Not enough R&D spending will hurt high-income goal, says BNM governor

PETALING JAYA: The country’s transition into a high-income nation is impeded by the fact that Malaysia does not spend enough on research and development (R&D), Bank Negara Malaysia (BNM) governor Nor Shamsiah Mohd Yunus said today.

She revealed that “we spend less than half that of other frontier economies like Korea, Taiwan and Singapore”.

“Our R&D efforts have focused on generating scientific knowledge, but not applying it. This has resulted in low commercialisation of that knowledge,” she said during a World Bank Group webinar today.

Shamsiah added that to become a high-income nation the country must be driven by the pursuit of innovation and a commitment to R&D.

With the World Bank Group projecting that Malaysia would move into this category between 2024 and 2028, she said the government must allow space for the private sector to take the lead in developing technology.

She added that Putrajaya just needs to play the role of regulator and infrastructure provider.

“From being a commodities-based economy, we have diversified into high-end manufacturing and modern services, which helped us advance into a middle-income economy in the 1970s.

“But since then, we have struggled to achieve the productivity and innovation-driven growth needed to become a high-income economy,” she said.

Shamsiah added that despite huge government investments in education, the results have not reflected the expenditure, adding that the system must be reformed to produce graduates capable of fulfilling the needs of the future job market.

“Education and the training system must be more forward thinking, and cater to the shifts we anticipate over the next 20-50 years. The next generation must have 21st century skills to meet the new demands.”

Koh Youngsun, South Korea’s former vice-minister of labour, detailed how both these factors were key in his country’s growth and development as a high-income country.

He said South Korea made the decision not to rely on foreign direct investments (FDIs) to develop its technical capabilities but instead invested heavily in domestic innovation and human capital development.

“For a developing country that wants to develop its technology, the Korean case shows how important it is to promote and encourage R&D activities by domestic companies,” he said, adding that foreign investment cannot be a crutch.

“Also, while many countries look local when they develop technology, from the very start, our goal was competing in the global market,” he said, advocating for ambitious targets.

He also said significant pressure was put on the higher education sector by employers and parents to prepare students adequately for future demands. This convinced education providers to adapt accordingly. — Free Malaysia Today