Getting grants right

IN Malaysia’s complex and myriad of avenues for research and development (R&D) grants, the creation of the Malaysia Science Endowment (MSE) does seem like a step in the right direction.

If executed well, it can achieve its goal to create a perpetual funding scheme that does not burden the government after the initial allocation.

The MSE was created in 2022 following a recommendation from the Academy of Sciences Malaysia (ASM).

Its objectives include “to reduce the government’s burden by providing a perpetual source of financial support to complement existing funding mechanisms”.

While the development of the perpetual funding scheme is a work in progress, an infographic on the website of the Science, Technology and Innovation Ministry illustrates the plan.

It shows that the MSE hopes to build up an “endowment reserve” of RM2bil, with the government and private sector contributing RM1bil each.

From that, the MSE hopes the scheme will generate RM100mil annually, which could then be used to fund research every year.

Even in that funding, it hopes to be doing so via matching schemes, meaning that the private sector matches the RM100mil that it funds.

This is a progressive way to create a constant stream of money, which would serve as useful grants to the industry.

It is possible that part of the government’s RM1bil could come from government-linked companies and government-linked investment companies.

It will, however, take more convincing to get private industry to pump RM1bil into this scheme.

Not that there is a dearth of philanthropists around.

The private sector’s worry would be over how this RM1bil will be managed and what levels of efficiency, transparency and accountability will be incorporated into the structure?

These are the very weaknesses that ASM is seeking to address.

ASM occupies an unusual position in Malaysia’s research ecosystem.

It is not itself a major funding agency but a statutory body established to provide independent scientific advice to the government, evaluate research excellence, and help shape national science and innovation policy.

It also manages peer review and evaluation for selected grant and award programmes, rather than directly funding most research.

ASM has advocated for reforms that focus less on increasing funding and more on improving how grants are governed and managed.

It has identified that Malaysia’s research funding system suffers from several structural weaknesses.

For one, multiple ministries and agencies operate separate grant programmes with different rules and evaluation criteria.

Thus, researchers often submit similar proposals to multiple agencies.

Another issue is that funding decisions are not always coordinated around national priorities.

When it comes to project monitoring, insufficient attention is given to outcomes.

Furthermore, commercialisation and societal impact are not systematically tracked after projects end.

These concerns closely mirror the issues highlighted by the auditor-general, namely fragmented governance, weak monitoring, and limited accountability for research outcomes.

ASM has proposed a coordinated national research funding system, where research priorities are aligned across ministries instead of having each ministry operating independently.

The objective is to reduce duplication and ensure funding supports shared national strategic goals such as semiconductors, biotechnology, energy transition, food security and advanced manufacturing.

It is also calling for stronger peer reviews in the funding evaluation process; staged funding – financing projects through a milestone approach instead of giving the entire grant upfront; and better monitoring of outcomes.

Coming back to ASM’s endowment fund, it is likely trying to mirror what major universities in the United States have achieved long ago.

Those universities are renowned for building large endowments and using that funding to create powerful companies that can commercialise research into end products and services.

Their model has been able to connect philanthropy, government research, private investment, intellectual property, and talent network.

And as the universities’ investment coffers grew so big, they even created their own investment teams.

However, in the case of ASM, it should outsource the money to professional investment firms and let these managers create a diversified portfolio of assets.

Going by the illustrative returns for the MSE of 5%, it should not be difficult at all to secure that from professional managers.

ASM need not incur the high cost of setting up its in-house investment team.

It just needs to have an administrative office that deals with the professional asset managers who are managing the RM2bil of endowment funds.

Trying to do anything more than that could raise eyebrows of donors, going by the patchy track record of government agencies managing investments.

The Malaysian Public Accounts Committee (PAC) has already raised concerns in the past about how some government-linked agencies handle investments.

The issues raised by the PAC are about governance, investment mandates, risk management, and whether public funds are being deployed with sufficient due diligence.

It’s noteworthy that even before it gets its RM2bil endowment reserve, the MSE is facilitating the provision of a matching grant for the Malaysia Advanced Packaging Consortium (MAPC) to kickstart the country’s move into advanced packaging.

The move is notable as it includes some of Malaysia’s top semiconductor companies.

While details are still being ironed out, it is hoped that this grant will take the form of an equity investment into the MAPC, which is being set up as a legal entity.

This will mirror how the US government today, after reviewing its own grant funding schemes, has decided to take direct bets into some its top tech companies.

Its bet on Intel is turning out to be a massive win.

ASM should be taking such a bet with MAPC, which could end up creating valuable intellectual property in the booming arena of advanced packaging.