PETALING JAYA: Malaysia has fallen one spot to 34th in the Global Innovation Index (GII) 2025, missing its target of breaking into the top 30.
The latest index showed persistent gaps in research and development (R&D) spending and education quality, despite strengths in tertiary education, particularly in science and engineering graduates.
Economists said the findings highlighted long-standing challenges in Malaysia’s innovation ecosystem.
“Most of the important R&D is done in companies, not universities. The ecosystem must focus on commercial R&D incentives. Lower tax on R&D investment is the main way to do this,” said economist Geoffrey Williams.
He said Malaysia’s higher education system remained oriented towards “teaching” rather than “research and commercialisation”, limiting its contribution to innovation. “The key challenge is simply that Malaysia does not focus on R&D either in universities or commercial enterprises.
“This has been true for decades and cannot be solved quickly or at all without a change of mindset,” he added.
Still, he pointed to opportunities in niche areas. “On a more positive note, R&D in strategic sectors where Malaysia has specific potential might include palm oil and halal products as well as financial technology in the Islamic finance space. These are under-researched elsewhere,” said Williams.
Meanwhile, Economist Yeah Kim Leng said Malaysia’s innovation ecosystem could be strengthened with sharper policy focus, stronger institutional support and better alignment of incentives.
“More public funding for research, development and innovation is definitely needed, given the country’s low R&D spending,” he said. Malaysia’s gross expenditure on R&D remains at around 1% of gross domestic product (GDP).
Last year, the Science, Technology and Innovation Ministry said RM85.7bil in R&D spending was required to achieve the targets set under the National Science, Technology and Innovation Policy or NSTIP 2021-2030. The policy aims to raise R&D expenditure to 2.5% of GDP by 2025 and 3.5% by 2030, with funding to come from both the public (30%) and private (70%) sectors.
Malaysia ranked 46th in the human capital and research pillar, with sub-rankings of 90th for education, 13th for tertiary education – including first globally for the share of science and engineering graduates – and 46th for R&D.
Economist Doris Liew said Malaysia’s weakness lies in infrastructure, and more critically, education and knowledge creation.
“Although the country produces the highest share of science and technology graduates, innovation outcomes remain poor, seen in low patent filings, limited scientific publications, weak creative outputs and a shortage of research talent,” she said.
She added that the issue was two-fold – education which focuses on “quantity over quality, while industry lacks the innovative capacity to absorb skilled workers.
“This creates a cycle where talent is underutilised and firms underinvest in R&D,” said Liew.
“To break this cycle, Malaysia must improve education quality and relevance, strengthen university-industry linkages and incentivise firms to move into higher value-added, research-driven activities.”
Similarly, Yeah said greater collaboration would be key to building a stronger innovation ecosystem.
“Stronger institutional support, especially pushing for strategic collaboration between public and private research institutions and universities, will be important to broaden and deepen the national innovation system.
“Policy support to promote collaboration between industries and universities will be crucial to increase impactful research outputs.” On education, Yeah said reforms under the new national education blueprint must prioritise quality and critical thinking, particularly in science, technology, engineering and mathematics.
“Importantly, the adoption of artificial intelligence or AI in education should focus on unleashing creativity and innovative capabilities rather than stifling them,” he said.
The current Malaysia Education Blueprint (2013-2025), which covers preschool to post-secondary levels, concludes this year, and the government is drawing up a new plan for 2026 onwards.
The GII, published annually by the World Intellectual Property Organisation (Wipo), ranks 139 economies on factors including human capital, research, infrastructure, business and creative performance.
Regionally, Malaysia’s overall GII ranking put it in eighth place within the East Asia, South-East Asia and Oceania regions, behind South Korea, Singapore, China, Japan, Hong Kong, Australia and New Zealand.
Within South-East Asia, however, it was second after Singapore, which ranked fifth globally. Wipo noted that Asean is “gaining ground” in the global innovation landscape. It pointed out that the region’s R&D spending grew at a compound annual rate of 8.5% from 2000 to 2023, reaching nearly US$60bil in real terms.
High-tech exports more than doubled between 2015 and 2022, while the venture capital investment surge reflects an “expanding startup ecosystem”. The index also showed Asean economies narrowing the gap with global innovation leaders in key indicators such as high-tech manufacturing, patents and scientific publications, Wipo added.
