Far East connections

After the valleys, glens and fens - comes Silicon Peninsula. Andrew North on Malaysia's 'cyber state'

A hill in the midst of a rubber plantation is not the obvious choice of location for promoting your technological vision. But no one was doubting the seriousness of Malaysia's Prime Minister when he stood in just such a place outside the capital Kuala Lumpur last month to launch what is being billed as the world's first "digital state", a haven for hi-tech enterprise and 21st-century living.

In fact, Dr Mahathir bin Mohamed is so serious about the idea that he is now on an extended world tour, wooing potential investors. The technology gurus in California's Silicon Valley, in Japan and in London have already received a dose of his determination.

The foundation for this ambitious idea is the so-called Multimedia Super Corridor (MSC), a 750-sq-km strip of land south of Kuala Lumpur, aimed at attracting software firms, electronic publishers, telecommunications specialists and other multimedia ventures. Lavish investment incentives, such as a 10-year tax holiday, are being dangled in front of would-be investors, as well as new cyberlaws to protect intellectual property. One of the key elements is a "multimedia university" to foster research.

A 2.5-10 gigabit per second fibre-optic network will link every building in the MSC and officials say they want to experiment with "electronic government". Special kiosks will be set up to handle day-to-day matters such as renewing driving licences and passports. "The establishment of the MSC will enable Malaysians to leapfrog into the Information Age," Dr Mahathir predicts.

Work is under way on the site and the Multimedia Development Corporation (MDC), the government agency responsible for the project, claims that 41 companies have already committed themselves to investing in the MSC, including Intel, Siemens, BT and Mitsubishi Corporation. Eventually, there will be a "cybercity" of some 240,000 people on the site of that hill, known as Cyberjaya, which apparently means "Cyber-success" in Malay. Just to the east will be the new federal capital, Putrajaya, and at the southern end of the MSC will stand a new international airport. In the long term, Dr Mahathir is hoping to create an environment "similar to that which prevails in Silicon Valley in the US".

That reference to what has become the world's technology capital is the key to understanding the whole venture. Malaysia is already a hi-tech manufacturing centre, churning out chips and circuit-boards. But Dr Mahathir wants it to become a centre for innovation, to achieve his aim of turning the country into one of the Far East's economic superpowers. The trouble is that rivals such as South Korea, Taiwan and Singapore have a head start. Neighbouring Singapore's plans to create a "wired state" are well advanced and it is already attracting much of the research and development investment Dr Mahathir is after.

Yet, with just 3 million people compared with Malaysia's 20 million, Singapore has a much smaller workforce to call on. And it is literally running out of land. Officials from the MDC have been subtly playing up these differences to would-be investors. Another disincentive is Singapore's censorship of Internet use. By contrast, one of the 10 guarantees for companies setting up in the MSC is "No Internet Censorship".

But how realistic is it to try to re-create Silicon Valley from scratch? Silicon Valley was not the result of a grand government plan. It began almost by accident, although the proximity of research centres like Stanford University certainly helped. But Malaysia does not even have an academic research centre; it is having to build everything. Moreover, some people question whether the country can afford the huge infrastructure costs of setting up the MSC.

Perhaps the greatest obstacle facing the MSC plan is the shortage of technology specialists. Dr Mahathir admitted as much when he spoke to executives in California: "We know we are weak in knowledge workers." But the MDC hopes to overcome this by allowing companies to recruit from anywhere in the world and guaranteeing minimum visa restrictions. Subsidised housing is also being offered to expatriate specialists.

Even then, some companies may be tempted to exploit the investment incentives without setting up the permanent R&D bases Dr Mahathir is seeking. In other words, they could just be satellite operations, easily closed when economic conditions deteriorate. Reports that Microsoft, which has a seat on the MDC's advisory panel, plans to set up its first big research base outside the US in Cambridge show that the attractions of centres of expertise are still powerful.

But one thing is certain. Dr Mahathir is not going to sit back and take no for an answer. If you run a hi-tech company and don't invest in his digital state, he will be knocking on your door demanding to know whyn