2. r&d and innovation in malaysian manufacturing sector-progress and challenges
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R&D and Innovation in
Malaysian Manufacturing
Sector: Progress and
Challenges
VGR Chandran Govindaraju
University of Malaya
Introduction
Contribution of Manufacturing Sector
◦ 27% to GDP
◦ 76% of total gross exports
◦ 48% of FDI inflows
◦ Value Added – 155 billion in 2010
◦ E&E sub-sector (22%) followed by petroleum
(20%) and chemical (12%)
◦ Its vital to understand the R&D and
innovation progress of this sector
R&D by sector, 2006-2008
Total Number of
Establishments
Establishments
involved in R&D
R&D Expenditure
(RM million)
Sector/Year 2006 2007 2008 2006 2007 2008 2006 2007 2008
Radio, television & communication eq. 469 538 517 111 112 131 692.7 735.4 1108.8
Office, accounting & computing
machinery
76 66 67 21 20 29 95.2 1014.4 292.9
Other transport equipment machinery 290 255 285 29 24 24 15.8 21 130.3
Machinery & equipment n.e.c. 1288 1274 1386 90 92 96 118.8 148.5 115.6
Rubber & plastic products 2026 2146 2197 253 305 237 71.7 104.6 75.4
Food products & beverages 4681 4603 4848 290 319 387 36.6 70.3 72.1
Chemical products 974 1024 1019 222 223 194 48.5 48 38.9
Electrical machinery & apparatus n.e.c. 498 504 513 73 73 83 190.9 173.7 32.3
Other non-metallic mineral products 1373 1411 1389 98 184 70 17.3 23 30.7
Motor vehicles, trailers & semi trailers 400 328 376 59 71 63 159.6 29.7 30.4
Others 19969 20435 19938 557 1103 617 74.7 62 77.1
Total 32044 32584 32535 1803 2526 1931 1521.8 2430.6 2004.5
Source: Authors calculation based on Malaysian Annual Manufacturing Survey, 2007, 2008 and 2009.
Active Sectors: E&E, Chemical, Food & Beverages, Rubber & Plastic
Nevertheless only 5.9% involved in R&D activities
R&D spending by ownership, 2000-
2005, (RM million)
2005 2004 2003
Sectors/Ownership Local Foreign Local Foreign Local Foreign
Food products and beverages 23,502 6,175 45,875 9,329 16,991 9,588
Tobacco products 2 923 9,645 0 8,434 0
Textiles 1,473 143 1,634 1,435 1,202 1,133
Wearing apparel; dressing and dyeing of fur 2,166 1,590 964 364 718 2,424
Tanning and dressing of leather 231 0 295 0 418 0
Wood and products of wood and cork 5,430 790 5,330 1,109 2,827 1,483
Paper and paper products 4,058 7,387 3,258 106 873 2,495
Publishing, printing & reproduction of recorded
media
7,818 34 1,460 4 789 1,509
Coke, refined petroleum products and nuclear
fuel
3,896 2,454 5,575 4,418 16,985 3,235
Chemicals and chemicals products 42,215 673,085 35,855 14,409 23,341 14,510
Rubber and plastic products 21,038 32,095 19,063 38,862 17,186 28,043
Non-metallic mineral products 12,630 7,530 8,003 12,457 5,048 3,783
Basic metals 4,714 2,088 6,063 888 4,735 368
Fabricated metal products except machinery &
equipment
3,078 3,515 4,598 4,093 2,787 6,797
Machinery and equipment n.e.c. 17,882 60,822 43,024 48,853 32,664 40,940
Office, accounting and computing machinery 3,108 432,948 313 416,960 330 88,572
Electrical machinery and apparatus n.e.c. 15,853 7,061 7,752 23,435 9,283 21,840
Radio, television & communication equipment &
apparatus
283,680 280,978 146,115 414,446 139,718 381,510
Medical, precision & optical instruments, watches
& clocks
2,121 8,617 4,722 3,686 2,888 5,092
Motor vehicles, trailers and semi-trailers 252,025 1,565 711,637 1,186 561,956 4,904
Other transport equipment 10,242 1,119 8,168 506 7,288 45
Furniture; manufacturing n.e.c. 12,984 2,490 12,053 5,135 15,035 1,107
Recycling 20 0 3 0
Total 730,165 1,533,408 1,081,402 1,001,681 871,496 619,378
Source: Authors calculation based on Malaysian Annual Manufacturing Survey, 2007, 2008 and 2009.
Patents granted by ownership and
field of technology, 1988-2008
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
198
8
198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
Num
ber
of
pat
ent
gra
nte
d
Malaysian Foreign
5,337
5,763
8,388
482
1,094
2,097
4,473
6,683
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000
Human Necessities
Performing Operations; Transporting
Chemistry ; Metallurgy
Textiles ; Paper
Fixed Constructions
Mechanical Engineering; Lighting; Heating; Weapons; Blasting
Physics
Electricity
Source: Chandran and Wong, 2011.
Mean scores of Technological
Capabilities Index (TCI), 2007
Industry Overall
TCI Investment Production Linkages
Food Processing 0.343 0.295 0.275 0.279
Textiles 0.316 0.272 0.255 0.250
Garments 0.263 0.217 0.206 0.222
Chemicals 0.447 0.401 0.383 0.317
Rubber & Plastics 0.386 0.365 0.320 0.276
Machinery & Equipments 0.373 0.343 0.294 0.298
Electronics 0.491 0.474 0.441 0.313
Motor Vehicles 0.425 0.350 0.363 0.329
Wood & Furniture 0.314 0.240 0.243 0.290
Product & Process Innovation Industry
Innovating
Firms (%)
Process
Innovation
Product
Innovation
Product &
Process
Innovation
Number of firms
Food and beverages 46 3 8 27
Textiles 73 - 10 16
Wearing apparel 29 - - 11
Tanning and dressing of leather 62 4 3 14
Wood 55 2 2 17
Paper 56 2 2 10
Publishing and printing 41 4 1 12
Coke, refined petroleum and nuclear fuel 25 - - -
Chemical 57 2 4 20
Rubber and plastics 62 4 3 24
Non-metallic mineral 32 - 10 20
Basic metals 58 2 - 14
Fabricated metals 56 4 3 15
Other machinery and equipment 47 1 2 17
Office, accounting and computing
machinery
63 1 - 2
Electrical machinery 57 10 - 19
Radio,television and communication eq. 76 2 11 13
Scientific equipment, watches and clocks 67 1 - 8
Motor vehicles ,trailers and semi trailers 71 1 - 5
Other transport equipment 50 1 2 18
Furniture 43 2 3 15
Recycling 67 10 - -
Source: MOSTI, 2006
Factors limiting Innovation
Factors limiting Innovation Business
Enterprise
Shortage of R&D personnel with required
expertise
√
Limited financial resources √
Increasing capital cost
Delay in making decisions √
Lack of new products/strategy √
Increasing labour cost √
Source: MOSTI, 2006
Sources of Innovation
Information, 1997-2008
Innovation Information Sources
Percentage of Firms Reporting High
Importance
1997-1999
(%)
2000-2001
(%)
2005-2008
(%)
Within the company 47.2 44.1 43.8
Other companies within company group 28.8 28.6 26.1
Suppliers of equipment ,materials,
components, or software 31.8 38.9
36.8
Clients or customer 65.2 57 37.6
Competitors and other companies from the
same industry 34.4 33.1
31.9
Universities or other higher education
institutes 6.2 8.6
16.8
Government or private non -profit research
institutes 11.7 16.9
16.4
Trade fairs and exhibitions 23.3 12.5 23.3
Scientific journals and trade /technical
publications 16.2 10.6
21.8
Professional conference and meetings 16.2 10.6 23.8
Source: MOSTI, 2006, 2010
Environment for technology development, Electronics,
Penang, 2006 Basic Infrastructure Mean Score
Transport 3.77
Power 3.89
Water 3.86
Telecommunications 3.89
Healthcare 3.84
Basic Government Institutions 3.66
Technical Training Institutions 3.61
University Education 3.26
Primary school 3.50
R&D Infrastructure
R&D scientist/engineers 2.18
R&D incentives 2.19
R&D grant 1.57
R&D institutions 1.82
Government, Policy and Institutions
Government incentives for innovation 2.46
Scientific/skilled manpower 2.55
Local universities for technical and R&D
collaboration
2.17
R&D institutions for technical collaboration 1.77
Availability of venture capital 1.08
Source: Chandran, 2010.
Case Studies: Electronics
Networks, R&D
Strength of relationship with
Mean
Score
R&D organization 2.56
Financial service institutions 3.18
Distributors 3.47
Suppliers 3.61
Customers 3.62
Technical service providers 3.50
Business service providers 3.37
Firms in industry associates 3.20
Strength of strategic alliances 3.16
Source: Chandran, 2010.
Case Studies: Automotive
Source: Wad and Chandran, 2011.
Training
(% of
sales)
Exports
(% of
sales)
Skilled
Workers
(% of total
workforce)
Semi-
skilled
Workers
(% of total
workforce)
Unskilled
Workers
(% of total
workforce)
R&D (% of
sales)
Manufacture of motor vehicles, trailers and semi-trailers
2001 0.06 4.93 5.24 5.40 89.36 1.70
2002 0.10 4.76 9.36 5.64 85.00 2.38
2003 0.07 7.02 5.80 5.66 88.54 3.10
2004 0.04 2.97 6.73 5.92 87.35 2.68
2005 0.07 5.78 7.09 6.00 86.91 1.14
Manufacture of other transport equipments
2000 0.09 23.16 3.91 4.80 91.29 0.04
2001 0.10 18.98 4.42 4.71 90.86 0.15
2002 0.13 18.37 9.26 6.34 84.40 0.08
2003 0.06 7.36 5.01 6.96 88.04 0.16
2004 0.06 10.63 5.11 7.23 87.65 0.17
2005 0.17 13.24 7.89 8.86 83.25 0.22
Conclusion & Implications
R&D is still low & limited
R&D is sector and ownership specific
Weak Innovation Ecosystem
Malaysia is yet to become a major site for the offshoring of R&D activities
Commercialization is made difficult – with weak industrial R&D landscape
Need for a mechanism to foster R&D in manufacturing – Public Private Partnership
