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Malaysia's new dream:
Biovalley
By Chee Yoke Heong
KUALA LUMPUR - Malaysia has prided itself as the
home to many grandiose creations and also humbly
declared the failure of a few others. But that doesn't
stop it from continuing to pursue its relentless
ambition to hop on to the next big project. And its
latest pet project, which has been championed by the
former prime minister Mahathir Mohamad and is now warmly
embraced by his new successor, Abdullah Badawi, aims to
put Malaysia on to the world's biotechnology map:
Biovalley.
In the heart of the country's other
grand project, the Multimedia Supercorridor (MSC), to
the south of Kuala Lumpur, Biovalley was officially
launched this year after three years in gestation. The
government is pouring in RM100 million (US$26.3 million)
initially to build the infrastructure and facilities by
2006 that will house 150-200 new biotech companies that
will support biotechnology activities as well as
coordinate and promote the commercialization of research
findings.
According to a study by the
Massachusetts Institute of Technology (MIT), the project
is to generate returns of more than $10 billion over the
next decade. Malaysia hopes to tap into the biotech
industry, which Ernst and Young estimated was valued at
$41 billion last year and is expected to grow much
larger in the coming years. Biotechnology is seen as one
of the components that will bring Malaysia to
industrialized-nation status, and for some analysts, a
way for the country to step up the value-added ladder as
the importance of manufacturing begins to fade with the
emergence of competition from China.
With this
potential in mind, Biovalley aims to capitalize on
Malaysia's natural resources to harness its rich
biodiversity, crucial in the development of
biotechnology with the hope of producing commercially
lucrative products. For a start, it will create three
institutes for research and development in the areas of
pharmaceuticals and nutraceuticals, genomics and
agricultural biotechnology, representing the R&D
core of Malaysia's biotechnology initiatives. To help it
leapfrog into the industry, it has entered a strategic
partnership with MIT to improve the country's know-how
in biotechnology and to enhance its international
linkages.
When fully operational in 2009,
Biovalley will comprise research, commercial, education,
recreation and residential on an 800-hectare site that
was once earmarked to house the Entertainment Village, a
now failed project to build Malaysia's version of
high-tech Hollywood-style studios.
But the
issues facing the project are numerous, with many
challenges promising to confront this Malaysian dream.
As the Brookings Institution has found in its study of
biotechnology centers in the United States, which
currently leads the world in this technology, the
industry is very risky and volatile. Half of the biotech
companies in the US formed in the 1970s have folded or
merged with other companies. The process of setting up a
successful company is protracted, requiring substantial
funding, time and uncertainties in product development,
resulting in most small biotech companies failing during
the past two decades.
The study adds that most
biotech firms operate at a loss, spending large amounts
of money on research and development for several years
in advance of earning any sales revenue. Those that do
succeed are found in metropolitan areas that combine a
strong research capacity with the ability to convert
research into substantial commercial activity. These are
also places where there is a high concentration of
capital flow, a critical ingredient in the development
process. Proximity to universities and research
institutes is also needed as sources of intellectual and
human capital.
Government financing, a criterion
that would be taxing especially to developing countries
such as Malaysia, is also required to boost growth. The
study notes that biotech centers in the US receive heavy
support and subsidies from the government; for example,
the National Institutes of Health provide substantial
research funding, totaling $229 million in 2000, to
biotech centers.
The study also concludes that
it would be a mistake to believe that biotech centers
will take off like computer-technology centers. Unlike
the boom created by the personal computer and Internet,
biotechnologies are often quite expensive and most
biotech products are applicable to only a narrow
fraction of the population.
Another shortcoming
of the biotechnology industry is that it often takes
years or decades to develop biotech-based products and
for them to reach commercial status, and some might
never see the light of day. This low rate of success and
long period of time associated with developing and
securing regulatory approval for commercial
biotechnology products mean that a biotechnology
industry would need to invest significant amount of time
and resources.
Aside from the economics, there
remain many scientific disputes and issues that are
being hotly debated at the global level. These issues
include genetic engineering, cloning, genomics mapping
and intellectual property rights, which are highly
contentious from the scientific, ethical, social and
economic points of view.
Can Malaysia rise to
the occasion? Does Malaysia have all these ingredients,
and can it afford to pump in the substantial financial
resources, energy and time to create a thriving biotech
center? Or does this scheme risk turning into a white
elephant, following the path of several other grandiose
projects?
On the financial viability of the
project, Science, Technology and Environment Minister
Law Hieng Ding has been quoted as saying that the
government hopes to attract $10.5 billion of investments
in the next decade by providing policies and incentives
such as unrestricted employment of local and foreign
workers, pioneer status, and zero duties on import of
biotechnology equipment. In addition, it will dish out
attractive business initiatives, efficient marketing
strategies for new technology, and manpower transfers.
The minister said funding will be secured
through the Malaysian Technology Development Corp and
other financial institutions and venture-capital firms,
but he gave no details as to the amount.
Meanwhile, three companies have pledged to
invest in Biovalley. Malaysia's INS Holdings and
China-based Dalian Zhen-Ao Bioengineering Co will
jointly produce bio-fertilizer, wheat-grass tea,
bio-dynamic oil and mineral water. And Dutch-based
Inproser Technologies is embarking on the third phase of
its enzymatic treatment of palm-kernel waste products.
Although past performance is not encouraging,
there are a few indications that Biovalley may fare well
in certain areas, and perhaps better than the MSC.
Malaysia has scored successes in bioengineering
higher-yielding oil-palm crops and pharmaceutical and
protein-producing rubber plants. Other genetically
modified plants and crops that contain traits of value
that have been produced at the experimental stage are
genetically modified rice, papaya, pineapple and chilli.
With the exception of pineapple, which is engineered for
tolerance to "black heart" (a physiological condition
resulting from long periods of refrigeration), all three
other food crops are engineered for resistance to viral
infection. But resistance and opposition to genetically
modified foods and products, especially in Japan and
some European countries, threaten to close export
markets for Malaysian goods, say analysts.
Malaysia's rain forests are a potentially rich
source of research and for production of
pharmaceuticals, an asset that analysts say gives
Malaysia the upper hand against its neighbor Singapore,
which has also spawned its own biotechnology ambitions
through Biopolis. If Malaysia were to leverage on its
advantages, including lower operation costs, it would be
in a strong position to attract investors away from
Singapore, which in recent times has seen a slow
departure of investors because of funding difficulties.
"It is a very feasible project provided that it
is packaged well," said Saifuddin Morat, chief economist
at Mayban Securities, adding that success hinges on the
project being executed and planned well. He cited the
experience of Port Pelepas, which successfully drew away
major shipping companies from Singapore to the Malaysian
port due largely to cost advantages and had emerged a
strong contender against the city-state's dominance.
Whether foreign investment will come into
Malaysia in droves depends on whether the Biovalley
project can attract a major investor here, he said.
"It's equivalent to the flying-geese theory. What is
needed is a big name to come and the rest will follow."
So far Biovalley has managed to entice a
Malaysian to uproot himself from a successful career in
Britain to return home to join the project. He is Kim
Tan, one of Britain's leading biotech entrepreneurs. Tan
has three listed biotech companies: London-listed KS
Biomedix, which is developing cancer-fighting
antibodies; TranXenoGen, which is using genetic
engineering in chickens to make them produce eggs
containing therapeutic proteins that can then be
extracted for use in drugs; and Genemedix, listed both
in London and Singapore, which makes generic drugs.
Tan has teamed up with the Malaysian government
investment arm, Khazanah Nasional, to manage Malaysia's
first biotech venture-capital fund - Springhill Biotech
Ventures - which will manage a $30 million
venture-capital fund. As manager of the fund, Tan will
provide key expertise and commercial know-how to the
Biovalley initiative. The other backers of the fund are
the Malaysian unit of Singaporean life insurer Great
Eastern Holdings, insurance firm Pacificmas and palm-oil
conglomerate TH Group. Springhill will license new
technologies developed abroad that are almost ready to
hit the market and can be used, in turn, as a platform
for further research in Malaysia. It will also invest in
start-ups in the United States and Europe, and set up
joint ventures with research and manufacturing companies
that agree to operate in Malaysia.
But the hope
that other "geese" will follow Tan's path could be
dampened by the problems that plague the project. The
lack of skilled professionals in the biotechnology
arena, the lack of regulations and intellectual-property
protection and the lateness at which Malaysia has joined
the biotechnology game in the region could be a
deterrent to foreign scientists and investments and
could put back the country's ambitious plan, said Daphne
Chung, a senior analyst with IDC Asia/Pacific, an
independent technology consultancy and market research
firm based in Singapore.
A sobering note, but
one that is needed to reflect reality as Malaysia
charges forward in its new big project.
(Copyright 2003 Asia Times Online Co, Ltd. All
rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
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