Prime Minister Dr Mahathir Mohamad today said the government is not ready to accord Multimedia Super Corridor (MSC) status to companies located outside the designated 15-by-50km strip south of Kuala Lumpur.

The premier said it is difficult for the authorities to develop the MSC if those new MSC-status companies are located outside the area.

"In the interest of development and to make sure that we can give privileges to them (MSC-status companies), they have to be in the MSC," Mahathir told a press conference after chairing the 5th MSC International Advisory Panel meeting in Cyberjaya.

According to the existing criteria, companies who are either providers or heavy users of multimedia products and services are qualified to apply for MSC status. However, they must be located in an MSC-designated city.

Still, certain companies outside the area, especially from small and medium industries, are hoping that they would be granted the MSC status without having to move there.

Most of these companies have existing offices and manufacturing centres elsewhere, and moving to the corridor would incurred additional cost.

MSC-status companies are entitled to various incentives such as tax breaks, and research and development grant in the information technology field.

The Malaysian version of US' Silicon Valley has currently guzzled more than RM10 billion in state fund, which includes building the new administrative capital Putrajaya, software development city Cyberjaya, and the Kuala Lumpur International Airport.

New flagships

Mahathir also stressed that the five-year-old MSC, despite widespread criticism, is still capable of attracting investors, citing the example of 46 world-class multinationals among the 554 MSC-status companies.

He noted that oil company Shell has three major operation and research centres in the world, with the biggest in Malaysia and the other two in the Netherlands and the US.

"In fact, we expected to have 500 MSC-status companies only by 2003 but the number has already exceeded the target now," he said.

Mahathir said the government also decided to add in several new flagship applications and this was discussed at today's International Advisory Panel meeting, which was attended by 26 key industry gurus and researchers.

"One of the flagships is distance learning where we would like to change the way we teach our children," he said.

Among the other new flagships were 'technopreneurship' to facilitate more small- and medium-sized enterprises to venture into 'world-class market', he added.

Asked to comment on the problems faced by the Hollywood-style E-Village launched around the same time last year, Mahathir said that it would still go on despite a change of developer.

"The initial developer did not have the adequate capacity to meet with its needs. We will find another party to invest in it. We are not abandoning the project and we will still go ahead with it," said the premier.

The multi-million dollar project was abandoned after its developer defaulted in a RM52.4 million payment. The so-called Entertainment Village, which has since been renamed the Eco-Media Village, was also unable to draw the attention of Asian film makers.

'As good as you can get'

Meanwhile, International Advisory Panel member Diana Lady Dougan, who is an adviser to a US think tank, said that it was important to keep the global economic downturn in mind when developing strategies for the MSC.

"We continue to be impressed by the MSC but we must also be reminded of the economic downturn. It will allow us to rethink certain issues and implement restructuring," Dougan said.

Infosys chairperson NR Narayana Murthy said that the existence of 554 MSC-status companies registered was proof that the project was successful.

"This is as good as you can get anywhere in the world," Narayana said.

Other IAP members and representatives who were present at the meeting today include NEC chairperson Dr Tadahiro Sekimoto, Sun Microsystems chief researcher Dr John Gage and Microsoft vice-president Michael Rawding.