Malaysia approves Japanese VC firm

Japan's JAIC becomes the first foreign venture capital firm to be approved to operate in Malaysia.
MalaysiaÆs Securities Commission has approved an application by Japan Asia Investment (JAIC) to start venture capital investment activities in the country. JAIC is the first foreign VC firm to be approved to operate in Malaysia.

JAICÆs investments in Malaysia will focus on infrastructure-related companies. The Tokyo-listed firm is also an active player in private equity-related businesses such as buyout investments, restructuring financing and secondary investments, and, according to its annual report, it had invested Ñ10.3 billion ($97.7 million) in Malaysian companies as of the end of its 2008 fiscal year.

ôThe presence of foreign VC corporations in the local venture capital scene will add greater depth and breadth to the pool of players within the industry,ö says Securities Commission chairman DatoÆ Zarinah Anwar.

At the end of 2007, MalaysiaÆs VC industry had M$3.3 billion ($1 billion) worth of assets under management. By the end of August, the sector was comprised of 57 corporations, according to the Securities Commission.

MalaysiaÆs 2009 budget gave the VC industry a boost as it included five-year tax exemptions for VC companies that invest at least 30% of their funds as start-up, early-stage financing or seed capital. JAIC will be eligible for these tax exemptions if its investments meet that requirement.

Already active in 11 other countries, JAIC is part of a recent wave of outbound Japanese mergers and acquisitions. Japanese companies are coming off four years of strong earnings as the country has experienced its longest sustained period of post-war economic growth.

Two weeks ago, Nomura, JapanÆs largest independent investment bank, purchased Lehman BrothersÆ Asia-Pacific and European operations and earlier this week Mitsubishi UFJ Financial Group (MUFG) finalised a $9 billion investment in Morgan Stanley that will give it a stake of up to 21%.

Despite JAICÆs 15-year, 11-country experience in the VC industry, one could question how much expertise a Japanese VC firm can bring. Innovation in Japan is largely conducted by corporations instead of the small start-ups VC firms traditionally fund elsewhere in Asia.
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