Overview: Malaysian Industrial Biotechnology

Overview: Malaysian Industrial
Biotechnology
The Malaysian
Industrial
Biotechnology
Sector
A Frost & Sullivan Whitepaper
2009
1
Contents
04
•Introduction
05
•Global Sector Overview
06
•Goals and Strategies for the Sector
The Malaysian Biotechnology Policy
The 9th Malaysia Plan
08
•Industrial Biotechnology Focus Areas
Biofuels
Bio-catalysts
Fine and Specialty Chemicals
12
•Review of Key Research and Development Areas
13
•The Malaysian Industrial Biotechnology Sector
The Malaysian Biofuels Sector
The Malaysian Bio-catalysts Sector
The Malaysian Fine and Specialty Chemicals Sector
16
•Progressive Development of the Industrial Biotechnology Sector
Example of a Research & Development Centre
18
•Malaysia’s Key Offerings
Designated Economic Corridors
BioNexus
Government Incentives
Intellectual Property Right Protection
Funding
2
23
•Conclusion
24
•References
Please note; all data included in this paper is from published sources or Frost &
Sullivan’s proprietary information, or from industry participants.
Where currencies are mentioned, the conversion of Malaysian Ringgit to US Dollar
uses the following exchange rate: RM 3.6 = US$1.0
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3
Introduction
Industrial biotechnology is the application of biological based systems and their components in the
manufacture of industrial products or in the support of industrial processes. Industrial biotechnology (also
referred to as “White Biotechnology”) is one of the three areas of the biotechnology sector, the others being
Healthcare biotechnology (“Red biotechnology”) and Agricultural biotechnology (“Green biotechnology”).
Industrial biotechnology is mainly based on fermentation technology and bio-catalysis. Fermentation is a
biological process in which an organism or its components anaerobically convert organic compounds into
alternative organic compounds. In industrial biotechnology this typically involves the conversion of complex
organic material into simpler products (e.g. the conversion of carbohydrates into alcohol). In Bio-catalysis
processes enzymes, which are produced and isolated from micro-organisms, are applied to accelerate
(catalyze) the conversion of one product into another product.
Industrial biotechnology covers a broad range of industrial applications and sectors, including polymer
manufacturing, biofuels production, fine and specialty chemical manufacturing and bio-remediation. By 2010
it is estimated that sector will be worth US$15.3 billion – US$33.6 billion . In Asia, growth in the industrial
biotechnology sector is being driven by the expansion of the biofuels industry in a number of Asian countries,
particularly Malaysia, Indonesia, Thailand, India and the Philippines. The development of a national biofuels
industry in these countries is strongly driven by the existence of significant quantities of feedstock in the
countries and by dedicated government support designed to foster the development of the industries. Other
areas of the industrial biotechnology across Asia are still in a nascent stage of development although some
countries in the region are developing niche areas of specialization, for example China has developed
significant expertise in the field of bio-remediation of waste water.
Malaysia is micro-cosmic representation of the region as a whole. The country has traditionally had strengths
in the palm oil sector and is moving to leverage on this expertise to expand into the adjacent biofuels sector.
The development of the sector is two tiered, with resource allocated to both establishing production facilities
in Malaysia and to enhancing biofuels processing, production and yields. Malaysia’s foray into other segments
of the industrial biotechnology sector are at are nascent stage of growth. However dedicated government
support for the industry is driving the growth of a number of opportunities in the sector, particularly in the field
of biocatalysts, fine chemical production, bioremediation and biopolymer production. In addition to the
utilizing the support matrix created by the government, companies in the sector will build on Malaysia’s
strengths including the significant biodiversity, established industrial manufacturing expertise and agriculture
production strength.
A number of key growth drivers for the sector include the declining cost of feedstock prices, which will make
the sector more cost competitive relative to other industrial processes, and the ability of the sector to reduce the
environment footprint of pollution and / or carbon emitting industrial process. The significant growth
opportunities and high value added nature of the sector have made it an attractive target for countries seeking
to move their manufacturing activities up the value chain.
4
Global Sector Overview
Biotechnology is likely to emerge as a significant growth engine of the global economy. Its applicable product
reach is high, and biotechnology applications are expected to alter the manufacturing and application of
products in the healthcare, agriculture and industrial sectors. The sectors footprint is likely to diversify further
in the future and will be driven by the continued emergence of new technology and a deeper interaction of the
sector with IT technology (bioinformatics). As a nascent industry, the biotechnology sector has developed as a
recognized industry only within the last twenty-five years. The creation and expansion of the industry was
driven by scientific breakthroughs that allowed organisms and their constituent parts to be isolated and
manipulated. The evolution of the biotechnology sector continues to be accelerated by on-going technology
development across multiple fields of science, including cellular techniques, genetic engineering, structural
molecular biology and recombinant DNA technology.
The global biotechnology sector has grown strongly in the Asia Pacific region. In 2007 the biotechnology
market in Asia was estimated at US$ 41 billion, with Japan, China, and Australia being the three largest
biotechnology markets in the region, representing a combined Asian market share of around 79%. Growth in
the sector has, in part, been driven by companies leveraging on the regions low cost but trained human capital
base and manufacturing expertise. Another strong growth driver in Asia has been the dedicated support
directed to the sector by various regional governments. The national governments of Malaysia, Singapore,
South Korea, China, India and Australia all actively support the development of their respective national
biotechnology sectors.
The outlook for the industrial biotechnology sector remains positive despite the current economic downturn.
One of the primary drivers for the sector will be its ability to create value across the production value chain by
accelerating and streamlining production processes in a number of different industries. As an example,
bio-catalysts will play a greater role in the pulp and paper industry by catalytically accelerating the separation
of wood fibers and by the enzymatic degradation of residual lignin that is typically removed by bleaching.
Currently the predominate application of industrial biotechnology is in specialized applications, however
technology driven efficiencies (such as a reduction in the cost of producing bio-catalysts and proteins) will
likely broaden the sectors applications into commodity products and eventually bulk products. Process
feedstock prices will also impact on the development of this trend. Current price levels of renewable feedstock
for the fermentation industry exceeds the price of feedstock used by bulk and petrochemical industries,
reducing the financial incentives to apply biotechnology to these sectors.
Another key driver of industrial biotechnology will be its ability to impact on the ‘carbon footprint’ of
production processes. Studies have demonstrated that industrial biotechnology has the potential to reduce air
and water pollution, reduce process energy demands and generate bio-degradable waste that is more
environmentally friendly. It is anticipated that a growing awareness of the environmental impact of industrial
process by both consumers and governments will drive the wider use of clean industrial biotechnology
processes. Government responses to the growing issue of global warming and environmental pollution will
have a significant impact on the evolution of this trend. Applying biotechnology to clean up industrial
processes comes at a financial cost; therefore government initiatives such as the EU Emission Trading Scheme.
The scheme requires companies to pay for their greenhouse gas emissions by requiring them to hold emission
credits equal to their surplus greenhouse gas emission levels. This type of scheme generates financial incentives
for companies to reduce their environment footprint will drive the uptake of biotechnology into industrial
processes. Malaysia is making a number of positive steps in this direction, for example in 2009 the Korea
Development Bank agreed to finance a US$80 million energy project that what generate carbon credits that
could potentially be traded in the EU carbon credit market. This project highlights the way investors can invest
in the ‘Green Technology” sector to create additional revenue generating opportunities.
5
Goals and Strategies
for the Sector
Malaysia has identified biotechnology as one of the new engines of growth for the national economy and it is
expected that the sector will generate US$75 billion (RM270 billion) in revenues by 2020. The country has a
rich biodiversity and cost-competitive skilled labour markets, as well as good transportation networks, ICT
infrastructure and strong capabilities in R&D. These combined characteristics make Malaysia an attractive
potential destination for foreign biotechnology companies and investors interested in the biotechnology sector.
The Malaysian Biotechnology Policy
The Malaysian Government has identified the biotechnology sector as one of the key strategic sectors that will
support the growth of the Malaysian economy. It is anticipated that growth in the sector will be supported by
leveraging on the strength of the country’s diverse natural resources and cost effective human capital talent
pool. The Government has identified the need to create a strong supporting framework to facilitate the long
term growth of the sector. In 2005 the Malaysian government enacted the Malaysian Biotechnology Policy to
achieve this goal. The policy detailed nine focus areas deemed critical to the creation of a sustained
biotechnology sector, one of which is to support the growth of the industrial biotechnology sector.
The Malaysian Biotechnology Policy detailed a series of aggressive development goals. The biotechnology
industry is expected to contribute approximately 2.5 % of national GDP by 2010, 4.0% by 2015 and 5.0% by
2020. Furthermore, it is estimated that the industry will create 280,000 new jobs – both directly and indirectly
– by 2020.
Thrust three of the policy deals with Industrial biotechnology. The focus of the policy in the sector is to nurture
and support growth opportunities in the application of advanced bio-processing and bio-manufacturing
technologies. Specific areas within the Industrial Biotechnology sector were identified as potential growth areas
in the policy. These include:
1. Bio-catalysts: Development of biocatalysts such as enzymes for food and feed preparations, cleaning
products, textile processing and other industrial processes.
2. Bioprocessing: A growth area which can be applied in the production of biomaterials such as bioplastics,
biofuel, fine and specialty chemicals such as cosmetic ingredients and electronic chemicals.
3. Biomanufacturing: as applied to the development of bio-materials, enzymes (biocatalysis), biofuels,
microbes technologies, biomass, bio-degradable plastics, oleochemicals and contract bio-process engineering.
The 9th Malaysia Plan
The 9th Malaysia Plan announced on the 31st March 2006 further defined and detailed the goals of the Malaysian
government in relation to the biotechnology sector. Importantly the Plan reviewed the amount of funding support
committed to developing the sector in Malaysia (as described below). It is anticipated that the industrial
biotechnology sector will benefit from all of these investments, including the funding support directed to
agro-biotechnology projects which, in part, will focus on the development of novel feedstock used in the
manufacture of biofuels (such as improved high oil yielding oil palm varieties).
6
The Nine Thrusts of the National Biotechnology Policy
Agricultural
Biotechnology
Transform and enhance the value creation of the agricultural sector through biotechnology.
Healthcare
Biotechnology
Capitalise on the country's biodiversity for commercialising the discoveries of health related
natural products and bio-generic drugs.
Industrial
Biotechnology
Leverage on the country's strong manufacturing sector to increase opportunities for
bio-processing and bio-manufacturing.
Research &
Development
Technology
Acquisition
Establish centres of biotechnology excellence, through research & development, as well as
technology acquisition.
Human Capital
Development
Build the nation's human capital through education, training and research activities, with the
aim of producing knowledge generation capabilities.
Financial
Infrastructure
Provide the right financial support via competitive lab to market funding and incentives to
encourage committed participation from academia and the private sector, including
Government-linked companies.
Legal & Regulatory
Framework
Strengthen the legal and regulatory framework by reviewing ownership of intellectual
properties and regulations relating to biotechnology processes and business.
Strategic
Development
Build international recognition for Malaysian biotechnology and find a niche in the global
technology value chain.
Government
Support &
Commitment
Realise the execution of policy through the establishment of a dedicated and professional
Government agency to spearhead the development of the biotechnology industry with the
incorporation of Malaysian Biotechnology Corporation Sdn Bhd (BiotechCorp).
Source: BiotechCorp, 2008
The policies describe an over-reaching series of goals, and the development plans for the Industrial
biotechnology sector are embedded within these policies. The Malaysian Biotechnology policy proposed
broad support for the industrial biotechnology sector and indicated that initiatives would focus on growing
opportunities in the advanced bio-processing and bio-manufacturing sectors. The 9th Malaysia Plan was more
specific and described specific sector niches that would be focused on, including bio-catalysts, bioprocessing
(in particular biofuels production) and contract biomanufacturing.
9th Malaysia Plan Biotechnology
Fund Allocation
Allocation
(US$, M)
Allocation
(RM)
$129.9
$463.0
$101.9
$363.0
Biotechnology Commercialization Fund
$28.1
$100.0
Biotechnology Acquisition Programme
$28.1
$100.0
Biotechnology Business Development
$148.7
$529.8
Technology and IP Management
$28.1
$100.0
Entrepreneurship Development
$14.0
$50.0
Agro-Biotechnology Projects
Institutional Support and Equity
$22.4
$84.2
$79.8
$300.0
Biotechnology Infrastructure
$260.6
$928.5
Total
$567.3
$2,021.3
R&D Development
Biotechnology R&D
Source: 9th Malaysia Plan, Economic Planning Unit
7
Industrial Biotechnology
Focus Areas
The industrial biotechnology sector is broad and for the purposes of this white paper Frost and Sullivan will
focus on 3 areas in which we believe Malaysia will be able to leverage on its natural strengths and capabilities
to develop an internationally competitive position in the market. The 3 focus areas are the biofuels sector, the
bio-catalyst sector and the fine & specialty chemicals sector:
Sector Strengths
Biofuels
Bio- Catalyst
Fine & Specialty
Chemicals
Vast natural resources
Abundant supply of biomass
Advanced commodity sector
Strength in oleochemical and specialty chemical
manufacturing
Cost competitive skilled labour
Heavy concentration of oil palm plantations
Palm oil refineries and ready supply of feedstock
Absence of moratorium on genetically modified crops
Globally recognised halal certification
We anticipate the development of biofuel sector in Malaysia will be particularly strong due to the multiple
benefits that local producers and developers can leverage on. These include the ample supply of palm oil and
other feedstock biomass and the strength of the commodity supply chain in Malaysia, which will reduce
logistics costs.
Focus Sector Overview 1: Biofuels
Biofuels represent an alternative fuel source to non-renewable petroleum-based fuels. The different types of
biofuels and their applications are described in the table below. The creation of the biofuels market was driven
by the need to address declining stocks of petroleum reserves and to mitigate the generation of greenhouse
gases caused by the consumption of fossil fuels. The transportation sector accounts for approximately two
thirds of the global consumption of petroleum and one third of the carbon dioxide emitted. To reduce the
transport sector consumption of fossil fuels numerous governments’ subsidize and encourage the use of
bio-fuels. The US directly subsidizes both the generation of corn based bioethanol (in 2006 US$900 million of
subsidies were paid) and also provides fuel suppliers with a 51¢ per gallon federal blenders credit. Due the low
cost of diesel fuel it will be critical for the government to subsidies the supply of biofuels.
In 2009 it is estimated that the EU will import one million tonnes of palm oil (mainly from Malaysia and
Indonesia) to use in biofuel production (550,000 tonnes for biodiesel and 450,000 tonnes for power
generation). The EU alone will account for more than 50 per cent of total global demand for biodiesel.
Forecasts for future demand are given below, based on two main assumptions:
•Governments will maintain regulatory and fiscal support; and
•Sufficient feedstock will be available to not only efficiently produce large quantities of biodiesel but will also
support research into technology focused on the efficient utilization of new and novel biofuels
8
Principle Biotechnology Generated Biofuels
Name and Description
Source
Application
Bioethanol
Ethanol produced by breakdown of
biomass, Brazil produces 50% of
global production
- Corn (US)
- Sugarcane Juice and Molasses (Brazil)
- Wheat, barley
Motor vehicle transport, no vehicle
modifications are needed to use less
than 10% bioethanol blends
- Soybean oil (US)
- Rapeseed oil (Europe)
- Palm oil (Malaysia and Indonesia)
Can be used pure but can cause
engine problems, also used as a
blend with petroleum diesel
- Landfill biomass
- Waste Water
- Other biomass and feedstock
Turbine based electricity generation
Biodiesel
Produced from vegetable oils via
transesterification process
Biogas
Principally Methane, generated by
biodegradation of feedstock
It is forecasted that by 2011 global consumption will exceed 22 million tonnes. The EU will remain the
largest market but Asia Pacific, USA and Latin America will also display strong growth. Potential additional
demand from regions such as South Africa, Canada, Russia, etc has not been included in these forecasts:
Global Biodiesel Demand
25,000
'000 Tonnes
20,000
15,000
10,000
5,000
-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
25
182
650
80
140
415
993
85
250
833
Latin America
Asia Pacific
USA
EU
7
17
300
600
50
65
900
941
2011
1,167 1,208
2,498 3,364 4,618 6,731
1,390 2,500 3,300 3,850 4,125
1,055 1,434 1,933 3,180 4,890 5,600 6,900 8,200 9,300 10,100
Source: Frost & Sullivan, 2007
9
The challenges faced by the expanding market for both bioethanol and biodiesel include feedstock supply and
cost competitiveness with petroleum-based fuels. Bioethanol and biodiesel feedstock has alternative uses as a
food product. In 2007 soaring biofuel demand contributed to an escalation of feedstock prices, which
significantly reduced the profitability of bio-fuel production. It is anticipated that as bio-fuel demand grows the
demand for feedstock will need to be met by cellulosic materials or alternative feedstock to limit the impact on
feedstock costs. Currently the production of biofuels from cellulosic materials is commercially not viable
although it is believed future advances in process technology will change the current scenario. The price of
crude oil, which competes with biofuels, also has a significant impact on the commercial viability of biofuels
projects. The current low price of crude oil will reduce the commercial incentives for companies to produce
biofuels, due to competition from crude oil. While the price of crude is sharply lower than its peak price
reached in 2008 over the long term increasing demand and declining oil reserves are forecast to increase crude
oil prices above their current levels. This forecast trend will benefit investors in the biofuels sector, particular
those with a medium to long term investment horizon.
Brent Crude Oil vs. Ethanol
+25%
0%
-25%
-50%
-75%
May 2008
Sep 2008
Jan 2008
The Asia Pacific region is a nascent but growing market for biodiesel. Local demand for biodiesel is limited and
is likely to remain muted unless concerted government efforts are made to stimulate local demand. The export
market represents the dominant market opportunity for producers in Asia, in particular we expect strong
opportunities to develop for exporters in the EU biodiesel market as the current production of rapeseed oil
based biodiesel in the EU is insufficient to meet local demand. Producers operating in the Asia Pacific region
will also benefit from cost efficiencies created by access to low-cost feedstocks. In addition the availability of
feedstock will also support the cost- effective production of bio-based compounds such as bio-plastics and fine
chemical compounds.
Focus Sector Overview 2: Bio-Catalysts
Bio-catalyst are proteins that act to accelerate chemical reactions by bringing chemical compounds involved
in a reaction into close proximity to each other. Bio-catalysts must be produced by living organisms and are
typically derived from plant, animal, or microbial sources.
The last few years have witnessed tremendous progress in the development of enzyme technology and enzyme
production efficiencies. In industry process bio-catalysts compete with chemical catalyst. While production
improvements have reduced the cost of producing bio-catalysts they continue to remain more expensive than
chemical catalyst. In recent years bio-catalysts have become more competitive as advances in recombinant
DNA and structural protein technology has resulted in creation of bio-catalysts with improved selectivity,
energy efficiency and environmental safety.
10
Bio-catalyst are extensively used in food and beverage production and processing such as sugar and starch
processing, dairy products, beer production, wine processing, juice processing and baking. Bio-catalysts
employed by the food industry are also called food enzymes. Technical enzymes are defined as those used in
more industrial process such as in the manufacture of detergents, textiles, leather, paper and pulp. A third class
of bio-catalysts, called animal feed enzymes, is used in feed processing. It is anticipated that technology
improvements and production efficiencies will drive the future use of bio-catalysts into other, non-traditional,
industrial sector.
In 2007 revenues generated by the global enzymes market were estimated at $4.1 billion, of which $2.71
billion was generated by the sale of industrial enzymes. Technical enzymes and food enzymes are the strongest
growing segment of the biocatalyst market. Industry participants need to continuously innovate to remain
competitive; hence firms in the sector devote significant efforts in new product R&D and in the acquisition of
new technology via merger and acquisition and in-licensing activity.
Technology Drivers – Shaping the future use of Bio-Catalysts
1. Discovery: Genomic mapping, decoding and screening technology will accelerate the discovery novel and
variant forms of bio-catalysts
2. Optimization: Protein Engineering will be used to manipulate protein structures to enhance the efficiency and
stability of current enzymes and allow the customized development of unique bio-catalysts
3. Production: Fermentation process yield enhancements via improvements in upstream and downstream
processing will strength the cost competitiveness of bio-catalysts
Focus Sector Overview 3: Fine and Specialty Chemicals
The field in which the application of biotechnology is most likely to make the greatest impact is anticipated to
be the fine and specialty chemicals segment. The industrial biotechnology sector is a key contributor to the
production of vitamins, amino acids and other biochemicals such as lactic acid and glycerol. However
applications of biotechnology to chemical manufacturing are rapidly growing. Current predictions forecast that
by 2010 up to 60 percent of fine and specialty chemical manufacturing may involve some use of biotechnology.
Biotechnology will create value by reducing process costs and by enabling the creation of novel chemical
products. It is estimated that the value that will be created by these developments will be worth between
US$15.3 – 30.6 billion by 2010 in the chemical industry alone .
A key factor that will drive the use of biotechnology in the fine and specialty chemicals sector is the increasing
process efficiencies the biotechnology can deliver. The use of biotechnology processes to produce fine and
specialty chemicals competes with traditional production methods. Improvements in biotechnology process
efficiencies will increase the cost benefits of these processes and drive their uptake by the fine and specialty
chemicals industry. This again highlights the importance of R&D in the sector and the need for companies to
allocate resources into the creation of new products in-order to tap into emerging opportunities within the
sector. Another driver impacting on the growing use of biotechnology in this sector will be the price of crude
oil. Petrochemical based processes are a key competitor to biotechnology processes, hence the price of oil will
have a strong impact on overall process costs competitiveness.
An additional benefit to companies operating in the sector is the HALAL status awarded to products designed
for human consumption. This will be a critical consideration for producers who intend to target the growing
opportunity offered by Islamic markets.
11
Review of Key Research and
Development Areas
Technology is one of the key growth drivers in the industrial biotechnology sector. The key technologies that will drive
the growth of the sector over the next 3 – 5 years are described below.
The large-scale production of proteins such as bio-catalysts typically involves fermentation, scale-up and recovery
steps (such as filtration, extraction, large-scale chromatography, and crystallization) and process engineering advances
will drive greater efficiencies in this space. Advances in biotechnology and genomics are expected to have a critical
impact on the identification, screening, and isolation of new enzymes and other proteins. The creation and
application of high throughput functional genomic screening assays such as polymerase chain reaction (PCR) based
screening and signal trapping screening will be another strong growth driver for the sector. Meta-genomics, transcript
profiling, and bioinformatics are other new tools that are being used to discover and characterize novel enzymes and
proteins. Protein engineering, which involves the rational modification of a protein to specifically alter its activity, will
have a proportionally greater impact on the bio-catalyst and fine chemical production sectors due to its application at
the molecular level. By comparison, the identification and commercial application of novel micro-organisms that can
efficiently breakdown and convert novel biomass (particularly cellulosic based feedstock) will be a key driver of the
biofuels and industrial biotechnology sectors.
Impact of Technology Enhancements on the Industrial Biotechnology Sector
Opportunity
Sector and Impact
Biofuels
Fine &
BioSpecialty
Catalysts Chemicals
Technology
Driven Process
Improvements
Process improvements will be driven by a combination of both
R&D improvements and engineering developments. All industrial
biotechnology sectors will be impacted by this trend as process
efficiency heavily impact on a processes commercial viability. At
the engineering level process improvements will enhance process
yields by reducing raw material consumption, energy consumption
and waste generation. In addition process improvements in protein
production will reduce the bio-catalyst costs and increase process
cost efficiencies.
Genomic DNA
Technology
Enhanced genomic screening techniques will accelerate the
identification of novel enzymes and other proteins used in industrial
process. It is anticipated that novel products and micro-organisms will
broaden the application of biotechnology into different industrial
processes. Genomic manipulation can also be used to improve cell
lines used in biofuels production by improving micro-organisms
production efficiency or by expanding the carbon sources that a
micro-organism can be use as a feedstock.
Advancements in the understanding of structural biology will enable
protein engineering to be used to improve or modify current
bio-catalysts and other proteins. These modifications can be targeted
to improve the catalytic efficiency of a process, reduce the amount of
non-specific by products produced or stabilise a bio-catalyst or
protein so that it remains stable and active for longer periods under
different process conditions.
Screening techniques (both DNA and non-DNA based) will
accelerate the discovery of new bio-molecules that may have
novel or improved applications in the bio-catalyst and fine &
specialty chemicals production sectors.
Screening techniques (including DNA and non-DNA based) will
accelerate the discovery of new micro-organism that may have
novel or improved applications in the bio-catalyst and fine
chemicals production sectors. The biofuels sectors will benefit
from the discovery of new organisms that can degrade and
convert novel biomass into biofuels.
Protein
Engineering
Novel
Bio-molecule
screening
Novel
Micro-organism
Screening
KEY: Strong Impact - ���
12
Notes
Moderate Impact - ��
Modest Impact - �
The Malaysian Industrial
Biotechnology Sector
2008 proved to be a challenging year for the global economy. However the biotechnology sector in Malaysia
continued its rapid expansion. In 2008 annual revenue growth from Malaysia’s 13 listed companies grew by
9% to RM2.4 billion.
The Malaysian Biofuels Sector
The Malaysian government is an active supporter of the development of the Malaysian biofuels sector, as
demonstrated by the introduction of the Malaysian biofuels policy. Strong support for biofuels sector in a
number of countries in 2007 and 2008 contributed to a surge in demand for biofuels and their feedstocks.
Bioethanol is not currently produced in Malaysia. However initiatives are underway to develop ethanol and
other biofuels from non food agricultural crop sources such as Jathropa curcas and oil-palm biomass (trunks,
fronds, empty fruit bunches, shells, and fiber). The existence of quantities of different biomass in Malaysia will
benefit developers seeking to develop new biofuel production processes utilizing more readily available
cheaper feedstock. In addition to biofuel production biotechnology companies can leverage on the availability
of large quantities of tropical biomass to cost effectively produce a range of bio-based chemicals. Biomass
accounts for a significant proportion of the cost of producing bio-chemical, and the availability of a diverse
range of biomass in Malaysia will benefit companies seeking to develop and establish new bio-based
production processes.
Malaysia’s first commercial-scale biodiesel plant using palm oil commenced operations in August 2006. From
August to December of that year, a total of 55,000 tonnes of biodiesel were produced, which grew to 130,000
tonnes in 2007. By the end of 2007, 92 biodiesel projects had been approved, with an estimated annual
combined production capacity of 10.4 million tonnes (11.7 billion litres) per year.
The Malaysian biofuels market contains a number of vertically integrated producers. Integrated producers
control assets across the biofuels production value chain including plantations, mills and refineries. Integrated
producers benefit from being able to selectively direct the flow of palm oil produced by their facilities into
either food based or non-food based applications (including biodiesel production). A number of large
plantation groups are entering the biofuels space. The dominant market player in Malaysia was formed by the
merger of three major plantations owners, Sime Darby, Kumpulan Guthrie and Golden Hope Plantations.
Other major players in the market include FELDA, IOI Corporation, Kuala Lumpur Kepong, Asiatic
Development and United Plantations Berhad.
Investment Highlights – The Malaysian Biofuels Sector
1. Abundant Feedstock: Ready availability of a diverse quantity of raw materials, particularly palm tree based
biomass of which 70M tonnes produced annually (representing 85% of the biomass available)
2. Established Infrastructure: Production and supply infrastructure is established, reducing start up and operating
costs
3. Strong Government Support: Government support targeted at supporting the development of the local biodiesel
market and the export markets
13
The Malaysian Bio-Catalysts Sector
The bio-catalyst market is an emerging market in Malaysia. The industry in Malaysia caters to a variety of the
industrial applications including the production of fine chemicals, oleochemicals modification, detergent
formulation, enzymatic de-inking of waste papers, animal feed formulation and effluent treatment processes.
Some enzymes are produced locally although imports account for a significant proportion of local
consumption. The small number of local companies and the presence of an established market offer an
opportunity for new entrants seeking to capture a share of the local market. Local producers have leveraged on
Malaysia’s biodiversity, and protein production from indigenous microbial isolates is being performed using
submerged or solid state fermentation processes. Malaysia plays a significant role in the region supply chain for
bio-catalysts; in 2008 Malaysia exported around 633 tonnes of repackaged enzymes throughout the region.
The local market is dominated by foreign players, with Novozymes and Dansico / Genecor accounting for 70%
of the market.
Malaysia’s biological diversity offers developers of novel bio-catalysts a significant opportunity to isolate novel
bio-catalysts. A variety of different bio-catalysts have been isolated from Malaysian isolated micro-organisms,
highlighting the opportunity that remains to be extracted from the countries unique ecology.
The cost efficiency of production in Malaysia would benefit companies looking at establishing local
manufacturing operations. Some players in the market are already moving to take advantage of this
opportunity. In 2008 Enzyme Technology Sdn Bhd and Insect Biotech of Korea entered into a partnership to
establish an industrial enzyme manufacturing facility in Malaysia. Bio-catalysts are proteins and their high cost
of product has limited their application in industrial processes. Rationalizing production costs, such as by
moving manufacturing to low cost locations, will reduce production costs and widen the application of
bio-catalyst to greater variety of industrial processes.
Bio-Catalysts Isolated From Malaysian Micro-Organisms
Type of Bio-Catalyst
Lipase, lipoprotein lipase
Humicola lanuginosa, Aspergillus niger, Aspergillus flavus, Mucor miehei,
Bacillus sp., B. megaterium, Cunninghamella echinulata, Corynebacterium
sp., Pseudomonas sp., Geobacillus thermodenitrificans, Pseudomonas
paucimobilis
Protease
Bacillus megaterium, Trichoderma sp., Cellulomicrobium sp., Aspergillus niger
Cellulase, β-glucosidase
Xylanase
Lignin degrading enzymes
Aspergillus niger, A. niger subsp. awamori Trichoderma reesei
Aspergillus niger
Phanerochaete chrysosporium, Humicola grisea
Tannase
Aspergilus niger
Mannanase
Aspergilus niger
Phytase
Aspergilus niger
Chitinase
14
Micro-Organism
Fusarium sp.
Investment Highlights – The Malaysian Bio-Catalyst Sector
1. Strong Patents for Commercialization: A number of patents covering unique bio-catalysts extracted from local
micro-organisms are available to support commercialization activity
2. Skilled Human Resource in R&D: Strong well trained human capital pool to assist in both R&D and production
activity
3. Manufacturing and Supply Chain Infrastructure: New companies can leverage on established infrastructure to
reduce start up and operating costs
4. Rich Bio-Diversity: Support the identification of commercially valuable novel bio-catalysts
The Malaysian Fine and Specialty Chemicals Sector
In Malaysia biotechnology is applied to production of a range of fine and specialty chemicals, the two most
significant markets in the country are the nutraceuticals and oleochemicals markets.
The oleochemical market developed as an off shoot of the Malaysian palm oil sector. The abundant supply of
raw materials and incentives provided by the Malaysian government has driven the growth of the sector in
Malaysia. The sector in Malaysia is still growing although this is slowing as the market matures. Products
manufactured by the sector include fatty acid, fatty alcohol, glycerine and methyl ester (biodiesel). The market
is highly competitive, which constrains profit margins and removes inefficient players from the market.
Biotechnology has the potential to shift the balance of power in the market by modifying production process to
make them more cost efficient
A niche that Malaysia can target is also the HALAL accredited product market. This niche can include products
related to the fine and specialty chemicals market that are made for human consumption such as
nutraceuticals, vitamins, health supplements, cosmeceuticals and other biological based extracts. This
certification also has potential applications in areas other than the production of fine and specialty chemicals
such as in the field of food and beverage production. This certification will support exporters seeking to target
emerging opportunities in the Islamic markets, and is a significant differentiating factor of the Malaysian
biotechnology relative to its regional neighbors who also have strengths in the biotechnology market.
Investment Highlights – The Malaysian Fine and Specialty Chemicals Sector
1. Rich Bio-Diversity: Malaysia’s world class ecological diversity harbors a broad range of medicinal plant
products. This would particularly benefit companies with established screening capabilities
2. Health and Wellness Industries: The growth of the health and wellness industries, particularly in western
countries will drive the demand for herbal products
3. Strong traditional knowledge base: Can be leveraged on to accelerate the discovery of new medicinal products
4. Availability of raw material: The presence of substantial quantities of raw materials improve cost efficiencies
5. Established Sector Expertise: Expertise in oleochemical manufacturing can be leveraged on to apply
biotechnology to production processes
6. HALAL Certification: Support biotechnology enterprises seeking to develop and manufacture biotechnology
products destined for predominately Muslim populated countries
15
Progressive Development of the
Industrial Biotechnology Sector
The Malaysian Biotechnology Policy announced in 2005 signaled the start of a national drive to establish a
globally competitive biotechnology sector. As of 2009 the sector was poised to complete a 5 year capacity
building phase at the end of 2010. Some of the goals of this phase include the practical implementation of the
government policies and plans, R&D capacity building and the establishment of industrial technology. Some of
the major progressive developments that have occurred in the sector since the inception of the biotechnology
policy are highlighted below.
Progress Specific to the Industrial Biotechnology Sector
Event
Description
Development of Biofuels
Production Capacity
• First commercial-scale biodiesel plan operational in August 2006
• 91 biofuel production licenses issued
• 14 Functional biodiesel plants built (as of Sept 08)
• 8 Plants operational (as of Sept 08)
Implementation of the
National Biofuels Policy
Support the growth of the domestic product and consumption market for
biodiesel and encourage the development of export orientated producers
Development of Industrial
Biotechnology Companies
As of 2008 22 Industrial biotechnology companies have been awarded
BioNexus status
Technology Acquisition
Acquisition of a supercritical fluid platform technology with strategic
applications in supercritical fluid extraction and particle formation. The
technology is targeted at supporting the local natural products industry’s
capability to produce standardized natural products extracts of high purity,
quality and consistency
Malaysian Biotechnology
Corporation (BiotechCorp)
Project Support
Industry Development Division has nurtured 44 companies and supported
the development of 2 international and 4 local collaborative and commercial
ventures
Industrial biotechnology is one of the three sectors highlighted in the Malaysian Biotechnology Policy as a
focus area. Six of the other policy thrusts were dedicated to the creation of a supporting environment that
would foster the growth of biotechnology companies in Malaysia. In the last 4 years Malaysia has steadily
progressed in development of all areas targeted by the national policy (as described in the BiotechCorp 2008
Annual Report). Broadly the developments have included:
•Strong government financial support for the sector, as of the end of 2008 US$0.9 billion of investment funds
were available for investment in companies
•Nurturing the growth of human capital in Malaysia, including entrepreneurial talent, via workshops,
conferences, mentoring and training programmes
•Initiation of specific programs to strength the development of IP and regulatory expertise in Malaysia
•Promoting the opportunities offered by the Malaysia biotechnology sector through various local and
international forums
All of these initiatives have targeted and strengthened critical elements required by biotechnology companies
to maximize their research and development activities and profitability.
16
Example of Research and Development Center: Industrial Biotechnology
The Standards and Industrial Research Institute of Malaysia (SIRIM) Berhad is Malaysia’s leading organization
in industrial research. The institute is focused on fulfilling the industry needs by blending new innovations with
quality and standards.
SIRIM Berhad is focused on building a role in industry development by becoming a strategic partner to the
industry by delivering excellence in research, technology transfer, technology incubation and skill
development. SIRIM’s focus is on discovering and developing new technologies to enable industries move up
the value chain by developing tools and technology that will help industries to reinvent their products and
business.
SIRIM carries out research in a number of different areas, including biotechnology, nanotechnology, green
materials, embedded technology, computer-aided design, renewable energy, and biomaterials. In 2007 the
center secured a total of US$4.2 million in 2007 under MOSTI’s Science Fund, Techno Fund and Biotech Fund
to support 64 of its R&D projects.
The core of the institute’s biotechnology efforts is the Environment and Bioprocess Technology Centre (EBTC),
which is mandated to spearhead the nation’s industrial biotechnology development by harnessing Malaysia’s
biodiversity while safeguarding environmental and resource sustainability. The center has a number of
on-going projects in various areas of biotechnology including bioprocessing of lignocellulosic biomass,
production of phytase and coenzyme Q10 from indigenous microbes.
As a partner supporting the development of Malaysia’s industrial biotechnology sector SIRIM offers companies
in Malaysia a range of service including contract research, technology transfer, material research, process
optimization and testing & quality control. Companies in the sector can leverage on these service to accelerate
their growth and development.
Examples of the diverse range of research projects being developed by the private and public sector are
described below.
Research Projects in the Industrial Biotechnology Sector
Company
Project
•Bioethanol from Palm Tree Sap: Development of a sap-squeezing system for
FRIM
oil palm trunk for production of bioethanol, the objective of the project is to
develop a sap collected system for conversion into liquid biofuel
•Palm Biomass Conversion: Convert oil palm biomass waste (empty fruit
bunches) to biofuel generating pulp using caustic soda
MPOB
Projects include growing better yielding oil palm trees through to
formulation of medicine from palm oil vitamins. Strong interest in
development of higher yielding trees to improve land utilisation
Nuclear Malaysia
Development of integrated EB Radiation - Ion exchange – Biological
Treatment System for recycling of industrial waste water for industrial effluent
Universiti Teknologi Malaysia
Enzyme discovery projects, focus on discovering enzymes in tapioca and
sago that can be utilised in the pharmaceutical and food industries.
Universiti Putra Malaysia
International collaboration between the National Institute of Advanced
Industrial Science and Technology, Japan and Kyushu Institute of
Technology, Japan (KIT) and University Putra Malaysia to develop new
methods to utilize different types of biomass.
17
Malaysia’s Key Offerings
Supported by a market-oriented economy and pro-business Government policies, Malaysia offers investors a
dynamic and vibrant business environment. A politically stable country with a well-developed infrastructure and
productive workforce, Malaysia also provides attractive incentives for investors in the biotechnology sector.
Investing in Malaysia
• Pro-business policies
• Responsive Government
• Liberal investment policies
• Attractive tax and other incentives
• Liberal exchange control regime
• Intellectual property protection
Supported by a market-oriented economy and
pro-business Government policies, Malaysia
offers investors a dynamic and vibrant business
environment with the ideal prerequisites for
growth and profits. A politically stable country
with a well-developed legal system, Malaysia
also provides attractive incentives for investors
Well Developed
Infrastructure
• Network of well-maintained highways and
railways
• Well-equipped seaports and airports
• High quality telecommunications network
and services
• Fully developed industrial parks, including
free industrial zones, technology parks and
Multimedia Super Corridor (MSC)
• Advanced MSC Malaysia Cybercities and
Cybercentres
Infrastructure in Malaysia is designed to serve
the business community; it is one of the best in
Asia. Telecommunications network served by
digital and fibre optic technology, five
international airports (all with air-cargo
facilities), well-maintained highways and seven
international seaports make Malaysia an ideal
springboard to the Asia-Pacific market. There
are also specialised parks that have been
developed to cater to the needs of specific
industries, as well as 5 economic corridors to
stimulate economic growth
Vibrant Business
Economy, Excellent
Quality of Life
• Market oriented economy, moving
towards technological advancement
• Well-developed financial and banking
sector, including the Labuan International
Financial Exchange
• Wide use of English, especially in business
Legal and accounting practice based on
the British system
• Large local business community with a
long history in international business links
• Large foreign business community in all
business sectors & extensive trade links
Malaysia is steadfast in providing for the modern
day requirements of investor companies based
in the country, and is one of the most
technologically developed countries amongst
industrialising nations in the ASEAN region. It
also offers and excellent quality of life, a safe
and comfortable living environment. Other
advantages are excellent and affordable housing,
modern amenities, good healthcare and medical
facilities, and excellent international schools.
Economic Strength
• Natural resources - oil, gas, tin, timber, palm
oil, rubber
• GDP growth - 4.6%
• Gross national savings - 37.9% of GNI
• Debt service ratio - 2.7%
• Unemployment rate - 3.7%
• Inflation (CPI) - 5.4%
• Export of manufactured goods 2008 - 70.0%
of total exports
Malaysia has used its natural resources to its
advantage in developing high technology
industries and creating jobs. Multinational
corporations from more than 40 countries have
invested in over 5,000 companies in Malaysia 's
manufacturing & related services sectors. Malaysia
today is one of the world's top locations for
offshore manufacturing and service-based
operations. Many foreign companies have also
continued to show their confidence in the country's
potential through expansions and diversifications,
particularly in high technology projects.
Human Resources:
An Educated
Workforce
• Young, educated and productive workforce
• Multilingual workforce, speaking two or
three languages, including English
• Comprehensive system of vocational,
industrial and advanced skills training.
• Harmonious industrial relations with
minimal trade disputes
One of Malaysia's greatest assets is her human
resources. The workforce here is young, educated
and productive, proving to be one of the best in
the region. The Government's emphasis on
human resource development ensures the
continuous supply of manpower to meet the
needs of the expanding biotechnology sector.
Supportive
Government Policies
in a Dynamic
Business
Environment
Sources: Malaysia Industrial Development Authority (MIDA), Economic Report 2008/2009, Malaysia:
Performance of the Manufacturing and Services Sectors 2008, Malaysia External Trade Statistic 2008
18
Designated Economic Corridors
Biotechnology is expected to drive the economic corridors in further developing the healthcare sector.
Malaysia has launched 5 Regional Economic Growth Corridors; i.e.: the Northern Corridor Economic Region
(NCER), East Coast Economic Region (ECER), Sarawak Corridor of Renewable Energy (SCORE) and Sabah
Development Corridor (SDC) and Iskandar Malaysia. The corridors aim to encourage companies seeking a new
growth opportunities in the area of industrial biotechnology and its implementation.
Northern Corridor Economic
Region (NECR)
East Coast Economic Region (ECER)
Development period: 2007 – 2020
Area: 66,736 sqm
Biotechnology Areas: Biomass/biofuels, GM crops,
nutraceuticals, bioremediation, bioprocessing
Strengths: Agriculture & aquaculture base,
bio-resources (oil palm, tobacco)
Expected employment: 1.9 million
Development period: 2007 – 2025
Thailand
Perlis
Area: 17,816 sqm
Kuah
Biotechnology Areas: GM Crops,
Kedah
Langkawi
Agricultural Biotechnology, Industrial Island
Kotabharu
Alor Setar
Biotechnology, Manufacturing –
Kuala
George Town
Trengganu
Medical, APIs
Penang
Kelantan
Island
Strengths: Biodiversity &
Trengganu
Ipoh
bioresources, manufacturing and
Perak
Kuantan
logistics infrastructure
Kuala Lumpur Pahang
Expected employment: 3.1 million
Tioman
Selangor
Island
Expected investment: RM 178 billion
Iskandar Malaysia
Development period: 2006 – 2025
Area: 2,216 sqm
Biotechnology Areas: Agricultural
Biotechnology, Human Capital,
Infrastructure, Manufacturing
Strengths: Location, Logistic
infrastructure, oil palm
Expected employment: 1.4 million
Expected investment: RM 382 billion
Negeri Malacca Johor
Sembilan Town
Johor Bharu
Melaka
Singapore
Kudat
Labuan
Island
Brunei
Darussalam
Miri
Marudi
Mukah
Kota
Kinabalu
Victoria
Mount
Kinabalu
Sabah
Lawas
Sandakan
Lahat Datu
Tawau
Bintulu
Sarawak
Kuching
Sri Amanl
Lubukantu
Sarawak Corridor of Renewable
Energy (SCORE)
Sabah Development Corridor
(SDC)
Development period: 2008 – 2030
Area: 70,708 sqm
Biotechnology Areas:
Biomass/biofuels, livestock,
bioremediation
Strengths: Focus on livestock
industry, biodiversity, oil palm
Expected employment: 3.0 million
Expected investment: RM 334 billion
Development period: 2008 – 2025
Area: 73,997 sqm
Biotechnology Areas:
Biomass/biofuels, Livestock &
aquaculture, bioremediation
Strengths: Aquaculture base,
biodiversity, oil palm
Expected employment: 2.1 million
Expected investment: RM 113 billion
Source: BiotechCorp, RMK, Frost & Sullivan (2009)
BioNexus
BioNexus Malaysia is essentially a network of centres of excellence throughout the country comprising companies
and institutions that specialize in specific biotech subsectors. Three centres of excellence comprise BioNexus:
• The Centre of Excellence for Agro-biotechnology;
• The Centre of Excellence for Genomic & Molecular Biology;
• The Centre of Excellence for Pharmaceuticals & Nutraceuticals.
These three institutes are part of the BioNexus initiative whose goal is to coordinate and strengthen existing
universities, laboratories, and research institutes. Through BiotechCorp, the Malaysian Government grants the
“BioNexus Status” to eligible international and local biotech companies that qualify for fiscal incentives, grants
and guarantees administered by BiotechCorp. (www.biotechcorp.com.my)
19
In order to achieve BioNexus status, the companies must be able to meet the following criteria:
• Establish a separate legal entity for the BioNexus qualifying business and activities
• Be a provider of a product or services based on life sciences, or substantially using life sciences processes
in production or agriculture (mere blending, repacking, mixing, distributing or trading of biotechnology
products shall not qualify)
• Possesses research capability and conducts research in thrust areas
• Employs a significant percentage of knowledge workers in its total workforce
• Complies with environmental and ethical laws and guidelines
A total investment in 42 companies with BioNexus status during 2005 - 2007 amounted to US$ 246 million.
The Malaysia Government had allocated US$ 3 billion to enhance and strengthen the biotechnology sector.
The number of BioNexus companies increased to 97 by end of 2008 with approved investment of US$ 360
million, and revenue growth by BioNexus companies grew at an annual rate of 187%. 22 out of the 97
companies are highly focused on industrial biotechnology, and in terms of revenues generated the industrial
biotechnology sector was the dominant sector in the emerging company biotechnology space. It generated
70.4% of all revenues earned by BioNexus companies in 2008.
Government Incentives
Malaysia provides competitive financial incentives under existing packages that are applicable to companies
in the biotechnology sector. In line with its goal to build a biotechnology sector across the entire value chain
the incentives offered support biotechnology ventures at all stages of development. These include:
1. Incentive for the holding company: Tax deductions for holding companies that fulfils certain conditions
and investment in approved subsidiary biotechnology entities;
2. Tax exemption: Approved biotechnology companies will be eligible for Pioneer Status, which entitles them
to a 100% income tax exemption for a period of up to 10 years. Specific biotechnology product are import
duty and sales tax exempt;
3. Investment Tax Allowance: 100% of qualifying investments over a period of 5 years can be set off against
profits;
4. Tax Exempt Dividends: Dividends issued by biotechnology companies to shareholders will be treated as
tax exempt income;
5. 200% deduction on qualifying expenditure on R&D: which may expenses related to pre-clinical and
clinical testing, except for companies carrying out these activities for revenue generation.
More specific to the industrial biotechnology sector, companies operating in the biofuels sector enjoy
additional benefits. The Government has initiated the B5 programme at the government agencies level since
the beginning of February 2009, which will mandate agency vehicles to use B5 biodiesel. Subsequent phases
will involve the industrial sector, followed by the mass transport sector. This represents a first step in
establishing a local market for biodiesel.
The Oil Palm Replanting Incentive Scheme will affect the availability of feedstock for the biodiesel sector.
Launched in 2008, the scheme aimed to destroy 200,000 hectares of oil palm trees aged 25 years and above
and was designed to promote palm oil price stability by removing 200,000 hectares of palm trees (equivalent
to 700,000 tonnes of palm oil supply).
20
The two policies highlight the governments’ commitment to the sector, and will bolster investors of the
governments long term support for the local biofuels market. In particular the implementation of the B5
mandate will guarantee a minimum amount of local biofuel demand, which will reduce producer risk by
diversifying their customer base.
Intellectual Property Right Protection
Malaysia has a strong intellectual property right (IPR) regime and ranks high among East Asian countries in
IPR protection. Malaysia is a member of World Intellectual Property Organisation (WIPO) and signatory to
the Paris Convention, the Berne Convention and the Agreement on Trade Related Aspects on Intellectual
Property Rights (TRIPS) under the World Trade Organisation (WTO). Malaysia provides adequate protection
to both local and foreign investors. Malaysia's intellectual property laws are in conformance with
international standards and have been reviewed by the TRIPs Council periodically. Malaysia also has
acceded to the Patent Cooperation Treaty (PCT) with effect from 16 August 2006. Prior to that, in 2002,
Malaysia has been accepted as the member of Pharmaceutical Inspection Co-operation Scheme (PICS).
Being a member of PICS, Malaysia has greatly improved its facilities to meet the international standard
requirements, and tremendously drive local pharmaceutical industry.
Thrust seven of the National Policy highlighted the need to improve the country’s innovation system by
reviewing the legal and regulatory framework. Part of this effort involves making regulatory changes to give
researchers a share in the ownership of the intellectual property and in the monetary rewards derived from
their work.
To date, the total number of patent and utility applications from 1989 up to May 2008 is 536,566. Out of this
figure, 322,709 had been granted. The number of foreign applications encountered for 93% of the total
applications (Intellectual Property Corporation of Malaysia).
Funding
The commitment and the importance of the role of the Malaysian government in financing the biotechnology
sector can be seen by the factor that the public sector remains the largest source of funding for biotechnology
projects and companies in Malaysia. Currently a total of US$1.3 billion, allocated across 17 different funds,
is available to be invested in biotechnology companies. As of Dec 2008 only US$0.5 billion of this amount
has been allocated to existing investments. The amount of funding available strongly contrasts to the limited
funding available to biotechnology companies in other parts of the world, where investments in the sector
have dropped sharply in line with the deterioration in the global credit markets.
Venture capital funds are active in Malaysia, however the total capital offered by these investors is minor
compared to government sources. By the end of 2008, it was estimated that US$97.7 of private venture
funding was available to biotechnology companies. The Malaysian capital markets represent an alternative
funding source available to companies developed enough to be listed on the Malaysian Bursa. The global
financial turmoil has delayed Malaysian biotechnology companies from seeking funding from this source,
and in 2008 only two Initial Public Offerings (Sunzen Biotech Berhad and Asia Bioenergy Technologies
Berhad) were conducted. The biotechnology segment of the Malaysian capital markets remains
underdeveloped although recent regulatory changes by the securities commission will make it easier for
biotechnology companies to access the market for development funding.
21
A list of funds and sources of funding is given below:
Available Funding Sources for Industrial Biotechnology
22
Malaysian
Technology
Development
Corporation (MTDC)
Malaysian Technology Development Corporation (MTDC): Malaysian Technology Development
Corporation (MTDC) was set up to spearhead the development of technology businesses in
Malaysia. MTDC his a venture capital outfit and has been the leading venture capitalist in the
country long before the concept became familiar and accepted in Malaysia. Apart from
venture capital funding MTDC disburses grants on behalf of the Malaysian government
(Commercialisation of Research & Development Fund and Technology Acquisition Fund)
Malaysian Life
Sciences Capital
Fund (MLSCF)
Malaysian Life Sciences Capital Fund (MLSCF) :The Malaysian Life Sciences Capital Fund
(MLSCF) was founded in late 2006 and is a life sciences venture fund specializing in early
stage investments in the biotechnology sector. The fund is co-managed by MTDC and Burrill
& Co. and has USD150 million in committed capital.
Malaysian Debt
Ventures (MDV)
Malaysian Debt Ventures (MDV): Malaysia Debt Ventures Berhad (MDV) is an innovative
financier and development facilitator for Biotechnology, ICT and other high-growth sectors
in Malaysia. Incorporated on 23rd April 2002 as a wholly owned subsidiary of the Minister
of Finance, Inc., MDV has been entrusted to manage funds of RM2.5 billion for the financing
of projects in these industry sectors.
SME Bank
SME Bank: The SME Bank (Bank Perusahaan Kecil & Sederhana Malaysia Berhad) - Is a
development financial institution to nurture small and medium enterprises (SMEs). The bank
complements existing products and services by providing an integrated financial and
business advisory services to companies. The bank offers a dedicated biotechnology
programme named" Program Usahawan Bioteknologi"
Ministry of Science,
Technology and
Innovation (MOSTI)
Ministry of Science, Technology and Innovation (MOSTI), In supporting the development of
biotechnology industry in Malaysia, MOSTI provides the funds for biotechnology such as
Science Fund, Inno Fund, Techno Fund, Agro - Biotechnology R & D initiatives, Genomic &
Molecular Biology R & D Initiatives and Pharmaceutical & Nutraceuticals R & D Initiatives.
Intensification of
Research in Priority
Areas (IRPA) program
Fund for research organisations and institutions of higher education in the public sector,
private sector entities can participate in the programme in association with the above
mentioned organisations through matching grants to fund research. All R&D projects that are
in line with the national Priority Areas and which have been approved by the IRPA Panels are
eligible to receive grants under the IRPAProgramme.
Malaysian Palm Oil
Association Loans
Provides low interest loans to biofuel production facility developers. It has already provided
loans totalling approximately RM 60 million (US$ 17 million) to three corporations to build
three biodiesel plants
Conclusion
The Malaysian industrial biotechnology sector is diverse and rapidly growing sector. Investment opportunities
vary depending on the sector targeted, with the biofuels sector providing investors with more mature
investments while the other sectors reviewed in this paper offer more early stage investment opportunities.
Clearly the government is the key driver of growth in the Malaysian biotechnology sector. The 9 thrusts of the
Malaysian biotechnology policy highlight the strength of framework that is being put into place to support the
growth of the Malaysian biotechnology sector. Some of these initiatives, such as strengthening human capital
development and strengthening IP regulations are passive factors that will attract biotechnology companies to
set up operations in Malaysia. In addition the Malaysian government and the public bodies that represent it
(such as BiotechCorp) are also actively working to build up the sector by supporting the direct development of
projects. Examples of direct projects include the acquisition and integration of the supercritical fluid platform
technology into the biotechnology community and the governments support for the establishing of the Agni
biomass energy plant in Pahang, Malaysia.
The bio-catalyst sectors and the fine & specialty chemical production sector are sectors that may interest pure
investors; however the early stage of the sector would benefit investors that can not only bring funding to
investment opportunities but also supply technical and commercial know-how. The broad biodiversity and
established manufacturing industry in Malaysia are strengths than can be expanded on by companies to create
novel industrial biotechnology projects and companies in Malaysia. In particular the natural Malaysian
ecological diversity creates opportunities that are not yet fully addressed by current players and there are
significant opportunities for new players to enter these markets.
The biofuels sector is not strictly limited to late stage opportunities, as significant on-going research and
development is being performed in the secondary biomass space. Here, bioethanol is produced from the
lignocellulosic parts of biomass, grass, and other non-edible parts of plant. While the successful commercial
use of cellulosic biomass has remained elusive the opportunites in the sector are huge as cellulosic biomass is
readily available and renewable in large quantities. In addition the production of biofuels from this material
does not have a secondary use as food, thus limiting the impact on food prices if used in large quantities for the
production of biofuels.
However it should be pointed out that the main drivers underpinning the industry remain intact, and in fact
their importance has probably intensified over the past year: namely increasing concern over greenhouse gas
emissions, a significant proportion of which is generated from transport fuels; increasing concerns over the
long-term security of global mineral oil supplies; and the increase in mineral oil prices globally. To address
these issues, as well as to stimulate their agricultural sectors (where appropriate) governments globally have
taken an increasing range of measures to stimulate biofuels consumption and production.
23
References
1. Industrial and Environmental Biotechnology Achievements, Prospects, and Perceptions (2005) – Report
Prepared by the UNU-IAS
2. An overview of the Malaysian Biotechnology Industry (2007) - ICE Kuala Lumpur
3. Asian Biofuels Roundtable (2009), Kuala Lumpur. Speech by the Hon. Datuk Peter Chin Fah Kui, Minister of
plantation industries and commodities
4. BiotechCorp Annual Report 2008. The Malaysian Biotechnology Corporation
5. Malaysian White Biotechnology Initiative: Technology Foresights and Roadmap for Future (2009) – Frost
and Sullivan
6. BIOFUEL DEVELOPMENT IN MALAYSIA (2008) – Presentation for the International Symposium On
Agricultural and Biofuel Policy, Thailand
7. The Malaysian Biotechnology Policy (2005) – Ministry of Science Technology and Innovation
8. ENZYMES-GLOBAL DEVELOPMENTS AND TRENDS (2008) – Frost and Sullivan
9. BIOFUELS - AT WHAT COST ? Government support for biodiesel in Malaysia (2008) – The Global Studies
Initiative
10. Growth and Global Opportunities in Biofuels for Malaysian Palm Oil (2008) - Au Leck Chai, Ministry of
Plantation Industries and Commodities Malaysia.
11. 9th Malaysia Plan (2006) – Malaysian Biotechnology Corporation
24