Monday, April 19, 2010

Intellectual capital as source of wealth

LET me start by paying tribute to the late Tan Sri P. Ramli whose birthday was last week. His songs and movies consoled many of our hearts when we were students overseas, especially during the cold winter.

If he were still alive today he would be a very rich man because every time his film is shown and his song aired, he would collect royalties or fees arising from his ownership of such works (or assets). Unfortunately, he died much too early to benefit from the reawakening to the importance of intellectual properties and assets now.

A nation is said to be rich with natural resources and savings. It can also enrich itself through greater intellectual assets based on creativity and innovation, which come in the form of registered intellectual properties (patents, design, copyrights, new business processes, traditional knowledge and many others) which can be further developed into intangibles. These assets can be bought and sold or franchised for the benefit of the owners.

In the course of economic growth, Malaysia had developed its natural resources into physical assets, and invariably or finally, some forms of financial assets (cash, shares, bonds and other savings). The last two financial crises (1997/98 East Asian contagion, and the financial meltdown of 2009) could have eroded the values of these assets.

It would be good and strategic for our society to increasingly emphasise on the development of intellectual capital in the form of intellectual properties and to commercialise them into products and services. Such an emphasis must be appreciated by all along the value chain, from research to production, marketing and distribution. Along the way, there will be efforts to improve, innovate and do better. For this, there must be a strong innovation system.

There must also be a strong culture to promote and undertake both fundamental and applied research in both public and private sector institutions.

The discoveries and findings of such research can be translated into patents, industrial designs and business processes, and incorporated into new products and services and processes. With the availability of funding and market, the potential to be derived from the development and value creation of these intellectual assets can be significant.

In reality, this is the basis of the prosperity of Silicon Valley in California, the United States which built its reputation on the intellectual capital of Stanford University and the surrounding institutions of higher learning.

It is also apt to say that the well-known Route 128 in the United States was the spillover effects of Harvard, MIT and Boston Universities in its vicinity.

Indeed our ample natural resources can be the basis on which in-depth research is undertaken to form advanced materials and thus fetch higher value than if they are sold in their original state (crude palm oil, for example).

A conducive ecosystem that promotes creativity and innovations will help evolve a corporate culture and institutional framework as well as mindset as to the importance of intellectual assets among us.

Such a system involves appreciation, recognition and serious support from all levels; decision-makers, managers and workers, all working within an ecosystem that encourages an enquiring mind and a readiness to innovate. Malaysia has yet to develop this culture.

The Domestic Trade, Cooperatives and Consumer Affairs Ministry had earlier led the task of implementing the Intellectual Property Policy to ensure that the concern gets its due attention by all. This initiative has to be revisited and appraised as to its impact, if there is any.

Some basic statistics illustrate this point. Our research and development (R&D) expenditure as a percentage of gross domestic product is below that of many other countries. Our annual patent registration is much lower than that in South Korea and Taiwan and way behind Japan and the United States and the European Union members.

Even South Korea is quite in the frontline now in content-based industries, an area it was not well known a decade ago (I stand corrected here, though).

In addition, our R&D work is not pervasive among all production units outside our public research entities, except perhaps among the larger government-linked companies (the likes of Petronas).

Even many of our foreign-owned companies are still largely involved in production techniques based on original equipment manufacturing rather than on original design manufacturing and original brand name. The situation among the small and medium industries is even more disheartening especially in the area of creating intellectual assets.

To infuse greater concern for innovation, we may need to promote more start-up funding or venture capital to provide the initial fund and take the risk of new ventures. Given the credit crunch in the developed West, Malaysia should take advantage of the high liquidity at home to provide our venture capital industry with more funding to underwrite new ventures.

At the moment our intellectual asset protection regime under the Malaysian Intellectual Property Organisation is very comprehensive and consistent with the expectations of World Intellectual Property Organisation and World Trade Organisation, so as to give protection to new technology, ideas, and intellectual assets. In this regard, we are ahead of China and several other countries in the region.

In conclusion, I think we have reached a stage where Malaysians should increasingly promote a culture of respect for knowledge, research and intellectual assets, so that these can be given due attention and become sources of wealth creation in the near future.

We need to be more creative and innovative in a positive manner, lest we become a society that does not display much disgust to “cetak rompak” (piracy) activities. My apologies if I sound crude here. -The Star

● The writer is chairman of Malaysian Industrial Development Authority.

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