A three-way marriage of the country’s natural biological wealth, sophisticated labour force and government incentives is a combination that Malaysia hopes will make it a player to be reckoned with in the biotech sphere – an industry sector that is increasingly important both to the national and the regional economy. To ensure some oversight of that development, the government established Biotech Corporation in 2006, with the remit of facilitating the prospects of local companies and incentivising foreign players to bring investment and skills to the domestic industry.

Biotech has been a growth area in Malaysia since well before the implementation of any policy designed to ensure its part in the economic mix. It was, in a sense, a natural product of high-calibre human capacity and the biological resources on the country’s doorstep. But now it is has become an important component of prime minister Abdullah Bin Haji Ahmad Badawi’s push to see the country fully industrialised by the year 2020.

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“Just as the Malaysian government identified information technology as an important area of potential, it believed that the same process of encouragement could be applied to the biotech sector,” BiotechCorp senior vice president Brian O’Keefe told fDi.

In terms of the sector’s contribution to the country’s economic growth, BiotechCorp has made predictions of a contribution of about 2.5% to the country’s gross domestic product (GDP) by 2010, and 4% and 5% by 2015 and 2020 respectively.

Serious signal

The formation of BiotechCorp is a signal that the country is taking the industry seriously. The corporation is wholly government owned, funded by the ministry of finance and overseen by the ministry of science. Its multi-disciplinary board of directors comprises scientists, industrialists and academics, and is augmented by an international advisory panel.

“Our remit is simple. It is to build on the existing biotech industry for the good of Malaysia,” says Mr O’Keefe.

As yet, not all areas of the biotech industry are equally sophisticated in terms of research or production. “In some respects, for example, healthcare is very much a ‘sunrise’ segment at the moment. Apart from some progress in the areas of diagnostics and devices, there is not yet a great deal happening – and there are only so many healthcare companies,” says Mr O’Keefe.

Likewise, he says, the industrial sector is at an early stage, although there are good prospects for areas such as development of biomaterials. “But on the other hand, in the agricultural field things are potentially very different.” It is this part of the biotech equation that is underpinning the whole, he suggests.

BiotechCorp has given consideration to how best to play its part in the country’s 2020 goals; in short, how to encourage and nurture sector development locally, while attracting skills and FDI from overseas. As Mr O’Keefe recognises: “Without a combination of both, we cannot grow.”

For foreign companies particularly, BiotechCorp possesses the advantage of offering a one-stop-shop service, expediting otherwise potentially time-consuming bureaucratic hurdles related to immigration and company formation.

BioNexus scheme

Key to the corporation’s initiative to “prime the pump” is its BioNexus scheme, under which both Malaysian and non-Malaysian companies have an opportunity to gain a head-start that might otherwise be difficult for a small company to obtain. On being awarded BioNexus status, companies are eligible for a number of privileges contained in a bill of guarantees that includes freedom of ownership, freedom to source funds from anywhere in the world, freedom to “bring in knowledge workers”, eligibility for special competitive incentives, access to top-flight laboratories and research centres, and access to an information network linking Malaysian centres of excellence.

Fiscal incentives include a 10-year corporate tax break, with tax payable from the first year of profit. And companies with at least 51% Malaysian ownership have access to grant schemes that can provide side capital worth up to RM2.1m ($605,000) and to research and development (R&D) grants which, says Mr O’Keefe, can be invaluable assistance for companies wishing to get some traction in the marketplace.

For the moment, Mr O’Keefe acknowledges that these are early days. “While we don’t have science parks or incubators in the acknowledged sense of the term, we do have laboratory space available and can put companies in touch with a number of institutions that have the facilities they need to grow,” he says.

According to Mr O’Keefe, since September 2006, when BiotechCorp was launched, there have been promising signs of take-up from both local and foreign companies. To date, seven companies have been granted BioNexus status, including Malaysia Bio-Diagnostic Research Sdn Bhd, which specialises in developing medical diagnostic kits; KL Biotech Manufacturing Sdn Bhd, which is involved in the development of supplements and pharmaceuticals derived from Malaysian herbs; Vivantis Technologies Sdn Bhd, a company that is involved in R&D and production of enzymes and related biological products; and Nova Laboratories Sdn Bhd, which is involved in the development of plant-based pharmaceuticals.

The three other companies are IPT Kosmo Sdn Bhd, which is involved in the application of an advanced and patented technology for waste water treatment; The Asiatic Centre for Genome Technology Sdn Bhd, which specialises in genome sequencing and the discovery of biomarkers; and Innobiologics Sdn Bhd, which specialises in contract manufacturing of biopharmaceuticals.

Foreign interest

Many more companies are in the pipeline and not all of them are Malaysian, says Mr O’Keefe. BiotechCorp is aware that Malaysia is not the only country in the region with hopes pinned on its biotech industries. While Korea, Taiwan, Singapore, India and China each have their own models, strengths and challenges they are all in the same game. This, according to Mr O’Keefe, suggests that the secret to success for BiotechCorp must go beyond straight competition to bring a degree of complementarity to the bigger picture.

The corporation has yet to pin down a major pharmaceutical company as an ‘anchor tenant’ in the country’s still-growing tech sector. But it is making progress.

Partnership strategy

In June 2007, a memorandum of understanding was signed by BiotechCorp and the Indian pharmaceutical company Avesthagen, illustrating the strategic potential of this model as an approach. Avesthagen manufactures nutraceuticals, biopharmaceuticals and other products in the agricultural, nutrition and healthcare spheres, and is establishing a presence in Malaysia with a view to obtaining BioNexus status.

“Indian companies are not finding it easy to expand and develop purely from an Indian base. There are human resources limitations, so labour costs are rising. Despite the fact that as a rule, Malaysian labour costs are higher, at the top end, the cost of doing business is not significantly greater in Malaysia than it is in India,” says Mr O’Keefe.

There are lifestyle issues also. Malaysia possesses a large, well-established Indian population. “A lot of Indian businessmen feel very happy living and working in Malaysia,” says Mr O’Keefe. “These things matter.”

All sectors of business see the heterogeneity of Malaysia’s rich and varied social fabric as a strong market differentiator in the south-east Asian region. Chinese language skills and relative proximity to China are another important element. Maximising these assets is a next step for BiotechCorp.