More restrictive digital regulations could cost Malaysia RM792 million in annual venture capital investment, according to a study by Oxford Economics.
The study, which was commissioned by Digital Prosperity Asia (DPA), reveqaled that the country currently adopts a broadly enabling approach to digital regulation, with safeguards in higher-risk domains while preserving openness across the broader digital economy, but this could have significant implications for Malaysia’s startup ecosystem over the coming decade.
The report highlighted that digital regulations are becoming an increasingly important consideration in investment decision-making in Malaysia.
Further, expectations of tighter regulation may dampen investment sentiment, as investors are adopting more cautious approaches, such as strengthening compliance requirements and incorporating regulatory risk assessments into their investment processes.
Key insights from the study include:
- 63% of startups say digital regulations increase uncertainty in the market and make it more difficult to raise capital.
- 73% of VCs say digital regulations heighten uncertainty around returns from their investments.
- Economic modelling shows that more restrictive regulations in Malaysia could reduce VC funding by 26% over 2026 to 2035 (~RM 792 million/year less on average). Conversely, a shift to more enabling regulations would increase VC funding by 6% (~RM 198 million /year more on average) over the same period.
