Country Economic Work for Malaysia - Islamic Development Bank

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centres to collaborate with the private sector. In this regard, a key move has been the establishment of Unit Inovasi Khas (UNIK) in the Prime Minister's Office. The UNIK's mandate is to formulate policies and strategies to promote innovation in the country. With the setting up of UNIK's implementation arm namely Agensi Inovasi Malaysia (AIM), country now has the sound institutional structure to undertake an organised and sustained programme of innovation initiatives. These initiatives are designed to improve the innovation ecosystem and create new wealth from innovation in Malaysia. Hence, following are the major innovation related challenges facing the country. Figure 5.5: Malaysia’s 12 Pillars of Economic Success Source: Ministry of International Trade and Industry (September 2011) Challenges/ Constraints to Innovation 97. Following are the challenges/critical constraints hindering the innovation: Preference for Imported Technology: There is a preference in Malaysia for imported technologies over those developed domestically, both by individual firms and various industries. The multinational corporations (MNCs) located in Free Trade Zones do not invest significantly in research and innovation, referring to undertake small incremental technical production-related operational changes to improve efficiency and productivity. There is limited technology diffusion and transfers through intra-industry trade and FDI flows. Low Innovation Capacity among SMEs: While there are examples of MNCs working with SMEs to help them innovate, most Malaysian SMEs still have low innovation capability as a result of the MNC ecosystem which has focused on a strong sub-contracting network for 45
Original Equipment Manufacturing (OEM) suppliers. Thus, they do not have the size and scale to expand their operations and compete in the regional and global markets. This, in turn, inhibits their capacity to introduce and manage innovative activities. Weak Procurement Practices: Based on the New Economic Model Report recently released by the Prime Minister’s Department, these weaknesses are compounded by the Government and GLC procurement practices that do not lend sufficient support to SMEs or buddingentrepreneur-researchers with innovative products/processes to offer. Absence of an Innovation Culture and Community: According to the New Economic Model Report released by the Prime Minister’s Department, insufficient attention has been paid to recognizing and celebrating innovation and the efforts of individuals or firms that come up with innovative products, ideas and processes in an orchestrated commemorative manner. A culture of innovation involves a society that creates incentives, monetary as well as social rewards that value creativity and diversity of ideas. The culture is created through recognition that innovation is also a process with a supply chain that requires collaboration between many parties. In Malaysia, the relationship among industry, academia, and researchers is weak. There is insufficient knowledge flow and collaboration on innovation projects. There is low demand for R&D personnel in industry and low mobility between industry, the public sector and academia. There is also an outflow of R&D talent to neighboring countries due to unattractive compensation packages, poor job prospects, and insufficient opportunity to build a professional reputation in the country. Weak Knowledge-based Economy: The knowledge-based economy of the future differs from the capital-based economy of the past. Knowledge will become the core element of competitiveness and the driving force for long-term growth. The rules of the game in the knowledge-based economy are speed, flexibility and innovation. The Government’s role is to foster innovation through sound governance arrangements developed with greater involvement of stakeholders in defining policy orientation and priorities. Shyness of the Private Sector to Take the Lead: As described above, the private sector must be allowed to take the lead. Policies related to industry structure, upgrading and expansion, as well as product or process development and specialisation need to be marketdriven. The market should dictate the pace of technological innovation on the basis of sustainable demand trends, whether in traditional or new areas of growth. The market needs to decide whether to utilise domestically-sourced or internationally-acquired innovative products or processes. This is dependent on the adequacy of the physical and ICT infrastructure that facilitates the location and development of knowledge and innovation investment platforms, and on an adequate skilled workforce. (iii) SMEs Development 98. SMEs and micro enterprises form the majority of business enterprises in most countries, and they contribute significantly to GDP, employment and wealth creation. Therefore, efficient access to SME financing is critical. The Malaysian experience to address the financing issue has been resolved through the establishment of the Credit Guarantee Corporation (CGC) to assist viable SMEs without collateral or without adequate collateral and track record to access financing by providing guarantees and credit enhancements for SME financing. The credit evaluation is carried out by banks, and by the CGC. A highly 46
Page 4: Acknowledgements Appreciation for s
Page 7 and 8: ISRA : International Shari’ah Res
Page 9 and 10: (v) Foreign Direct Investment……
Page 11 and 12: (2005)), key insights emerged in tw
Page 13 and 14: drain. Further, the Government need
Page 15 and 16: macroeconomic indicators are given
Page 17 and 18: SMEs are concentrated in the servic
Page 19 and 20: easy technology adoption, pro-busin
Page 21 and 22: Kelantan with the lowest per capita
Page 23 and 24: Figure 1.12. General Growth Diagnos
Page 25 and 26: that the Government’s Economic Tr
Page 27 and 28: (ii) Low Returns to Investments app
Page 29 and 30: Figure 1.22. Malaysia's Exports by
Page 31 and 32: 43. Malaysia’s private firms are
Page 33 and 34: over the medium-term. Several initi
Page 35 and 36: growth software compared to its maj
Page 37 and 38: esearchers and technicians in R&D p
Page 39 and 40: 59. Malaysia can further enhance it
Page 41 and 42: Annex Table 1.2. Malaysia: MDGs Ach
Page 43 and 44: 64. The Malaysian experience has al
Page 45 and 46: economic growth. The ETP is expecte
Page 47 and 48: 77. According to the Global Competi
Page 49 and 50: development of infrastructure throu
Page 51 and 52: a. Northern Corridor Economic Regio
Page 53: The challenge is for financial inst
Page 57 and 58: Intensify formalisation to promote
Page 59 and 60: Sukuk market has experienced unprec
Page 61 and 62: For innovation to become an importa
Page 63 and 64: y the United States (MYR2.3 billion
Page 65 and 66: (vi) (vii) Sharing Eexperience and
Page 67 and 68: institutions as well as Islamic pro
Page 69 and 70: Liberal Foreign Exchange Administra
Page 71 and 72: Issues/Challenges Facing the Islami
Page 73 and 74: Funding from Government of Malaysia
Page 75 and 76: programmes in the country. Initiati
Page 77 and 78: labeling and branding of Halal prod
Page 79 and 80: to over 200 industrial estates or p
Page 81 and 82: member countries can be provided te
Page 83 and 84: Figure 6.5: MATRADE Business Strate
Page 85 and 86: offered by the 35 MTCP training ins
Page 87 and 88: case of the economies in transition
Page 89 and 90: Key Challenges Facing the MTCP
Page 91: iii. Conclusion 185. Above diagnost

Country Economic Work for Malaysia - Islamic Development Bank

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