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7-Business: Malaysia's Prime Minister pushes plan for 'Bio Valley'

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TITLE:  Malaysia's Prime Minister Pushes Plan for 'Bio Valley'
SOURCE: The Wall Street Journal, by Cris Prystay
DATE:   November 19, 2001

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Malaysia's Prime Minister Pushes Plan for 'Bio Valley'

KUALA LUMPUR -- Malaysia has registered one biotechnology patent in its 44 
years of independence. But that hasnŐt deterred Prime Minister Mahathir 
Mohamad from trying to build a national biotech industry from scratch.

Dr. Mahathir wants to create a so-called Bio Valley inside Malaysia's $3.7 
billion Multimedia Super Corridor, a 15-kilometer-by-50-kilometer hard-
wired zone in and around Kuala Lumpur that is intended to be a test bed for 
new technologies. The Bio Valley project -- now in its planning stage -- 
will include three new research institutes. Malaysian officials are banking 
on the plan to spawn domestic biotech ventures and to attract $10 billion 
in foreign and local investment within 10 years.

That is a tall order for Malaysia, which has a small scientific community 
and is still struggling to attract information technology investors to the 
six-year-old Super Corridor project. Moreover, the country faces stiff 
biotech competition from Asian rivals with a bigger research capacity, 
particularly Singapore.

Still, Massachusetts Institute of Technology scientists helping to design 
Bio Valley say the plan is viable if Malaysia follows the right strategy. 
To play to Kuala Lumpur's competitive advantages, the MIT team recommends 
developing a research niche based on agriculture- and natural resource-
based biotechnology. To make the plan work, the MIT advisers say, Malaysia 
must also hire research experts to administer the project and be willing to 
pay top-dollar to recruit talented foreign scientists and beef up the 
country's own technical know-how.

"I'm confident we can build a multibillion dollar biotechnology industry in 
Malaysia," says Anthony Sinskey, a professor of metabolic engineering at 
MIT. "All the ingredients are here. We are just working on the recipe."

The Bio Valley project faces the same pitfalls that beset the Super 
Corridor plan, which is intended to help transform Malaysia's manufacturing-
 and resource-based economy to one based on value-added technology. A 
review of the Super Corridor commissioned by a government agency earlier 
this year concluded that the project had failed to draw significant 
investment from multinational companies and said Malaysia must offer better 
incentives to lure such concerns. Companies that have moved into the Super 
Corridor also complain about too much red tape and contend that government-
backed venture-capital funds -- currently run by bureaucrats -- should be 
managed by professionals.

Bio Valley planners want to avoid making the same mistakes.

"Our recommendation is that you need an international team to do this," 
says ChoKyun Rha, a professor of biomaterials science and engineering and 
the head of the MIT team. The National Biotechnology Directorate, a 
Malaysian government-linked agency, will oversee the project, but the MIT 
team has proposed that a separate business-development group -- composed of 
consultants from the U.S., Europe and Malaysia -- be created to guide 
investments and manage the three institutes. The institutes will specialize 
in pharmaceutical, agribiotechnology and genomics.

Dr. Mahathir "is well aware" of the challenges that lay ahead, Ms. Rha 
says. "He is entirely supportive. He has made it clear this is a priority."

In 1999, the Malaysian government set up a five-year Biotechnology 
Partnership Program with MIT, headed by Ms. Rha, to encourage collaboration 
between MIT and Malaysia-based researchers and to train a group of 160 
Malaysian scientists. According to Bernama, the national news agency, 
Malaysia has allocated 21 million ringgit ($5.5 million) for research to 
increase palm oil yield and on traditional medicinal plants under the 
partnership program.

So far, the program has produced two patent applications: one for an 
anticancer drug and another for a compound found in a local plant 
traditionally used as an aphrodisiac. In addition, more than 8,000 palm oil 
genes and 10 previously unknown chemical compounds have been identified 
from Malaysian medicinal plants.

But competition for investment will be stiff. Australia, Japan, South Korea 
and China have all introduced new legislation and provided funding to jump-
start their life-science industry. Singapore, for example, set aside $2 
billion to offer as incentive to attract leading research corporations and 
to invest in local and foreign biotech start-ups. To bolster its 
universitiesŐ research capabilities, Singapore is also offering competitive 
salaries to attract professors from top-ranked U.S. institutions.

"Singapore has been extremely aggressive," says Baiju Shah, a California-
based consultant with McKinsey & Co., who has worked on life-science 
projects in the U.S. Mr. Shah says several successful U.S.-based biotech 
start-ups have received sizable investment incentive offers from Singapore 
in recent months, on the condition that part of their operations be based 
in the city-state.

Singapore has also invested heavily in research at home. According to the 
United Nations Education, Scientific and Cultural Organization, Singapore 
spent the equivalent of 1.13% of the country's gross national product on 
research and development in 1996, the latest year with comparable data. 
Malaysia spent just 0.24% of its GNP that year, and was outstripped by 
countries such as Latvia, which spent 0.46% and Bulgaria, at 0.57%.

Malaysia published just 3,582 social and science research papers between 
1996 and 2000, or 0.1% of the world's total, according to ISI, a unit of 
Thomson Corp., which tracks articles published in international research 
journals. Singapore published 0.38% of the world's total during that 
period, while India published 2.14%.

Dr. Rha says the MIT partnership program, and the Bio Valley project 
itself, will help improve Malaysia's performance. In the first half of the 
five-year partnership program, 22 Malaysian scientists have spent between 
six months and two years each honing their skills at MIT. "We're getting 
there," she says. "Implementation will be the major challenge. You could 
build tremendous buildings with no intellectual capacity. Human resources 
are the key."

Since Malaysia aims to create its biotech sector from scratch, it will have 
to catch up by attracting cutting-edge foreign companies, says McKinsey's 
Mr. Shah. "If Malaysia wants to move quickly, its better focus would be to 
attract small companies" that are looking for a cost advantage, he says.

The government should also consider incentives to big drug companies to set 
up manufacturing operations in Malaysia, Mr. Shah suggests. As Bio Valley 
develops, those companies may add a research component to their local 

But Malaysian incentives currently aren't competitive, according to some 
industry executives. "When the government says, 'Come, it's cheap,' the 
government needs to do its sums," says Kim Tan, a Malaysia-born scientist 
who founded three biotech companies now listed on the London Stock Exchange.

Mr. Tan -- who is also a director of a London-listed investment fund 
company and recently founded Biotech Ventures Investments Pte. Ltd. in 
Singapore -- has been scouting Asia for a site for a drug manufacturing 
plant for one of his companies. Malaysian incentives, he says, don't come 
close to those offered by the Canadian government to build his plant near 
Vancouver. "The Bio Valley will be a challenge," Mr. Tan says. "The 
competition out there is pretty intense, and there are lots of government 
initiatives in Asia."


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