Critics have slammed the government and in particular Prime Minister Mahathir Mohamad for the Multimedia Super Corridor (MSC) initiative, with the mega-project described as brandishing the ego of the premier and "a complete waste of money".

Information technology (IT) analysts have also spewed skepticism on Mahathir's brainchild. Their main criticisms are focused on the lack of venture capital in Malaysia and the competition faced from other countries like the US, UK and South Korea.

While these concerns do hold water, the government has not been entirely complacent about initiatives to spur growth of companies involved in high-tech ventures. Mahathir this week announced that new policies would be implemented and fresh directives issued to local banks to encourage tolerance for business failure and risk taking.

The new directive will ensure that failed businesses are not barred from securing financing as this will be a road-hump to their potential success.

"It does not mean those who fail will not succeed in the future. If we penalise them by barring them from getting loans and financing, they will not be able to realise their potential," Mahathir said after opening a new Ericsson mobile phone plant on Monday.

Admitting that there was a shortage of venture capital in Asia, he said measures were being taken to address this problem, some of this through the Multimedia Development Corporation's (MDC) Venture Corporation.

MDC, the company entrusted with ensuring the success of the MSC and companies operating in it, has about RM140 million in grants for companies starting-up business. The approval process, however, has been vehemently criticised for being too cumbersome.

IT analyst Shufiyan Shukur agrees that government intervention has played a vital role in Malaysia's emerging knowledge-based economy. "Without government intervention and push, we would still be an agro-based economy," he said.

However, Shufiyan feels that government intervention brings along attendant bureaucracies, another problem Malaysia is faced with.

Physically, the MSC is a 15km-by-50km corridor starting from the Petronas Twin Towers and continuing south to include Putrajaya (the new administrative centre), Cyberjaya (the heart of MSC) and Kuala Lumpur International Airport (KLIA).

Pundits see the high-technology blueprint for the 21st century as an engine that is set to transform Malaysia's move from industrial to information age. The corridor continues to attract a significant number of investors from the US to as far as the British Virgin Islands and Russia.

Statistics as of Dec 31, 1999, from MDC show that there are 300 companies operating in the MSC. The MSC-approved Asian companies come from India, Hong Kong, Korea, Taiwan, Sri Lanka and Brunei, while European MSC-approved companies are based in the Netherlands, UK, Germany, Finland, Belgium, France, Ireland, Switzerland, Sweden and Russia.

Of the 300 companies, 34 are major international firms including Microsoft, Oracle, Nippon Telegraph and Telephone, Fujitsu, British Telecom and Sun Microsystems. The government continues to provide lucrative incentives to lure global multinationals to set-up office in the MSC.

This includes tax holidays of up to 10 years in return for foreign companies initiating technology transfer and link-up with government, schools and hospitals. This has brought about a concern that the government is focused only on multinationals and not local companies which are starting-up businesses in other parts of the world where venture capital is easily available.

"This world is moving too quickly. You will have to get out of your civil service mind-set," Shufiyan said. He pointed out that Malaysia faces a strong challenge from other countries that are able to make the shift easily. "It is quite frightening to see South Korea coming in very strongly into this game".

While critics feel Malaysia might never make it as an Asian Silicon Valley if it does not work hard to address bureaucracy and competition, there is no denying the accelerated expansion and radical changes in the country driven by the growth of the MSC.