1 Bioeconomy Initiative in Malaysia: Lessons learnt and the way forward Conference paper Kuala Lumpur, May 21, 2013
Today, our world faces a confluence of very pressing challenges 1 Population growth 2 Food security 3 Climate change Global population [bn] 12 10 8 High case Low case 6 4 2 0 1940 1960 1980 2000 2020 2040 2060 Crop production growth [%] 2.2 1.3 1961-2007 2007-2030 0.7 2030-2050 Projected change in temperature [degc] Global temperature change [ o C] 6 4 2 0 2000 2020 2040 2060 2080 2100 Global challenges today 4 Energy security 5 Human disease 6 Economic uncertainty Energy consumption [bn toe] 14.8 12.6 11% 5% 8% 5% 87% 85% 16.8 6% 13% 81% Infectious diseases globally Dengue HIV H5N1 SARS Malaria OECD countries quarterly growth of real GDP over previous quarter [%] 0.2 0.3 0.6 0.3 0.4 0.1 0.2 0.0 2011 Nuclear 2020 Renewables 2030 Fossil Ebola Cholera Nipah virus Q1 Q2 Q3 Q4 Q1 Q2 Q3 2011 2012 Q4 Source: UN, FAO, BP Statistical Review, OECD, IPCC, Roland Berger analysis 2
An increasingly shared global view is that "living off the land" is the only way to secure long term human survival World population - from year 0 to year 3000 [in billions] 10 9 8 7 6 5 4 3 2 1 0 "AGE OF HYDROCARBONS" WE ARE HERE "LIVING OFF THE LAND" Population < 1 billion Population 9-10 billion "LIVING OFF THE LAND" 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 CO2 30 Source: UN world Population Prospects; Population Reference Bureau; BP; Roland Berger analysis 3
A global bio-based economy is the way forward as it addresses key sustainable development challenges affecting the world Sustainable bio-economy model and biotechnology innovations Environment Viable Economy SUSTAINABLE Livable Equitable Society POTENTIAL BIOTECHNOLOGY CONTRIBUTIONS TO SUSTAINABLE DEVELOPMENT CHALLENGES Economy > New industry innovations can drive economic growth and create more jobs Environment > Use of bio-based fuels can reduce the net greenhouse emissions and combat climate change Society > Focused efforts on agricultural biotechnology can lead to improved food security for the growing global population > New cures to infectious diseases can be found Source: Roland Berger analysis 4
In a bio-based economy, sustainably produced biomass is converted into energy and bio-products in a closed natural cycle Concept of a bio-based economy PRODUCE BIOMASS CONVERT BIOMASS PRODUCE BIO-BASED PRODUCTS Sustainable available (parts) of crops/plants Biochemical conversion Food & feed Algae Specialty chemicals Primary residuals (road grass, wood trimmings, ) Secondary residuals (beet pulp, beer brush) (Base) chemicals & materials Fuels WASTE Tertiary residuals (animal fat, dung, VFG) (Thermo) chemical conversion WASTE Power Heat Source: Innovation agenda for the BBE, Roland Berger 5
The global evolution towards a bio-based economy is on the way, facilitated by an increased commercialization of biotech research Global bio-based initiatives (selection, non-exhaustive) Poet Pacific Ethanol Iogen Lignol Blue Fire Abengoa NewPage (Cellulose ethanol) ICM Dedini/Novozymes BioGasol (Cellulose ethanol & gas) Green Biorefinery Green Biorefinery (Chemicals, food, feed, biofuels, gas and power) Range fuels (Cellulose ethanol) Alico DSM-Roquette (Chemicals) BioHub (Chemicals) Ghent Bioenergy Valley (Biofuels, gas and power) Large scale ethanol production Braskem (biopolymers) VTT/Kemira (Biomass R&D center) Borregaard (Cellulose ethanol & specialties) Force (Cellulosic fibers & chemicals) CHRISGAS NExBTL Biorefinery (Veg oil & animal fat biodiesel) Lignocellulosic Biorefiniery (Cellulose ethanol and chemicals) Green Biorefinery (Chemicals, biofuels, gas and power) Green Biorefinery (Chemicals, biofuels, gas and power) Forestry Biorefinery (Chemicals) Microalgea Biorefiniery (Chemicals, feed, food) Mackay biorefinery Waste Biorefinery NExBTL Biorefinery (world s largest biorefinery) (veg oil & animal fat biodiesel) Source: Wageningen University Research Center, IEA, Department of Energy, Company websites 6
Global revenues in the biotechnology sector will breach RM 1 trillion this year with Asia Pacific displaying above average growth Global biotech revenue evolution [RM bn] Biotechnology revenue breakdown by geography WORLD ASIA PACIFIC 590 666 +10% 735 800 861 945 +10% 1,261 1,146 1,040 1,386 US Europe Japan China 23% 43% 21% 13% Asia-Pacific 53% 17% 9% 5% 16% India South Korea Rest of the world Rest of Asia Pacific Asia Pacific biotech revenue evolution [RM bn] 2007 08 09 10 11 12 13 14 15 16 153 185 +9% 198 209 215 234 260 +12% 291 325 364 2007 08 09 10 11 12 13 14 15 16 Source: Assessment of Phase I and Review of the National Biotechnology Policy 7
Recognizing biotech as a driver for economic growth, Malaysia launched the National Biotechnology Policy (NBP) in 2005 Launch of Malaysia's National Biotechnology Policy LAUNCH OF NATIONAL BIOTECHNOLOGY POLICY 2005 2010 2015 2020 The National Biotechnology Plan is separated into three phases with specific strategies for each phase: Phase I Capacity builting (2005-2010); Phase II Science to business (2011-2015); Phase III Global presence (2016-2020) Source: Desktop research, Roland Berger analysis 8
The NBP set a target for biotech to grow to 5% of Malaysia's GDP and create 280,000 jobs by 2020 through nine policy thrusts 9 NBP POLICY THRUSTS PHASE I IMPLEMENTATION STRATEGIES TARGETS 1 Agriculture biotechnology development 1 Establishment of Biotechnology Corporation Malaysia 2 Healthcare biotechnology development 2 Establishment of advisory and implementation councils 3 Industrial biotechnology development 3 Industrial technology development 4 R&D and technology acquisition 4 Agricultural development 2020 objectives 5 Human capital development 6 Financial infrastructure development 5 6 Skills development Job creation 5% of GDP in 2020 7 Legislative and regulatory framework development 8 Strategic positioning 7 8 Business and corporate development through accelerator programmes Capacity building in R&D 280,000 jobs 9 Government commitment 9 Bioinformatics 10 Adoption of policies, plan and strategies Source: National Biotechnology Policy, Assessment of Phase I and Review of the NBP 9
Since 2005, many other policies and initiatives have been launched including the Biotechnology Transformation Program, laying the foundation for a bio-based economy Timeline of developments/national plans surrounding bioeconomy sector Formation of BiotechCorp > Economic Transformation plan - PEMANDU NKEA Labs > 10th Malaysia Plan (10MP) > Renewable Energy Act > Formation of Agensi Innovasi Malaysia (AIM) > Launch of 1Malaysia Biomass Alternative Strategy (1MBAS) > Conclusion of BTP lab sessions BTP EPPs and trigger projects announced by the Prime Minister Oct '12 2005 2006 2009 2010 2011 2012 LAUNCH OF NATIONAL BIOTECHNOLOGY POLICY Launch of National Green Tech Policy > PM Datuk Seri Najib Tun Abdul Razak announces plans to cut Malaysia's carbon emissions by 40% by 2020 > Formation of the Sustainable Energy Development Authority Malaysia (SEDA) > Launch of National Biomass Strategy (NBS) Source: Desktop research, Roland Berger analysis 10
But the lack of alignment of the numerous policies, strategies and initiatives makes it a challenge to coordinate implementation Key developments/national plans surrounding bioeconomy sector 10th Malaysia Plan (10MP) National Biotechnology Policy Source: Desktop research, Roland Berger analysis 11
We were engaged to conduct a lab to develop the Biotechnology Transformation Program Biotechnology Transformation Program BIOTECHNOLOGY TRANSFORMATION PROGRAM PRIVATE SECTOR INITIATIVES BIM OPPORTUNITIES (2012) Projects Projects Projects Projects Projects Projects Projects under BIM are not exhaustive and must be revisited and prioritized to meet overall BIM objectives BTP CONTEXT AND OBJECTIVES Context: > Need for much better consolidation and coordination of strategies and initiatives > The Bio-economy Initiative Malaysia (BIM) seeked to align these efforts; was later re-named as the Biotechnology Transformation Program (BTP) Objectives: > Foster full participation of the private sector through monetizable projects > Ensure coordination, consistency and sustainability of all national biotechnology policies in parallel with the ETP > Reap long term benefits for Malaysia > Contribute to the country's economy, welfare, productivity, health and environment Source: MOSTI, BiotechCorp 12
Three key focus areas were identified to support national aspirations to become a high income bio-economy VISION To become a global high income bio-economy through a sustainable ecosystem of R&D and commercialization in the areas of agriculture, healthcare and industrial biotechnology by 2020, leveraging upon:- 1 2 3 Tropical agro-biotechnology Renewable bio-resources Innovative healthcare products and services Source: BIM Workshop 13
A series of lab and workshop sessions identified ten entry point projects in agriculture, healthcare and industrial biotechnology Filtering process to identify initiatives under the BTP BIM WORKSHOP LAB SESSIONS 10 PROJECTS Start with a long list of biotechnology opportunities > 87 participants over a 6 week lab > Identify suitable EPPs, action plans, owners, KPIs and project impact > Participants from public & private sector, academia > >200 participants over a 3 day workshop > Identification of potential EPPs Industrial bio Inputs Biochemicals Biomaterials Biosimilars Drug discovery Bio-based farm inputs High value bioingredients High value food varieties Molecular screening Stem cells Industrial biotechnology Agriculture biotechnology Healthcare biotechnology Source: BIM Workshop 14
The 10 PROJECTS translate into 20 catalytic trigger projects EPPS TRIGGER PROJECTS INDUSTRIAL BIO INPUTS BIOCHEMICALS BIOMATERIALS BIO-BASED FARM INPUTS HIGH VALUE BIOINGREDIENTS HIGH VALUE FOOD VARIETIES BIOSIMILARS DRUG DISCOVERY MOLECULAR SCREENING STEM CELLS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Establishment of an energy crop plantation Production of syngas for steam generation from solid bimass Production and utilization of compressed biomethane gas (CBG) for transportation and industrial sectors Production of isobutanol from cellulosic feedstocks Bioethanol and biomethanol production from solid biomass Production of cellulosic sugars from woody biomass produced by energy crop plantations Establishment of commercial production of PHBH from palm oil and its by-products & derivatives Production of bioplastics resin Production of Biopolyols for Biopolyurethanes from Palm Oil derived Oleic Acid Scale up production and promote usage of biodegradable & compostable packaging products from sustainable agro-waste Converting agriwaste to bio fertilizers through implementation of integrated waste treatments plants Scale up of production and commercialization of bio-feed for livestock industry Scale up plantation, extraction & commercialization of Stevia as an alternative sweetener for food & beverage products Develop plantation, extraction and commercialization of mangosteen Develop, produce and commercialise indigenous hybrid paddy seed Scale up production of high value mushroom products Accelerate development, production and commercialization of Malaysian-made biotech drugs (biosimilars/biologics) Develop drug discovery services and IP development around natural products Scale up innovative molecular screening and diagnostics (MSD) products and services To promote, encourage and ensure progress of stem cell therapeutics and regenerative medicine in Malaysia Industrial biotechnology Agriculture biotechnology Healthcare biotechnology Source: BIM Workshop 15
delivering a GNI contribution of RM 3.6 bn and creating 13,600 new jobs by 2020 Value creation of trigger projects GNI IMPACT [RM BN] JOBS CREATION 0.7 5.4 1.5 1.8 1.4 TRIGGER PROJECTS Current (2011) Industrial Agriculture Healthcare 2020 GNI contribution in 2020 RM 3.6 bn Jobs created by 2020 13,600 Source: BIM Workshop 16
Our internal analysis and conversations with industry players reveal 6 key challenges for the Malaysian biotechnology industry Key challenges for the Malaysian biotechnology industry (1/3) EFFICIENCY OF FUNDING AND INCENTIVES > Certain industry sectors lack of tax incentives to spur investments (e.g. biopolyols & biopolyurethanes from palm oil derivatives) > Some ventures are not cost competitive and rely on direct/indirect subsidies to improve economics (e.g. subsidized natural gas) > Recipients of grants and investments made by the government should be monitored closely to track performance SECURITY OF FEEDSTOCK SUPPLY > Uncertainty of reliable feedstock supply domestically (e.g. EFB, RSPO, woodchip) > High dependency on limited number of players for supply > Lack of land to cultivate energy crops in competition with more profitable crops Source: BIM Workshop, Roland Berger analysis 17
Our internal analysis and conversations with industry players reveal 6 key challenges for the Malaysian biotechnology industry Key challenges for the Malaysian biotechnology industry (2/3) COMPETITION > Established multinationals could constrict the growth of domestic biotechnology ventures with their scale, technology leadership and resources > Stiff competition with existing manufacturers who do not rely on biobased input (e.g. bio-plastics) INADEQUATE LOCAL EXPERTISE > Limited number of local & skilled manpower for bio-manufacturing e.g., for biopharmaceuticals > Limited number of experienced personnel on the side of regulators to assist in reviewing documents/dossier > Need for targeted development program for SMEs involved in the biotechnology sector Source: BIM Workshop, Roland Berger analysis 18
Our internal analysis and conversations with industry players reveal 6 key challenges for the Malaysian biotechnology industry Key challenges for the Malaysian biotechnology industry (3/3) CHALLENGES IN POLICY & REGULATION > Some industry players have noted that government bureaucracy has resulted in a long waiting period to receive the necessary approvals > The process for clinical trials of bio-pharmaceutical products needs to be reviewed to expedite product development and commercialization MARKET EDUCATION > Building customer awareness with those who are unfamiliar with biobased product substitutes and their inherent benefits > Educating customers about the usage of new therapy programs and bio-pharmaceuticals in the field of medicine, healthcare and pharmaceuticals Source: BIM Workshop, Roland Berger analysis 19
Going forward, some key focus priorities are needed to propel Malaysia's bio-based economy towards further growth Key priorities (1/2) Develop a clear roadmap for implementation Defining what needs to be done and how we set out doing it will set us up for success. Alignment, execution, performance monitoring and regular strategic reviews are all necessary for success. Engrain sustainability in people's mindset Malaysia has inherent advantages to 'win' in the bio-economy. But the mindset of sustainability and living off the land must first be a way of life not easy; given that we always have 'enough' resources, there is hardly any incentive to be efficient. Further invest downstream Extract maximum value from our natural resources by making sustainable investments further downstream the value chain in new application areas (e.g. biochemicals, bioplastics, bio-based pharmaceuticals etc) Develop biotechnology innovation clusters The biotechnology industry requires a diverse supporting ecosystem of interconnected companies, suppliers, service providers, research institutions and other related organizations located within geographic concentrations to promote effective collaboration. Build solid policy and governance structures It is often observed that the more successful bio-based economy models in the world have solid policy setting and strong governance structures, providing the necessary environment for growth Source: Roland Berger analysis 20
Going forward, some key focus priorities are needed to propel Malaysia's bio-based economy towards further growth Key priorities (2/2) Attract and develop talents Quality supply of engineers, scientists, biotechnologists from the local talent pool required; attracting global experts and leading biotech firms; providing a conducive environment for innovative research Engage the people Public education and communication is necessary to seek buy in and also to overcome skepticism and negative feelings over novel bio-based products & technologies Foster cross-industry integration Bio-based value chains cut across different sectors and require multi-industry collaboration to develop new applications closer to the needs of consumers Focus on commercialization Thriving collaboration amongst the government, business entities and research initiatives must translate into increased numbers of successful commercialization of biotechnological innovations Anticipate future trends The biotechnology sector is today probably where the IT sector was in the 1980s. Trends may still be volatile and the end game is still unclear. Need to keep up with the latest industry trends and developments. Recalculate plans when the facts change. Source: Roland Berger analysis 21
22 It's character that creates impact! john.low@rolandberger.com +6012-9696 570