- The Washington Times - Thursday, June 30, 2005

KUALA LUMPUR, Malaysia — In the early 1980s, Prime Minister Mahathir Mohamad sought to transform this country’s agrarian economy into a manufacturing one. Before he stepped down in 2003, manufacturing accounted for 30 percent of Malaysia’s gross domestic product, double the sector’s share of GDP in 1970.

With a population of 23 million — similar to that of Texas — Malaysia ranks as the 12th largest U.S. trading partner.

But with neighboring rivals such as India, China and Thailand luring away Malaysian investors, the government in Kuala Lumpur feels a need to change course again or risk being left behind.

In April, Prime Minister Abdullah Badawi prodded Malaysia toward the crowded biotechnology sector. The government expects this move to account for at least 5 percent of GDP and 280,000 jobs by 2020. It is set to shell out an estimated $1.1 billion in the first five years of the project.

Mr. Badawi is calling biotech a natural fit for Malaysia, home to some of the planet’s richest biodiversity, with about 15,000 plant species (compared with 5,000 for Europe). But Malaysia will need to make sense of the forests to tap their potential, which will require attracting substantial investment and top international scientists to collaborate with local firms.

As part of the project, the government is offering biotech companies a 10-year tax-exempt status. A fund will be established to train skilled workers and hire researchers. And a nexus of institutions will be nurtured to become the best Malaysia has to offer in specific sub-sectors of biotechnology.

Skeptics point out that there is little to distinguish Malaysia’s incentive package from other nations moving into biotech. They also warn that Malaysia has in the past scared off investors with grand plans that have turned into white elephants. National carmaker Proton, protected by high import tariffs, comes to mind. As does the Multimedia Super Corridor, which stretches from the capital, Kuala Lumpur, to the hub-aspiring airport envisioned as the Silicon Valley of the East. Through tax breaks and other incentives, the $4 billion project was expected to attract the world’s top high-tech companies. But a cornerstone of the MSC, the planned city of Cyberjaya, is now home to vacant fields and empty rental spaces.

Government officials say this go-round will be different and that they’ve learned from past mistakes, namely that success in the world of advanced industry is as contingent upon brain power as infrastructure (Malaysia boasts some of Southeast Asia’s best infrastructure.)

“We are aware of what we need,” said Ahmad Zaharuddin Idrus, head of the Malaysian Biotechnology Corp., established in late April to oversee what is being tagged the BioMalaysia plan. “We need to radically move away from our normal way of thinking. We need a transformation in mind-set.”

Mr. Idrus was referring to the need to establish a culture of innovation, innovation serving as the primary catalyst to growth in biotech. In that regard, Malaysia is not alone. For most Asian countries venturing into biotech, scientific breakthroughs have been slow to materialize; the bulk of biotech innovation continues to emanate from the U.S. and Europe, with 90 percent of Asian innovations coming from one country, Japan.

India’s biotech industry has shown promise, offering low costs, a large dynamic talent pool and an abundance of research facilities and universities. So has the tiny nation-state of Singapore, which has poured $200 billion into research since 2000. It boasts 4,000 Ph.D.s, 30 percent of whom are foreigners.

And therein lies half the battle for Malaysia, said Sharon Low, managing director of StemLife, a Malaysian-based biomedical company. “The biggest challenge I think is trying to attract some of the world’s best to collaborate with our companies,” Ms. Low said.

But how the Malaysian government intends to do so is not clear. It has outlined nine points of focus, which include adding value to the agricultural sector and securing international recognition for Malaysian biotechnology.

But when asked about the how-to of the thrusts, the government has been mostly mum; Minister of Science, Technology and Innovation Jamaludin Jarjis declined to comment on what specifically is being done to attract and develop talent, to ensure close collaboration between industry and universities, and to spur innovative thinking and risk-taking — all points outlined in the nine thrusts.

“There’s still so much we’re trying to figure out,” said a ministry insider.

Which some see as akin to opening a restaurant before the silverware is delivered.

“The nine thrusts sound great, but the telling is in the details, and so far what we’re seeing is a very broad-based approach,” said David Ho, managing director of Hovid, a Malaysian pharmaceutical company. Mr. Ho said the government’s exploring of agriculture, vaccine, health care and industrial ventures is cause for concern. There also is talk of using biotech to upgrade cottage industries and set up industries in remote villages. “Where is all the expertise going to come from?” asked Mr. Ho rhetorically.

Ms. Low said the government is wise not to be too specific in its approach initially. “I think the government is doing the right thing by not getting itself too involved in the details, but rather creating the type of environment where private enterprise can feel comfortable making investments.”

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