A new knowledge economy

Malaysia has experienced a remarkable growth journey, transitioning from a country dependent on primary commodities to its present-day knowledge and innovation-driven economy.

Having rebounded from the economic crisis, by 2014 the country had achieved a Gross National Income (GNI) per capita of US$11,000. In 2017, within a year, the World Bank revised the GDP growth forecast from 4.5 per cent to 5.2 per cent. A focus on innovation was central to this growth; Malaysia declared 2010 as the ‘Year of Innovation’, which set off a series of activities that have fuelled the country’s economic progress.

While innovation was not unknown in Malaysia before this point, the following years have seen far more attention placed on fostering innovation, and its scope widened beyond the limits of science and technology.

A collage with various landmarks from Malaysia

Agensi Inovasi Malaysia (AIM) was set up as a statutory body, overseen directly by the Prime Minister and seven ministers, from education to finance and trade, with members from academia, the corporate sector and government agencies.

AIM leads the development of Malaysia’s innovation ecosystem through multiple initiatives. This includes supporting the development of medium to large corporates; strengthening collaboration between industry and academia; supporting social innovation and nurturing a culture of innovation.

Meanwhile, other institutions such as the Malaysian Global Innovation & Creativity Centre (MaGIC) and TERAJU (a strategic unit under the Prime Minister’s Department of Malaysia) were established to support the entrepreneur community, while Yayasan Inovasi Malaysia (YIM) looked at how innovation could be inclusive from the citizens’ perspective.

Too many policies?

The focus of the Malaysian government on entrepreneurship led to investment to the tune of RM5.88 billion from the various ministries and agencies, for small to medium-sized businesses (SMEs) and startup development. This was designed to help small companies find and develop talented staff, access funding and market opportunities, invest in innovation and technology and build new infrastructure.

However, all these efforts towards propelling Malaysia into an innovation-led economy resulted in overlapping initiatives and policies. In 2015, there were 81 national policies, of which 56 were science, technology and innovation-related, with 458 agencies promoting or implementing them. These agencies and institutions were not working collaboratively and were often seen as competing with each other.

This overlap was hindering the country from realising its full innovative potential. It was driven by a number of factors, including: insufficient political will and legislative drive to address issues relating to science, technology and innovation; the absence of an overarching master plan and, most importantly, failure to align science, technology and innovation with economics and finance.

A new strategic plan

Over the past two and a half decades, a key driving force in Malaysia’s transformation has been Vision 2020, which outlined how Malaysia would become a developed nation by 2020. The Government has put in place numerous programmes, the latest being the 11th Malaysia Plan and National Transformation Policy. As the future of Vision 2020 began to look uncertain, in 2017 the Government launched ‘Transformasi Nasional 2050’, or TN50, as a strategic plan for the future of Malaysia for the period of 2020-2050.

Malaysia has made great strides in moving forward economically and creating an inclusive economy across the population. Recent administrations were making a concerted effort to streamline innovation efforts and accelerate growth within certain areas (namely agriculture; biotechnology; building; education; energy; finance; food; green technology; healthcare; hospitality; smart cities; sports; telecommunications; transportation; tourism; water management; and waste management).

The announcement of a new regulatory sandbox - allowing innovators to test and refine new policies and ideas in a controlled ‘live’ environment with real users, before rolling them out fully - paves the way for a new approach towards innovation policymaking.

Authors

Nathan Kably

Nathan Kably

Nathan Kably

Senior Strategy Analyst

Nathan works on the design and delivery of Nesta's strategy.

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Benjamin Reid

Benjamin Reid

Benjamin Reid

Head of International Innovation - Development Programmes

Benjamin is head of the International Innovation team within Nesta's Policy and Research division, examining new global trends and practices in innovation, with an emphasis on emerging…

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Silvia Pau

Silvia Pau

Silvia Pau

Assistant Programme Manager, A Fairer Start mission

Silvia is an Assistant Programme Manager.

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Florence Engasser

Florence Engasser

Florence Engasser

Senior Foresight Analyst

Florence is a Senior Foresight Analyst within Nesta’s Discovery Hub, which aims to create a link between Nesta’s current portfolio and our pipeline of future work.

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Paulina Gonzalez-Ortega

Paulina Gonzalez-Ortega

Paulina Gonzalez-Ortega

Design Lead, International Innovation

Paulina was the Design Lead for the Global Innovation Policy Accelerator, a 14-country collaborative development programme for senior innovation policymakers.

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Anna Schlimm

Anna Schlimm

Anna Schlimm

Learning Experience Designer, Global Innovation Policy Accelerator

Anna was a Learning Experience Designer for the Global Innovation Policy Accelerator.

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