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Friday, April 29, 2005

Malaysia's biotech adventure

The Malaysian Prime Minister announced that Malaysia is planning a forray into biotechnology. At the first glance, this is a worthwhile undertaking. To go into biotech is an emerging industry and thus, a clear sign that the country bets on the future. This is different from IT and ICT, for example, sectors and facilities, that are taken for granted around the world. I.e.; if you invest in a country, you expect to have high-class ICT facilities (nevermind that there are hiccups in Malaysia as well).

Biotech is pretty localised. A country benefits from local sources, if it can capitalise on the higher value activities, and builds up a related industry that, however, need jumpstarting with great names in the industry. It basically is tough to develop the industry on your own.

This is actually the second trial of Malaysia - the first was in 2001 with the Bio Valley project venture when officials hoping to attract US$10 billion in foreign and local investment in the biotechnology industry in 10 years - clearly an adventure that was too ambitious at that time - by now, only 3 companies have signed up to establish plants.

There are some challenges ahead for Malaysia anyway:

  • The country needs to have regulating governmental bodies;
  • The country needs a workforce that can cope with the challenges imposed by biotech;
  • The country needs a lot of highly educated employees.

Major challenges come from competing, neighbouring countries are far ahead of Malaysia and could attract the big boys of the industry. We have India, that aims to become a biotech center already - and has a great advantage with its input of highly educated IT people and the sheer number of fresh graduates that come out from the universities each year. We have Singapore that develops its Biopolis and is already a strong player in the pharmaceutical industry. "Singapore, for example, set aside US$2 billion to offer as incentive to attract leading research corporations and to invest in local and foreign biotech start-ups. To bolster its universities' research capabilities, Singapore is also offering competitive salaries to attract professors from top-ranking US institutions - something Malaysia is finding difficult to do." Additionally, Australia, Japan, South Korea and China have all introduced new legislation and provided funding to jump start their life-science industry.

Another challenge is the time that it takes to develop a successful biotech product: "A study of 51 biotech centers in the US by the Brookings Institution revealed that it often takes a decade or more to develop biotechnology-based products, and perhaps only one in 1,000 patented biotech innovations produces a successful commercial product. The study also showed that most biotechnology firms are quite small and typically contract with global pharmaceutical firms to produce, market, and distribute successful products rather than attempting to create their own capacity to do so.

The losses, too, have been tremendous. According to accounting firm Ernst and Young, publicly traded biotechnology companies in the US lost US$41 billion from 1990 to 2003. As the saying goes, the road to hell is paved with good intentions gone astray, and Malaysia's national biotechnology policy might be another headstone in a graveyard of investors' dreams." Can Malaysia afford this?

Next - there is the conflict between the timber barons and the biotech industry. While Malaysia has a great diversity in its rainforests - one of the world's oldest - the timber industry is an industry that also has an interest in exploiting its commercial interest (so I don't necessarilty agree with them). The challenge here is that ones a promising plant for biotech has been found, it could have disappeared because of loging activities.

And lastly - the discussion about genetically modified food, one component in the global biotech discussion, is also ongoing.

A lot more could be said. I believe it is good that the government of Malaysia takes a forward looking approach. But challenges are ahead and let's see, if the country can grow along the challenges.

(By Asia Business Consulting)