STI POLICY IMPERATIVES (With Special Reference To The Malaysian Experience

Tan Sri Datuk Dr Omar Abdul Rahman Senior Fellow & Founding President, Academy of Sciences Malaysia; Coordinator, STI Policy Consultative Unit, UNESCO‟s International Science, Technology and Innovation Centre for South-South Cooperation (ISTIC), Kuala Lumpur, Malaysia; Chairman, Commonwealth Partnership for Technology Management – CPTM Ltd., London; Science Advisor to the Prime Minister of Malaysia (1984 – 2001)


In the Innovation Economy, policy consideration must span the whole
concept and processes of Science, Technology and Innovation. The

Ecosystem of the Innovation Economy must include the sub-systems
of creativity, entrepreneurship and commercialization. Basic concepts

are discussed and generic policy frameworks will be presented. The
achievement of Malaysia in the context of these frameworks are

The Malaysian experience will be useful to policy makers. Improvements to the generic policy frameworks which are more country specific may emerge from the discussions.




The Essentials of the K-Economy / the Innovation
Economy STI Policy for the Innovation Economy – sharing


Malaysia‟s Experience
C. STI Policy Imperatives – Proposed Framework


A. The Essentials of the K-Economy / The Innovation Economy



The K-Economy is essentially about increased application of knowledge in:
Traditional economic sectors using various available enabling

technologies : ICT, biotech, nano-tech, new materials, etc.
New Economic Sectors which are ICT – enabled : e - or i – businesses Green Economy Sectors

Governance – application of relevant technologies in public and
corporate governance for improved productivity, efficiency, profitability.


including green products Innovation is the Driver (+ Green Innovation) 6 .2 K-ECONOMY = INNOVATION ECONOMY Knowledge (science) does not impact economy directly Technology and Innovation Do Hence K-Economy = Innovation Economy Innovation Economy – Growth through economic restructuring and diversification into production of manufactured goods and others modern goods and services with high value added.A.

scientific basis.A. economic viability 7 . technological feasibility. green innovation Sustainability consideration.3 GREEN ECONOMY New emphasis related to sustainability Green technologies.

A.4 AREAS OF INNOVATION Science & Technology Governance – policies and implementation Business practices Geo-politics Socio-economic issues Strategies & alliances TECHNOLOGICAL INNOVATION Vs SOFT INNOVATION 8 .

A. UK Research Report July 2009 MASS INNOVATION – GRASSROOTS INNOVATION  NOW EVERYONE CAN INNOVATE ! 9 . ii. Changes in products in the creative industry Aesthetic innovation in goods and services primarily functional in nature Soft innovations significant if economically important Soft Innovation. NESTA.5 SOFT INNOVATION Changes in aesthetics more than changes in technology i.

A. Advertisement  After sales services  Customer loyalty SOFT INNOVATION TECHNOLOGICAL INNOVATION TECHNOLOGY PROVIDER  Products  Devices  Accessories BUSINESS ENABLER  Work Force  Business Processes  Cost cutting and productivity increases  Financial management SOFT INNOVATION Soft innovation often possible only because of Technological Innovation 10 .6 INTER-RELATION BETWEEN SOFT INNOVATION AND TECHNOLOGICAL INNOVATION TECHNOLOGY-BASED BUSINESS BUSINESS DRIVER  Sales and Marketing  Promotion.

7 PRIMARY POLICY CONSIDERATIONS FOR THE INNOVATION ECONOMY Total National Capacity in Science.A. Technology and Innovation Integrated Human Capital Development Status of STI in Industry – Industry‟s appetite for STI Information Flow And STI Advisory System 11 .

12 . processes. etc) A private sector capable of creating wealth through application of technology and innovation in all sectors of the economy. funds. A government committed to providing a comprehensive STI Infrastructure (soft and hard: institutions. innovativeness and entrepreneurship. A society imbibed with a culture of creativity.A.8 TOTAL NATIONAL CAPACITY IN STI Innovation Economy dependent on Total National Capacity – (TNC) in STI : A scientific community able to contribute to and draw from the global pool of scientific and technological knowledge.

apply and utilize technology and innovation Management of the interface between the two (in both Government and Industry) The above constitute the Core Elements of STI Policy for the Innovation Economy 13 .9 IMPLICATION OF TOTAL NATIONAL CAPACITY (TNC) in STI Doing good Science is not good enough.A. Good Science must translate into innovative technologies at the marketplace TNC in STI therefore requires an STI Policy encompassing Capacity to develop (R&D) and to acquire technology (technology transfer) Capacity to commercialize.

A.10 CORE ELEMENTS OF STI POLICY Technology Generation and Acquisition Technology Utilization And Commercialization (Interface) 14 .

Enhancement of capacity to generate and acquire STI.A. utilize. acquire. commercialize and manage STI. Creation of the right environment (Ecosystem) for the Innovation Economy.11 STI POLICY FRAMEWORK Enhancement of science advisory and consultative system and processes. Enhancement of capacity to evaluate. Development of human capital. (all the above apply to both government and industry) 15 .

A.12 THE ECOSYSTEM OF INNOVATION ECONOMY Smart Partnership Practices K-Intensive Governance (Public/Private sectors) K-Generation and Acquisition K-Utilization and Commercialization Human Capital Development • Capacity and capability building • Entrepreneur development Culture of Creativity and Innovation Science Ethics Practices 16 .

A.13 THE INNOVATION ECOSYSTEM MUST BE SUPPORTED BY: Creativity Ecosystem Entrepreneurship Ecosystem Commercialization Ecosystem AND Smart Partnership Practices Science Ethics Practices “Human Capital Development” 17 .

B. STI Policy For The Innovation Economy – Sharing Malaysia‟s Experience 18 .

II (1996 – 2005).2010 19 . current: 9th Plan (2006 – 2010).1 STI POLICY – MALAYSIA’S EXPERIENCE Rukun Negara 5 .year Development Plans – starting 5th Plan (1986 – 1990).2009 The New Economic Model (NEM) .B. Aerospace. 10th Plan (2011 – 2015) National Science and Technology Policy I (1986) and Policy II (2003) Action Plan for Industrial Technology Development – 1990 Vision 2020 – February 1991 Industrial Master Plan I (1986 – 1995). etc National Innovation Model . III (2006 – 2020) K-Economy Master Plan – 2002 Sub-sectors – IT. Biotechnology.

Mahathir Mohamad. caring. robust and resilient ”. . economically just and equitable. dynamic. infused by strong moral and ethical values. progressive and prosperous and in full possession of an economy that is competitive.B. living in a society that is democratic. with a confident Malaysian Society. 28 February 1991 20 . liberal and tolerant.2 VISION 2020 To be developed nation in our own mould by year 2020 characterized by … “a united nation.

. Establishing a scientific and progressive society that is innovative and forward looking.” 9th Challenge “ . robust and resilient ”. Establishing a prosperous society with an economy that is fully competitive.3 VISION 2020 – STI CHALLENGES 6th Challenge “ . . dynamic. 21 . . one that is not only a consumer of technology but also a contributor to the scientific and technological civilization of the future. .B. .

B.4 INDUSTRIAL MASTERPLAN II (1996 – 2005) 22 .

Thrust 3 : Addressing persistent socio-economic inequalities constructively and productively. Thrust 2 : Raising the capacity for knowledge and innovation and nurture „first class mentality‟. 23 .5 THE FIVE THRUSTS OF 9TH MALAYSIA PLAN (2006 – 2010) Thrust 1 : Moving the economy up the value chain.B. Thrust 4 : Improving the standard and sustainability of quality of life. and Thrust 5 : Strengthening the institutional and implementation capacity.

6 NATIONAL INNOVATION MODEL . Supply-side R&D by public sector. support and facilitate technology-driven innovation for medium-to-long term benefits.B. driven largely by domestic private enterprise and DDI. demand-side R&D by private sector. Pursue market driven innovation for short-to-medium term opportunities. 24 . Dual approach – technology development and technology acquisition.2009 Shift from resource-led economy to innovation-led economy.

7 THE NEW ECONOMIC MODEL(NEM) AND THE ECONOMIC TRANSFORMATION PROGRAMME – 2010 .B.2020 Overcoming Barriers To Vision 2020 : Slower economic growth Middle income trap Not enough value add Weak productivity growth Low skill labour force Lack of innovation and creativity Issues in education Problems related to ethnic and economic policies 25 .

Smooth Implementation Of Government‟s Development Programme 10th Malaysian Plan – macroeconomic growth targets and expenditure allocations – 2011 .2015 26 . New Economic Model – High Income. Effective Delivery Of Government Services Government Transformation Programme – 6 National Key Result Areas 3. Performance Now 2. Preservation and Enhancement Of Unity In Diversity 1 Malaysia : People First.B. 12 National Key Economic Areas (NKEA). Inclusiveness and Sustainability Economic Transformation Programme – 8 Strategic Reform Initiatives (SRI). 131 Entry Point Projects (EPP) 4.8 THE FOUR PILLARS OF THE ECONOMIC TRANSFORMATION PROGRAMME 1.

9 THE NEW ECONOMIC MODEL – ECONOMIC TRANSFORMATION PROGRAMME – THE EIGHT STRATEGIC REFORM INITIATIVES (SRI) SRI 1 – Re-engineering The Private Sector Target high value added products and services Remove barriers and cost to doing business Create eco-system for entrepreneurship and innovation Encourage efficiency through healthy competition Promote SME growth Create regional champions 27 .B.

10 THE NEW ECONOMIC MODEL – ECONOMIC TRANSFORMATION PROGRAMME – THE EIGHT STRATEGIC REFORM INITIATIVES (SRI) SRI 2 – Developing Quality Workforce and Reducing Dependency on Foreign Labor Increase local talent overtime (education system for creative and critical thinking) Re-skill the existing labor force Retain and access global talent Remove labor market distortions constraining wage growth Reduce reliance on foreign labor 28 .B.

11 THE NEW ECONOMIC MODEL – ECONOMIC TRANSFORMATION PROGRAMME – THE EIGHT STRATEGIC REFORM INITIATIVES (SRI) SRI 3 – Creating A Competitive Domestic Economy Improve economic efficiency through competition Build Entrepreneurship – (revamp seed and venture capital fund to support budding entrepreneurs) Remove market distortions leading to misallocation of resources 29 .B.

B.12 THE NEW ECONOMIC MODEL – ECONOMIC TRANSFORMATION PROGRAMME – THE EIGHT STRATEGIC REFORM INITIATIVES (SRI) SRI 4 – Strengthening The Public Sector Improve decision making process Improve service delivery Reduce “friction costs” Provide a safety net to facilitate a smooth transition Strengthen public finance management 30 .

B.13 THE NEW ECONOMIC MODEL – ECONOMIC TRANSFORMATION PROGRAM – THE EIGHT STRATEGIC REFORM INITIATIVES (SRI) SRI 5 – Transparent And market – Friendly Affirmative Action Reduce income disparity Create market-friendly affirmative action Narrow regional difference Encourage rewards on the basis of performance Promote equal and fair access to opportunities 31 .

ITRI Taiwan cluster model Operationalize the National Innovation Model announced by the government in 2007 Balance the technology-driven innovation approach with market-led policies such as global procurement through technology intermediaries Establish stronger enabling institutions 32 .B.14 THE NEW ECONOMIC MODEL – ECONOMIC TRANSFORMATION PROGRAM – THE EIGHT STRATEGIC REFORM INITIATIVES (SRI) SRI 6 – Building The Knowledge Base And Infrastructure POLICY PURPOSE Create an Ecosystem for entrepreneurship ■ ■ ■ ■ Promote an environment for innovation ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ POSSIBLE POLICY MEASURES Easing entry and exit of firms as well as high skilled workers Revamp the seed and venture capital funds to support entrepreneurs Simplify bankruptcy laws pertaining to companies and individuals to promote vibrant entrepreneurship Harness Web-based expertise and industry networks Improve access to specialized skills Ensure protection of intellectual property rights Incentives firms to embrace technology and move up the value chain Enforce strict adhered to global standards and benchmarks Fostering R&D links between the institutions of higher learning and the private sector Immediately roll out nationwide fast broadband connectivity Review and consolidate all present government R&D funding Align R&D to national growth objectives particularly in innovative and hi-tech fields Open access to funding to competition among researchers Ensure public procurement supports local innovation Establish KPIs for universities based on commercialization Setup a technology research powerhouse and centre of excellence run on a commercial basis e.g.

15 THE NEW ECONOMIC MODEL – ECONOMIC TRANSFORMATION PROGRAM . pharmaceutical Integrate education services with industrial development for example a centre of engineering excellence in the E&E cluster Further priorities the logistics industry.g. finance. ports and ICT infrastructure readily available in Malaysia Improve seamless tourism services by ensuring quality services along the value chain (examples such as the revamp of poor quality taxi services and improving personal safety for travelers) Capture greater share as a distributional hub as intra-regional trade expands Improve maritime and port services. medical tourism and ecotourism markets through domestic and regional partnerships Promote climate change mitigating products and services e.g.B. especially for electronics Encourage competition between localities Cluster industries to leverage on integration. leveraging on technology Move into alternative energy generation as well as energy saving products and services Expand service-oriented industries to regional markets based on Malaysia’s inherent biodiversity Promote corridor-based development around spatially dense poles and adjacent hinterland. leveraging on roads. scale and connectivity Exploit economies of scale through networking of production and supply chains leveraging on location – “speed to market” Establish global presence through international acquisitions of companies in the same field Adopt an open innovation system to acquire technology and expand networks Support rapid transformation of SMEs with potential for innovation Develop industries that support sustainable development such as use of traditional plants and herbs for modern applications Develop the commodities trading platforms and products for domestic producers to benefit from financial innovation and expansion Offer Malaysia as a regional hub for both futures and spot markets for commodities Develop Islamic-based financial products to support domestic production and risk management of prices and production Build scale of industries and production networks for specialization Harness innovation potential Integrate real sector industries with financial services 33 . recyclables Promote products and services that comply with Islamic tenets e.THE EIGHT STRATEGIC REFORM INITIATIVES (SRI) SRI 7 – Enhancing The Sources Of Growth POLICY PURPOSE Create value from first mover and other comparative advantages ■ ■ ■ ■ ■ ■ Develop greater integration between products Create new markets ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ POSSIBLE POLICY MEASURES Identify E&E sub sectors to build depth and foster new niche industries and to capture a greater share as a distributional hub as intra-regional trade expands Focus on palm oil-related downstream industries to develop indigenous technology and innovation or acquire technology to meet new market demands Encourage upstream technology innovation to develop higher yielding fresh fruit bunches Capture a greater share of the education.

16 THE NEW ECONOMIC MODEL – ECONOMIC TRANSFORMATION PROGRAM – THE EIGHT STRATEGIC REFORM INITIATIVES (SRI) SRI 8 – Enhancing Sustainability Of Growth POLICY PURPOSE Preserve natural resources POSSIBLE POLICY MEASURES Use appropriate pricing. efficient and transparent government procurement process Adopt international best practices on fiscal transparency 34 . pollution mitigation Develop banking capacity to assess credit approvals for green investment using non-collateral based criteria Liberalize entry of foreign experts specializing in financial analysis of viability of green technology projects Support green technology investment with greater emphasis on venture capital funds Use appropriate pricing.e.B. regulatory and strategic policies to manage non-renewable resources sustainable Encourage all sectors to embrace “green technology” in production and processes Develop a comprehensive energy policy Increase focus on downstream high value added production and services Develop a comprehensive energy policy ■ ■ ■ Leverage on comparative advantages for high value added products and services Meet international commitments Facilitate bank lending and financing for “green investment” Ensure sound public finances ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ Reduce carbon footprint in line with government commitment Enforce clean air and water standards in utilizing natural resource i. regulatory and strategic policies to manage non-renewable resources sustainable Reduce wastage and avoid cost overrun by better controlling expenditure Establish open.

35 .B. EPPs = Total 131 Entry Point Projects have been identified under NKEAs. Gas and Energy Palm Oil Financial Services Tourism Business Services Improving Electronics and Electrical Wholesale and Retail Education Healthcare Communications Content and Infrastructure Agriculture Greater Kuala Lumpur / Klang Valley NKEAs = focus economic areas receiving government prioritized support : funding.17 NEM. top talent and PM’s attention. ETP AND THE 12 NATIONAL KEY ECONOMIC AREAS (NKEAs)* Oil.

.B. . . .18 KEY WORDS FROM THE NEW ECONOMIC MODEL (NEM) “The weak track record of domestic innovation in Malaysia is reflected by the comparatively low number of researchers. . Incentives to support innovation . . To build skills so that they can use their entrepreneurial instincts . . . Low R&D expenditure results in a lack of innovation in the industrial and export sector”. well governed.” “ . . Inadequate creativity and English proficiency . . “ “ . high value added economy.” RECURRING BUZZ WORDS Technology The Knowledge Base Value Add Creative / Creativity Innovativeness / Innovation Entrepreneurial 36 . . . .” “growth through productivity. . Technologically capable industries and firms . Needed to spur an innovative. .” “The economy will be market-led. regionally integrated entrepreneurial and innovative. To enable entrepreneurs to develop higher value added products and services . . . “ . “ “ . . Focus on innovative processes and cutting-edge technology .

37 .B.19 NEM AND THE INNOVATION ECONOMY NEM in short is a clarion call for Malaysia to take vigorous steps to Migrate to the K-based or the INNOVATION ECONOMY. The Essence of the INNOVATION ECONOMY is growth through economic restructuring and diversification into production of manufactured goods and other modern goods and services with High Value added including green products.

38 . There will be measures to ensure income and wealth are distributed in an equitable manner thereby reducing inequalities. The role of government will evolve to become an effective facilitator in the transformation of the economy and provide quality services to the rakyat. Building an environment that enhances quality of life. Economic growth will be supplemented by strategies to raise the quality of life of the rakyat that commensurate with the country‟s higher income status. Moving towards inclusive socio-economic development. The objective will be to build a more inclusive society. This will be key to promote productivity and innovation-led growth. attract and retain quality talent base. Central to this will be strategies to develop. as it details strategies to create an environment that fosters economic growth with the private sector as the main driver. Developing and retaining a first-world talent base. This will be the anchor of the Plan. and Transforming Government to transform Malaysia.20 THE FOCUS AREAS OF THE 10TH MALAYSIA PLAN (2011 – 2015) Creating the environment for unleashing economic growth.B.

21 10TH MALAYSIA PLAN (2011 – 2015) RM230 billion = USD75 billion 39 .B.

22 10th MALAYSIA PLAN (2011 – 2015) RM230 billion = USD75 billion 40 .B.

23 INSTITUTIONAL STRUCTURE SUPPORTING INNOVATION & R&D – 10TH MALAYSIA PLAN (2011 – 2015) National Innovation Council (NIC)  Chaired by PM  Provide strategic leadership  Policy decision making Innovation Malaysia. PM’s Department  Provide policy inputs to NIC  Oversee functioning of the NIS  Undertake evaluation of poli cy instruments and programmes  Assess Innovation outcomes Other ministries /agencies/ /universities/research institutions  To support innovation activities in their respective areas MOSTI  Secretarial to NIC  Formulate policies for S&T development  Oversee resource allocation for technological innovation MITI  Promote enterprises innovation  Oversee resource allocation for non-technological innovation National Science & Research Council (NSRC)  Set priorities for R&D investment  Evaluate R&D programme & monitor outcomes MTDC  Nurture technology based enterprises  Provide support services for commercialization MPC  Undertake productivity enhancement research & activities  Advisory & training to enable enterprise innovation Source: Economic Planning Unit 41 .B.

roadmaps and incentives.Collaboration with RIs and . leadership. sense of urgency Industry-Government Technology and Innovation Agenda . Need for change of mindset.Joint Government – Industry Research Centres . no industrial deepening despite various government policies and master plans.Contribution to a central R&D fund Role of GLCs – GLCs as a technology and innovation powerhouses 42 .In house R & D .Out sourced . low appetite for technology and innovation.24 STATUS OF STI IN INDUSTRY There is a consensus of poor achievement.B.

256.1% & Q2 6.5%).25 MALAYSIA’S VITAL STATISTICS Population – 28.4 billion (2009) GDP per capita – RM26.7%) & 2010 (6.7%).0% estimated) (Q1 -10. (2009 – 2010) – USD 8.10 43 .B.8% (2009) (less than USD1000 per month) – (Hard cover poverty : 1.3%) & services (47.8%) Unemployment rate – 3. PPP 12.420. 2009 (1.000). 2008 (4.6%) GDP growth – 2007 (6.3 million (2010) Real GDP – USD 207.0%) Poverty – 3.6% WEF Global Competitiveness Index 2010 = No. GDP – by sectors : agriculture (10. 26 IMP World Competitiveness Scoreboard 2010 = No.977 (10th Plan target: USD12. industry (42.1%).

26 MALAYSIA’S GROSS EXPENDITURE ON R&D – GERD World Ranking: GERD: 37.3 (2008) 44 .000 labor force = 20.B. GERD per capita=41 (IMD Top 50 ranked countries) Scientists/engineers per 10. GERD/GDP = 44.

STI Policy Imperatives – Proposed Framework 45 .C.

C1. FROM THE INNOVATION ECONOMY ECOSYSTEM TO THE NATIONAL INNOVATION SYSTEM (NIS) Human Capital (K-Workers) Finance Institutions Law and Regulations Process and Management Standards Make Some Government K-Generation & Acquisition Government Enterprises K-Utilisation & Commercialization People At Large Enterprises Buy Some Trade and Business 46 46 .

authority. neutral and timely advice. Advisory mechanism must have legitimacy. not separating STI Development policy from National Development policy or Industrial Development or any other sectoral policies.2 INFORMATION FLOW AND THE STI ADVISORY SYSTEM In the context of Innovation Economy holistic approach to policy formulation is important. 47 . An integrated and inclusive STI Advisory System is crucial. The concept of Policy for STI and STI for Policy or Development of STI and STI for Development becomes evermore important and information flow between sectoral systems must be facilitated. capacity and linkages to deliver objective. Moving the STI agenda requires Champions in public and private sectors and champions require advice. technology generators and private sectors to get buy-in. Information flow between all stakeholders especially between government.C.

innovative capacity and competitiveness in manufacturing and k-economic sectors 4) 5) 6) 7) 8) Education and human capital development Intensifying knowledge content in governance Enhancement of Entrepreneur Development Innovative Financing mechanism and support system for commercialization of technology and innovation Creating a national culture of creativity and innovation Enhancing knowledge management Promoting science ethics and smart partnership ethos and practices Enhancing the STI Advisory System Securing Private Sector Buy-In 48 9) 10) 11) 12) .3 PROPOSAL FOR POLICY RESPONSES 1) 2) 3) Intensifying the capacity for knowledge generation and acquisition Increasing knowledge intensity in traditional economic sector Increasing productivity.C.


– GOVERNMENT INDUSTRY PARTNERSHIP K-Generation & Acquisition Champions Advisors Popularisers Planners INSTITUTIONS Managers The NIS Value Chain K-Utilisation & Commercialization Champions Advisors Popularisers Planners STATE INDUSTRY Managers Educators Practitioners COMPANIES Educators Practitioners 50 . THE NATIONAL INNOVATION SYSTEM.C5.

6 TECHNOLOGY MANAGEMENT BEST PRACTICE – THE STI POLICY IMPERATIVES CHECK LIST Political Commitment Policy Integration S&T Advisory System S&T Development Planning and Coordination Infrastructure for STI Development & Acquisition Funding & Management of R&D Mechanism for Commercialization of Research & Technology Integrated Human Resource Development Mechanism for S&T Enculturisation Smart Partnership Practices 51 .C.

istic-unesco.ISTIC SPCU TEAM • • Coordinator : Tan Sri Datuk Dr Omar Abdul Rahman Collaborating Organizations: • • • IEMP@MUST. Malaysia Commonwealth Partnership for Technology Management – 52 .org website : http://www. Malaysia PRIMA Consulting. London • • ISTIC – email : info@istic-unesco.

com 53 .THANK YOU Omar Abdul Rahman tsomar@bostonwebacademy.