R&D and Innovation in

Malaysian Manufacturing
Sector: Progress and
Challenges
VGR Chandran Govindaraju
University of Malaya
vgrchan@gmail.com

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

Sector/Year
Radio, television & communication eq.
Office, accounting & computing
machinery
Other transport equipment machinery
Machinery & equipment n.e.c.
Rubber & plastic products
Food products & beverages
Chemical products
Electrical machinery & apparatus n.e.c.
Other non-metallic mineral products
Motor vehicles, trailers & semi trailers
Others
Total

Total Number of
Establishments
2006 2007 2008
469
538
517
76
66
67

Establishments
involved in R&D
2006 2007 2008
111
112
131
21
20
29

290
255
285
1288 1274 1386
2026 2146 2197
4681 4603 4848
974 1024 1019
498
504
513
1373 1411 1389
400
328
376
19969 20435 19938
32044 32584 32535

29
90
253
290
222
73
98
59
557
1803

24
92
305
319
223
73
184
71
1103
2526

R&D Expenditure
(RM million)
2006
2007
2008
692.7 735.4 1108.8
95.2 1014.4 292.9

24
15.8
21 130.3
96 118.8 148.5 115.6
237
71.7 104.6
75.4
387
36.6
70.3
72.1
194
48.5
48
38.9
83 190.9 173.7
32.3
70
17.3
23
30.7
63 159.6
29.7
30.4
617
74.7
62
77.1
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, 20002005, (RM million)

2005
Sectors/Ownership
Food products and beverages
Tobacco products
Textiles
Wearing apparel; dressing and dyeing of fur
Tanning and dressing of leather
Wood and products of wood and cork
Paper and paper products
Publishing, printing & reproduction of recorded
media
Coke, refined petroleum products and nuclear
fuel
Chemicals and chemicals products
Rubber and plastic products
Non-metallic mineral products
Basic metals
Fabricated metal products except machinery &
equipment
Machinery and equipment n.e.c.
Office, accounting and computing machinery
Electrical machinery and apparatus n.e.c.
Radio, television & communication equipment &
apparatus
Medical, precision & optical instruments, watches
& clocks
Motor vehicles, trailers and semi-trailers
Other transport equipment
Furniture; manufacturing n.e.c.
Recycling
Total

2004

2003

Local
23,502
2
1,473
2,166
231
5,430
4,058
7,818

Foreign
6,175
923
143
1,590
0
790
7,387
34

Local
45,875
9,645
1,634
964
295
5,330
3,258
1,460

Foreign
9,329
0
1,435
364
0
1,109
106
4

Local
16,991
8,434
1,202
718
418
2,827
873
789

Foreign
9,588
0
1,133
2,424
0
1,483
2,495
1,509

3,896

2,454

5,575

4,418

16,985

3,235

42,215
21,038
12,630
4,714
3,078

673,085
32,095
7,530
2,088
3,515

35,855
19,063
8,003
6,063
4,598

14,409
38,862
12,457
888
4,093

23,341
17,186
5,048
4,735
2,787

14,510
28,043
3,783
368
6,797

17,882
3,108
15,853
283,680

60,822
432,948
7,061
280,978

43,024
313
7,752
146,115

48,853
416,960
23,435
414,446

32,664
330
9,283
139,718

40,940
88,572
21,840
381,510

2,121

8,617

4,722

3,686

2,888

5,092

252,025
10,242
12,984
20
730,165

1,565
1,119
2,490
0
1,533,408

711,637
8,168
12,053
3
1,081,402

1,186
506
5,135

561,956
7,288
15,035
0
871,496

4,904
45
1,107

1,001,681

Source: Authors calculation based on Malaysian Annual Manufacturing Survey, 2007, 2008 and 2009.

619,378

Patents granted by ownership and

field of technology, 1988-2008
6,000
5,000
4,000
3,000
2,000
1,000

Malaysian

2008

2007

Foreign

Electricity

6,683

Physics

4,473

Mechanical Engineering; Lighting; Heating; Weapons; Blasting

2,097

Fixed Constructions

1,094

Textiles ; Paper

482

Chemistry ; Metallurgy

8,388

Performing Operations; Transporting

5,763

Human Necessities

5,337
0

Source: Chandran and Wong, 2011.

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

0
1988

Number of patent granted

7,000

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

Mean scores of Technological

Capabilities Index (TCI), 2007
Industry
Food Processing
Textiles
Garments
Chemicals
Rubber & Plastics
Machinery & Equipments
Electronics
Motor Vehicles
Wood & Furniture

Overall
TCI
0.343
0.316
0.263
0.447
0.386
0.373
0.491
0.425
0.314

Investment

Production

Linkages

0.295
0.272
0.217
0.401
0.365
0.343
0.474
0.350
0.240

0.275
0.255
0.206
0.383
0.320
0.294
0.441
0.363
0.243

0.279
0.250
0.222
0.317
0.276
0.298
0.313
0.329
0.290

Product & Process Innovation

Industry
Food and beverages
Textiles
Wearing apparel
Tanning and dressing of leather
Wood
Paper
Publishing and printing
Coke, refined petroleum and nuclear fuel
Chemical
Rubber and plastics
Non-metallic mineral
Basic metals
Fabricated metals
Other machinery and equipment
Office, accounting and computing
machinery
Electrical machinery
Radio,television and communication eq.
Scientific equipment, watches and clocks
Motor vehicles ,trailers and semi trailers
Other transport equipment
Furniture
Recycling
Source: MOSTI, 2006

Product &
Process
Product
Process
Innovating
Innovation Innovation
Innovation
Firms (%)
Number of firms
46
3
8
27
73
10
16
29
11
62
4
3
14
55
2
2
17
56
2
2
10
41
4
1
12
25
57
2
4
20
62
4
3
24
32
10
20
58
2
14
56
4
3
15
47
1
2
17
63
1
2
57
76
67
71
50
43
67

10
2
1
1
1
2
10

11
2
3
-

19
13
8
5
18
15
-

Factors limiting Innovation

Factors limiting Innovation
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

Business
Enterprise

Sources of Innovation
Information, 1997-2008
Innovation Information Sources

Within the company

Other companies within company group
Suppliers of equipment ,materials,
components, or software
Clients or customer
Competitors and other companies from the
same industry
Universities or other higher education
institutes
Government or private non -profit research
institutes
Trade fairs and exhibitions
Scientific journals and trade /technical
publications
Professional conference and meetings
Source: MOSTI, 2006, 2010

Percentage of Firms Reporting High

Importance
1997-1999 2000-2001 2005-2008
(%)
(%)
(%)
47.2
44.1
43.8
28.8
28.6
26.1
31.8
65.2

38.9
57

36.8
37.6

34.4

33.1

31.9

6.2

8.6

16.8

11.7
23.3

16.9
12.5

16.4
23.3

16.2
16.2

10.6
10.6

21.8
23.8

Case Studies: Electronics

Environment for technology development, Electronics,
Penang, 2006
Basic Infrastructure
Transport
Power
Water
Telecommunications
Healthcare
Basic Government Institutions
Technical Training Institutions
University Education
Primary school
R&D Infrastructure
R&D scientist/engineers
R&D incentives
R&D grant
R&D institutions
Government, Policy and Institutions
Government incentives for innovation
Scientific/skilled manpower
Local universities for technical and R&D
collaboration
R&D institutions for technical collaboration
Availability of venture capital
Source: Chandran, 2010.

Mean Score
3.77
3.89
3.86
3.89
3.84
3.66
3.61
3.26
3.50
2.18
2.19
1.57
1.82
2.46
2.55
2.17
1.77
1.08

Networks, R&D
Strength of relationship with
R&D organization
Financial service institutions
Distributors
Suppliers
Customers
Technical service providers
Business service providers
Firms in industry associates
Strength of strategic alliances
Source: Chandran, 2010.

Mean
Score
2.56
3.18
3.47
3.61
3.62
3.50
3.37
3.20
3.16

Case Studies: Automotive

SemiTraining Exports
skilled
(% of
(% of
Workers
sales)
sales)
(% of total
workforce)
Manufacture of motor vehicles, trailers and semi-trailers
2001
0.06
4.93
5.24
5.40
2002
0.10
4.76
9.36
5.64
2003
0.07
7.02
5.80
5.66
2004
0.04
2.97
6.73
5.92
2005
0.07
5.78
7.09
6.00
Manufacture of other transport equipments
2000
0.09
23.16
3.91
4.80
2001
0.10
18.98
4.42
4.71
2002
0.13
18.37
9.26
6.34
2003
0.06
7.36
5.01
6.96
2004
0.06
10.63
5.11
7.23
2005
0.17
13.24
7.89
8.86
Skilled
Workers
(% of total
workforce)

Source: Wad and Chandran, 2011.

Unskilled
Workers
(% of total
workforce)

R&D (% of
sales)

89.36
85.00
88.54
87.35
86.91

1.70
2.38
3.10
2.68
1.14

91.29
90.86
84.40
88.04
87.65
83.25

0.04
0.15
0.08
0.16
0.17
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

Thank You

Chandran
vgrchan@gmail.com