The Malaysian Insight

PUTRAJAYA needs to invest in research and development (R&D) for small and medium enterprises (SMEs) to help them grow, as such firms do not have their own resources to do so, said a political economist.

Universiti Malaya’s Professor Edmund Terence Gomez told The Malaysian Insight this as expectations increase that Putrajaya will unveil an expansionary Budget 2020 to boost spending and domestic investment.

The call is also in response to Anwar Ibrahim’s plans to help nurture SME growth when he becomes prime minister next year.

Investments in R&D, especially in the agricultural sector, will boost income in rural areas, in line with Putrajaya’s aim to reduce wealth disparity.

The main reasons SMEs are reluctant to invest in R&D are the risk and high cost involved, said Gomez, despite the fact that new technology and know-how from such ventures are crucial for growth.

SMEs that fail to upgrade their operations and products through R&D will remain small and unable to compete on a global scale, he said.

Malaysia needs its SMEs to become industrial giants, such as Samsung of South Korea or Sony of Japan, so that they can create the high-wage, high-skilled jobs that locals need.

Putrajaya has to either pay for the R&D or link SMEs with institutions already doing research, said Gomez, from UM’s school of Economics and Public Administration.

“In the short run, you can link them up with foreign firms, but the long-term outcome must be by doing this ourselves so that we learn the process of R&D ourselves.

“And the reality is, even if you link up with foreign firms as we did in the past with Proton, they don’t transfer technology.”

Tech transfers 

Malaysia’s strategy of getting new technology by linking up with foreign firms has been mixed, said Gomez.

This was seen in the experience of Proton, one of the flagship projects during the drive to industrialise the country in the 1980s.

“Mitsubishi (Proton’s Japanese partner) gave us an old engine model, not their latest one, when we insisted on the latest technology,” said Gomez.

“The reality is, multinational corporations are reluctant to transfer new technology. They keep new technology and transfer the old tech.”

When Mitsubishi was not forthcoming, then prime minister Dr Mahathir Mohamad turned to French carmaker Citroen.

“He tried to tie up with Citroen and they gave us a car called the Tiara, and it was one of the worst models Proton ever created,” said Gomez.

Government investment in R&D for the agricultural and fisheries industries is also important if the Pakatan Harapan administration hopes to achieve its aim of food security and boost rural development.

A week ago, the cabinet announced that its “shared prosperity” agenda is aimed at reducing disparity in incomes between rural and urban areas.

Gomez said Putrajaya would have the means to do this if it reorientated agricultural and rural development institutions, such as Porim (Palm Oil Research Institute of Malaysia) and Kesedar (Lembaga Kemajuan Kelantan Selatan), to carry out research for agro-businesses.

“The problem is that they did not become vehicles to transfer technology to the ground, but vehicles for patronage politics.”

During the Barisan Nasional era, such entities became channels to reward party loyalists with plum positions and contracts, rather than help farmers or fishermen increase productivity.

“So, that’s why you have a large number of rural areas mired in poverty, low incomes, despite the presence of all these institutions that were originally meant to help them,” added Gomez. – September 25, 2019.