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Thursday, 17 January 2019

Huawei’s founder Ren Zhengfei breaks years of silence amid continued US attacks on Chinese tech giant

Ren Zhengfei, founder and chief executive officer of Huawei Technologies Co., speaks during an interview at the company's headquarters in Shenzhen, China, on Tuesday, Jan. 15, 2019. Ren, the billionaire telecom mogul, broke a years-long silence as his technology empire faces its biggest crisis over three decades of existence. Photographer: Qilai Shen/Bloomberg https://youtu.be/YNkfddyDEkk https://youtu.be/TUqg4yrs-Po

Ren Zhengfei, the billionaire founder of Huawei Technologies, broke years of silence on Tuesday as his business empire faces its biggest crisis in more than three decades amid continued pressure from the US that its networking gear may pose a security threat.

The telecoms mogul called Donald Trump “a great president” and said he would take a wait-and-see approach to whether the US leader will intervene in the case of his eldest daughter and Huawei finance chief Meng Wanzhou.

Meng is in Canada facing extradition to the US, where authorities have accused her of fraudulently representing Huawei to evade US sanctions on Iran. She has denied any wrongdoing and said that she will contest the allegations if surrendered to the US.

The emergence of the reclusive Ren, who last spoke with foreign media in 2015, underscores the depth of the attacks on Huawei, the largest symbol of China’s growing technological might.

“I love my country, I support the Communist Party. But I will not do anything to harm the world,” the 74-year-old Ren told a select round table briefing, only his third formal chat with foreign reporters. “I don’t see a close connection between my personal political beliefs and the businesses of Huawei.”

The US has banned government use of Huawei’s technology products and services because of security concerns. US security experts have warned of a range of potential security risks, including but not limited to the capacity to control telecommunications infrastructure and even conduct undetected espionage. It has pressed its allies to follow suit.

Japan has excluded Huawei from public procurement and Australia and New Zealand have effectively blocked Huawei from the roll-out of their 5G network infrastructure. The UK and Canada are also weighing the possible security risks posed by Huawei — along with a growing list of other European countries.

Huawei has consistently denied any connections with the military, saying that it is a private company part-owned by its employees and that governments need to ensure there is an objective basis for choosing technology vendors.

“Ren Zhengfei doesn’t give many interviews, but his decision to speak publicly seems like a smart move,” said Brock Silvers, Shanghai-based managing director of Kaiyuan Capital. “The threat to Huawei’s European business is real and it is understandably responding to it. Ren’s public comments today show how seriously he views the situation.”
Ren, who joined the Communist Party after leaving the People’s Liberation Army, stressed the potential for cooperation with the US. He played down Huawei’s role in current trade tensions between Washington and Beijing, which have rattled investors and corporations worldwide.

“Huawei is only a sesame seed in the trade conflict between China and the US,” Ren said from the company’s newest campus in the industrial city of Dongguan.

“Trump is a great president. He dares to massively cut tax, which will benefit the business. But you have to treat well the companies and countries so that they will be willing to invest in the US and the government will be able to collect enough tax.”

Meanwhile, China's Foreign Ministry on Tuesday urged Canada to release Meng immediately, saying the case was an abuse of legal procedure. Ministry spokeswoman Hua Chunying made the comment at a daily news briefing in Beijing.


Meng was released on bail five weeks ago and is living under restrictions in her multimillion-dollar Vancouver home while awaiting extradition proceedings.


The arrest in Poland last week of a sales executive accused of spying may have helped prompt Ren to personally marshal Huawei’s global response. The employee in Poland was subsequently fired by Huawei, which said the individual had brought the company into disrepute.

Ren expressed hope that Huawei could find a way forward with the US.


“Huawei is not a public company, we don’t need a beautiful earnings report,” Ren said. “If they don’t want Huawei to be in some markets, we can scale down a bit. As long as we can survive and feed our employees, there’s a future for us.”


Ren is a legendary figure in China’s business world and moves in the highest government circles. The self-made billionaire is the son of schoolteachers and grew up in a mountainous town in China’s poorest province, Guizhou.

Huawei founder and CEO Ren Zhengfei survived a famine, but can he weather President Trump?


A survivor of China's great famine between 1958 and 1961, Ren graduated from the Chongqing Institute of Civil Engineering and Architecture. He worked in the civil engineering industry until 1974 when he joined the PLA as an engineer – a connection that still provokes questions in the West about Huawei’s ties to the Chinese army and government.





Monday, 14 January 2019

SC to regulate digital assets

Good move: Lim says many people have bypassed Malaysia because the policy was not clear about digital assets

Move seen to spur growth in digital currency sector


Regulatory oversight of digital currencies and tokens, which kicks in from today, offers timely clarity and transparency to various players in the fledgling industry.

Omni Capital Partners Sdn Bhd managing director Scott Lim said everything would be above board with the regulation and governance under the Securities Commission (SC).

“Digital assets in Malaysia have been underwhelmed mostly. A lot of people have been bypassing Malaysia because the policy was not clear about it.

“Certainly, now that this is regulated by the SC, it’ll be good. We shall wait for the guidelines,” he said.

Celebrus Advisory co-founder Edmund Yong said the regulation is very much welcomed and one which is needed, as it would spur growth in the industry.

Celebrus is a compliance-first blockchain consultancy firm.

He added that the statement by the Finance Ministry was very accommodative with the intention to use tokens and the recognition of it as a fund-raising tool.

“In fact, it can be an indirect source of foreign direct investment, a borderless method to raise funds.

“But from now until March 31, there will be a twilight period. Many activities will be stopped in their tracks because they don’t know where they stand.

“Some would possibly even move offshore because of the draconian RM10mil and 10-year imprisonment punishment,” said Yong.

He said digital tokens could also be for points in computer games or reward points, and it too would be quite draconian if it is all painted with the same brush.

The Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 kicks in today and any person operating unauthorised initial coin offerings (ICOs) or digital asset exchanges faces up to a 10-year jail term and up to a RM10mil fine.

Digital currencies and digital tokens are collectively known as digital assets, which will now be prescribed as securities.

The SC is putting in place relevant regulatory requirements for the issuance of ICOs and the trading of digital assets at digital asset exchanges in the country.

This is expected to be launched by the end of the first quarter this year.

Finance Minister Lim Guan Eng said the offering of such instruments, as well as its associated activities, would require authorisation from the SC and needed to comply with relevant securities law and regulations.

“The Finance Ministry views digital assets as well as its underlying blockchain technologies as having the potential to bring about innovation in both old and new industries.

“In particular, we believe digital assets have a role to play as an alternative fund-raising avenue for entrepreneurs and new businesses, and as an alternative asset class for investors,” he said in a statement yesterday.

Any person offering an ICO or operating a digital asset exchange without the SC’s approval will face an imprisonment term not exceeding 10 years and a fine not exceeding RM10mil.

Federal Territories Minister Khalid Samad mooted the idea of the Harapan Coin last year, which would be the world’s first political fund-raising platform using blockchain and cryptocurrency technology.

In November last year, shareholders of Country Heights Holdings Bhd approved the company’s plan to conduct an ICO to issue its own cryptocurrency, called “horse currency”.

Country Heights founder and chairman Tan Sri Lee Kim Yew had said that the company would like to be the first to launch cryptocurrency in the country when the regulations are ready.

The company’s plan is to eventually issue one billion horse currencies backed by RM2bil worth of physical assets held by the holding company, with an initial 300 million open to the public for circulation.

StarBizBy ROYCE TAN roycetan@thestar.com.my

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    Startup opportunities abound

    Band together: Entrepreneurs are urged to build strong communities to have a bigger voice that will enable them to affect policy that is beneficial to the industry.

    Local startup sector gaining ground with stronger investor interest

    THE past few years have seen an increase of entrepreneurs in the local tech startup sector. With better access to funding, there is ample opportunity for new business ideas to take off.

    But while the number of startups in Malaysia has increased, industry observers say we are merely scratching the surface of where the industry could be.

    According to Yusuf Jaffar, programme manager of Global Accelerator Programme from Malaysian Global Innovation & Creativity Centre (MaGIC), there is an estimate of 3,000 startups in Malaysia. Compared to the over 1 million registered enterprises here, startups make up only 0.25% of total companies registered.

    In contrast, Singapore has 42,000 startups, making up some 8.88% of companies in the island state.

    In the region, South Korea has an estimated 30,000 startups, while Indonesia and India has over 4,700 and 7,700 respectively.

    Although the numbers in Indonesia and India look low, Yusuf points out that they have a vibrant startup ecosystem.

    “India has 1,200 new startups every year, and this does not include the ones that are failing. These are the ones that are surviving or thriving. This shows vibrancy of ecosystem.

    Getting there: Hall says Malaysia’s startup ecosystem is rapidly maturing. 
    Getting there: Hall says Malaysia’s startup ecosystem is rapidly maturing.

    “For Malaysia’s ecosystem to grow, we need to rapidly increase our number of startups. We need more entrepreneurs here and we need more ideas,” he says.

    He names four components that are needed for the industry to grow – more startups, capital, markets and talent.

    In terms of capital, Yusuf notes that venture capital (VC) penetration in Malaysia is relatively high with 110 VC firms. Statistically, he says, there are a lot of funds available in Malaysia with US$1.75bil in VC funding for the local ecosystem, of which, only 50% has been spent to-date.

    However, most of these funds go into funding Series A (US$1mil-US$3mil) and B (US$3mil-US$10mil) rounds, whereby the startups have grown sizably.

    According to statistics, only 0.89% of VC capital went into early-stage investment, which amounted to about eight investments last year. In Singapore, 67% of VC funding goes to the early stage.

    It is crucial to have adequate funding for early stage investment to ensure that entrepreneurs can tap these funds to grow their ideas.

    “We are investing late,” says Yusuf.

    In Malaysia, he estimates that the success rate for startups is 20%.

    He adds that 90% of the current 242 unicorns – startup company valued at over US$1bil – in the world received VC funding from the get-go, underscoring the importance of VCs in making high-growth companies.

    Additionally, the frequency of investments in the local market is low. In 2017, there were only 77 investments made by VCs, or only 2.57% of startups received VC investment. Considering that there are 110 VC firms here, it is small wonder that entrepreneurs feel that there is a lack of funding available in the local market.

    Stacking up regionally

    Malaysia has often been cited as a country with great potential. We have a fairly well-educated population, infrastructure and a strong economy.

    However, the other countries in the region have somehow garnered more interest from investors. Singapore and Indonesia, in particular, have been receiving sizeable investments from VCs. The Indochina region has also been getting a lot of attention in recent times.

    And not many from the industry will forget that Malaysia-founded Grab eventually moved to Singapore given the more vibrant ecosystem across the straits.

    But Justin Hall, partner at Singapore-based Golden Gate Ventures, says that Malaysia’s startup ecosystem is rapidly maturing.

    “As we’re starting to see in other regional countries, Malaysian entrepreneurs are actively seeking to build out platforms and products that appeal to the entire South-East Asia, and not simply the domestic Malaysian market.

    “Regional funds are actively looking for and investing in Malaysian-born startups, and I see this trend accelerating as investors look out from Indonesia and Singapore,” says Hall.

    Last November, Golden Gate launched its Malaysian office in Kuala Lumpur to solidify its presence here. The firm had already utilised a quarter of its Fund II to invest in early-stage tech companies that are based or operating in Malaysia. It is planning to invest a further RM75mil in Malaysia-based startups.

     Smart capital: Ganesh notes that VCs can now pick and choose their investments because there are more startups around. — Bernama
    Smart capital: Ganesh notes that VCs can now pick and choose their investments because there are more startups around. — Bernama 

    He notes that Malaysia also has a large digital consumer market.

    “It bears some striking similarities to other South-East Asian countries in terms of consumptive behaviour such as regulatory bottlenecks in certain industries, and regulatory, infrastructure, and logistical constraints. This means that products and services that resonate with Malaysian consumers and businesses might be easier to localise into other regional markets than, say, companies that specifically appeal to Singaporeans,” he adds.

    Hall opines that Malaysian companies are undervalued compared to Indonesia and Singapore, largely due to the sheer amount of capital being invested in the later markets. There were previously also some gaps in founder experience and capability between the markets, but that gap is rapidly closing.

    According to Hall, logistics and supply-chain focused startups will come into focus in 2019 as the e-commerce boom starts sizing up in the region.

    “We are really only scratching the surface of scalable, efficient, inter-country logistics and supply-chain platforms. We hope to continue finding and investing in the best, most talented entrepreneurs in South-East Asia this year,” he says.

    However, Commerce DotAsia Ventures Sdn Bhd executive chairman Ganesh Kumar Bangah notes that the startup frenzy in the region seen a few years ago has cooled off.

    “Valuations were very high three to four years ago. I think it has cooled off. There are still some startups who ask for crazy valuations, but they don’t get funded. VCs can now pick and choose because there are so many startups. They don’t compete with each other as much as before.

    “It is not like three or four years ago, where a startup can say, ‘if you don’t give me this value, the next guy who comes in will offer me that’. Today, there’s realism in the game.

    “There is still a lot of money in the region for the right companies. People are less willing to overpay for them,” he says.

    Building the ecosystem

    Governments play an important role in developing the startup ecosystem and in creating new markets for the ecosystem.

    Yusuf says favourable policy can mobilise funds and help grow the industry.

    He cites the example of Singapore, which has allocated S$5bil in matching grants for startups, effectively pouring in S$10bil for the sector. In the US, some US$84bil is invested into VCs annually, with the bulk of these funds coming from pension funds.

    Obviously, the funding ecosystem in Malaysia has a long way to go. But developments in the local market such as equity crowdfunding and Leap Market have opened up more funding avenues for startups looking to tap new money. Additionally, more people have shown interest in becoming angel investors, which would help fill the gap in the early-stage financing.

    “It is not that there is not enough money in the ecosystem. The case is, there’s not enough intelligent capital at the early stage here. Intelligent money means that these investors have the knowledge to value the startups, and have the ability to give them the add-ons to help them grow.

    “We don’t lack capital, we lack intelligent capital at the early stage. We’ve got a lot of people with money and a lot of them want to invest in technology but don’t know how,” notes Ganesh.

    Yusuf concurs. The Malaysian ecosystem lacks specialist talents who can run funds. Most of the local VCs are managed by generalists who may not be able to discern startup-specific issues and challenges.

     Paving the way: Governments can play an effective role in creating new markets for the ecosystem.
    Paving the way: Governments can play an effective role in creating new markets for the ecosystem. 

    Thus, there is a need to attract more foreign funding and talent to close the gap in the local market.

    “Governments also play a big role in market creation. The government needs to put in real money into these specific markets.

    “A good example is the “buy social” campaign in the UK where all government procurement contracts have to go to social enterprises. That has led to the UK becoming the epicentre of social enterprises in the world, because the government made that effort and made that pledge.

    “So it’s not just about identifying a market, but creating real value in the market. There’s no way an entrepreneur can grow unless the market is created,” says Yusuf.

    He notes that 5% of the UK’s GDP now comes from social enterprises.

    Yusuf also urges entrepreneurs themselves to be part of the effort in building the local startup ecosystem by creating communities that will enable them to work outside their silos. By working within communities, entrepreneurs will be able to share ideas and collaborate to form better solutions and business models.

    “We need to have clusters, where you can get matching of skillset and vision. And these clusters should be connected to other clusters to see how you can build the ecosystem and move the ecosystem forward.

    “So build the community. And the importance of building a bigger community is so that you can affect policy in a way that will benefit the industry,” he says.

    By joy lee Starbiz

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