by | Prof Emeritus Dato’ Dr. Zakri Abdul Hamid, Science Advisor to the Prime Minister of Malaysia /Joint Chairman – Government, MIGHT
MALAYSIA has successfully transformed its economy from its original agricultural base to one characterised by strong manufacturing and service sectors. This ongoing transition moves Malaysia ever closer to its official Vision 2020: a high income economy based on innovation and knowledge generation.
Underpinning a high income economy are science, technology and innovation, which together form an important contributor to economic growth and help determine the competitiveness of firms in the marketplace, nationally and internationally.
A prerequisite for technological advancement is research and development (R&D). The level of R&D expenditure is a reliable indicator of innovative capacity and the 10th Malaysia Plan aims to achieve R&D investment of at least one per cent of GDP by 2015. Reaching that goal will require a bold commitment, including large injections of funds from the government and, more importantly, the private sector.
Across the world, the private sector carries out twothirds to three-quarters of R&D activities. Private sector involvement in research-driven activities, therefore, is key to Malaysia’s economic growth and competitiveness.
Private sector involvement in research-driven activities, therefore, is key to Malaysia’s economic growth and competitiveness.
Because the private sector is closer to the market, it is better positioned to create wealth through R&D — transforming knowledge into products and services that Malaysians and others in today’s global marketplace need, want and will pay for. Private sector R&D will also strengthen the firms involved in innovation, which in turn allow them to improve productivity, succeed in competitive markets, and meet environmental and regulatory standards.
Although the private sector traditionally develops research capabilities in-house, they also establish collaborative links with other organisations, such as universities, and acquire the results of innovation from other enterprises through licensing or takeovers. Finally, private sector R&D creates highly skilled human capital.
Various mechanisms were introduced globally to promote private sector R&D. Widely used financial instruments include subsidies/grants and tax incentives. For example: A generation ago the United States was one of the first nations to encourage private sector R&D through tax credits. Since then, a range of economists have agreed that every tax credit dollar stimulates from US$1 (RM3) to US$3 in additional private investment by US companies.
In the case of Malaysia, the main R&D incentives are granted in the form of “pioneer status”, investment tax allowance and double deduction or tax exemption. However, an innovative, bolder approach is needed to enhance private sector R&D activities, attract foreign investment and stimulate domestic investment to achieve Vision 2020.
Toward this end, the Malaysian Industry Government Group for High Technology (MIGHT), under the Prime Minister’s Department, was instrumental in nurturing and encouraging private sector R&D in the past. MIGHT has come a long way since its establishment in 1993 as a not for- profit, industry government partnership with a mission to promote high technology development in Malaysia.
MIGHT’s agenda remains focused on two major challenges.
First: provide measured opinions on cross sectoral issues or cross-cutting technologies, and, second: take actions needed to harness the commercial applications of technology to foster a better economic future for the nation.
MIGHT believes the nation’s future rests on its ability to continuously harness technology for business and create new industries. What is needed is a continuous, systematic effort to prospect for strategic technologies in both the traditional fields like manufacturing and new fields, such as biotechnology and nanotechnology.
One interesting initiative to boost private sector R&D was the offset management activities through MIGHT’s Technology Depository Agency for the Finance Ministry. The service plays a strategic government role undertaken for the purpose of ensuring that national procurement programmes support the country’s development objectives through acquisitions of technology, industrial participation and market access.
MIGHT is working closely with ministries and industry players to ensure that the offset programmes are developed and structured to address issues related to the development of strategic industry in the country, leveraging major acquisitions by the government and government-linked companies. These efforts respond to the prime minister’s call to create more revenue-based projects, and for the private sector to lead in creating wealth for Malaysia.
An innovative approach championed by MIGHT to encourage private sector R&D is the recent founding of the Aerospace Manufacturing Innovation Centre (AMIC). Jointly funded by the government and industry, the centre’s participants include the European Aeronautic Defence and Space Company, Rolls-Royce and Composite Technology Research Malaysia.
A significant feature of AMIC is that the R&D, conducted by a university consortium, will encourage local industry to participate and base its research pursuits on industry needs.
AMIC will also train local talent with courses at Master’s and PhD levels in the field of aerospace technology.
The AMIC R&D centre of excellence is modelled on the Advanced Manufacturing Research Centre (AMRC) in Sheffield, United Kingdom. It is founded on the shared scientific excellence, expertise and technological innovation of the world’s leading aerospace companies, and world class research within the University of Sheffield’s Faculty of Engineering.
It develops innovative and advanced technology solutions for materials forming, metal working and castings.
It also has internationally acknowledged research in the field of composite materials, an area crucial to the development of Boeing’s next generation aircraft.
Achieving the right balance between the public sector and private industry is a complicated economic endeavour for a country like Malaysia — a small country with relatively limited resources. But neither the private sector’s invisible hand nor governmental heavy-handedness can be the solution.
It is true that the private sector cannot spur an innovation agenda without the government, but it is equally true that the government cannot replace private-sector market forces. It is imperative that the public and private sectors work together well.
This article was published in Th News Straits Times, 20 August 2011