MARCH 9 — Malaysia has invested much in R&D. Though only about 1.5 per cent of GDP, lower than the target 2.5 per cent, the amount is still substantial. With a GDP per capita expected to exceed US$12,000 by the end of 2024, the total GDP for the year would easily touch RM1.7 trillion. Much of the R&D is funded by the government. It is different in the developed economies where the bulk of their R&D spending comes from private industries.
Despite efforts to increase private sector spending on R&D through tax-related incentives, the result has been mixed. The only industry visibly investing significantly in R&D is the palm oil industry. Most leading palm oil companies have their own R&D outfits developing new products and processes for their business. For other sectors, R&D spending is relatively lower. It is no surprise, therefore, that R&D commercialisation has been a bone of contention for the country.
Malaysia can study the models of developed economies to incite better return of value, ROV. One model is Germany’s Fraunhofer, a leading applied research organisation in the EU, with affiliations in many countries. As a former Fraunhofer Senior Advisor for Malaysia, I find the model very appropriate for us. In this era of AI, IoT, and digitalisation, SMEs will do better if they make innovation a business culture.
Malaysia has strong ambitions to evolve into a knowledge-based economy through innovation and R&D, but challenges such as fragmented efforts, limited industry-academia collaboration, and underfunded research institutions hinder progress. Adopting a Fraunhofer model R&D ecosystem could be a transformative solution to bridge the gap between research, industry, and commercialisation, accelerating Malaysia’s innovation agenda.
What is the Fraunhofer model? The Fraunhofer model, developed in Germany decades ago, focuses on applied research and a strong partnership between academia, government, and industry. Key features include industry-driven R&D where research priorities align with industry needs, ensuring innovation is practical and market-ready.
Funding comes from both government grants and industry contributions, creating shared accountability. There is a strong emphasis on translating research into viable commercial values. The institutes are specialised depending on the industry sectors in their areas. Overlaps are minimal. The nearly 80 institutes under the Fraunhofer family also create research alliances on key topics such as energy, water, AI, sustainability, and materials.
Bridging academia and industry has always been our weakness. Malaysia’s current innovation ecosystem often sees a disconnect between academic research and industry needs. The Fraunhofer model’s emphasis on industry collaboration ensures research outputs have practical applications, reducing the commercialisation gap. SMEs form the backbone of Malaysia’s economy but often lack access to cutting-edge technology.
Malaysia can study the models of developed economies to incite better return of value, ROV. — Picture via Unsplash/Patrick Hendry
Fraunhofer institutes serve as technology enablers for SMEs, helping them adopt innovative solutions. The co-funding model incentivises private sector investment in R&D, reducing reliance on public funds while promoting sustainable innovation. Malaysia’s key industries, such as oil and gas, palm oil, rubber, and manufacturing, can benefit from targeted innovation. A Fraunhofer-inspired ecosystem can create a pipeline of highly skilled talent through collaborative R&D projects, aligning Malaysia’s workforce with future industry needs.
It also encourages the establishment of specialised innovation hubs across the country. There are implementation challenges, though. We need to build trust between stakeholders. One suggestion is to launch pilot projects in key sectors to demonstrate the value of collaboration. To sustain funding, we can introduce tax incentives and matching grants.
We can expect many benefits from the new ecosystem. These include increased R&D outputs, higher quality and quantity of patents, and publications. This would also enhance our competitiveness in global markets. Adopting the Fraunhofer model could be a game-changer for Malaysia’s innovation ecosystem.
It will enable a structured, impactful, and sustainable approach to R&D. By fostering collaboration, aligning efforts with industry needs, country priorities, and invigorating commercialisation, Malaysia can position itself as a global leader in innovation. This will make a career in R&D an attractive profession. R&D is one sure way to attract student interest in STEM.
* The author is an associate fellow at Ungku Aziz Centre for Development Studies (UAC), Universiti Malaya.
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