Finland a role model for R&D excellence
Finland is a small country by any measure. With a population base of only 5.2 million people it is among the smallest in Europe and only one fifth the size of Malaysia. Like Malaysia, a few decades ago it was also an agricultural economy. The break up of the Soviet Union, its main trading partner, 15 years ago almost caused a major depression with unemployment at 20%. However, they didn’t take this potential economic disaster lying down; they made significant policy shifts, became more innovative and today they are among the most successful nations in the world. The World Economic Forum ranked Finland the most competitive economy in the world in three of the last four years, an amazing achievement for a nation on the verge of crisis just 15 years ago.
How they did this is itself an interesting story but in a gist, instead of taking the normal economic measures of slashing costs and reining in spending they transformed their economy from one based on natural and agricultural resources to a knowledge-based economy (k-economy) and increased their research & development and innovation efforts. Today they are well known as the most innovative economy in Europe and their most famous company is (no prizes here) - Nokia.
Much of the credit for their transformation is due to their R&D capabilities. According to the Washington Post, in 2003 Finland spent 3.5% of their Gross National Product on R&D, bettered only by Sweden with 4.3% and followed by the USA with 2.6% and the European Union with 2%. Their total R&D expenditure was Euro 5 billion (RM 23 billion) in 2003. For a small nation that also provides among the highest social benefits in Europe they allocate a huge amount towards R&D.
Malaysia in contrast spent only 0.69% of its 2002 Gross Domestic Product on R&D according to MASTIC, the Malaysian Science & Technology Information Centre. Total spending amounted to RM 2.5 billion (Euro 543 million). Finland spends almost 10 times what we spend on R&D.
One interesting aspect of Malaysia’s research spending is that the private sector spent RM 1.6 billion on R&D but 80% of this was outsourced to overseas partners with India the largest recipient followed by the USA and UK. This is probably because most of the R&D spending is by multinational companies who seek external R&D expertise. Hence only RM 320 million private sector spend was on local R&D and adding government expenditure only RM 1.2 billion was spent on R&D in Malaysia. True R&D spending within Malaysia is actually only 0.34% of GDP and not really 0.69%.
Finland also has the highest proportion of researchers in Europe, 75,000 or 1.5% of its population and spends more money on research than on capital expenditure. Malaysia in contrast has only 25,000 research personnel or 0.1% of its population and spends far more on capital expenditure than on research.
So what does this mean to Malaysia and our science and technology sector including our new initiatives in Biotechnology and the Life Sciences? How will we achieve our goals of making Malaysia a k-economy and providing employment for future graduates as well as contributing to future economic growth.
Finland’s transformation began with a policy change focusing on high-level science and technology initiatives. It made a conscious shift from agriculture and natural resources to the k-economy by allocating not just funds for research but also for human resource development.
While our government has made all the right ‘noises’ there hasn’t been an equivalent shift into the actual implementation of policy and funds allocation. It is action not words that will create a viable k-economy. The low level of R&D investment at a mere actual 0.34% of GDP will never get us anywhere close to being a k-economy. Instead we must ramp up R&D allocation at least to the EU level of 2% within the next 10 years of the 9th and 10th Malaysia Plans.
It’s not just increasing R&D funding that matters but also the implementation of policy and allocation of funds. This is Malaysia’s Achilles Heel, and where we often falter. We have the planners and policy makers but not the implementers. We can take a cue from the Finns who have three institutions that channel R&D funds.
The first is Tekes, the national technology agency, which supports both basic and applied research. It grants 40% of funds to universities and other research institutions and the balance to business. Tekes is a completely autonomous agency, which is funded by the Finnish government. Its success is owed not just to its independence but also to its clean non-corruptible image (Finland is one of the least corrupt nations in the world). Tekes also works with businesses and assists in their collaboration with universities and research organisations including identifying markets and products before allocating funds.
Interestingly a third of the projects that they fund fail completely but instead of backing off they are actually looking to increase the failure rate because higher failure rates means they are taking risks without which you will never discover newer technologies.
The second organisation is Sitra, the Finnish National Fund for R&D, another politically autonomous organisation, which acts as a venture capitalist and invests in start-ups. It has a huge endowment thanks to the government’s share in Nokia. Almost 90% of the companies that Sitra funds were formerly Tekes funded companies. This is an incentive for us to increase funding for the Cradle program and perhaps also extending funding to more commercially oriented programs.
The third organisation is the Finnish Academy of Science & Letters, which provides funds to the best scientists with the most promising projects. Scientists whose projects are heading nowhere will be cut off from funding. They will not even fund prominent scientists if they cannot prove the validity of their projects so it is again a truly independent organisation.
However, Finland’s performance will not be positive without an education system that is one of the best in Europe. So meritocracy and higher levels of education go hand-in-hand with research excellence. Our government must not allow anyone to detract it from achieving educational excellence, if we are to have a successful k-economy.
Malaysia needs to increase its R&D funds and channel it through independent, politically autonomous organisations like the MDC, which has been hugely successful with the MSC R&D Grant Scheme (MGS). It also has to channel funds for all sectors of research; basic scientific research and commercial research like Cradle and MGS. Reports that MGS may have run out of grant funds will not assist our goal of being a k-economy. The government must ensure that more money is allocated towards successful programs like Cradle and MGS.
We have a proven success story to follow if we want to achieve success in our own goals for a k-economy and developed nation status by 2020. In short we need to allocate a bigger budget towards R&D, we must have independent organisations with capable leaders to implement and channel the funds without political interference and without corruption, we must have meritocracy and excellence in our educational system and we must have the political will to do what is necessary for the future long-term success of the nation. We have the wish but do we have the will? For the sake of our future I hope we do.
1 August 2005
How they did this is itself an interesting story but in a gist, instead of taking the normal economic measures of slashing costs and reining in spending they transformed their economy from one based on natural and agricultural resources to a knowledge-based economy (k-economy) and increased their research & development and innovation efforts. Today they are well known as the most innovative economy in Europe and their most famous company is (no prizes here) - Nokia.
Much of the credit for their transformation is due to their R&D capabilities. According to the Washington Post, in 2003 Finland spent 3.5% of their Gross National Product on R&D, bettered only by Sweden with 4.3% and followed by the USA with 2.6% and the European Union with 2%. Their total R&D expenditure was Euro 5 billion (RM 23 billion) in 2003. For a small nation that also provides among the highest social benefits in Europe they allocate a huge amount towards R&D.
Malaysia in contrast spent only 0.69% of its 2002 Gross Domestic Product on R&D according to MASTIC, the Malaysian Science & Technology Information Centre. Total spending amounted to RM 2.5 billion (Euro 543 million). Finland spends almost 10 times what we spend on R&D.
One interesting aspect of Malaysia’s research spending is that the private sector spent RM 1.6 billion on R&D but 80% of this was outsourced to overseas partners with India the largest recipient followed by the USA and UK. This is probably because most of the R&D spending is by multinational companies who seek external R&D expertise. Hence only RM 320 million private sector spend was on local R&D and adding government expenditure only RM 1.2 billion was spent on R&D in Malaysia. True R&D spending within Malaysia is actually only 0.34% of GDP and not really 0.69%.
Finland also has the highest proportion of researchers in Europe, 75,000 or 1.5% of its population and spends more money on research than on capital expenditure. Malaysia in contrast has only 25,000 research personnel or 0.1% of its population and spends far more on capital expenditure than on research.
So what does this mean to Malaysia and our science and technology sector including our new initiatives in Biotechnology and the Life Sciences? How will we achieve our goals of making Malaysia a k-economy and providing employment for future graduates as well as contributing to future economic growth.
Finland’s transformation began with a policy change focusing on high-level science and technology initiatives. It made a conscious shift from agriculture and natural resources to the k-economy by allocating not just funds for research but also for human resource development.
While our government has made all the right ‘noises’ there hasn’t been an equivalent shift into the actual implementation of policy and funds allocation. It is action not words that will create a viable k-economy. The low level of R&D investment at a mere actual 0.34% of GDP will never get us anywhere close to being a k-economy. Instead we must ramp up R&D allocation at least to the EU level of 2% within the next 10 years of the 9th and 10th Malaysia Plans.
It’s not just increasing R&D funding that matters but also the implementation of policy and allocation of funds. This is Malaysia’s Achilles Heel, and where we often falter. We have the planners and policy makers but not the implementers. We can take a cue from the Finns who have three institutions that channel R&D funds.
The first is Tekes, the national technology agency, which supports both basic and applied research. It grants 40% of funds to universities and other research institutions and the balance to business. Tekes is a completely autonomous agency, which is funded by the Finnish government. Its success is owed not just to its independence but also to its clean non-corruptible image (Finland is one of the least corrupt nations in the world). Tekes also works with businesses and assists in their collaboration with universities and research organisations including identifying markets and products before allocating funds.
Interestingly a third of the projects that they fund fail completely but instead of backing off they are actually looking to increase the failure rate because higher failure rates means they are taking risks without which you will never discover newer technologies.
The second organisation is Sitra, the Finnish National Fund for R&D, another politically autonomous organisation, which acts as a venture capitalist and invests in start-ups. It has a huge endowment thanks to the government’s share in Nokia. Almost 90% of the companies that Sitra funds were formerly Tekes funded companies. This is an incentive for us to increase funding for the Cradle program and perhaps also extending funding to more commercially oriented programs.
The third organisation is the Finnish Academy of Science & Letters, which provides funds to the best scientists with the most promising projects. Scientists whose projects are heading nowhere will be cut off from funding. They will not even fund prominent scientists if they cannot prove the validity of their projects so it is again a truly independent organisation.
However, Finland’s performance will not be positive without an education system that is one of the best in Europe. So meritocracy and higher levels of education go hand-in-hand with research excellence. Our government must not allow anyone to detract it from achieving educational excellence, if we are to have a successful k-economy.
Malaysia needs to increase its R&D funds and channel it through independent, politically autonomous organisations like the MDC, which has been hugely successful with the MSC R&D Grant Scheme (MGS). It also has to channel funds for all sectors of research; basic scientific research and commercial research like Cradle and MGS. Reports that MGS may have run out of grant funds will not assist our goal of being a k-economy. The government must ensure that more money is allocated towards successful programs like Cradle and MGS.
We have a proven success story to follow if we want to achieve success in our own goals for a k-economy and developed nation status by 2020. In short we need to allocate a bigger budget towards R&D, we must have independent organisations with capable leaders to implement and channel the funds without political interference and without corruption, we must have meritocracy and excellence in our educational system and we must have the political will to do what is necessary for the future long-term success of the nation. We have the wish but do we have the will? For the sake of our future I hope we do.
1 August 2005
posted by Dr. Siva at 10:58 PM
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