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[COLUMNIST] Why innovation is the key to a Malaysian revival

October 9, 2023
Astro Awani
5 mins read

THE former CEO of INTEL, the company that produces one of the best microchips in the world, once said: "Only the paranoid survives." However, in an age where paranoia can lead to overindulgence in conspiracy thinking, thus ruining the thought process of the leaders and laity alike, the focus of any wise Muslim leader or otherwise, should be on innovation.

Innovation is akin to value-adding each and every part of the supply chain, to ensure a country's security, resilience and stability from any Dark Swan Events. Literally, external shocks.

The history of Malaya, ultimately, Malaysia, has been repleted with the shock from the global economic depression in 1920s yet again in 1980s, when the price of tin and rubber both collapsed, inducing a recession.

Even the Asian Financial Crisis in 1997-1999 came like a thunder from the lightning. On these three occasions, Malaysia has learned not to take things for granted.

But then again, even by 2007, the year when Apple 3 was first unveiled, Malaysia was still adopting what the late Professor Yoshihara Kunio at Kyoto University, called “Ersatz Capitalism” (i.e. characterized by patronage between capitalists and bureaucrats). By no means was Yoshihara complimenting the Malaysian economy or that of other newly industrialized countries for that matter.

Ersatz Capitalism does exist. The likes of economists in Malaysia, including Distinguished Professor Dr Rajah Rasiah, an expert on innovation, and concurrently a member of the Malaysian Economic Action Council, would know that the term i.e. Ersatz Capitalism refers to a form of economic system where the likes of Malaysia are part of the low-level industrial value supply chain.

Whatever Malaysia produces for the region or the world, there are very few technological breakthroughs. Warning signs have been there that this would cost Malaysia deeply in the long run as we have entered the information age.

If the semiconductors processing capacity would double every year, especially granted that this industry had already begun in earnest in 1950, then the doubling of this capability based on the prediction of Gordon Moore, one of the first founders of INTEL, whose prescient analysis has led to the remarkable Moore's Law, then Malaysia would be left in the trails if our semi-conductor industries are confined to foundries in Penang only. Of which Malaysia produces only 10 per cent of the world's need for microprocessors and semiconductors.

Not a lot since China has dominated the export of such chips almost reaching 90 per cent of them. These are not even the highly sophisticated 3 to 7-nanometer chips, of which China —- finally —- has been able to produce the Huawei Pro 60 Mate in September 2023 based on the cutting edge 7-nanometer microchip too.

For the lack of a better word, China's technological breakthrough has happened despite the Science and CHIP act of the Biden Administration that bans ASML of the Netherlands which has the lithography machine to make the 3 to 7-nanometers microchips. The ASNL Lithography machine is made of a few hundred thousand components. Yet China could find its way around the Science and Chip Act that bans the Netherlands from producing and exporting anymore sophisticated chips to China.

In other words, the G7 has not succeeded in stopping Huawei from making that highly impactful breakthrough. This was accomplished by Huawei albeit in a low keyed manner. Indeed, it rivalled the launch of the latest iPhone 15 in September 2023, which is based on 5-nanometer microchips.

Thus while the US may have its powerful Silicon Valley, the Shanghai Silicon Valley and other scientific and technology zones in various cities in China are not to be trifled with.

The Made in China (MIC 2025) strategic blueprint, announced by former Prime Minister Li Ke Qiang in 2015, in which China will dominate at least some of the world's ten most strategic tech sectors by 2025, is gaining traction. This blueprint intends to keep backing Made in China technological breakthrough in 2035 and 2045, of which the latter plans to ensure China dominates all ten of them. China further seeks to eliminate all poverty by 2048.

While it is laudable that Malaysia has reviewed the 12th Malaysia Master Plan and the National Strategic Energy Transition 2050 plan, despite emitting only 0.8 per cent of the world's total greenhouse gases, equal focus must be given to a National Innovation Master Plan to pull Malaysia into the direction of producing anything and everything that is in the high demand of the developed and developing world, in other words, the Global North and Global South respectively.

Malaysia should also not underestimate the need to have E-payment and E-solutions, consequently, blockchain, to ensure that all transactions can be carefully executed without any margins of errors, even if many such gateways are already acknowledged by the international authorities such as Mastercard, Visa, MoneyGram or UnionPay preferred by Chinese consumers. These are entities all acknowledged by Bank Negara too. In the private sector, Malaysia has Touch and Go, Mobility i, Total Financial Platform (TFP) and Ali Pay that are already in the eco-system.

However Malaysian companies cannot resort to cannibalising each other to dominate the consumer retail sectors since the population of the country still stands at 33.6 Million.

With a geography 640 times larger than Singapore, Malaysia has to think of how to work closely with Singapore, in turn, Indonesia and Thailand, not excluding Brunei, for that matter India and Bangladesh, of which the latter has one of the highest growth rates in the world.

The focus on the countries in ASEAN is because these are the countries that formed 80 per cent of the 23 per cent of the intra-regional trade across the whole of Southeast Asia. The figure of 23 per cent was brought up by Prime Minister Anwar Ibrahim himself at the ASEAN Summit in Jakarta in mid-September 2023. Ironically, if not tragically, this is the same intra-regional trade figure since 1970, barely 2.5 years after ASEAN was formed on August 7 1967.

Not all tech start-ups can succeed in becoming Unicorns. Research shows that only 4.17 per cent of all tech start-ups in the world make it to the league of being valued at US$10 Billion. There are ten of them in Southeast Asia, of which some are in Indonesia such as Bukalapak, Tokopedia, and Gojek, while a few are based in Singapore such as Grab, Lazada and Shopee.

The thrust of Malaysia’s revival does not rest on e-commerce alone but the courage to have enough workers, skilled or otherwise, from around the region and within, to pulsate Malaysia’s innovation plans to transform itself into a Smart Country. This would be in line with its role as the chair of the ASEAN and East Asian Summit in 2025; where the ASEAN Community of 680 million people would be formed, ideally, as one unit making it the fifth-largest Gross Domestic Product (GDP) in the world.

To achieve all of the above, Malaysia must breathe and live credible innovation, nonstop. No two ways about it!

Notably, Malaysia has been going down or remain stagnant, at best, in the realm of digital and innovative (Figure 1), especially post-pandemic.

via EMIR Research
via EMIR Research

Although in 2023 we observed an increase in IMD World Competitiveness Score and Global Innovation Index (GII) for Malaysia, when we consider the input-output relationship like in GII, it is becoming obvious that these increases are driven by mere increases in the inputs (committed national resources and tax-payers money spin-offs) that are yet to be translated into any sensible outputs, outcomes and impacts for the nation as depicted, for example, in Figure 2 and Figure 3 (for a deeper analysis of how falsely comforting these figures could be, refer to “Malaysia’s Position in the Global Innovation Index: False Comfort Risk?”).

via EMIR Research
via EMIR Research
via EMIR Research
via EMIR Research

EMIR Research has continuously persuaded policymakers that the gap between the inputs and the outputs, outcomes, and impacts for the nation will persist until similar to successful nations Malaysia institutionalises the Input-Output-Outcome-Impact (IOOI) framework (Figure 4) across all the ministries, government agencies, GLCs and GLICs (refer to “Recalibrating National Budget – Eradicating Leakages and Corruption”).

via EMIR Research
via EMIR Research

In short, the IOOI framework (Figure 4) is logical and robust reasoning (solely based on science and data) of the entire causal path from inputs (scarce resources / capitals) to outputs (tangible and intangible manifestation of intervention activities) to outcomes (real-world benefits / changed lives) and finally to impacts (higher-level intergenerational goals, if we speak in the context of a nation). Importantly, each level comes with a set of metrics to track the progress of transforming inputs into outcomes and impacts.

Furthermore, EMIR Research reiterated multiple times the importance of having a solid framework driven by data, science and economics to catalyse national digital transformation — Malaysia 5.0 with the vision of moving towards a society deeply integrated with technology, governed by inclusive and equitable “eco-vironmental” (i.e. taking into account economy and environment) principles and practices (Figure 5).

via EMIR Research
via EMIR Research

EMIR Research believes that to achieve Malaysia's 5.0 vision three pillars are fundamental:

1. Instil a new core identity philosophy that transcends individual societal divides and upholds the value of shared prosperity with an eventual goal of encouraging growth and progress for many.

2. Adopt, value-add and produce digital transformation and 4IR technologies centred around solving eco-vironmental problems with the goal of deep integration of 4IR technologies at every level of society: individual, industry, government and environment; and

3. Produce well-rounded citizens who are well-positioned and empowered to face, navigate and thrive 4IR with the goal to transform and reform the national education system to reflect ground reality (4IR) from primary-school level to university level.

Building effective policies around the above thrusts will help the current administration to deliver on its innovation agenda.