TPPA tonic to spur innovation

  • Letters
  • Wednesday, 21 Oct 2015

LET us no longer deny the facts about innovation in our country.

The truth is we are still not up to it. Despite the many initiatives created by the Government, the state of innovation in Malaysia still leaves much to be desired.

For one, only a very low percentage of our research and development (R&D) has been commercialised.

Second, the industry as a whole is still not truly innovation-savvy.

Third, there is little investment in R&D by the business sector.

Fourth, R&D at universities are still skewed towards basic and fundamental research. There is minimal true applied research in our universities. But this is understandable because university researchers are more driven by the KPI to publish in high-impact journals than to develop products and processes which can command market value. Even the patents generated are more to do with basic science rather than applied. Those would not count as innovation.

Therefore, not many would dispute the fact that, as a country, we still have some way to go before we can match the innovation sophistication of the developed economies.

Many theories have been proposed to explain the lacklustre performance of innovation in this country. In fact, studies of other economies have come up with similar conclusions.

A recent study on the factors driving innovation in South Korea, for example, has highlighted one very significant contribution. It has to do with competition.

The study found that even in South Korea, not all companies actively invest in R&D to spur innovation. Only those industry sectors which operate in a highly competitive business segment invest heavily in applied research.

More often than not, such companies have to compete for business in the global marketplace.

Even in Malaysia, the sectors which invest relatively higher in R&D are those that have to compete to thrive in the export market. The palm oil industry stands out as one which has treated R&D as a matter of business priority.

It is clear that competition is what will truly create the urgency to innovate.

And this is where the Trans-Pacific Partnership Agreement (TPPA) can play a role.

In the negotiations leading to the agreement, many sensitive issues were raised. But based on recent feedback, all such concerns have been fully resolved. The general view is that the TPPA, which involves 12 nations, may generate more competition among local businesses.

After many rounds of negotiations since the first one in Melbourne in March 2010, the TPPA is now ready to be ratified by Parliament. This may take about two years.

It is still uncertain how Parliament will decide but what is certain is that the TPPA will provide access to a market of 800 million people and combined gross domestic product (GDP) of more than US$30tri.

If China eventually joins, which many believe it will, the cake would be even bigger.

As a country heavily dependent on external trade, are we ready to abandon this massive opportunity? Based on the performance so far, there is no reason for us to be scared of emerging competition.

The Government views the TPPA as an important initiative as Malaysia seeks to expand market access. A recent UN study has suggested that we will enjoy improved GDP growth. In fact, according to a simulation study done by the Peterson Institute of Economics in June last year, by 2025, Malaysia will benefit with an increase in gross national income of RM26.3bil and increase in exports of RM41.7bil.

Admittedly, the Government is aware of the challenges and controversies the TPPA may bring but there are more positives. Many Malaysian companies have become global investors and they want the TPPA. There is also interest from foreign companies in non-TPPA countries that are looking at Malaysia as a base for their operations, hoping to enjoy the benefits of the TPPA.

No doubt the combination of greater market access for Malaysian products and services under the TPPA and the continued inflow of foreign investments will create a powerful catalyst in driving Malaysia’s economic transformation agenda.

What is clear is that the TPPA will generate the kind of competition we need to invigorate innovation among local firms. We need the right dosage of international competition to wake us up from the slumber of complacency and embrace innovation with more vigour.

The TPPA can provide that dosage. It has become clear over the years that, apart from a few of our industries such as palm oil, rubber, and electronics, the rest have not invested adequately in R&D and innovation.

Many believe the TPPA can motivate the change that we desperately need.

Unless innovation becomes an important part of our business culture, we may one day find that we have failed to capture a decent share of world business. The TPPA will provide the right tonic to spur the nation’s innovation agenda!


Fellow, Academy of Sciences Malaysia

Professor UCSI University

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