21/07/2026
Stop Competing with Startups: Governments Should Enable Innovation, Not Replace It
By Ir.Ts. Muhammad Didi Hendra Shah Bin Norharashid, CMILT.
President of Malaysia Industry Forward Association (MIFA)
Malaysia has long aspired to become a regional leader in innovation, digital transformation, and high-value industries. Billions of ringgit have been allocated through grants, technology roadmaps, digitalisation programmes, and entrepreneurship initiatives to nurture local startups. Yet, despite these investments, many startups continue to struggle, not only against market forces, but sometimes against the very institutions established to support them.
This raises an uncomfortable but necessary question:
Should government agencies be competing with startups, or should they be empowering them?
The answer is clear. Governments should be "market enablers", not "market competitors".
Governments Possess Advantages That Startups Never Will.
A startup begins with an idea, limited capital, and a small team willing to take significant personal and financial risks. Every customer must be earned. Every investor must be convinced. Every failure carries the possibility of closure.
Government agencies, on the other hand, operate under fundamentally different conditions. They are supported by public funding, possess institutional credibility, have direct access to government data and infrastructure, and enjoy established relationships across ministries and public agencies.
When these agencies begin offering commercial products or services that compete directly with startups, the playing field is no longer level.
Competition should reward innovation, efficiency, and customer value, not institutional advantages.
The Hidden Cost of Government Competition
The consequences extend far beyond individual companies.
1. Investors Lose Confidence
Private investors seek markets where competition is fair and predictable. When government agencies become commercial players, investors perceive greater uncertainty.
Why invest millions in a startup if a publicly funded organisation could eventually offer a similar solution with institutional advantages?
Less investment ultimately means fewer innovative companies.
2. Innovation Slows
Innovation thrives under competitive pressure.
Startups survive because they innovate faster, respond to customers more quickly, and continuously improve their products.
Governments excel at governance, regulation, and public administration, but they are not designed to operate with the speed and agility required for commercial innovation.
Rather than accelerating innovation, government competition may unintentionally slow it.
3. Public Funds Are Used Inefficiently
Taxpayer money should stimulate private-sector innovation, not duplicate it.
If capable Malaysian startups already provide a technology solution, government resources should be directed toward helping these companies scale instead of building parallel systems that compete against them.
Every ringgit invested should generate broader economic returns through business growth, employment, exports, and tax revenue.
4. Entrepreneurs Become Discouraged
Entrepreneurship requires courage.
Founders invest years of their lives, often risking personal savings and financial security.
When they see government agencies entering their markets instead of becoming customers or partners, confidence declines.
Some entrepreneurs leave the sector. Others move overseas. Many simply choose not to innovate again.
The nation loses far more than one company, it loses future innovators.
Governments Create Markets, They Should Not Dominate Them
The role of government is unique because it can shape markets in ways the private sector cannot.
Governments establish policies, standards, procurement frameworks, funding programmes, and regulatory environments.
These powers should be used to unlock innovation, not crowd it out.
The most successful innovation economies understand this principle.
Countries such as Singapore, Finland, South Korea, and Estonia rarely position government agencies as commercial competitors. Instead, governments act as facilitators by:
* Becoming the first customer for innovative local companies.
* Providing grants tied to commercial outcomes.
* Opening government procurement to startups.
* Supporting regulatory sandboxes for emerging technologies.
* Encouraging public-private partnerships.
* Helping startups expand internationally.
* Building national standards that encourage adoption rather than ownership.
Their governments create opportunities. Entrepreneurs create solutions.
A Better Model for Malaysia
Malaysia already has talented engineers, software developers, researchers, and entrepreneurs. What many startups lack is not capability, it is access.
Government agencies can have far greater impact by becoming:
"Facilitators" that connect startups with industry.
"Customers" that validate local technologies through procurement.
"Regulators" that provide clear and innovation-friendly rules.
"Funders" that de-risk early-stage innovation.
"Export promoters" that help Malaysian technology reach international markets.
When agencies collaborate instead of compete, the entire innovation ecosystem becomes stronger.
Collaboration Creates National Champions
Every successful technology nation has companies that become global ambassadors for its innovation ecosystem.
These companies were not built because governments competed with them.
They succeeded because governments created an environment where innovation could flourish.
Malaysia should aspire to build more globally competitive technology companies, not more government-owned commercial products.
Strong startups generate employment, attract foreign investment, create export revenue, and strengthen national competitiveness. Their success ultimately benefits the government through higher tax revenues, greater a resilience, and improved public services.
Conclusion
Government and startups should never be viewed as competitors. They are partners with complementary roles.
Governments build the environment. Startups build the innovation.
The true measure of a successful innovation policy is not how many products a government agency develops, but how many successful companies emerge because of the ecosystem it has created.
If Malaysia genuinely intends to become a high-income, innovation-driven economy, our public institutions must resist the temptation to compete with entrepreneurs. Instead, they should focus on enabling them to succeed.
The future belongs to nations where governments create opportunities, and startups seize them. That partnership, not competition, is the foundation of sustainable innovation and long-term economic prosperity.
