Managing Science, Technology and Innovation in a Late Industrializing Country: The Experience of Mal

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Managing Science, Technology and Innovation in a
Late Industrializing Country The Experience of
Malaysia

• Lecture 3

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What will this presentation cover

• Theoretical Insights
• -K-Economy and NIS
• Overview of Malaysias Economy
• Science, Technology and
• Innovation in Malaysia
• Summary of 2006 Indicators Report
• Way Forward

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The World Has Changed!

• Success is not about ownership of land, labour
  and capital but about acquisition, generation and
  diffusion of knowledge putting value into
  knowledge (knoVa)

People who own ideas have become more important
than people who own machines
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Knowledge-based Economy

• An economy where knowledge, creativity and
  innovation play an ever-increasing and important
  role in generating and sustaining growth.

• The i³ Challenge New Zealands Response to the
  Knowledge Economy
• Ideas
• Innovation
• Investment

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K-Economy Key Elements

• an economic framework that fosters the
  acquisition, development and use of knowledge
• an education system that enables citizens to
  create and use knowledge
• innovation systems or networks to develop new
  knowledge and technologies
• Organizations that are flexible and responsive to
  changes
• Sound information infrastructure

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Knowledge and Growth
Labour
Growth
Capital
TFP
Knowledge
Source Zainal Aznam Yusof, 2001
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Knowledge Economy Index (KEI) and GDP per Capita
? Knowledge is critically linked to economic
performance
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National Innovation System

• NIS is a set of distinct institutions which
  jointly and individually contribute to the
  development and diffusion of new technologies,
  and which provide the framework within which
  governments form and implement policies to
  influence the innovation process.

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Industry/Firm
Government
Academia
Society
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• In short, NSI is about 3L
• Linking - connecting with outside to acquire
  technologies and skills
• Leveraging - going beyond arms-length
  transactions to squeeze as much as possible from
  the relationships
• Learning- making the many efforts to consciously
  build the foundation for improving current
  technologies and creating new ones

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MALAYSIA KEY ECONOMIC INDICATORS
Source EPU
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The Economy At a Glance

• Impressive GDP growth 5.5 2008
• Economy more and more developed. Service sector
  largest (nearly 60).But manufacturing (over 30
  of GDP and 80 of exports) important.

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• An open economy-18th biggest trading nation in
  the world
• E E accounts for nearly 50 of manufacturing
  output and over 40 of exports a strength and
  vulnerability

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The Malaysian economy has undergone profound
structural changes
In 1957 -agriculture, forestry fishing 40
of GDP By 1987 -manufacturing played a more
dominant role Going forward -focusing on
enhancing value-add of productive activities
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Malaysias GDP growth has been relatively robust
since the 1960s GDP grown by average 6.3 per
annum in this period GNP per capita grew 18
times since independence from US200 in 1957 to
US3,600.8 in 2002 By 2002, unemployment fell to
3.5 (1970 7.7), and incidence of poverty fell
to 4.5 (1970 52.4)
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ISSUES OF INDUSTRIAL DEVELOPMENT IN 90s

• Malaysia at a critical cross-road because of
  increasing complex global trade and investment
  environment
• Reduced comparative advantage, no longer low
  labour cost
• Labour shortages, both skilled unskilled
• Low level of RD activity
• Bottlenecks in support infrastructure
• Inter-intra industry linkages still low
• Lack of indigenous technology marketing
  capability

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The Value Chain
Value-Added Per Employee
PLUS
PLUS
Malaysias emphasis before 1996
Production (Basic Processes/ Conventional Assembly
)
RD Product Design Product Development
Procurement Logistics Distribution Marketing
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CHALLENGES TO BE ADDRESSED

• Competitiveness
• Brain Drain
• Income Disparity
• Jobless growth
• Sustainable development
• Enhancing and expanding linkages

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Brief Profile of ST in Malaysia

• IMR established in 1901 followed by RRIM in 1925
  and FRIM in 1929
• MOSTI constituted in 1976
• NCSRD in 1975
• National ST Policy formulated in 1986
• IMP launched 1986

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• Fifth Plan witnessed first time inclusion of
  separate chapter on ST
• IRPA mechanism introduced in 1988
• Action Plan on Industrial Technology Development
  was accepted by Govt. in 1990
• IMP2 1996
• Second ST Policy 2003
• Biotechnology Policy 2005
• IMP3 2006
• National Innovation Council 2006

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Science and Technology Policy

• Science Technology Policy 1986
• - sets out the framework for ST development
• Second ST Policy (STP II) introduced in 2003
• - provides a framework for improved performance
  and long-term growth of the Malaysian economy

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• Goal
• Accelerate the development of ST capability and
  capacity for national competitiveness
• Objectives
• Increase GERD/GDP to 1.5 by 2010
• Increase number of researchers to 60 per 10,000
  labour force

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9th Plan Targets for STI

• Increase GERD to 1.5 per cent of GDP
• Increase RSEs to 50 per 10,000 workforce
• Creation of 300 ST-based companies and 50
  companies with global partnerships

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Funding Mechanism

• Increased funding for RD and commercialization
  from RM1,264.8 million to RM 3,567.4 million (2.8
  times)
• Restructured funding mechanism to address gaps
  and imbalance between RD and commercialization-

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• -consolidation of existing RD funds into 2
  types, i.e Science Fund (research) and Techno
  Fund (development pre-commercialization)
• -enhancement of commercialization fund
• Ratio of RDC allocation from 73.3 26.7 to
  44.3 55.7

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RDC Funding Mechanism in 9MP
RD
COMMERCIALISATION
PRE-RD
PRE-COM
Incubation/ Early Growth
Value Realisation
Prototype Development
Mature Stage
Pre-RD Process
Value Analysis
Concept/ Idea
Basic R
Applied R
Pilot Plant / CR Prototype
ScienceFund
Priority Setting, Technology Scanning
TechnoFund
CRDF,TAF/ TAF-W
VCs, MAVCAP,MOF, Industries
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Key ST Institutions

• Cabinet highest policy making organ
• Ministry of Science, Technology and Innovation
  (MOSTI) responsible for developing and
  implementing policies and programmes on STI

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• National Innovation Council (NIC) sets
  strategic direction for enhancing the innovative
  capacity coordinates policy initiatives that
  impact on innovation
• National Council for Scientific Research and
  Development NCSRD an advisory body that
  oversees public sector research

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MOSTI Key ST Programmes

• Enhancing public sector RD capabilities
• promote commercialisation of research and
  technology
• increase industry participation in RD thru
  various grant schemes
• strengthen ST manpower development

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• enhance public understanding of ST
• develop capabilities in strategic technologies
• strengthening coordination and management of ST
• international ST collaboration

Budget for RD under 9th Plan (2006-2010) -
almost US 1.1 billion (double that of previous
plan)
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Perspectives on Malaysias STI

• Participation and Orientation
• Public sector driven
• Supply push orientation
• policy measures more input driven less output
  focused
• STI efforts largely national - weak regional and
  local initiatives

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• Governance and Performance
• Weaknesses in MOSTI to steer STI agenda
• poor implementation and monitoring mechanism
• Weak capabilities to exploit research findings
• Research funding and incentives - limited in
  scope, cumbersome and time consuming

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• Partnerships and Prioritization
• Poor linkages with industry
• Diffused research efforts need for focusing
• weak diffusion efforts
• Poor attention to developing absorptive
  capabilities of SMEs

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• People and Education
• Poor post-graduate enrollment in science and
  engineering disciplines
• Unattractive career prospects for researchers
• Poor formulation of schemes to attract Malaysian
  and foreign talent
• Education system largely rote-learning and
  examination-oriented

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• Culture and Community
• Community not engaged in policy formulation
• Emphasis given to professionalisation of ST but
  not its institutionalisation

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What can we summarize about STI in Malaysia
Strategy - ineffective mechanisms need for
selectivity
Structure - structure is sound but champion
agency weak to steer national agenda
Towards Strength-ening Our Ability to Harness STI
for Wealth Creation and Social Well-being
System - slow, stringent cumbersome poorly
developed linkages
Skills lack of skilled personnel in SE lack
of absorptive capabilities rote learning
Style centralised weak regional or local
initiatives
Society not engaged weak institutionalisation
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What have we achieved todate

• Increasing budget for ST including manpower
  development and education
• Research funding mechanism consolidated
• establishment of dedicated RIs and other
  institutions
• Skills Development Fund
• Increasing support for innovation
• More industry engagement in RD/innovation
  related activities
• Initiatives such as MSC and Bionexus

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STI (Input) Indicators, 1996-2004
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STI INDICATORS (OUTPUT), 1996 - 2002
1996
2000
2004
Total Patents Filed - Resident -
Non-resident Total Patents Granted -
Resident - Non-resident Publications in
International Journals Royalties (RM million)
- Receipts - Payments - Net
5,575 221 5,345 1,801 79 1,722 1,555
72.2 1,094.2 -1,022
5,963 193 5,770 566 21
545 1,767 71.7 1,451.7 -1,380
27,661 2,013 25,648 9,395 142
9,253 5,688 193 3,370 -3,177
2001-2005 period
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National RD Manpower (Headcount)
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RSEs International Benchmark
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GERD/GDP International Benchmark
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Comparison of Quantity of ISI papers in ASEAN
(2001-2005)
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Patent Applications Filed in Malaysia by
Malaysians and Non-Malaysians for period 1996
2000 and 2001 2005
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Patents Granted to Malaysians and Non-Malaysians
by the Intellectual Property Corporation of
Malaysia (MyIPO) for period 1996 2000 and 2001
2005
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Malaysian Science and TechnologyIndicators
Report 2006

• DRAFT FINAL REPORT
• DECEMBER 2006

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Stocktake 1 Education in STI

• Increase in students registration for science and
  mathematics at SPM and STPM levels
• Decline in proportion of Arts students in
  first-degree enrolment in public IHLs
• Sharp increase in postgraduate enrolment and
  graduation where Arts students predominate. Ratio
  of PG to UG enrolment increased from 1 14 (1994)
  to 1 6.7 in 2004
• First degree enrolment at private HEIs almost 50
  that of public IHLs
• More women enrolment and graduates at
  first-degree level in both Arts and Sciences

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Stocktake 2 RD Manpower

• Substantial increase in RSEs both in headcount
  and in FTE. However, numbers of support staff
  static
• Increasing representation of women research
  personnel
• Trend of increasing qualification among
  researchers

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Stocktake 3 RD Expenditure

• Slight decline in research intensity (0.69 to
  0.63)
• Industry leads in RD expenditure. Most RD
  expenditure by large firms
• Most expenditure devoted to applied research
• Foreign firms accounted for 44 of total industry
  RD expenditure
• Bulk of RD conducted in Malaysia

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Stocktake 4 Public Support for ST

• The total amount of RD grant approved under the
  various grant incentives declined in 2004
• Sharp increase in amount granted under
  double-deduction tax relief
• Increasing investments by foreign companies in
  provision of RD services
• Need to address grouses of industry when applying
  for incentives

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Stocktake 5 Innovation in the Manufacturing
Sector

• Improvements in incidence of innovation over
  previous periods
• Dominance of large firms reporting innovation.
  Decline in local firms
• Low incidence of intellectual property
  registration
• Most firms reported favourable environment
  particularly role of universities and government
  support

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Stocktake 6 Trade in Technology

• Despite some improvements services account
  continues to be negative with the deficits
  remaining high.
• The high deficits in royalty payments for
  intellectual property suggests that Malaysia is
  still a net technological learner typical of
  economies still located low in the technological
  ladder.
• There is thus a need to strengthen government
  policy to quicken further learning and innovation
  in firms in Malaysia.

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Stocktake 7 Publications and Citations

• Malaysias contribution to global scientific
  publications is low both in terms of output as
  well as quality stagnant global share (0.09)
• growth in output for some strategic fields such
  as Applied Physics/Condensed Matter/Materials
  Science and Material Science Engineering as
  well as in Biotechnology and Applied
  Microbiology
• Huge gap in publishing between IHLs and GRIs
• Publishing in top journals is minimal.

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Stocktake 8 Patents

• 119 increase in patents granted for period
  2001-2005 over previous 5 year period
• Declining number (142) of patents granted to
  Malaysians although applications have increased
• Patenting activity abroad insignificant
• Time taken for obtaining a patent (4 - 5 years)
  behind that of Korea, Singapore and US

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Stocktake 9 ICT

• Surge in cellular phone subscription while
  decline in DEL segment
• Steady increase in Internet usage although
  largely (88) through dial-up
• Similar upward trend in computer ownership
• Expansion in e-commerce transactions
• Malaysias declining share of global ICT market

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Stocktake 10 Public Awareness of Science and
Technology Malaysia.

• Attitude of Malaysians towards ST has improved
  appreciably over the years.
• An analysis of trends from 1998 to 2004 revealed
  that interest of Malaysian public towards ST has
  remained relatively constant
• Malaysians have a relatively good understanding
  of scientific concepts and knowledge but poor on
  questions that require higher order scientific
  knowledge. Also, we do not fare well on questions
  that impinge on religious sensitivities

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What are the findings telling us?
PROGRESS in

• Increasing Gross Expenditure RD
• Increasing no. of researchers
• Increasing science enrolment both at first degree
  and post-graduate levels
• Expanding range and scope of incentives for STI
• Attracting foreign investments in RD
• Increasing incidence of innovation

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• Reducing deficit in technology balance
• Reducing time for patent to be granted
• Increasing internet and computer access
• Increase in publications in selected fields
• Increase in attitudes towards STI

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BUT, we need to address the following

• Education in STI
• need to increase science and engineering PG
  enrolment to boost research activity
• Need to strengthen postgraduate education in
  private HEIs

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• RD Manpower
• need to address problem of static growth of
  supporting staff and technicians
• Anecdotal evidence suggest exodus of senior
  researchers over next 2-3 years succession
  planning/mentoring must be in place

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• RD expenditure
• Our RD spending is increasing steadily but our
  competitors are investing more in RD need to
  enhance returns from our RD investments
• Our IHLs and PRIs are overly dependent on public
  funding for RD expand joint/collaborative
  efforts
• Most RD undertaken by large firms - Need to
  ensure more SMEs engage in RD issues
  pertaining to strengthening absorptive
  capabilities of SMEs have to be addressed

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• Public Support for STI
• Noticeable decline in RD grant approved under
  the various grant schemes since 2004 does not
  bode well for industry to seek such funding.
  Efforts must be made to encourage more firms to
  apply for these incentives as well as to enhance
  the administrative machinery governing the
  approval of these grants

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• Innovation in the Manufacturing Sector
• Importance of innovation recognised but mainly
  undertakan by large firms Need to support SMEs
• Also, need to address
• -Declining number of firms reporting increase in
  new product development and increase in firms
  reporting falling innovation-related expenditure

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• Trade in Technology
• Despite some improvements services account
  continues to be negative with the deficits
  remaining high.
• There is thus a need to strengthen government
  policy to quicken further learning and innovation
  in firms in Malaysia.
• The growth in surplus involving construction and
  engineering involving other economies also
  suggests that the government should encourage
  diversification of service markets.

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• Patenting
• Low patenting call for
• Enhancing awareness of patenting among firms
  (SMEs) and public institutions
• Provision of funds/incentives to encourage
  patenting
• Strict enforcement of patent rights

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• Publications
• Our scientific publication performance is low. We
  are even losing out to our ASEAN neighbours in
  terms of citations
• Our record of publishing in high impact journals
  is also poor
• Low publication performance by GRIs

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• Public Awareness
• Our lower scores on understanding of ST
  necessitates more proactive measures to increase
  public awareness of ST, and to review the
  effectiveness of the programs.

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STI Performance Scorecard 2006
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The Way Forward Facing the STI Challenges of the
21st Century
FACES

• Focused and Flexible
• Autonomous
• Connections and Commitment
• Equilibrium
• Skills and Society

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• Focused and Flexible
• Concentrate on value-add activities and
  activities that build on firms capabilities
• Build on our past strengths
• Schemes to be flexible and friendly
• Promote and strengthen clusters

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• Autonomous/governance
• PRIs/universities/institutions more autonomous
• Administrative reforms to reduce bureaucracy
• Greater industry involvement in PRIs/universities

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• Connections and Commitment
• Support network groupings
• Strengthen diffusion efforts
• Engage our citizens abroad with emphasis on
  developing partnerships
• Support industry association technology
  activities
• Establishment of high level council to oversee
  STI agenda
• Strong monitoring, evaluation and reporting
  mechanism

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• Equilibrium
• balance between
• basic/applied
• short-term and long-term
• sciences and arts
• Traditional sectors vs new sectors

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• Skills and Society
• Reform education system to foster creativity,
  thinking and language skills
• Expand post-graduate science, technical and
  engineering enrollment
• Strengthen skills and training delivery system
• Enhance managerial skills of public
  organisations
• Introduce acculturation programmes to elicit
  greater societal support for STI

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Lessons for Managing STI
People Partnerships Processes Prioritization Perfo
rmance
5Ps
Effective management of these elements central to
success
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The Sisyphus Challenge
Multiple hills to conquer never-ending quest to
keep up with advances in science and technology

• There is no rest in the Sisyphean task of
  building knowledge and innovation capabilities

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China will catch up by 2010 Can Malaysia follow
suit?
Source EU Commission 2005
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Summary

• 3Ls
• FACES
• 5Ps
• There is no one best approach - a mixture of
  approaches which will change over time and need.
  Policy-making needs to be innovative itself