Biotech, An Instrument of Wealth Creation

Biotech, an Instrument of Wealth Creation
By: Dr Ahmad Ibrahim

Malaysia seeks to deploy biotechnology to add value to the nation’s resources. With the nearly RM300 million that has been set aside to fund various activities, we seem to be heading in the right direction, writes AHMAD IBRAHIM

BUDGET 2008 offered good news for biotechnology. The government has again demonstrated its commitment to biotechnology as another engine growth.

Malaysia has high hopes for biotechnology. The country wants to deploy biotechnology to add value to the nation’s resources, especially its largely untapped biodiversity. Nearly RM300 million has been set aside to fund various biotech activities.

The will be money for research and development, funding to buy technology, and allocations to promote investment. The Malaysian Biotechnology Corporation (MBC) will anchor programmes to attract investment in biotech.

Already, 36 companies have been given BioNexus status. With that, they enjoy benefits including tax incentives and access to grants for R&D. By the year’s end, the number of BioNexus companies may have doubled. MBC now handles RM100 million in seed funding, loans and others grants to be distributed over five years.

Since the launch of the National Biotechnology Policy in 2005, much has happened. MBC has made good progress in getting the legal, funding and institutional framework in place. Investor interest has started to pick up. InnoBiologics Sdn, Bhd, a Malaysian government-owned biotech investment, has its own RM100 million biopharmaceutical facilities to make generic drugs.

Indications are that the company has been getting many orders to contract manufacture generic drugs. A company from India recently signed a RM7 million deal with the company. Another, also from India, is moving to Malaysia to do stem cell research.

A lot more is needed, however, if biotech is to deliver on its promise to create wealth for the nation. Key stakeholders such as the universities, the business community and investors must come together to germinate new business as well as technology ideas. This is where the country’s technology parks have a role to play.

In Malaysia, Technology Park Malaysia Corporation (TPM Corp), the country’s pioneer science and technology park, plans to allocate more tenancy for biotech companies. A few other S&T parks in the country are also gearing to do the same.

In the decade or so of its existence, TPM has built excellent infrastructure to support the growth of the technology business. It has not been easy.

Attracting the right tenancy to the park has been a major challenge. Companies must have a high-technology element. Notwithstanding the challenges, the park has helped many tenant companies grow from start-ups into highly successful businesses. Several, mainly IT companies, have been listed in the stock market.

But TPM still needs to attract more players to the park. How?

At TPM, new strategies to help enhance R&D commercialisation are being put in place. The park’s Centre for Technology Commercialisation (CTC), for example, will bring key stakeholders together to ideate on R&D and potential business opportunities.

The hope is that business entities development through CTC will eventually constitute the core of the park’s future tenancy. Who knows? They may also provide potential equity opportunities for TPM Corporation.

MBC, on the other hand, has been busy instituting measures-to handle issues of safety and intellectual property.

Very soon, Malaysia will have in place its own Biosafety Bill. This will streamline all the legalities to do with biotechnology. As is true for all investments, there are risks in biotech. It is important to have a clear legal framework if Malaysia is to attract foreign investments in biotech. Only then can risks be evaluated and the necessary mitigation measures taken.

Biotechnology does have its fair share of issues and contro-versies. R&D investment in biotechnology takes a longer time to reach the market. Safety issues have to be adequately addressed through proper legal guidelines.

Then there is the matter of intellectual property. How do we make sure that the IP related to the country’s biodiversity wealth will be local-owned?

We also have to be judicious and selective about which biotech investments to support. There have been instances in the past of Malaysia being preyed on by pseudo-technology companies from abroad bent on making quick bucks. There is no substitute for proper due diligence to avoid such things happening.

Next is the matter of human capital in biotechnology. How can we attract the best talent to biotechnology?

Biotechnology calls for larger upfront investment than IT. Small companies may find difficulty venturing into biotechnology without some initial support. The facilities needed are costly. This is where technology parks can come in and provide shared laboratory and analytical facilities to help especially the small players in the field.

TPM has excellent support laboratories to help new biotech ventures. Together with the technology-commercialisation funding made available by government, there is no reason why new business ideas in biotechnology cannot be nurtured in technology parks for eventual wealth creation.

Author
Dr Ahmad Ibrahim is a Fellow of the Academy of Sciences, Malaysia

Source: The New Straits Times, Monday, September 17, 2007
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Incentives for the Biotechnology Industry

1. Main Incentives for the Biotechnology Industry

A company undertaking biotechnology activity and has been approved with BioNexus Status by the Malaysian Biotechnology Corporation Sdn Bhd is eligible for the following incentives:

a) 100% income tax exemption for 10 years commencing from the first year the company derives profit, or

b) Investment Tax Allowance of 100% on the qualifying capital expenditure incurred within a period of 5 years and effective from 2 September 2006, a BioNexus status company will be given a concesionary tax rate of 20% on income from qualifying activities for 10 years upon the expiry of the tax emption period. This enhanced incentive from 2 September 2006.

c) Tax exemption on dividens distributed by a BioNeus status company;

d) Examption on import duty and sales tax on raw materials/components and machinery and equipment;

e) Double deduction on expenditure incurred for R & D; and

f) Double deduction on expenditure incurred for the promotion of exports;

g) Effective from 2 September 2006, building used solely for the purpose of biotechnology activities will be an Industrial Building Allowance over a period of 10 years.

2. Incentive for Investment in a BioNexus Status Company

(a) Investment by Parent Company to this Subsiadiary

Effective from 2 September 2006, company that invested in its subsidiary, which is a BioNexus status company, is eligble for tax deduction equivalent to the amount of investment made in that subsiadiary provided that the investing company own at least 70% of that subsidiary.

b) Investment by a Company or Individua; to a BioNexus Status Company

Effective from 2 September 2006, a company or an individual investing in a BioNexus status company is eligble for a tax deduction equivalent to the total investment made in seed capital and early stage financing.

c) Tax Incentives for Mergers and Acquisitions with a Biotechnology Company

A BioNexus status company undertaking merger and acquisition with a biotechnology company is eligble for exemption of stamp duty and real property gain tax within a period of 5 years until 31 December 2011; and

Application should be submitted to the Malaysian Biotechnology Corporation Sdn Bhd.

Source: Malaysia Industrial Development Authority (MIDA), Malaysia Investment in the Manufacturing Sector: Policies, Incentives and Facilities.
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