This article first appeared in Forum, The Edge Malaysia Weekly on February 2, 2026 - February 8, 2026

The global technology landscape is undergoing a fundamental transformation. As nations compete to secure their positions in the digital economy, Malaysia stands at a critical juncture. The question is no longer whether the public sector should participate in innovation and technology development but how it can do so most effectively.

At Permodalan Negeri Selangor Bhd (PNSB), along with other Selangor state-linked entities, we have embraced a conviction that we must evolve beyond traditional infrastructure and property development. As a wholly owned subsidiary of the Selangor state government under the supervision of Menteri Besar Selangor (Incorporated) or MBI, PNSB has deliberately positioned itself at the intersection of public mandate and commercial innovation. Our journey into venture capital and deep-tech investment offers valuable insights into how public sector involvement can catalyse genuine technological advancement.

In 2023, we established PNSB Innovation Ventures Sdn Bhd as a dedicated subsidiary focused on the venture capital ecosystem. Our first investment in iMotorbike highlighted our dedication to supporting Malaysian start-ups with growth-oriented business models.

iMotorbike is the leading platform in Southeast Asia for buying and selling used motorcycles, and is based in Glenmarie, Selangor. This investment decision was made by an independent investment committee and took into account consultation with private sector players such as The Hive Southeast Asia, an earlier investor in the company and which collaborates closely with the Selangor Information Technology and Digital Economy Corporation (Sidec).

iMotorbike has since demonstrated significant growth, expanding to Johor Bahru and Penang as well as Vietnam. The company has also raised a Series A round led by Headline, a global venture capital firm renowned for backing transformative B2B and B2C ventures, with participation from other prominent investors, including 500 Global, Gobi Partners and Endeavor Catalyst.

However, it was the establishment of Ehsan Semiconductor Fund in November 2025, in partnership with Sidec and venture capital fund Artem Ventures, which marked a strategic inflection point.

This RM100 million fund, targeting at least seven semiconductor-related start-ups, represents more than capital deployment. As Selangor Menteri Besar Datuk Seri Amirudin Shari emphasised, it is “not just a financial instrument but a long-term commitment to nurture local expertise in research, development and technological design”. The fund focuses on integrated circuit design, artificial intelligence (AI) chips and advanced semiconductor solutions — precisely the high-value segments in which Malaysia has historically underinvested.

The menteri besar’s observation that semiconductor investments backed by initiatives like the ARM Design Token Programme could help start-ups scale and list publicly within three to four years is particularly significant. This timeline creates a credible pathway for venture capital participation and investor confidence, transforming the ecosystem from speculative to strategic.

Malaysia’s economic success in semiconductors has been built largely on the back of manufacturing excellence — packaging and testing operations that employ thousands but generate limited intellectual property. While this foundation is important, it leaves us vulnerable in an industry increasingly defined by design capabilities and proprietary technology.

By investing in a dedicated semiconductor fund, the public sector forces a necessary shift up the value chain. We are no longer content to be the region’s assembly hub; we are building the capacity to design the chips ourselves. This transition requires patient capital, technical infrastructure and a willingness to accept that not every investment will succeed — precisely the role that public investment is uniquely positioned to play.

The fund’s focus on chip design, AI processors and advanced semiconductor solutions directly addresses this gap. Each start-up we back becomes a node in an expanding network of Malaysian intellectual property, creating defensible competitive advantages that cannot be easily replicated or relocated.

Malaysia has long struggled with the exodus of highly skilled engineers to Singapore, Taiwan and beyond. The loss of talent represents not just a failure to retain individuals but also a systemic inability to offer them opportunities that are commensurate with their skills.

By combining world-class educational institutions like Advanced Semiconductor Academy of Malaysia (ASEM), created by Sidec and The Hive Southeast Asia, and venture-backed commercial opportunities through Ehsan Semiconductor Fund, Selangor is creating a local environment where top engineers face a genuine choice. They can access cutting-edge technical work, launch their own ventures or join venture-backed chip start-ups — all without leaving home.

This approach raises the opportunity cost of emigration. When talented Malaysians can see a clear path from university to start-up to exit, the gravitational pull of foreign opportunities diminishes. Our role as venture capital partners in programmes like the Selangor Twin Accelerator Programme, including Deep-X and Retail-X, further diversifies the opportunities available to technical talent across sectors.

Perhaps the most underappreciated benefit of public sector venture investment is what it teaches policymakers. The Malaysia Venture Capital Roadmap 2024-2030 (MVCR) positions venture capital as a national tool to fund frontier technologies early and facilitate their diffusion into the broader economy. But regulations written in isolation from market realities often miss the mark.

Direct government involvement through vehicles like PNSB mitigates information asymmetry. When state-linked entities are active investors, policymakers gain access to real-world implications of regulatory decisions. They observe market dynamics first-hand, enabling proactive rather than reactive regulation. Moreover, the public sector gains early exposure to innovations that may eventually benefit government services, from healthcare to public administration.

PNSB anchors the fund’s operational model, deploying state capital under a clear investment mandate that channels government resources into commercially disciplined venture capital structures. Acting alongside established private venture capitalists such as The Hive Southeast Asia and Artem Ventures, PNSB ensures that public capital is deployed on market-driven terms with a clear focus on exit and profitability. This hybrid structure integrates public capital stewardship with private-sector investment rigour — ensuring that all investments are vetted by professional venture capitalists, aligned to market outcomes and simultaneously supportive of broader state economic and innovation objectives.

A critical principle underlying Selangor’s approach is that it should build enabling infrastructure rather than attempt to do the technology development itself. Through PNSB’s capital deployment and Sidec’s ecosystem coordination, we lower capital expenditure burdens for start-ups, allowing them to focus resources on research and development.

Projects like the Carey Island Edu-Tech Park exemplify this philosophy of creating physical and institutional infrastructure that supports innovation without dictating its direction. Similarly, our affordable housing initiative through PNSB Construction Sdn Bhd under the Rumah Idaman MBI scheme demonstrates how state-linked entities can address public needs while maintaining commercial discipline.

This approach aligns seamlessly with the National Semiconductor Strategy and MVCR. Rather than establishing government labs that compete with private innovation, we coordinate policy and procurement to create demand signals that guide private investment. Sidec provides connections between federal agencies, start-ups and Selangor’s commercial arms, creating a coherent ecosystem rather than fragmented initiatives.

Malaysia’s innovation revolution will not be driven by government alone, nor by the private sector in isolation. It requires a sophisticated partnership model where public capital de-risks early-stage investment, professional venture expertise ensures commercial discipline, and policy coordination aligns incentives across the ecosystem.

At PNSB, we view our role as catalytic rather than dominant. We plan to invest where markets alone would underinvest, we build infrastructure that enables rather than constrains, and we learn from our portfolio to inform better policy. The semiconductor fund, our accelerator partnerships and our venture subsidiary represent experiments in a new model of state capitalism — one that respects market mechanisms while pursuing strategic national objectives.

The technology revolution Malaysia needs will be measured not in factories built or jobs created, but in intellectual property generated, talent retained and capabilities developed. Public sector investment, thoughtfully deployed, can be the catalyst that transforms aspiration into achievement.

Raja Ahmad Shahrir Iskandar is CEO of Permodalan Negeri Selangor Bhd. This opinion piece is part of The Hive’s ongoing biweekly series, which explores how private capital drives innovation and growth in Malaysia and Asean.

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