Issue 4/2012

TRADING ACROSS BORDERS News Highlights:

In a globalised world, making trade between countries easier is increasingly important for business. The ability of firms and economies to compete in global markets has been put to the test in the past few years of economic turmoil. In 2009, world trade recorded its largest decline in more than 70 years. No region was left untouched and one study shows that during the recent slump in global demand, making trade easier helped to mitigate the decline in an economy’s exports by promoting stronger links between suppliers and buyers. In Malaysia, PEMUDAH’s Focus Group on Trading Across Borders, chaired by the Ministry of International Trade and Industry, is undertaking initiatives to improve Malaysia’s trade environment.

 Reducing Time and Costs to Trade  Simplifying Procedures to Trade 

Consulting Stakeholders on Import and Export Guidebook

 ePASS : Online Port Ancillary Services System  Going from Strength to Strength  Malaysia has Moved Up the Value Chain

There are seven major federal ports, namely; Port Klang, Penang Port, Johor Port, Port of Tanjung Pelepas, Kuantan Port, Kemaman Port , and Bintulu Port. All these federal ports are under the jurisdiction of the Ministry of Transport and are equipped with modern facilities. Bintulu Port is the only port which handles liquefied natural gas. In tandem with the expansion of the economy and trade, ports in the country registered impressive growth in recent years. Two of the ports; Port Klang and the Port of Tanjung Pelepas are ranked among the top 20 container ports in the world.



On Transition towards Innovation Driven Economy



Committed to Enhancing Competitiveness

 Cutting Construction Red Tape  Can Malaysia become an Innovation Driven Economy?

PEMUDAH e-Bulletin Issue 4/2012

Page 2

REDUCING TIME AND COSTS TO TRADE The World Bank Doing Business Report is widely known and assesses comprehensive measures of business-enabling environment that can be compared across 183 economies. In the Doing Business 2012, the areas which were presented include Starting a Business; Dealing with Construction Permits; Getting Electricity; Registering Property; Getting Credit; Protecting Investors; Paying Taxes; Trading Across Borders; Enforcing Contracts and Resolving Insolvency. In the 2012 report, Malaysia was ranked 29th among 183 countries in the area of Trading Across Borders. Cost to export and import in Malaysia at USD450 and USD435 per container respectively, are the lowest globally. Continuous efforts to reduce time, costs and procedures to trade are being undertaken through establishing benchmarks and best practices in relation to ASEAN and OECD countries.

Time And Costs To Import and Export As Measured By World Bank

Trading

Across

Borders

measures the time and cost (excluding tariffs) associated with exporting and importing a standardized cargo of goods by ocean transport. The time and cost necessary to complete every official procedure for exporting and importing the goods from the contractual agreement between the two parties to the delivery of goods are recorded.

PEMUDAH e-Bulletin Issue 4/2012

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SIMPLIFYING PROCEDURES TO TRADE The Focus Group on Trading Across Borders, chaired by the Minitstry of International Trade and Industry (MITI), is undertaking initiatives to improve Malaysia’s trade environment, especially with respect to Trading Across Borders. Among the reform initiatives undertaken include:  Streamlining import and export process flows;  Standardisation of import and export process flows;  Combining documents for export: invoice and packing list;  Trade facilitation initiatives project; and  Consultative Committee on ancillary charges. IMPORT FLOW FOR FULL CONTAINER LOAD (PORT KLANG) Shipping Agent / Freight Forwarders

5

1

2 Approval of

-COO documenta tion from FTA Countries

3

13

Forwarding Agent

4

16cPay port charges

PIAs

To submit discharge list to Port Operator. 6 hrs prior vessels arrival

Importer/Bank

9

Issue CMO

10

21 Advice on return of empty container

haulier on 16dAdvice container pick up

Physical inspection if applicable

and pass the Gate pass to Haulier

Grant Approval in SMK

Port Operator 16aVerify shipping

•Electronic

agent release container

•Manual

Haulier 16eReceived Gate Pass

16bVerify container release by Customs and issue gate pass to FA

Customs

FA prepare and Submit K1 electronically SMK-DNT SMK SMKDNT

7

Customs receive K1 electronically

8

Risk assessment via CVI

11

Customs received printed K1& supporting documents

of exemption if 12a Verification relevant

17

Pick up container out of port

Port Operator release container & issue EIR

21 Send container to

19

Cargo release at port gate

Haulier prepare Empty back form and send to depot Depot Advise shipping agents upon receipt of empty container

importer premises or warehouse

Advise shipping Agents on container

12c Physical inspection if necessary

14

Approved / release K1

C: Ports & Terminal Handling

B: Customs Clearance & Tech Control

A: Documents Preparation

Haulier prepare CDA

18

20

12b Assessment of goods PROCESS INVOLVING NSW SYSTEM

Shipping Agent Received RFD

CMO

Make Duty Payment thru

Received instruction for cargo clearance - including Document preparation (if applicable)

-Applicatio n of Import Permit - Collecting shipping documents from bank

6

Import Permit

Documents preparation including (if applicable)

15

15 Prepare RFD and

Submit Manifest to Customs/ Port Operators

PIAs Importer

Forwarding Agents

Exchange Bill of Lading for Delivery Order

D: Inland Transportation &1 Handling

EXPORT FLOW FOR FULL CONTAINER LOAD (PORT KLANG)

Streamlining import and export flows 18 import and export process flows for nine types of trade activities, ranging from full container load, lesser container load and transshipment were streamlined. These 18 processes are based on best practices at Port Klang and are published at the MITI portal and other stakeholders’ websites to provide clear and comprehensive import and export guidelines;

Standardisation of import and export process flows This initiative is undertaken to develop a standard import-export process flow at major ports in Malaysia and is intended to expedite the import-export process. The nine types of trade activities developed as standard process flows are Full Container Load; Lesser Container Load; Transshipment; ZB form; Barter trade; Roll On and Roll Off; Break Bulk Cargo; Liquid Bulk Cargo; and Dry Bulk Cargo.

Combining Documents for export

Importer & Bank 1

Shipping Agent/ Non Vessel Operating Common Carrier Freight Forwarder/ Forwarding Agent

2

Issue Purchase Order /

Shipping Agent 5

PIA

a.) Issue of Shipping note & CMO (if required)

16

b.) Pre-advise Port & Depot Operator

c.) Release containers to forwarding agent or shippers

Submit freight quotation and finalise freight charges

PIAs 3

7

Approval of Export Permit (if applicable)

8

a.) Release empty container

-Invoice -Packing List -Shipping Instruction -Permit

Stuff & seal container

b.) Update details to port system & Shipping agent

13

15 Port Operator 11

Documents preparation

Haulier Forwarding Agent 4

a.) Received instruction for cargo clearance

Port Operator loads container on to ship

Customs

14

Exporter 1

Ship 21

22 Exporter

Depot

Advise on LC (if required)

Inspection or endorsement of permit (if required)

6

Received RFD & CMO

9

Haulier Prepare CDA

12

Received shipment/ consignment details

c.) Apply for Permit (if applicable)

10

18

Verifies booking information

Pick up of empty (shipping depot) & full container (exporter warehouse)

b.) Prepare K2

17

Update seal number to port system

19 20

Received K2 form - SMK-DNT

K2 passed to PIA (if applicable) K2 vetted by Risk Assessment System to identify High Risk Cargo Non High Risk Cargo, automatic approval is given

23 24 MITI / Chambers 25 Approval of Preferential /NonPreferential COO (if required)

Receipt of Duty Payment (if applicable)

B: Inland Transportation & Handling

Update to Port Operator on K2 release

C: Customs Clearance & Tech Control

Trade Facilitation Initiatives Project This process improvement project using six-sigma tools was undertaken with the objective to expedite, reduce number of required documents and identify best practices for import-export activity.

Consultative Committee on Ancillary Charges

Release of cargo

PROCESS INVOLVING NSW SYSTEM A: Documents Preparation

To reduce the number of required documents for export, an initiative to combine invoices and packing lists was undertaken to reduce paperwork, simplify and expedite the export process through integrated data management.

D: Ports &2 Terminal Handling

To provide oversight for fees and charges, an ad-hoc consultative body co-chaired by MITI and the Ministry of Transport (MOT) was formed on 12 January 2012.

PEMUDAH e-Bulletin Issue 4/2012

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CONSULTING STAKEHOLDERS ON IMPORT & EXPORT GUIDEBOOK The Trade Facilitation Working Group raised the concern that SMEs are not sufficiently aware of the import and export procedures for their products. This lack of information makes it difficult for SMEs to take advantage of import and export opportunities which hinders their competitiveness. Therefore, the need for a handbook which provides clear and concise information on government import and export procedures in a user-friendly format suited to SMEs with little import and export experience. The Trade Facilitation Working Committee Group also benchmarked other countries’ guidebooks on import and export procedures.

The proposed Guidebook framework for Import and Export Procedures in Malaysia: 1. Message 2. Introduction 3. Overview 4. Economic Operators 5. Regulatory Authorities 6. Import and Export Restrictions 7. Import Process and Procedures 8. Export Process and Procedures 9. Use of ICT in Import/Export Processes 10. Checklist and Best Practices 11. Frequently Asked Questions 12. Resources 13. Contact List

PEMUDAH e-Bulletin Issue 4/2012

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ePASS : ONLINE PORT ANCILLARY SERVICES SYSTEM

Notification for Port Ancillary Services System – ePASS

SISTEM PERKHIDMATAN SAMPINGAN PELABUHAN PORT ANCILLARY SERVICES SYSTEM (ePASS) PANDUAN PENGGUNA BAGI SYARIKAT YANG BERDAFTAR

In line with the Government’s effort to increase Public Sector’s Delivery System through the modernisation of business licenses, the Focus Group on Business Process Re-engineering (FGBPR) was established to reduce the barriers in conducting business and to eliminate unnecessary regulations by revising the licensing of businesses and improving the rules and procedures relating to issuance of licenses or permits. Port Klang Authority being one of the agencies under the Ministry of Transport, has taken the initiative in developing the on-line Port Ancillary Services System (ePass) to facilitate and speed up the process of acquiring approval of license for Ancillary Services in Port Klang.

Disediakan oleh : Lembaga Pelabuhan Kelang 2012

In view of this, effective from 1st June 2012, all new applications or renewal of license of Port Ancillary Services in Port Klang by any ancillary service providers, can be done online. For more information, visit the Port Klang Authorities website at www.pka.gov.my.

PEMUDAH e-Bulletin Issue 4/2012

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GOING FROM STRENGTH TO STRENGTH Malaysia’s Total Trade Expanded By 5.5% from January-July, 2012 Malaysia’s total trade was sustained for the first seven months of 2012, expanding by 5.5% to RM764 billion compared with the corresponding period in 2011. This was broadly in line with the trade performance of regional economies. Exports rose by 3.3% to RM409.3 billion while imports grew by 8.2% to RM354.6 billion. Among the top 5 trading partners, expansion in trade was recorded with ASEAN, an increase of 9.3%; the People’s Republic of China (PRC), 12.5%; and Japan 6% while trade with the European Union (EU) decreased by 0.7% and the United States of America (USA), 2.7%. Trade with ASEAN was valued at RM209 billion accounting for 27.4% of Malaysia’s trade compared with 26.5% in January to July 2011. Exports increased by 11.1% to RM109.8 billion while imports grew by 7.4% to RM99.6 billion. Higher exports to ASEAN were attributed by refined petroleum products, E&E products mainly monolithic integrated circuits, chemicals and chemical products especially pigments, paints, varnishes and related materials as well as machinery, appliances and parts primarily food processing and other specialized machines, as well as pumps, fans and compresses. The following charts show Malaysia’s major trading partners for January - July, 2012

The following charts show Malaysia’s trade with ASEAN countries for January - July, 2012

Source: Department of Statistics Malaysia/Ministry of International Trade and Industry. Latest Releases on Malaysian External Trade Statistics, 9 September 2012

PEMUDAH e-Bulletin Issue 4/2012

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MALAYSIA HAS MOVED UP THE VALUE CHAIN In the latest Global Competitiveness Report 2012-2013 by the World Economic Forum (WEF) based in Geneva, Switzerland, Malaysia ranked at 25th position is among the top 20 per cent of the most competitive economies globally. Malaysia has also been upgraded to the transition towards innovationdriven stage of development from the efficiency stage of development. The top five most competitive countries are Switzerland, Singapore, Finland, Sweden and Netherlands.

Overall Competitiveness Performance Switzerland

1 (1) ; 5.72 (5.74)

Austria

Singapore

2 (2) ; 5.67 (5.63)

Belgium

Finland

3 (4) ; 5.55 (5.47)

Saudi Arabia

Sweden

4 (3) ; 5.53 (5.61)

Korea, Rep.

19 (24) ; 5.12 (5.02)

Netherlands

5 (7) ; 5.50 (5.41)

Australia

20 (20) ; 5.12 (5.11)

Germany

6 (6) ; 5.48 (5.41)

France

21 (18) ; 5.11 (5.14)

United States

7 (5) ; 5.47 (5.43)

Luxembourg

22 (23) ; 5.09 (5.03)

United Kingdom

8 (10) ; 5.45 (5.39)

New Zealand

23 (25) ; 5.09 (4.93)

Hong Kong SAR

9 (11) ; 5.41 (5.36)

United Arab Emirates

24 (27) ;

Japan

10 (9) ; 5.40 (5.40)

Malaysia

25(21) ; 5.06 (5.08)

11 (14) ; 5.38 (5.24)

Israel

26 (22) ; 5.02 (5.07)

Denmark

12 (8) ; 5.29 (5.40)

Ireland

27 (29) ; 4.91 (4.77)

Taiwan, China

13 (13) ; 5.28 (5.26)

Brunei Darussalam

28 (28) ; 4.87 (4.78)

Qatar

m

16 (19) ; 5.22 (5.14) 17 (15) ; 5.21 (5.20)

m

m

18 (17) ;

5.19 (5.17)

5.07 (4.89)

Canada

14 (12) ; 5.27 (5.33)

China

29 (26) ; 4.83 (4.90)

Norway

15 (16) ;

Iceland

30 (30) ; 4.74 (4.75)

Note: (2011-2012 rankings are in brackets) Total Countries : 2012-2013 = 144

5.27 (5.18)

5

PEMUDAH e-Bulletin Issue 4/2012

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ON TRANSITION TOWARDS INNOVATION-DRIVEN ECONOMY Malaysia is ranked 25th position among 144 countries and is placed among the top 20 percent of the most competitive countries globally, in the recently released Global Competitiveness Report 2012-2013 by the World Economic Forum (WEF), compared with 21 st position among 142 countries in 2011-2012. Malaysia remains as the 2nd most competitive among ASEAN countries and 8th position among 22 Asia Pacific countries, ahead of China, India, and other ASEAN countries except Singapore. Malaysia achieved top ten position among the 144 countries in many areas of the report, including in the Legal Rights Index, ranked 1 st; Pay and Productivity, Dato’ Sri Mustapa Mohamed is the Minister of International Trade and Industry (MITI)

ranked 3rd; Government services for improved business performance, ranked 4 th; Strength of investor protection, ranked 4th; Government regulation and Ease of access to loans, ranked 8 th; Financing through local equity market, ranked 9th; Business impact of rules on FDIs and Efficiency of legal framework in challenging regulations, ranked 10th.

The WEF acknowledged Malaysia’s efforts to move up the value chain and upgraded Malaysia's stage of development to “transition towards innovation-driven” from “efficiency-driven” previously. This means that Malaysia has to increasingly focus on both non-technological and technological innovations to further enhance competitiveness. We can expect greater broadband penetration with the launching and implementation of the “1Malaysia Affordable Broadband Package” and Bestari Net in Schools. Continuous efforts will be undertaken to identify areas for improvement and to implement initiatives to ensure a smooth progression towards an innovation-driven, high income economy. The WEF also acknowledged Malaysia’s success at tackling the twin issues of lack of transparency and red tape. This is reflective of the initiatives such as implementation of the Integrity Pact and the Corporate Integrity Pledge under the Entry Point Projects within the Economic Transformation Programme. Initiatives in facilitating businesses through modernizing business licensing where the Special Taskforce to Facilitate Business (PEMUDAH) works with ministries and agencies have resulted in better procedural reforms. PEMUDAH will continue to undertake initiatives to improve the business environment. These include business process re-engineering in various licensing processes and procedures; implementation of web-based e-payment facilities for online payments nationwide; and fine tuning the one-stop centre approval processes for building plans. As Malaysia moves into the "transition towards innovation" phase, it is important that we focus on technological as well as nontechnological innovation. The GCR clearly indicates that it is imperative for Malaysia to focus on innovation. In this context, various initiatives have been undertaken including the National Innovation Strategy to drive the national innovation agenda. This forms the framework vital for shaping a supportive eco-system for innovation; creating innovation opportunities, emplacing innovation enablers and funding, which will lead to a vibrant innovation eco-system. It is recognized that Malaysia needs to create new economic wealth through entrepreneurship as well as fresh and innovative ideas. Programmes such as the “Genovasi” (Innovation Generation) and the i-Think were established to train innovation ambassadors as well as equip Malaysia’s next generation of innovators to think critically and be adaptable in preparation for the future.

They will eventually take

the lead in spurring progress through innovation solutions for the nation, thus contributing to a better quality of life.

PEMUDAH e-Bulletin Issue 4/2012

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COMMITTED TO ENHANCING COMPETITIVENESS It is a perpetual race to improve our competitiveness performance as other countries are also intensifying efforts to move ahead. However, it is encouraging that the report notes that Malaysia has a high capacity for innovation and acknowledges the emphasis that the Government has placed on innovation as the centre of the reform agenda. The introduction of the Science Act as well as the Science and Technology Human Capital Roadmap launched early this year will serve as one of the platforms for science and technology to thrive in Malaysia. The Government will address areas requiring improvement as highlighted by the report, and will also continue to invest resources in areas that the WEF acknowledges to have shown positive impact. In light of the WEF’s assessment that increased business sophistication and technology factors are the way forward to improve Malaysia’s competitiveness, the Government will continue to support innovation-led growth through the National Innovation Strategy. To implement this, Agensi Innovasi Malaysia (AIM) was established to bridge the gap between innovation and market readiness, to assist in successfully converting Malaysian intellectual property and ideas into commercialisation. The end-goal is to achieve high-income status by 2020. If Malaysia stay focused on sectors with natural strengths and continue to create conditions for competitiveness to flourish, Malaysia will be able to successfully compete globally

Moving Forward • With the new stage of development accorded to Malaysia (transition towards innovation-driven), Business Sophistication, Non-technological and technological innovations are the engines which will propel Malaysia towards the innovation stage of development.

• Continuous efforts will be undertaken to identify areas for improvement and to implement initiatives to ensure a smooth progression towards an innovation-driven, high income economy.

R

C

ontinuous initiatives by both the public and private sectors to address competitiveness challenges in the areas of Technological readiness, Education, Health and Infrastructure.

A lways

egulatory review to facilitate business on policy, regulatory changes and new regulations.

engage and benchmark with International Ranking Agencies as well as strategic collaboration among agencies.

E

ffective communication strategy through various media, including social networking. 16

WEF’s Assessment of Malaysia’s Competitiveness Performance “The most notable advantage is found in Malaysia’s efficient and competitive market for goods and services and its remarkably supportive financial sector, as well as its business-friendly institutional framework. In a region where many economies suffer from lack of transparency and the presence of red tape, Malaysia stands out as particularly successful at tackling these two issues. Yet, despite the progress achieved, much remains to be done to put the country on a more solid growth path. Its level of technological readiness is surprising, especially given its achievement in other areas of innovation and business sophistication and the country’s focus on promoting the use of ICT. Lack of progress in this area will significantly undermine Malaysia’s efforts to become a knowledgebased economy by the end of the decade.”

PEMUDAH e-Bulletin Issue 4/2012

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CUTTING CONSTRUCTION RED TAPE

Dato’ Saw Choo Boon is the Chairman of PEMUDAH’s Focus Group on Public Relations

IT is common for organisations to react to issues and problems by introducing new rules or making existing ones more complicated. Don't get me wrong, I am not against rules. Rules are necessary for proper control and standards, and to ensure people's rights are protected. Without them, there would be anarchy. But if rules are copious, inflexible and complicated, they result in the dreaded phenomenon of "bureaucracy" or "red tape", increasing inefficiency and costs, and stifling innovation and entrepreneurship. Albert Einstein called bureaucracy the death of all sound work. My favourite is this anonymous definition of bureaucracy as a game where everybody stands in a circle and the first one to do anything loses. The reduction of bureaucracy is the main objective of Pemudah, the Special Public-Private Sector Taskforce To Facilitate Business, initiated by the government in 2007, in pursuance of its values of facilitation and not hampering, and no more regulation than necessary. This is being progressively tackled with a great sense of urgency and determination by adopting the following approaches:

PROCESS REENGINEERING : radical restructuring and simplification of processes and removal of antiquated laws; GUILLOTINE : deletion of licenses and permits where their continued existence cannot be justified; COMPUTERISATION : online applications, removal of human interface and discretion; CONSULTATION : understanding the needs and concerns of businesses and feedback on changes before implementation; DIFFERENTIATION : one size does not always fit all; differentiating rules and procedures where necessary; and, BENCHMARKING : comparison with and learning from the best in the world. There has been much success but much more needs to be done. An area currently receiving urgent attention is construction permits, a complex process requiring submission of project documents; obtaining necessary clearances, licenses, permits and certificates; completing all required notifications; receiving all necessary inspections; obtaining connections for water, electricity, sewerage, telephone lines, etc. In total, five ministries and nine government agencies are involved. It is also timely that this area is being addressed as construction is one of the key drivers of Malaysia's economic development, recording a gross domestic product growth of 3.5 per cent to RM18.9 billion last year. Volume of work over the next decade is expected to increase by 30 to 50 per cent with the commencement of seven construction-related Entry Point Projects under the Economic Transformation Programme -- KL-Singapore high speed rail; KL MRT; Revitalising Sungai Klang ; Greening Greater KL/Klang Valley; Creating iconic places and attractions; Comprehensive KL pedestrian network and solid waste management eco-system. While Malaysia has progressively improved to an overall 18th position last year among 183 countries in the World Bank Doing Business Report, ranking of Dealing With Construction Permits slipped from 111th to 113th position, despite introduction of a one-stop centre and reducing the number of procedures involved. The World Bank had assessed Malaysia to have 22 procedures compared with the best of six for Denmark and to take 260 days for processing compared with the best of 26 days for Singapore. This is obviously unacceptable, requiring an urgent resolution with a more aggressive and concerted effort. Working with Kuala Lumpur City Hall, the initial focus will be Kuala Lumpur which will then serve as the model to be implemented throughout the country. Beginning early this year, the focus group immediately went into action and has conducted a comprehensive series of engagements with involved parties -- developers, contractors, engineers, architects, etc. They have also gone on a benchmarking mission to Singapore and consulted with the World Bank expert. Arising from these activities, an improvement plan has been crafted involving the following main actions: SEPARATE requirements for higher value projects with higher risks (eg. construction of a tower block) and lower value projects with lower risks (eg. construction of a warehouse); IMPROVE the coordination between ministries and agencies to enhance the efficiency of the one-stop centre and make it the only party the private sector has to deal with; STREAMLINE and combine procedures to reduce the number and eliminate unnecessary requirements; INTRODUCE self-regulation but with heavy penalties for noncompliance; EXPLORE outsourcing to the private sector the processing of submissions and inspections for low risk building; and, IMPROVE online application system to integrate the entire process on a single platform for greater efficiency and reduce the time taken. With the above actions being currently implemented, the focus group has targeted a reduction of procedures to 12 and the completion time to 105 days, and subsequently to 60 days. While the main aim is to improve the government service and delivery of the whole country, this improvement will further enhance Malaysia's ranking in the World Bank Report. The focus group is confident of delivering but it will need the cooperation of the private sector in two aspects -- feedback on faults, problems and proposals for further improvement, and usage of online systems where the overall uptake has been disappointingly slow.

PEMUDAH e-Bulletin Issue 4/2012

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CAN MALAYSIA BECOME AN INNOVATION-LED ECONOMY? Moving out of the middle-income trap means, among other things, building an economy that has the capacity to innovate and use innovations to compete in the market place. So being able to convert ideas into products is a key to success. To reach developed nation status by 2020, the government has projected that the country needs to grow by 6 per cent annually, and this growth has to be productivity-driven. Not only must we be able to put bricks and mortar together, we must also be able to work smarter and be more creative and innovative. An innovation-driven economy must have the ability to commercialise ideas that individuals or research and development centres produce. It also must have the capacity to commercially exploit patented ideas and resources for public use. Dato’ Mohd. Razali Hussain is the Director General of the Malaysia Productivity Corporation

Where do we stand? The latest World Economic Forum’s (WEF) Global Competitiveness Report, ranked Malaysia the 25th most competitive out of 144 economies it surveyed. However, in the Innovation Sophistication category, we were ranked 28th for quality of scientific research institutions, and 34th for PCT patents application per million population. In the category of Technological Readiness, we ranked 29th for firm-level technology absorption, 41st in Internet users per 100 population, 83rd in Internet bandwidth (Kb/s) per internet user, and 68th in fixed Broadband Internet subscriptions per 100 population. Earlier this year, the Institute of Management Development (IMD) released the results of its survey of the competitiveness of 59 economies. Malaysia ranked 32nd in the category of business expenditure on R&D as percentage of GDP, 42nd in total expenditure on R&D as percentage of GDP, 39th in terms of total R&D personnel nationwide in business enterprises, and 42nd in terms of scientific articles published. These are not impressive figures. We must improve our record in the creation and commercialisation of intellectual property. What do we have to do? There are a number of key issues we need to address if we want to become an innovative-driven economy: We must increase funding and incentives to support private sector research and help bring products to market and we must improve our management of the various government funds that have been allocated for R&D, as well as our ability to assess the impact of this funding. We must develop the expertise to provide technical assistance to help bring to commercialisation the ideas and products that are emerging from R&D centres. Two other observations : SMEs are often the source of a lot of good and innovative ideas, but not enough SMEs are undertaking R&D. This has to change. Secondly, we also need to recognise that there is a big untapped group of budding innovators - let's call them grassroots or garage innovators - who need and deserve professional help. We should identify them and help take them to the next level of development and commercialisation. Addressing these challenges The government has taken a number of policy measures to get the economy moving in this direction. Government and GLC procurement policies, for example, are being changed to support local innovative products and services. Universities have also been assigned the role of R&D centres to collaborate with the private sector. A key move has been the establishment of Unit Inovasi Khas (UNIK) in the Prime Minister's Office. UNIK's mandate is to formulate policies and strategies to promote innovation in the country. With the setting up of UNIK's implementation arm Agensi Inovasi Malaysia (AIM), we now have the institutional structure to undertake an organised and sustained programme of innovation initiatives. These initiatives are designed to improve the innovation eco-system and create New Wealth from innovation in Malaysia. Universities have special responsibility There is an expectation these days that institutions of higher learning should serve not only as centres of learning, but also as founders and incubators of ideas that can be transformed into commercially viable products. So, it is not surprising to see universities forming start-up companies to market their research. A number of universities and technical institutes overseas have succeeded admirably well in this regard, and can boast of being the source of an impressive list of patents, industrial designs, trademarks and copyrights. But regrettably, this has not been the case in Malaysia. Only 0.5 per cent to 0.8 per cent of the R&D output of our universities gets commercialised, whereas in developed countries the ratio is 5 per cent to 10 per cent. We have quite some way to go before universities here can claim to be centres of a technopreneur culture . University-industry collaboration is key In these circumstances, there is the need for intervention programmes to promote innovation-led entrepreneurship. This has to be done in a way that will have a lasting and institutionalised impact on society. The government is banking on improved collaboration between academia and industry to identify ideas and products that can be developed and brought to market. It is also putting in place a regulatory framework that will provide the funding support for these activities. We are confident that these measures will produce results, and are optimistic that we can transform Malaysia into an innovation-led economy.

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