WHAT do South Korea, Japan, Switzerland, USA, Germany and Sweden have in common? They are the most innovative ones, featuring among the top 10 in the Global Innovation Index 2024 (GII).
Another common trait is that these countries spend between three and four per cent of their gross national product (GDP) on research and development (R&D).
South Korea tops the list, dedicating five per cent of its GDP to this venture.
In contrast, low- and middle-income nations spend only half as much as rich nations on R&D in GDP terms. That explains Malaysia's middling GII ranking of 33rd among 133 countries.
R&D fuels innovation and sows the seeds for future growth. Innovations boost productivity – the capacity to produce more with less.
And productivity is at the heart of a nation's competitiveness, enabling it to export more and attract talent, know-how and foreign investments.
Productivity and competitiveness together spur economic growth, employment and living standards. This causation runs through the Madani-Economy framework.
We aspire to be a rich nation by 2030 and improve our GII ranking to 30th by next year. To achieve these targets, we need to become an innovative society.
Thus, we should consider offer these three strategies in that direction.
First, the meagre R&D expenditure of one per cent of GDP requires a pump-up to the levels of rich nations.
The ministry of science, technology and innovation reckons we need an R&D investment of around RM86 billion to bring the ratio of R&D expenditure to GDP to 3.5 per cent by 2030.
With only RM600 million allocated for R&D, 2025 Budget could have done more. But we have some years to go to meeting the R&D-expenditure target.
Hopefully, the matching grant of RM170 million will cause the private sector to rise to the challenge of contributing more to R&D.
Increased R&D spending is essential. Take the Defence Advanced Research Project Agency (DARPA) - a US government agency reputed for inventing the internet and the global positioning system.
The DARPA's robustness in financing risky ideas with public funds has created tech behemoths, caused Silicon Valley to boom and the nation to excel in innovation.
Accordingly, the US enjoys stronger productivity and sterling economic performance than most other economies.
Second, the New Industrial Master Plan 2030 should encourage industries with R&D capabilities.
For example, the German Technology Park in Melaka envisions becoming a regional innovation hub. Such hubs inspire start-ups.
A rigorous scorecard to guide the government's policy on investment promotion is in the making.
Key indicators such as high technology, high-value job creation, domestic linkage and the ESG – environmental, social and governance – agenda have already been identified.
R&D capabilities of prospective investors could be added to this list.
Third is building a vibrant innovation ecosystem. This would require, among others, developing start-ups, venture capital and talent.
Khazanah National, a sovereign wealth fund, will launch two schemes to enlarge venture capital and talent while attracting international counterparts.
Additionally, incentives that support tech startups, such as grants and tax relief, would surely increase the risk appetite of venture capitalists.
The 2025 Budget adds to the plethora of such incentives.
Developing high-tech talent in Malaysia would require upgrading the STEM (science, technology, engineering and mathematics) education and vocational training curricula to incorporate skills in emerging technologies like AI.
Intensifying collaboration between universities and tech companies will ensure that higher education fits industry needs.
Collaborating with foreign firms would also be a bonanza for novel ideas from abroad.
Internships leading to employment, such as the 'Academy in Industry' pioneered by the Malaysia Productivity Corporation, can expand the stock of skilled labour in the companies concerned.
While upskilling helps workers stay updated with technological advancements, highlighting the lucrativeness of technology careers among school children can build the next generation of technical talent.
These strategies should accelerate Malaysia's journey to becoming a rich nation and climbing up the GII.
* The writer is an adjunct professor at the Perdana University