar Ibrahim’s Twitter account

For instance, Malaysian Prime Minister Anwar Ibrahim had a virtual meeting with Musk on July 14, claiming that the billionaire would consider investing in the country. But the deal turned out to be the setting up of a Tesla sales and services office in Kuala Lumpur and the licensing approval of Space X’s Starlink in Malaysia.

This came at the cost of rare exemptions and concessions. Ibrahim still hopes Musk himself will join him in opening Tesla’s Malaysia office in September.

Not wanting to be outdone, Indonesia’s Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan
said
 in an August 14 Instagram post that the country will be signing two deals with Musk soon. These involve the construction of a lithium battery factory and the approval of Starlink for rural areas.

Pandjaitan claims the business magnate will be visiting the country in September or October.

But the swooning over Musk is too much.

Consider Tesla. In Malaysia, the
cheapest
 model, the Tesla Model Y Standard Range RWD, is 199,000 ringgit (US$42,858). The long range and performance versions of the vehicle retail for 246,000 ringgit (US$52,962) and 288,000 ringgit (US$62,004), respectively.

Want a blue-colored one? That’ll cost you too — 5,000 ringgit extra (US$1,076) for black, silver, or blue paint. There are other add-ons, from interior color to full self-driving mode, that range from US$2,153 to US$6,890.

If Malaysia was a high-income nation, then this wouldn’t be a problem. But it isn’t. Economic Affairs Minister Rafizi Ramli
believes
 that Malaysia could surpass the high-income threshold by 2026 if the country maintains 4% in annual growth. Indonesia is
expecting
 to breach that threshold by 2045.

Clearly, the Tesla price tag is out for many middle-income earners. This is where Chinese EV makers, which typically provide cheaper options, take the stage.

BYD, for example, is making inroads in Malaysia. Distributed by government-linked Sime Darby, BYD has two models that are currently sold in the country.

The first is the Atto 3, which has been available since December and is priced between 149,800 ringgit (US$32,256) and 167,800 ringgit (US$36,137), depending on the model.

BYD Dolphin / Photo credit: Sime Darby Motors

The second and more recent launch is the Dolphin. The standard version goes for 100,530 ringgit (US$21,649) while the premium range is 125,530 ringgit (US$27,033), significantly cheaper than a Tesla.

Southeast Asia, though home to several emerging countries, is a big EV market. According to a
study
 by research firm Counterpoint Research, Chinese brands sold 75% of their Q1 EV stock in the region.

Nickel-rich Indonesia, in particular, is a target for Chinese EV makers
BYD
,
Hozon Auto
, and
Great Wall Motor
.

To be sure, Indonesia and Malaysia want to go big with EV; it’s their national policy. Indonesia wants to
build out
 an EV industry that can be an alternative to China’s, while Malaysia is
looking to national carmaker Proton
 to introduce vehicles below the 100,000 ringgit price tag. Proton is 49% owned by Chinese auto company Geely.

In both countries, the main pain point is price. The challenge: attracting low- to middle-income earners. To do this, the Indonesian government
slashed
 tax on EVs from 11% to 1% in April. It also
promised
 subsidies for locally made EVs.

That said, 85% of Indonesians still depend on two-wheelers,
according
 to the country’s statistics department. So, Tesla is nowhere near tackling this market.

Out of reach

What about Space X’s Starlink? Again, both Malaysia and Indonesia have gone public to state that the satellite internet service will be a game changer, especially for rural populations.

Malaysians have the option of choosing one of two Starlink kits: standard or high-performance. / Photo credit: Starlink

But the upfront expenses will hit pockets hard. In Malaysia, the subscription for the service costs 220 ringgit (US$47.40) per month with no contract. Great. But then you’ll need to fork out 2,300 ringgit (US$495) for the standard kit consisting of a Starlink dish, a base, a Wi-Fi router, and cables.

The standard package is designed for casual users, but those wanting to use Starlink for business and enterprise applications will need to opt for the high-performance kit going for 11,613 ringgit (US$2,500).

For that hefty price, Starlink claims the kit is souped up, being able to withstand high temperatures and extreme environments and coming with a spare power supply.

To be sure, it doesn’t mean that if someone lives in a rural part of a country that they are automatically less well-off. Let’s get that straight.

But the average monthly household income in rural Malaysian states, such as Kelantan, is 3,614 ringgit (US$772). Even Sarawak, the country’s largest state with a huge rural population, nets a median household income of 4,978 ringgit (US$1,060), according to the
latest government data
.

And for context, home broadband plans under Telekom Malaysia, which has the largest fiber network in the country, are comparatively cheaper. Base plans range from 89 ringgit (US$19.20) per month for 30 mbps to 129 ringgit (US$27.80) per month for 300 mbps.

Equipment is usually bundled together with the subscription and, yes, there’s a lock-in period where you’ll have to subscribe to a provider’s service for at least two years before you terminate your plan. Ending it earlier incurs a penalty.

You might cry foul, and indeed there might be a case here, but for the average man or woman working the streets of Kedah and Kelantan, cheap broadband is more than welcomed. This effectively puts Starlink out of reach for its intended audience.

See more:
Making sense of Tesla’s Indonesia investment

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.64 ringgit


Malaysian startup secures Antler funding to address networking pain points

Image credit: Mole

The business world has long been a
push and pull
 between extroverts and introverts. Nowhere is that more apparent than in networking sessions.

This has led
Mole
, a Malaysian startup building an all-in-one networking platform, to organize an event series dubbed “I Hate Networking.”

“We understand that networking can be uncomfortable for anyone, and especially for those who are introverted,” said co-founder and COO
Melly Ling
. “Mole’s vision is to create a world where professionals network for real connections that go beyond business transactions.”

But the event series is just the tip of the iceberg. Mole is also creating a digital business card powered by near-field communication and QR codes, with the aim of making networking more productive and produce less paper waste. Doing so would let the company take a stab at the traditional business card market, which Mole co-founder and CEO
Au Soung Rong
 said is worth US$1 billion.

The company
has recently secured US$110,000 in pre-seed funding from early-stage VC firm Antler.

Funding details

Funding amount:
 $110,000

Lead investors:
 Antler

Stage:
 Early Stage

Source

Founded in June 2022, Mole was previously bootstrapped.
This investment will fund the development of Mole’s digital business card platform and the launch of a networking app tailored for SMEs in Malaysia.

The company plans to expand the business card platform to other parts of Southeast Asia next year.
It also offers a variety of features to help professionals connect and network such as a messaging system, a contact directory, and event listings

“We believe that Mole has the potential to reshape the networking landscape and create meaningful change in how professionals connect and collaborate,” said Erik Jonsson, partner at Antler.

See also:
How tech destroyed Astro’s dominance in Malaysian pay TV

More details

Mole
→

The company was founded in 2022 by
Soung Rong A.
 and
Melly Ling
.

Stage

Amount (US$)

Investors

Early Stage

$110k

Antler

Total

$110k


Grab’s financial health in 9 charts

Southeast Asian super app Grab just announced its second quarter 2023 results. Below are nine charts – updated by quarter – that track the company’s performance.


Gobi leads Malaysian recommerce startup’s series A round

Photo credit: CompAsia

CompAsia
, a Malaysia-based recommerce platform, has raised series A funding in a round led by Gobi Partners. The amount is undisclosed.

The company runs a one-stop platform for customers to trade in or purchase secondhand electronic devices. It plans to use the funds to expand across “various touchpoints” and bolster its penetration in its newer markets.

Along with its native Malaysia, it also operates in Singapore, Thailand, the Philippines, and Indonesia.

“We have recently partnered with a number of major telcos around the region to assist in running their buyback and trade-in programs,” said
Julius Lim
, CompAsia’s founder and CEO, in a statement.

In addition, the company will be “rolling out our device financing and device care programs across multiple major retailers.”

Aside from its online platform, CompAsia recently launched a flagship store at the Sunway Pyramid shopping mall in Petaling Jaya. The startup plans to open more branches across Klang Valley by the end of the year.

Founded in 2016, CompAsia said it has sourced and transacted over 2.1 million secondhand mobile devices from 2019 to 2022.

See also:
Niche recommerce takes the fight to Carousell in SEA


US, China power up rivalry in EVs as trade war escalates

Welcome to On the Rise! Delivered every Tuesday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in emerging tech. If you’re not a subscriber, get access by
registering here
.

Hello there!

At home, I’m known for my love of weird movies.

My particular niche is ‘80s cult films like
Repo Man
,
The Forbidden Zone
, and
Near Dark
.

Why do I like them so much? Because knowing the movie isn’t supposed to make much sense allows me to turn off my brain, sit back, and enjoy the on-screen weirdness without – and this is the important part – having to write about it. It’s pretty much the opposite of my work.

This month, I tried to make sense of a lot of things as part of my job. I spent a couple days writing about why the US ban on high-end semiconductors to China was going to
cause World War III
.

My colleague Shadine is also writing about the US-China tensions in this week’s Big Story, but thankfully she’ll be writing about competition involving electric vehicles instead of war.

But for our second Big Story this week, I jump right back into chaos – I wrote about how generative AI is transforming call centers. The news isn’t bad, but there are certainly a few bits there that people won’t be happy about.

For one last bit of drama, I’ll also be taking you through the drama at the Hodlnaut bankruptcy in Token Issue. It looks like the crypto platform finally found a white knight to ride to their rescue.

Spoiler alert: The “knight” is actually the founders of Three Arrows Capital (3AC), who are still on the wanted list in Singapore – Hodlnaut’s home market.

After the month I had, it’s definitely movie time.

—
Scott

THE BIG STORIES

1⃣
Mapping the US-China rivalry in global EV race

Image credit: Made by Tech in Asia using Midjourney

BYD recently overtook Tesla to become the top-selling electric vehicle firm, and China has been growing its dominance over the US in the EV race.

2⃣
This AI firm’s bots can speak Singlish, use WhatsApp to collect loan repayments

Image credit: Timmy Loen

Wiz.ai set out to make bots that could talk to people in their own accents. The resulting software has the potential to change the call center industry.

TOKEN ISSUE

Who’s going to invest in a platform run by Hodlnaut and 3AC?

Image credit: Timmy Loen

Last week,
the end of Hodlnaut
 seemed imminent, but it didn’t happen.

To refresh your memory, Hodlnaut is the Singapore-based crypto platform that got caught with its hands in the
Anchor Protocol cookie jar
. The company
lied
 about its losses, which became clear when it
filed for creditor protection
.

Hodlnaut has been under interim judicial management (IJM) since the end of August 2022.

The case has been contentious, with claims of
impropriety
 leveled against
both sides
. But when a judge scheduled a hearing for August 7 to wind down the company, the end seemed in sight: Hodlnaut would be liquidated.

But just last week, a white knight came charging in and made an offer to Hodlnaut directors
Simon Lee
 and
Zhu Juntao
. The digital asset exchange would rescue Hodlnaut by
buying a 75% stake
.

BUZZ!

Sorry, that’s not allowed when a company is under IJM.

The IJM is the only one in charge, not Lee and Zhu. The managers handling the Hodlnaut case,
Angela Ee
 and
Aaron Lee
, weren’t happy with the attempt to strike a deal behind their backs.

Worse, the judge wasn’t happy. Justice Aedit Abdullah said he did not like behind-the-scenes “manoeuvring” and warned that as court officers, the IJMs should not be ignored, according to a recap of the hearing issued by Hodlnaut.

But despite the founders’ blunder, Ee and Lee are
reviewing
 Lee and Zhu’s dealings with Opnx, according to an announcement on August 14. The two are supposed to report back to the judge at the next hearing, but no date has been set.

Maybe you’re wondering, who’s behind Opnx, Hodlnaut’s white knight? Things get weird when you lift the veil and find Kyle Davies and Su Zhu, the founders of an even bigger Singaporean crypto disaster:
Three Arrows Capital
 (3AC).

Davies and Zhu are still
wanted
 in the US and in Singapore for their involvement in 3AC. Both have moved to Dubai, where they
started their new firm
 called – you guessed it – Opnx.

But some things never change. In May,
Dubai regulators
 formerly reprimanded Davies and Zhu for operating an unregulated exchange.

So the question for Hodlnaut’s IJMs and Justice Abdullah is: Should they let a couple of crypto bros, already under investigation for billions in losses, bail out another crypto firm that has admitted to lying about how it handled assets?

The answer may seem obvious, but there are other complications, such as the an ongoing
legal fight
 between Hodlnaut and Samtrade Custodian Limited.

Samtrade, which is also being liquidated, had over US$127 million in stablecoins in Hodlnaut when it filed for creditor protection. But Hodlnaut believed those funds should be included in its own assets and used to pay its creditors.

If Justice Abdullah rejects Opnx’s offer to rescue Hodlnaut and Samtrade wins the right to those stablecoins, there will be virtually nothing left of Hodlnaut to liquidate. But if the judge allows it, he could be approving the creation of a platform run by some of the most infamous names in crypto.

—
Scott

FYI

1⃣
Rejection, not dejection: learning from failed VC pitches
:
 Founders needn’t despair when their pitches get turned down by VCs. Take each meeting as a learning opportunity instead.

2⃣
The good, the bad, and the ugly of Malaysia’s govtech push
:
 The country’s latest tech drive may sound enticing, but startups should only go in with eyes wide open.

Image credit: Timmy Loen

3⃣
This AI startup said no to VCs after ‘perplexing’ experiences with them
:
 Known as a “Swiss Army knife” for hate speech and other problematic content, Singapore-based Tisane Labs bootstrapped its way to profitability.

NEWS YOU SHOULD KNOW

Also check out Tech in Asia’s coverage of the emerging tech scene
here

1⃣
Layoffs are not noice
:
 Indonesian audio-streaming platform Noice has laid off some of its staff amid a “strategic organizational restructuring.” The company has offered severance packages and career transition assistance for retrenched employees.

2⃣
Tencent doubles down on AI
:
 The Chinese tech titan’s future focus is AI, company president Martin Lau said during its latest earnings call. He sees AI’s potential going beyond chatbots similar to OpenAI’s ChatGPT.

3⃣
Investing in good health
:
 HealthXCapital, an early-stage investment platform based in Singapore, has merged with Jungle Ventures. The deal will improve Jungle Ventures’ capacity to invest in Asia’s healthcare sector and give it access to HXC’s network and resources.

4⃣
Beep beep, funding complete
:
 IoT firm Beep has raised an undisclosed seed round led by GGV Capital and investor Wing Vasiksiri. The Singapore-based startup is also launching VoltNet, an electric vehicle roaming network.

5⃣
Ether’s ETF Path
:
 The US Securities and Exchange Commission is poised to approve the first ETFs based on Ether futures. The move could allow various firms including Volatility Shares and Bitwise to offer such products.

That’s it for this edition – we hope you liked it! Do also check out previous issues of the newsletter
here.

See you next week!


The good, the bad, and the ugly of Malaysia’s govtech push

Dan Lain-Lain
 (Malay for “and others”) is a weekly column by Tech in Asia journalist Emmanuel Samarathisa that dissects the goings-on in the Malaysia tech scene but with a heavy mix of current affairs, policy, and politics. Click
here
 to read past articles
.

Malaysia wants to go big on govtech. Don’t take my word for it. Even Catcha Digital founder Patrick Grove wants in.

Putrajaya, the administrative capital of Malaysia, is embarking on a massive digitalization project of public services. / Photo credit: Wikicommons

But before we dive into this, we need a definition: Govtech refers to public sector modernization. That’s still vague, but in essence, it refers to the digitalization of government services to help them better serve the public.

The government under Prime Minister Anwar Ibrahim has given some emphasis on this aspect of the tech space in the past few months. In May, Anwar
said
 that his administration will establish a dedicated center to focus on, among others, govtech.

One component of this push is the consolidation of information technology systems.

Economic Affairs Minister Rafizi Ramli
said
 that there are 297 government databases existing independently, and maintaining all of them costs 7 billion ringgit (US$1.5 billion) a year.

He’s been meeting with investors and tech players to discuss the possibility of creating a “single window.”

To put things in perspective, Malaysia doesn’t have its own version of Gov.uk, the UK’s centralized hub for all government services, and that’s among the things the Malaysian government is working on.

Patrick Grove, co-founder of Catcha Group / Photo credit: Patrick Grove

Industry players have certainly taken the bait: Catcha Digital founder Grove
announced
 in June that he’s setting up a business arm called i-Gov, where he’ll be looking to acquire current govtech concessionaires to “enhance their capabilities and services.”

But in Malaysia, like elsewhere, the govtech space isn’t straightforward. Here are three important things to consider:

The ugly

Government is political, so any kind of govtech venture will depend on political stability. Malaysia has seen some turmoil, with three regime changes between 2018 to 2022.

Instability presumably ended when the country had its general election last year. Just last week, it held state elections, too, and the results were as expected, with the dominant coalition
retaining
 key states.

These point to some semblance of stability with Anwar’s government. That said, stability doesn’t guarantee that a tech project can smoothly proceed, especially one that has a long timeline.

I’ll take a recent example: the cancellation of the National Integrated Immigration System (NIIS) project. The NIIS is a crucial undertaking because it seeks to consolidate the fragmented migration services into one single platform. Migration in Malaysia not only means tourists, but also foreign workers and national security.

But the NIIS has been dogged with controversy since it was mooted in 2018, and it has been
canceled twice
. During its first iteration, ICT service provider Prestariang (now known as AwanBiru Technology) was awarded the tender via direct negotiations.

But after Mahathir Mohamad won the 2018 elections, Prestariang lost the contract after a review by the new government. The Bursa Malaysia-listed company has been seeking damages of up to 722 million ringgit (US$156 million) – and the case is
ongoing
.

Mahathir’s government will call for an open tender and Iris, another Bursa-listed IT services provider, won the contract. But Iris’ abilities
came under scrutiny
 and just last Monday, it also lost the contract. Why? This time, Anwar’s government canceled the contract. Iris is mulling legal action.

It’s worth noting that a number of startups and deeptech firms were engaged by these contractors to help come up with solutions for specific components of the NIIS. So when the main contractor goes, so do its subcontractors.

The bad

What follows politics is policies. Between 2020 and 2021, Anwar’s predecessors made two major policy reversals that didn’t end well.

First, Malaysia
missed out
 on a massive internet undersea cable project led by Facebook because of a flip-flop over cable repair and maintenance.

Second, industry players were
up in arms
 because the government decided to regulate data centers and cloud services.

I have
previously covered
 how out of touch Malaysian tech agencies can be, and this remains true today.

Some of the issues plaguing the govtech sector come from state investments in startups. Founders will have to go through hoops and hurdles – bouncing from one ministry or agency to another – to not only secure funding but also deal with terms and conditions that may prohibit them from executing their projects.

One common clause, a founder tells me, is that a startup can only hire a skilled worker within a certain salary bracket, which is usually priced below what the market is offering.

This is common especially for R&D grants in tech, they say, and this puts startups in a bind, as they need talent but can’t pay for it due to restrictive clauses in an investment’s term sheets.

The good

There are silver linings, of course. Minister Rafizi has gone big on open data. The Department of Statistics Malaysia (DOSM), which falls under his purview, has been actively providing more granular information.

His ministry has also
launched an app
, made in partnership with a local IT firm, to check and compare grocery prices based on DOSM data.

Amazon Web Services will be investing US$5.4 billion in Malaysia. / Photo credit: Amazon

A number of data center players, such as Amazon, have
reiterated
 their commitment to setting up shop in Malaysia. Tech giants such as Tesla have also been showered with
extraordinary perks
 (a good and bad thing, but this is for another day).

There are some hints toward policy continuity, too. For example, Anwar’s government is
committed
 to turning Kuala Lumpur into a tech hub, which is an idea raised by his predecessor, Najib Razak.

This marks a shift from when new prime ministers would overhaul such policies and turn them into vanity projects of sorts. Ironically, Najib did that when picking Kuala Lumpur to be the tech hub, as his mentor-turned-nemesis Mahathir
favored Cyberjaya
.

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.62 ringgit.


How tech destroyed Astro’s dominance in Malaysian pay TV

Image credit: Timmy Loen

Astro is Malaysia’s “largest content creator.” That’s according to the group’s CEO, Euan Smith, in the firm’s July 28 bourse filing. What followed wasn’t the usual chest-thumping of higher sales or record-breaking profits but the announcement of a retrenchment.

Competition in an “increasingly borderless and digital world” is “relentless,” Smith said at the time, “especially in a challenging economic landscape.” He added that the
layoffs were purely voluntary
.

Astro didn’t respond to requests from
Tech in Asia
 on the specifics of the exercise.

Did the move come as a surprise? Kuala Lumpur-based media analysts we spoke to say no. The media giant provides a wide range of content across different media and languages, including a 24/7 news channel. But competition has long been the “antithesis of Astro’s business model,” says one analyst – the company had a 20-year monopoly deal on satellite pay TV in Malaysia.

When its license to operate as a monopoly ended in 2017, Astro’s revenue stood at 5.6 billion ringgit (US$1.2 billion). By 2023, this had declined to 3.8 billion ringgit (US$831 million).

Cutting the cord

While Netflix and other streaming platforms can be blamed for the struggles of companies like Astro, the analyst says that consumers themselves began shifting their appetite for pay TV in 2016.

Viewers became “cord-cutters,” the previous analyst says, referring to the term used for consumers who canceled multichannel pay TV services for content streamed on the internet, which is either significantly cheaper or free.

Netflix exploded in 2016 when the company declared that it would reach every market by the end of that year. When it made that announcement on January 11, Astro’s shares fell 7.2%.

This forced traditional media players, including the Malaysian company, to adapt. Astro’s management in June this year
told
 Malaysian equity analysts that it had pivoted to video-on-demand services with the launch of Sooka. The streaming platform targets younger viewers and cord-nevers, referring to a group of viewers that have never used commercial cable or satellite TV.

Astro claims that two-thirds of new Sooka customers are under the age of 40.

The company also made two significant changes to its business model. First, it decided to be a so-called super aggregator, offering Netflix, Disney+, and other services to its viewers. It hoped that by hiking the overall price of its bundled services, it could stay afloat.

The logic was that while viewers could access these streaming platforms easily – and even if they’d be paying more to Astro – the cost to subscribe to all of these services would be higher than Astro’s bundle price.

Second, the firm is offering broadband packages tied with its TV packs. To execute this, Astro has partnered with another dominant player: telecommunications firm Telekom Malaysia. This gives Astro access to more than 6 million homes nationwide, according to estimates from analysts we spoke to.

The media giant also collaborated with internet provider Celcom Timur to supply high-speed broadband internet to homes in Sabah.

Economic benefits aside, the partnership helps connect underserved areas, says one of the analysts.

But it may not translate to substantial growth, he cautions. “This is because margins are expected to be low due to competition.”

Astro’s latest quarterly filings (Q1 2024) show a drop in subscription and advertising revenue, dragging down proceeds from its TV segment – which accounts for 91% of total revenue – by 6%. Gains from its radio service, however, remained strong.

Meanwhile, net profit dropped year on year to 15.9 million ringgit (US$3.5 million) from 100 million ringgit (US$21.8 million) on the back of higher content, broadband, and staff-related expenses as well as unfavorable foreign exchange from the lease of its transponders.

Astro added that the drop in quarterly revenue to 891.1 million ringgit (US$194.8 million) – from 962.1 million ringgit (US$210.3 million) – was due to a decrease in subscription revenue, advertising revenue, and merchandise sales.

The analysts we spoke to aren’t the only ones skeptical about Astro’s media pivot.

For example, in his
June 20 note
, RHB Research’s Jeffrey Tan acknowledged that the media company has tried to push back against disruption by joining the streaming bandwagon. Tan’s argument is backed by the fact that Astro’s average revenue per user has been hovering between the US$22.3 and US$21.8 band.

But he also flagged that “structural issues” such as cord-cutting and “heightened inflationary pressures” continue to make it difficult for the group to stem the subscription revenue decline. Astro, according to its annual reports, has also been seeing a steady decline in share of TV viewership. In 2017, it commanded 77% of the national pie. Today, it’s down to 72%.

Troubles, ahoy

No discussion of Astro’s woes would be complete without talk of piracy and illegal streaming.

To understand this, one needs to dial back the clock to 1996 when billionaire T. Ananda Krishnan founded the company – which he still controls via his investment vehicle Usaha Tegas. With his wealth and influence, he was able to obtain and maintain a monopoly license on satellite TV services for two decades.

The tycoon was able to build Astro because he already had other telecommunications companies up and running, namely telco Maxis and satellite services firm Measat.

No other wealthy businessperson was able to match Krishnan in that respect, giving him an unobstructed runway. Certain Malaysian economists even
called
 Astro a natural monopoly simply because its dominance in the local market was due to an extremely high barrier to entry.

But there was one thing that the firm’s 20-year monopoly contract couldn’t control: the internet, which allowed users to bypass paying for Astro’s packages by downloading programs for free.

Malaysia has laws to combat piracy, but during the early days of the internet, that wasn’t enforced, an industry veteran who has worked with government-owned tech agencies tells
Tech in Asia
.

The reason for this was Malaysia’s policy of internet freedom, which was known as the
MSC Malaysia Bill of Guarantees
. Among its promises: “no censorship of the internet.”

The policy was rolled out under then prime minister Mahathir Mohamad to attract tech multinationals to set up shop in Malaysia, particularly in Cyberjaya, which was envisioned as the country’s Silicon Valley.

The bill gave Malaysians unfettered access to peer-to-peer file-sharing applications such as Napster and Limewire, and later on, BitTorrent.

While these platforms provided access to media illegally, enforcers, particularly the Malaysian Communications and Multimedia Commission (MCMC), didn’t crack down on households downloading music or TV shows from these applications, the veteran says.

The MSC bill of guarantees, he notes, isn’t law. This allows the government of the day to “adjust” the policy as it deems fit.

According to the industry veteran, MCMC today seems to have more bite – news portals and porn sites have been blocked in recent years. “But these, too, can be circumvented through the use of VPNs (virtual private networks).”

On its part, Astro has been
working
 with enforcers to track down individuals selling TV boxes preloaded with unauthorized content.

While there have been some headlines regarding this recently, such as the case of two individuals being
fined
 a total of 40,000 ringgit (US$8,717), the tech insider we spoke to believes it’ll be difficult to have a major clampdown. It’ll be “a lot of work,” as it involves cooperation from different stakeholders including consumers, the person believes.

Going private?

Ever since Astro lost its monopoly in 2017, media and analysts have raised the specter of possible privatization.

RHB’s Tan, in his
recent note
, opined that privatization from Krishnan’s Usaha Tegas could be a potential “catalyst” for the company. On March 10, business publication
The Edge

reported
 that Astro could be delisted, leading the stock to rally by 20%.

Billionaire T. Ananda Krishnan controls a number of telecommunications companies including Astro. / Photo credit: Wikimedia Commons

However, the media giant poured cold water on such speculation. Astro
said
 it didn’t receive any proposals for privatization.

Why these murmurs carry weight is due to two developments. First, Krishnan controls both Astro and Maxis. A merger could complement the two entities.

For example, Maxis’ mobile and home fiber plans could be bundled together with Astro’s TV offerings, which could then be streamed on mobile devices. But Astro has already set off on its own with regard to its mobile and broadband packages.

Second, Krishnan has been known to delist and relist his companies. Some of the firms he privatized include Measat and power and gaming firm Tanjong PLC. Both entities have yet to be relisted.

Astro, on the other hand, went private in 2010 but relisted two years later without its international business unit. It relisted at a price of 3 ringgit. Today, it’s worth less than 1 ringgit.

Krishnan’s investment vehicle, Usaha Tegas, didn’t respond to
Tech in Asia
’s request for comment.


Antler Malaysia appoints serial entrepreneur as associate partner

Antler Malaysia country head and associate partner Frank Kang / Photo credit: Antler

VC firm
Antler
 has appointed
Frank Kang
 as country head and associate partner for Malaysia. It looks to back over 30 startups across the country in the next three years.

Kang will be in charge of operations and investment strategy in Malaysia, according to a statement.

Before the appointment, Kang co-founded People2, a social networking service backed by SoftBank. He then went on to establish Twitter directory Koreantweeters and beauty ecommerce platform
Althea
.

Kang also served as a venture partner at Vynn Capital as well as COO and founding partner of
LivingSocial Malaysia
.

Antler has set up offices across 26 cities globally. Most recently, it announced that it launched a
US$60 million fund
 for the Middle East, North Africa, and Pakistan (MENAP).

The company also appointed
Dr. Jonathan Doerr
 and
Romain Assunção
 as MENAP partners. Its Riyadh cohort, which is launching in September, is looking to support over 60 founders.

Meanwhile, Antler Japan recently
closed its first deal
, backing local freelancing platform Sollective.

See also:
Exclusive: Antler, Iterative back Indonesian mental health app for Muslims


What’s going on with Malaysia and Elon Musk’s Starlink?

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Hello reader,

I’m going to be honest with you – I’m quite unhappy about the fact that Twitter, the platform I use to complain about my problems and look at pictures of my favorite K-pop idols, has been rebranded to “X.”

I miss the little blue bird and what it was before all this happened, and I’ve got some not-very-charitable things to say about Elon Musk, the man behind this move, as I’m sure many other people do.

But this newsletter isn’t about me lamenting the social media platform formerly known as Twitter. It’s about another Musk-owned company – namely Starlink, the satellite-internet unit of SpaceX – and what it’s doing in Malaysia.

My segues are getting better, aren’t they? Anyway, let’s get into this.

Today we look at:

Starlink in Malaysia

How GrabRentals is doing

Other newsy highlights such as our takeaways from Temu’s lawsuit against Shein and how much Singapore’s digibanks spent in their first few months of operations

Premium summary

Twinkle twinkle, not-so-little Starlink

Image credit: Timmy Loen

When a company applies for a license in Malaysia, the country’s laws require that the maximum ownership of a foreign entity in that licensee is 49% – unless granted an exemption. Starlink received this exemption from the communications and digital minister, one of only four companies to have gotten this privilege since 2005. Let’s find out more:

E is for exemptions:
 The decision to exempt Starlink from the foreign ownership requirement was made after assessing the “value and benefits” it provided to the country, the Malaysian Communications and Multimedia Commission told
Tech in Asia
. The agency added that this decision was made with other government ministries that had their own requirements.

Connecting Malaysia:
 Following the development, Starlink will begin providing satellite-internet services to educational institutions located in Malaysia’s rural areas. Communications and Digital Minister Fahmi Fadzil said that the approval of Starlink’s license applications is part of the government’s efforts to close gaps in internet access around the country.

Starlink for everyone:
 Beyond its collaboration with the Malaysian government, Starlink is also offering its services to the country’s consumers. Its broadband plan costs around US$48 a month, though users will also need to purchase a device that costs at least US$500.

Read more:
Malaysia grants Musk’s Starlink rare ownership exemption to operate in country

News spotlight

Let’s grab a rental and go

Image credit: Timmy Loen

Super app Grab has lots of business units so today let’s shine the spotlight on its private car rental arm GrabRentals, which appears to have done pretty well in
its latest financial year
.

Bringing in the cash:
 GrabRentals recorded US$89.8 million in revenue for FYE 2022, growing 17% year on year. It’s also an all-time high for the firm.

Growing and going:
 It also posted US$15 million in earnings before interest and taxes for the year, an increase of 73% from FYE 2021.

Welcome to the family:
 GrabRentals recently announced the acquisition of Trans-Cab, Singapore’s third-largest taxi operator, with the deal reportedly worth US$75 million.

See also:
Does combining Grab with asset-heavy Trans-cab make sense?

Tech in Asia’s Founders Meetup: India

We’re headed to Bangalore next! Seize your chance to be part of our exclusive founders-only networking event

With over 13,000 startups founded last year, India is abound with immense potential and growth opportunities. However, it is not without its challenges in fundraising and talent acquisition.

If you’re seeking solutions to your startup’s most pressing issues or if you can help others overcome their own roadblocks, our upcoming event is just for you!

Mark your calendar for August 25 and join us in the heart of Bangalore at Byg Brewski to connect, learn, and exchange ideas with fellow founders from the
Tech in Asia
 community. Why navigate the startup journey alone when you can collaborate with others and break through barriers together?

Tickets are now on sale at US$12.50 each, inclusive of light bites and one complimentary drink. Hurry, tickets are limited –
secure yours before they’re sold out
!

Special thanks to our official event partners – AWS, CleverTap, Cooley, Sinarmas Land, Singapore Global Network (SGN), Quest Ventures, and Purple Quarter – and our community partners – WeWork and Gobi Partners – for making this meetup possible.

Quick bytes

1⃣
Another one does a layoff

Indonesia-based Ayoconnect
has laid off
 10% of its local workforce after “carefully aligning objectives for 2023” to transition to “a leaner organizational structure.” According to its website, the fintech firm has over 200 employees across four countries.

2⃣
Endow me with money

Singapore-based wealthtech firm Endowus
recorded a 2.5x year-on-year increase
 in its 2022 revenue at US$6.1 million . However, it also reported higher losses, from US$13 million in 2021 to US$20 million in 2022.

3⃣
Teaming up

Indonesian digital bank Superbank
has partnered
 with local peer-to-peer lending firm Amartha to provide working capital loans to more than 1 million women microentrepreneurs on the latter’s platform. So far, Amartha has disbursed over US$800 million in loans to 1.6 million businesses, with most of these being women-led.

4⃣
Big spenders

Superbank isn’t the only digibank we have news for today. Singapore’s Trust Bank, GXS Bank, and MariBank
have all spent big
 in their first few months of operations.

Trust Bank logged some US$92.9 million in operating expenses last year, while the figure for GXS Bank was US$101.4 million. MariBank, which launched later than the previous two banks, incurred US$31.3 million in expenses for 2022.

5⃣
Temu tells all

The Chinese marketplace recently filed a lawsuit that accused Shein, one of its biggest rivals, of engaging in anti-competitive practices. Temu’s lawsuit revealed several details about Shein’s network and the ultra-fast fashion industry as a whole – here are
some of our takeaways
.

6⃣
Hello, license

HashKey Exchange, a Hong Kong-based crypto firm, has obtained licenses that enable it to offer retail and professional services in the city, making it
the first licensed exchange
 to do so. The company recently partnered with Standard Chartered to provide deposits and withdrawals in fiat currency.


Capital A partners with UnionDigital Bank for SEA expansion

Photo credit: AirAsia Super App

Malaysia-based
Capital A
 has announced a partnership with
UnionDigital Bank
, the digital bank unit of Philippines-based
Union Bank
.

The aim is to push the expansion of
BigPay
, Capital A’s fintech arm, in Southeast Asian markets including Malaysia, Singapore, Thailand, Indonesia, and the Philippines. This effort also involves Capital A’s two other subsidiaries: airline business
AirAsia
 and the
AirAsia Super App
.

As part of the deal, UnionDigital Bank will partner with BigPay to provide embedded finance within the super app’s travel category, which is the main booking channel for AirAsia flights in the Philippines.

The digibank will also handle flexible payment options for Capital A’s customers, including making “fly now, pay later” available on the super app.

See also:
Capital A’s financial health in 3 charts

The deal comes on the heels of the appointment of
Zubin Rada Krishnan
 as acting group CEO of BigPay.

In April, the firm said it has
1.3 million transacting and carded users
 and recently achieved US$224 million in gross transaction value on its international remittance service.

Tony Fernandes
, the CEO of Capital A,
reportedly
 confirmed that listing AirAsia Philippines on the local stock exchange is not currently part of his plans, potentially marking another delay in the fundraising plan that was initially conceived in 2015.


Jirnexu founders launch crypto fund manager Halogen Capital

The Halogen team / Photo credit: Halogen Capital

Hann Liew
 and
Lucas Ooi
, founders of Malaysian fintech firm Jirnexu, have announced their new venture:
Halogen Capital
, a fund manager focused on digital assets.

As shared on Liew’s
LinkedIn post
, the new company aims to make crypto investing mainstream in Malaysia. Crypto investors in the country have limited choices: They can either opt for unregulated offshore exchanges or go with onshore platforms focused on short-term trading instead of longer-term investing.

Halogen Capital’s goal is to “safely” open up crypto investing to individual and institutional investors.

Liew serves as the company’s CEO while Ooi acts as chief business officer.

Halogen Capital holds a full license from the Securities Commission of Malaysia, allowing it to manage cryptocurrencies, NFTs, and tokenized assets, among others. It offers a ringgit-denominated fixed income wholesale fund.

The company also has a Shariah-compliant fund for Bitcoin and plans to roll out a similar fund for Ethereum.

Liew wrote in the post that Halogen Capital wants to provide “access and professional management through familiar traditional structures such as mutual funds, managed portfolios, and hopefully ETFs soon.”

See also:
Pleasant surprise in Malaysia’s digibank race

The news comes just weeks after Liew and Ooi
left their leadership posts
 at Jirnexu, a startup that helps banks and insurance companies streamline their operations. They both remain shareholders and board members of Jirnexu.


Malaysia grants Musk’s Starlink rare ownership exemption to operate in country

Tesla and SpaceX founder Elon Musk and Malaysian Prime Minister Anwar Ibrahim (right) in talks during a July 14 virtual meeting / Photo credit: Anwar Ibrahim’s Twitter

Starlink, the satellite-internet unit of Elon Musk’s SpaceX, has received a rare ownership exemption to operate in Malaysia.

Tech in Asia
 understands that only four firms, including Starlink, have been accorded that privilege since 2005.

The satellite-internet company was awarded two licenses: the network facilities provider (NFP) individual license and the network service provider (NSP) individual license. Both run from July 17 this year to July 16, 2033.

NFPs refer to owners or providers of network infrastructure such as towers and satellite stations. NSPs, on the other hand, are firms that enable connectivity across different networks.

Malaysian law dictates that foreign ownership in a licensee can only be up to 49% unless exempted by the minister in charge, in this case Communications and Digital Minister Fahmi Fadzil.

The Malaysian Communications and Multimedia Commission (MCMC), however, told
Tech in Asia
 that SpaceX retains full ownership of the company that was granted these licenses.

Starlink Internet Services Malaysia is wholly owned by Starlink Holdings Netherland, according to the Malaysian companies’ database.

MCMC said that only three companies, aside from Starlink, had been given such an exemption since 2005. The remaining firms are: NTT MSC (2005 and 2010), AT&T Worldwide Network Services (2012), and BT Systems (2014).

The industry regulator told
Tech in Asia
 that the decision to grant Starlink the exemption was made after assessing the “value and benefits” provided by the satellite-internet firm.

MCMC added that this case is similar to the other licensees that were granted exemptions, which are “companies with a global footprint” that had full foreign ownership.

Some of the policy considerations for the exemption include a review of Starlink’s Malaysia Digital status, Malaysia’s commitments to any free-trade deal with the applicant’s country of origin, and the direct and indirect benefits that the licensee can bring to Malaysia. The entire process also involves other relevant agencies and ministries, MCMC said.

Malaysia Digital
 is a series of perks for multinational or local tech companies, ranging from tax incentives to grants.

Malaysians have the option of choosing one of two Starlink kits: standard or high performance. / Photo credit: Starlink

Minister Fahmi said in a
Facebook post
 dated July 20 that SpaceX will start providing internet access to tertiary education institutions and schools in rural areas.

He added that the approval of Starlink’s license applications was part of the Malaysian government’s efforts to connect people nationwide. According to the minister’s
estimates
, 97% of populated areas currently have internet access, while the remainder is hindered by geographical challenges.

It’s why his ministry is betting on Starlink and is purchasing 40 kits to close this gap.

On July 23, Fahmi
announced
 that the Mara Institute of Technology, a public university exclusively for the country’s bumiputera demography, will be among the first recipients of Starlink’s devices. He added that the university’s campuses in Perak, Negri Sembilan, Sabah, and Sarawak had been earmarked to receive satellite-internet broadband.

See also:
Tesla enters Malaysia with Model Y SUV

But Starlink will not only be reserved for government initiatives as Musk’s firm is also offering its services to the public. Yesterday, Starlink Malaysia
said
 its broadband plan costs 220 ringgit (around US$48) per month. This doesn’t come with a binding contract, which means Starlink will allow users to cancel their subscriptions anytime, but they’ll have to purchase hardware separately.

There are two kits to choose from: standard at 2,300 ringgit (US$504) and high performance at 11,613 ringgit (US$2,500). The former is recommended for home users while the latter for enterprises and power users.

Starlink said its service provides download speeds of around 100 mbps. It added that users can try the service for 30 days and seek a full refund if they’re unsatisfied by returning the hardware.

The company’s offerings are available in a number of countries and has been expanding in Asia, such as in the Philippines and Japan.

Tesla’s Model Y on display during the Malaysia launch on July 20 / Photo credit: Tesla Asia’s Twitter

The firm’s entry to Malaysia comes on the back of a virtual meeting between Musk and Prime Minister Anwar Ibrahim on July 14.

Aside from Starlink, Musk’s Tesla also
began operations
 in the country last week. The electric carmaker
said
 that bookings for its Model Y were already available on its website since July 14. Prices range from 199,000 ringgit (US$43,519) to 288,000 ringgit (US$62,983), with delivery of the first Tesla unit to be shipped around early 2024.

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.57 ringgit.


TikTok Shop signs deal with BNPL major Atome in Malaysia

Photo credit: Shutterstock

TikTok Shop
 has signed a deal with buy now, pay later firm Atome in Malaysia that will allow consumers to defer payment for their purchases over three or six months.

“By integrating Atome as a payment option on TikTok Shop, we’re excited to help drive ecommerce growth and support brands of all sizes,”
William Yang
, head of commercial at Atome said in statement.

Atome is operated by Singapore-based Advance Intelligence Group, which raised
US$80 million
 from Warburg Pincus and Northstar Group. Recently, Atome
confirmed
 its withdrawal from the Vietnamese market due to lackluster business.

Meanwhile, TikTok Shop has been aggressively expanding in Southeast Asia. Despite being a new player, TikTok Shop is already one of the region’s
top five ecommerce players
 in terms of market share, according to a recent report from venture builder Momentum Works.

In June, CEO
Shou Zi Chew
 said TikTok will invest billions in Southeast Asia in the coming years.

See also:
TikTok’s Project S triggers alarm bells in Indonesia


Battle for Malaysia’s ‘last mile’: Local couriers struggle against foreign players

Analysts say Indonesia-based J&T Express commands significant market share in the Malaysian courier space. / Photo credit: J&T Express

To say last year was nightmarish for Malaysian courier companies would be an understatement.

Household names in the industry either folded or had to sell their loss-making last-mile businesses.

Such was the fate of two Bursa Malaysia-listed logistics players, Nationwide Express and CJ Century Logistics. Nationwide Express, founded in 1985, shut its business on November 16 last year, retrenching 1,100 employees. It would then be delisted and go into receivership.

A year earlier, CJ Century Logistics had sold its loss-making courier arm for 7.5 million ringgit (US$1.6 million) after bleeding losses since 2018.

Both companies in their respective bourse filings attributed their troubles to stiff competition and higher startup costs. These developments come despite the surging demand for courier services in Malaysia – and the rest of the world – as Covid-19 lockdowns were put in place.

According to data by industry regulator Malaysian Communications and Multimedia Commission (MCMC), parcels per capita jumped from 7.6 in 2019 to 23.5 in 2021.

Malaysian courier companies who survived were left to slug it out with tech-enabled upstarts. Some veterans tell
Tech in Asia
 that the battlefield has become uneven, blaming their younger, foreign-owned counterparts for deploying “aggressive pricing strategies.” They didn’t name these foreign-owned couriers though.

Two Kuala Lumpur-based equity analysts who cover the sector tell us that frustration among some of the older firms was at a boiling point. Even Malaysian Communications and Digital Minister Fahmi Fadzil entered the fray,
telling reporters
 on July 4 that his ministry would study the base price and licensing problems in the courier industry. Fahmi’s ministry oversees MCMC.

Price dumping for valuation purposes?

To get a feel of the tension brewing among courier companies in Malaysia, consider some of the key points Pos Malaysia CEO Charles Brewster flagged during his June 26 media luncheon in Kuala Lumpur. Bursa-listed Pos is the country’s national courier.

Pos Malaysia CEO Charles Brewster / Photo credit: Pos Malaysia

Brewster told the press that he was in discussions with regulators MCMC and the Malaysian Anti-Competition Commission (MyCC) regarding the problems posed by foreign players.

While MCMC is the industry regulator, MyCC is the country’s anti-competition body. But MyCC doesn’t have powers across a few sectors including logistics. Reining in industry players falls on the shoulders of MCMC.

Brewster said he highlighted to the two entities and government officials a few problems. Among them was the inability of consumers to choose their preferred service provider to deliver parcels especially when shopping on most ecommerce platforms. He also emphasized the saturated parcel delivery space in the country.

“You’re not allowed (to choose us) because they (ecommerce platforms) dictate who delivers it, which has legal ramifications as well,” he said.

Brewster is arguing that Malaysia is granting too many courier licenses. According to the Pos CEO, there are 120 licenses for parcel operators in Malaysia despite the country only having a population of 30 million people. In Indonesia, with a population of nearly 300 million, there are 30 licenses, and in Thailand there are 37 accredited couriers for 70 million people.

“Many of the parcel operators (in Malaysia) are foreign and they’re not publicly listed,” allowing these companies to “price dump” to boost valuation, he told the press. “They’re just looking to get the market share.”

Pos declined to comment further on the matter when we reached out.

The national courier registered a net loss of 335.7 million ringgit (US$74 million) on the back of 2.2 billion ringgit (US$484 million) in revenue last year.

But Pos is not the only one with these types of grievances.
Tech in Asia
 understands that other local courier players also want some form of intervention.

Not for the lack of trying

To be sure, the Malaysian government has heard the grouses of local industry players before.

MCMC imposed a moratorium between September 15, 2020 and September 15, 2022 on new courier licenses.

But that did little to ease the situation, as foreign-owned courier companies could circumvent the block by acquiring local firms, two Malaysian logistics CEOs tell
Tech in Asia
.

MCMC then issued a public consultation paper in 2021. The agency asked courier companies for feedback for a new licensing framework for the industry.

Dubbed Pakej, the proposal was part of the regulator’s National Courier Accelerator Plan to improve courier and postal services in Malaysia. Among the proposals under Pakej included restrictions on the number of parcels handled by courier companies as well as limits on the ownership structure of firms, depending on the type of license they hold.

Analysts speaking to
Tech in Asia
 point to the boom in the number of couriers during the pandemic as the reason for foreign-owned companies entering the market. And according to the people we spoke with, VC-backed players such as Singapore-based Ninja Van and Indonesia’s J&T Express slashed their prices to capture market share.

Ninja Van Malaysia CEO Adzim Halim tells
Tech in Asia
 that while the company believes in “healthy competition,” it acknowledges the importance of addressing “certain underlying issues to promote a fair and thriving industry.” He welcomes MCMC’s possible revisions to the licensing framework.

Ecommerce platforms such as Lazada and Shopee have also ventured into the logistics business, adding price pressure especially for the last-mile segment.

Singapore-based Ninja Van believes it has gone beyond last-mile by diversifying into public relations and enterprise solutions, among others. / Photo credit: Ninja Van

These forays into logistics have been met with criticism. Industry players claim that the platforms’ other businesses cross-subsidize each other. Therefore, these companies can reduce courier charges to the point of offering free deliveries.

An ecommerce chief tells
Tech in Asia
 that some of these platforms establish a logistics arm to not only “do deliveries for you but eventually do delivery for others.” The main goal for ecommerce firms, they say, is to keep costs down and not be too reliant on third-party couriers all the time.

But the ecommerce chief admits that it’s “impossible” to cover every nook and cranny of the country, so “we do use third-party services where it makes sense.”

The two analysts we spoke to earlier are betting on J&T Express as the winner in the market, saying that the courier company managed to dominate the ecommerce delivery segment in less than three years, despite the pandemic.

J&T Express is also seeking to list on the Hong Kong Stock Exchange, “so with fresh capital, the company is in an advantageous position to expand even more aggressively,” one of the analysts says.

Not out of the woods yet

Analysts and industry players we spoke to believe that the courier battle, especially over last-mile coverage, will only intensify.

The government’s target is for the national ecommerce industry to reach 30 packages per capita by 2025.

RHB Research analyst Alexander Chia wrote in a June 22 note that last-mile players were not out of the woods yet.

The government may have expressed commitment to address the operating costs and competitive environment, but “we have yet to see any impactful measures or initiatives being announced so far,” he wrote.

Chia said that some of the companies under his coverage told investment analysts that the outlook for courier services and logistics industries remains “challenging.”

He cited sector overcrowding – brought about by the rise in the number of foreign players – weak market sentiment, and inflationary pressures (including manpower costs) as the most pressing issues.

Ninja Van’s Adzim believes his company has gone beyond focusing on last-mile deliveries with the introduction of its two other businesses, Logistics+ and its public relations arm. “We believe that our differentiation in the market is not solely based on us being a foreign player,” he says.

Logistics+ is a suite of services for SMEs – ranging from cross-border payment facilities to inventory management.

The firm’s PR business, on the other hand, allows shippers to create and manage their brand reputation, among others.

But according to the analysts we spoke to earlier for this article, labor will put another spanner in the works for the industry.

DHL, for instance, is expanding its operations in the northern state of Penang, but it
told

The Financial Times
 recently that it was “fast seeing a scarcity of available people” across the country.

DHL is betting big on Penang but a labour crunch is stymying expansion. /Pic credit: DHL

DHL had “secured an agreement with the Malaysian government to bring in more foreign staff in return for offering facilities for workers that went beyond the minimum standards required,” it said in the report.

Talent will remain at a premium until building workers’ facilities that meet international standards become less costly, the analysts say.


Sime Darby, AEI Capital join Vynn Capital as partners in latest fund

Vynn Capital managing director/ Photo credit: Vynn Capital

Malaysia-based
Vynn Capital
 announced that local conglomerate
Sime Darby
 and private equity firm
AEI Capital
 have joined the VC firm’s latest fund as limited partners.

With a target of US$30 million, the fund has also attracted investments from Wide Technologies from Indonesia and other limited partners from Malaysia and Singapore.

Vynn Capital is an early-stage VC firm that aims to bridge the gap between traditional industries and new economies. It also helps investors understand new industries and markets through its localized team and network across major cities in Southeast Asia.

With the new fund, Vynn Capital intends to strengthen its presence in Malaysia’s startup ecosystem by providing financial support and industry expertise to startups focusing on areas such as smart mobility, transportation, logistics, and supply chain optimization.

Sime Darby is an industrial conglomerate that operates in a diverse range of businesses, including trading, logistics, and healthcare. The firm is particularly eyeing developments in the mobility space.

See also:
What Malaysia’s latest policies mean for the tech scene

“This investment in Vynn Capital is in line with our mobility strategy that aims to future-proof our traditional core businesses against disruptive trends,” said Sime Darby CEO
Jeffri Salim Davidson
.

Meanwhile, AEI Capital’s role in the fund is to identify “disruptive” businesses and “strong” industry connections in Asia. Its group-wide asset under management (AUM) has exceeded US$1 billion as of the second quarter of 2023.


Tesla enters Malaysia with Model Y SUV

Tesla electric vehicle charging points / Photo credit:
tummataivas / 123RF

Electric vehicle (EV) manufacturer Tesla has officially started sales in Malaysia.

In a recent social media post, the company introduced the Model Y – billed as the company’s first mass-market SUV – to the Malaysian market.

Elon Musk, the CEO of Tesla and SpaceX, previously had a virtual meeting with Malaysia’s prime minister, Datuk Seri Anwar Ibrahim, as Tesla prepares to open its headquarters in Selangor this year.

The prime minister reiterated the country’s commitment to achieving net-zero emissions by 2050 and emphasized its comprehensive ecosystem and competitive resources in supporting the clean energy industry, including electric mobility.

The discussion also touched on the participation of SpaceX in providing its Starlink satellite service to Malaysia.

Tesla’s official launch in the country is scheduled for July 20. The move allows the US firm to capitalize on the red-hot ASEAN EV market, which is
expected to rise
 from US$859 million this year to a staggering US$3.5 billion in 2028.

Meanwhile, Chinese EV makers are making waves in Southeast Asia. BYD recently
launched
 its Atto 3 vehicle in Singapore, while Great Wall Motor
announced
 the establishment of a subsidiary in Malaysia.

See also:
Mapping SEA’s electric vehicle players


Foodpanda to expand in-store grocery pickups to Bangladesh, Pakistan

Photo credit: Foodpanda

Foodpanda
 is taking its in-person pickup service for
Pandamart
 stores to Bangladesh and Pakistan “in coming months.”

The feature, which was launched in March in Singapore, is currently available in one Pandamart store in the city state and for select items in all stores in Malaysia.

Foodpanda also said it expanded the service in Hong Kong after first launching there in April. It allows customers in the city to grab their groceries in as fast as five minutes. Consumers in Singapore and Malaysia can collect their orders in 15 minutes.

Meanwhile, Grab, one of Foodpanda’s competitors, has
launched a similar omnichannel feature
.

Foodpanda was established in Singapore in 2012 by
Lukas Nagel
 and
Rico Wyder
. The company, which is owned by Germany-based Delivery Hero, offers services including food and grocery deliveries, dine-in payments, as well as parcel delivery service Pandago.

Besides Singapore, Hong Kong, Malaysia, Bangladesh, and Pakistan, Foodpanda operates in Thailand, Taiwan, Laos, Cambodia, Myanmar, and the Philippines.

AirAsia recently
partnered with Foodpanda
, a deal that sees the latter handle the travel app’s food delivery business.

See also:
Can Grab’s dine-in services reverse a fall in food delivery growth?


Antler expands into Malaysia through partnership with Khazanah

Antler co-founder Jussi Salovaara (left) and Khazanah Nasional’s Amirul Feisal Wan Zahir / Photo credit: Antler

Antler
 announced its expansion into Malaysia through a partnership with
Khazanah Nasional
, the country’s sovereign wealth fund.

Tech in Asia
 first
reported
 in March that Khazanah was looking to team up with the global VC firm.

Antler will be involved in the Future Malaysia Programme – an initiative under Khazanah’s 6 billion ringgit (US$1.3 billion) Dana Impak (Impact Fund) – which is committed to investing in local startups over the next five years.

Antler will also have a base in Kuala Lumpur, aiming to invest in over 30 startups in the country on its own over the next three years. Malaysia is the latest addition to Antler’s presence in Southeast Asia after Singapore, Indonesia, and Vietnam.

“This is another step forward for our Future Malaysia Programme, which aims to scale Malaysian ideas and businesses to be globally competitive,” said
Amirul Feisal Wan Zahir
, managing director of Khazanah, in a statement.

Zahir said that the impact fund will aid startups in stages ranging from pre-seed to growth.

Founded in 2017, Antler has invested in over 792 companies with a cumulative portfolio value of US$3.7 billion to date.

Last month, it
closed
 its US$285 million emerging growth Antler Elevate. The VC also aims to participate in
100 investment deals
 in Southeast Asia this year.

See also:
What Malaysia’s latest policies mean for the tech scene

Currency converted from Malaysian ringgit to US dollar: US$1 = 4.61 ringgit.