The Network State Dream Meets Malaysian Reality

By:Leticia Liew En Qi

Not too long ago, the Network School, a co-living and co-working startup community in Forest City, was shut down. A seemingly foolish action: driving advanced tech out of the country and kicking out digital nomads- how could Johor not come to regret this?

Well, in this article we will explore exactly what the Network School actually is, the lead-up to its closure and why this matters at all.

What is the Network School? 

Despite its name, the Network School is far from conventional. Instead, it was a working retreat where people could work, make ideas into reality, build connections, enjoy themselves, and attend talks. 

As a subversion of standard schools, the Network School possessed many unique elements; one such example was a focus on well-being, with students encouraged to work out and stay in shape. However, this would come at a cost: a staggering 1500 USD monthly membership fee. Thus, an overwhelming majority of its students were overseas tech builders and elite entrepreneurs. 

Why would people join Network School? 

The Network School exposes the gap between private ventures and government-backed startups. In Network School, youths could launch programmes freely at any time, while state-backed startups must strictly adhere to regulatory frameworks before launch, ensuring they align with immigration rules and corporate governance standards. Funding for startups in Network School bypasses physical banks through cryptocurrency, while government-funded startups are paid for by taxpayer money. Local government startups are legally and contractually obligated to generate economic returns and keep that wealth in Malaysia, while the high-value economic assets made through private startups are borderless and focus on generating global network wealth. Especially for international workers, the Network School provided freedom and flexibility. 

A Possible Network State? 

In 2022, Balaji Srinivasan published a book titled "The Network State". The ultimate goal of this concept was to create interconnected digital hubs independent of any country. To achieve this, three things had to be set up: a community with shared values, a currency for this digital hub, and physical land. When the Network School was established, it was perceived as the first step towards this goal. Unfortunately, in the process, it raised major concerns over immigration, as the school built a community of digital nomads working there and treating the school like a comfortable second home. This is where the cracks in public perception began to form, something only furthered by their isolation.

Isolated from Reality

Beyond immigration concerns, the Network School was not even registered under the Private Higher Educational Institutions Act 1996 and therefore was not recognised by the ministry. It had zero collaboration or involvement with any other higher education institutions, leaving it out of touch with the rest of Malaysia’s higher education sector. Its advertisements refused to acknowledge the fact that it was located in Malaysia, referring to it simply as a "man-made island near Singapore". Building this school on a "ghost town" in Johor made it isolated both geographically and in practice. This unsettled many citizens, as many saw this as a sign that they were getting ready to break off from Malaysia. And they soon would, but not by choice.

The Exposé

Following an anonymous tip-off that Israelis were permitted to attend the school using secondary passports, the Immigration Department ran an investigation. However, it would prove to be fruitless.

Nevertheless, this managed to spark further investigations by the Iskandar Puteri City Council (MBIP), directly resulting in the business license of NSO Malaysia Sdn. Bhd. (the Network School operator) was revoked for breaching licensing conditions and premise usage requirements. 

As the Johor state election was around the corner, a rapid response towards this incident was speculated to win the favour of the public. This meant that shortly after the business license revocation, the Network School signboard was taken down, and enforcement officers sealed up the area.

Balaji Srinivasan on stage during the Bitcoin Asia conference in Hong Kong, China (Chan Long Hei/Bloomberg)

Is Malaysia worth investing in?

-Balaji Srinivasan on X

The Response

Its founder, Balaji Srinivasan, promptly moved the Network School operations to Kazakhstan, but not before pulling out of a RM500 million expansion plan and requesting an audience with Prime Minister Anwar Ibrahim to discuss a Memorandum of Understanding for Network School to resume operations in return for complying with local laws and respecting national sovereignty. He emphasised that the school had boosted Malaysia’s economy and built its reputation as a tech hub, and that Malaysia is making a huge mistake by shutting down Network School.

The government has repeated many times that Malaysia is not against tech development; they simply want to protect our national sovereignty. This is a dangerous lesson on what a country is willing to compromise for the sake of digital advancement. If allowed to continue, this school could go two ways: a hopeful prospect for Malaysia’s tech industry, or a rising threat towards Malaysian land.