development of biotechnology entrepreneurship –...

Development ofBiotechnologyEntrepreneurship –Malaysia

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� Implementing Institution:Melaka Biotechnology Corporation

� Head:Professor Ramli bin Hitam (Chief Executive Officer)

� Details of Institution:Address: Melaka Biotechnology Corporation, Lot 7, MITC City, Ayer Keroh, Melaka, 75450 MalaysiaTel.: (+60) 06 231 3532Fax: (+60) 06 2326109E-mail: [email protected]: www.melbio.com.my

� Implementation Period:2003 to 2006

� Costs:The Melaka State Fund provided $297,000 and the Council of Trust of the Indigenous People (MARA) provided a loan of $958,900.

199

GENERAL INFORMATION

200 VOLUME 17: EXPERIENCES IN DEVELOPING CAPACITY FOR SUSTAINABLE DEVELOPMENT

SU M M A RY

The aims of the research-development-commercialization continuum of thisproject were to:

• realize economic benefits from scientific and technologicaladvances in biotechnology in line with national policies on commercialization;

• develop the national biotechnologyindustry;

• develop entrepreneurship among agroup of indigenous people ofMalaysia, the bumiputras; and

• stimulate rural development.

The Melaka BiotechnologyCorporation initiated a project toencourage the development of entrepre-neurship in biotechnology. In this pro-ject, outputs (i.e., the production ofseedlings of herbal and aromatic plantsand of essential oils and herbal extracts) from the Melaka Institute ofBiotechnology, the research and develop-ment arm of the Corporation, have beencommercialized by its business arm,Melaka Biotech Holdings Sdn. Bhd.

Research and development started in2003. Pilot-scale production and the cre-ation of two start-up companies began in2005 and the funds for commercializa-tion were approved in September 2006.

Of the two start-up companies,Invitrotech Sdn. Bhd. focuses on thecommercial production of plantlets ofcash crops and medicinal, aromatic and

ornamental plants. The other company,Tropical Bioessence Sdn. Bhd., is engagedin the discovery and production of essen-tial oils and plant extracts from tropicalmedicinal and aromatic plants, the identi-fication and characterization of bioactivecompounds from these essential oils andextracts, and the screening of medicinalplants for biological activity.

BAC KG R O U N D A N D

JU S T I F I C AT I O N

The Government of Malaysia has identi-fied biotechnology as a new engine ofnational economic growth. It is envisagedthat biotechnology will be able to gener-ate new wealth and income for rural andurban populations, thus improving thesocio-economic status of the population asa whole. In order to fully realize the poten-tial benefits of this technology, theresources of Malaysia need to be deployedin a structured and focused manner.

Of the issues needing to beaddressed, facilitating the commercializa-tion of technology is particularly impor-tant as a means to create wealth fromknowledge. Traditionally, research anddevelopment have been considered to bewithin the domain of the federal govern-ment and almost all centres of researchand development have been establishedusing federal government funding.Perhaps for this reason, the commercial-ization of new technologies issuing frompublic institutes of research and develop-ment has been limited. To improve thesituation, the federal government created

Development of Biotechnology Entrepreneurship – Malaysia 201

a new biotechnology policy, establishedin 2005, that focuses on concepts andmeasures designed to promote thebiotechnology sector in Malaysia.

Another concern of the federal gov-ernment is equality of the different racesand ethnic groups in Malaysia. In linewith the Eighth and Ninth MalaysianPlans, entrepreneurial development hasbeen placed on the national agenda as atool for increasing employment opportu-nities and improving income equitability.

Melaka is a small State in southwestMalaysia that has limited naturalresources and that is seeking new ways ofdriving its economic development. In linewith federal government efforts, the Stategovernment has taken a proactive role indeveloping the biotechnology industryand Melaka is now the first MalaysianState to have an independent centre forresearch and development dedicated tobiotechnology.

The issues addressed during this pro-ject were:

• the management of research anddevelopment activities so as toyield outputs that can be commer-cialized and have a positive impacton the rural economy;

• the selection of projects from thebroad field of biotechnology thathad the potential to yield a commercial product as quickly aspossible;

• the integration of the entrepre-neurship programme with current

research and development activities;

• the facilitation of the involvementof farmers, given the lack of theirown capital; and

• the need for complementaryindustries to ensure project sustainability.

DE S C R I P T I O N

The project to encourage the developmentof research in, and commercialization of,the biotechnology industry in Melaka,Malaysia, began in 2003 with the forma-tion of the Melaka Biotechnology Divisionas part of the Melaka Chief Minister’sDepartment. The four full-time staff mem-bers were led by Farida Habib Shah, thedirector. The Melaka BiotechnologyDivision grew rapidly with the registrationof Melaka Biotech Holdings Sdn. Bhd. asits business arm and the establishment oftemporary laboratories for plant tissue cul-ture and plant molecular biology at aninterim site later that year. In July 2004, thetwo laboratories were relocated to a per-manent site occupied by a new institute,the Melaka Institute of Biotechnology,formed as the research and developmentarm of the Melaka Biotechnology Division.The Melaka Biotechnology Division waslater upgraded to become an autonomousbody, the Melaka BiotechnologyCorporation, which was inaugurated inJanuary 2005.

From this modest start, the MelakaBiotechnology Corporation, with abudget of approximately $400,000 and


five key personnel, has expanded andnow employs 31 staff members withcompetencies in biotechnology, businessdevelopment and administration.

The Melaka BiotechnologyCorporation now acts as a link betweenresearch institutions and industry. Its mis-sion is to become a centre of excellencein the commercialization of research anddevelopment in the field of biotechnology,acting as an engine of economic growthfor the sustainable development of Melakaas a dynamic and progressive State.

The main objectives of the MelakaBiotechnology Corporation are to:

• develop the biotechnology industry– particularly in the areas of agri-culture and medical biotechnology– in order to create a platform forwealth-creation activities that willharness natural biodiversity and thebio-resources of the State ofMelaka; and

• develop the infrastructure andhuman resources required byworld-class centres for researchand development and the commer-cialization of biotechnology.

The Melaka BiotechnologyCorporation is unique in the sense that ithas housed a centre for research anddevelopment, the Melaka Institute ofBiotechnology, and a commercializationarm, Melaka Biotech Holdings Sdn. Bhd.,under one roof from the very first day ofits inception.

Of the programmes run by the MelakaInstitute of Biotechnology, the micro-propagation of plants using tissue culturemethods and the extraction of essentialoils were selected as having particularlygood potential for commercialization.Research and development outputs concerning essential oils had not beendeveloped previously as a commercialventure and commercial tissue culturewas limited to oil palm and orchids aswell as the small-scale production ofbanana plantlets in Melaka and inMalaysia in general.

From the outset, activities associatedwith the production of quality seedlings,the cultivation of herbal and aromaticplants to serve as raw materials, the production of essential oils and herbalextracts, the manufacture of value-addedproducts and marketing were integrated.By mid-2005, researchers at the MelakaInstitute of Biotechnology had docu-mented protocols for optimizing the tissue culture of 30 species of herbal, aromatic and ornamental plants and cashcrops. At the same time, nearly 100species of indigenous plants and cropswere screened for phytomedicinal prop-erties and major bioactive compounds(e.g., phenolic compounds such as caffeicacid and catechin) were isolated.

A model was developed to act as aguide in the implementation of theprocess of commercialization of outputsof these programmes (fig. 1). The modelincludes forming start-up companies toexploit the results of research and devel-


opment, developing a project businessplan (for fund acquisition and internalcompany-planning purposes), making con-tact with potential funders and financiers,and selling the idea of strategic alliances in the integration of a research-to-production-and-commercialization system.

This system involves four stages:

• Bio-incubator: Melaka Institute ofBiotechnology is a biotechnologyservice centre that provides services and facilities for start-upbiotechnology companies. Bio-incubators, in conjunctionwith Melaka Biotech HoldingsSdn. Bhd. and strategic partners,offer consultancy services to new companies, based on theirknowledge of the special require-ments of the field;

• Bio-start: this is an early-stage commercialization programmedesigned to facilitate the develop-ment of a realistic business model.Its mission is to stimulate andfacilitate the commercialization ofintellectual property to enhance andfoster links between universities,research institutes and bio-industry;

• Bio-preneur: this programme focusesmainly on the development ofentrepreneurship by selectingpotential entrepreneurs and pro-viding services such as productionand marketing development;

• Bio-funding: this is a scheme to provide funds for entrepreneurs tocommercialize the production anddevelopment of their intellectualproperty.

Figure 1 A model for the development of entrepreneurship in biotechnolology: the commercialization of technologies derived from research programmes on plant tissue culture and essential oils at the Melaka Institute of Biotechnology, Malaysia.

MELAKA BIOTECHNOLOGY CORPORATION

MELAKA INSTITUTE OF BIOTECHNOLOGY

RESEARCH & DEVELOPMENT

• TISSUE CULTURE

• ESSENTIAL OILS AND HERBAL EXTRACTS

• PILOT-SCALE PRODUCTION

• PRODUCT DEVELOPMENT

• PROCESS OPTIMIZATION

• REGISTRATION OF START-UP COMPANIES:

– INVITROTECH SDN. BHD.

– TROPICAL BIOESSENCE SDN. BHD.

• SELECTION OF ENTREPRENEURS

• ENTREPRENEURSHIPDEVELOPMENT

• MARKET DEVELOPMENT

• PRODUCTION

• SCALING UP

• FUND ACQUISITION

• COMMERCIAL DEVELOPMENT

• COMMERCIAL PRODUCTION

BIO-INCUBATOR

BIO-START

BIO-PRENEUR

BIO-FUNDINGS

MELAKA BIOTECH HOLDINGS SDN. BHD.


Under the bio-incubator programme,the process of commercialization was ini-tiated. In accordance with the MalaysianCompanies Act 1965, Melaka BiotechHoldings Sdn. Bhd. incorporated twonewly created start-up companies in early2005. These were Invitrotech Sdn. Bhd.(production of tissue-culture plantingmaterials) and Tropical Bioessence Sdn.Bhd. (production of essential oils andherbal extracts).

Under the bio-start programme,funding for the purchase of machineryand equipment and for working capitalfor these two companies was provided inthe form of a “soft” loan (below the market rate of interest) of $958,900 froma government agency, the Council ofTrust of the Indigenous People (MARA),which was approved in September 2006.Tropical Bioessence Sdn. Bhd. andInvitrotech Sdn. Bhd. used part of theloan to rent factory lots from MalaysianIndustrial Estates Bhd. at subsidized rates.The technology fees provided by MARAto each start-up company amounted toapproximately $15,000.

Under the bio-preneur programme,three graduates with technical and business backgrounds were selected tobecome entrepreneurs and trained todirect Invitrotech Sdn. Bhd. and TropicalBioessence Sdn. Bhd. The selected candi-dates also supplied capital for the start-upand were thus majority shareholders ofthe companies, reducing the equity of theState to only 20 per cent.

In order to integrate the aims of theprogramme with respect to the promo-tion of rural development, an integratedproduction system was developed thatincorporated rural farmers as input usersas well as producers of intermediate prod-ucts in line with an integrated productionmodel (fig. 2). The modus operandi forthe project from start-up to commercial-ization has been that each individual inthe supply chain plays a role as a user andas a distributor.

Tissue-culture plants and herbs provided by Invitrotech Sdn. Bhd. will beplanted and grown by local farmers whowill be trained in crop planting and main-tenance by experts from the MelakaBiotechnology Corporation. The harvestwill be sold or supplied to companies thatuse plants and herbs as raw materials,such as Tropical Bioessence Sdn. Bhd. It ishoped that encouraging farmers toundertake contract farming will lead tothe increased development of rural areas.

To ensure long-term sustainability interms of consistency of the raw materialand quality of the end product, theMelaka Institute of Biotechnology provides continuous support in relationto research and development services toTropical Bioessence Sdn. Bhd., InvitrotechSdn. Bhd. and the farmers.

To strengthen the competitivenessand sustainability of the programme, theMelaka Institute of Biotechnology hasalso explored strategic alliances in theform of joint ventures and collaboration


with established industrial players toform an integrated production and mar-keting cluster (fig. 2). One such effortwas the formation of Healol MelakaBiotech Sdn. Bhd. as a result of a joint-venture agreement between the Instituteand Healol Pharmaceuticals Sdn. Bhd.,which was signed in August 2006. HealolMelaka Biotech Sdn. Bhd. will producetablets, capsules, creams and ointmentsbased on herbs recommended by the

Melaka Institute of Biotechnology usingraw materials produced by InvitrotechSdn. Bhd., Tropical Bioessence Sdn. Bhd.and contract farmers. These products areintended to be marketed in seven Asiancountries and Healol Melaka BiotechSdn. Bhd. is providing a market forapproximately 75 per cent of the produc-tion capacity of Invitrotech Sdn. Bhd.and Tropical Bioessence Sdn. Bhd.

Figure 2 The integrated and sustainable production cluster formed by the alignment ofcompanies and strategic alliances made during the bio-preneur programme.

R & D = research and development.


PAT E N T I N G A N D

CO M M E R C I A L I Z AT I O N

Commercial production began in 2006for both Invitrotech Sdn. Bhd. andTropical Bioessence Sdn. Bhd. While nopatents have yet been registered, bothcompanies are under development andare expected to make a profit in 2009.These companies have expanded theirworkforces in order to cope with greaterdemand; Invitrotech Sdn. Bhd. andTropical Bioessence Sdn. Bhd. employ 11and 5 staff members, respectively.

PA R T N E R S H I P S

The Council of Trust of the IndigenousPeople (MARA), formed in 1966, is agovernment agency under the Ministryof Entrepreneur and CooperativeDevelopment. Its main function is to promote, train, facilitate and assistbumiputras to actively participate inindustrial and commercial activities.Melaka Biotech Holdings Sdn. Bhd.applied for project financing by submit-ting the business plans of TropicalBioessence Sdn. Bhd. and InvitrotechSdn. Bhd. to MARA in June 2005. Approvalwas received in September 2006.

Melaka Herbs and Plants Sdn. Bhd., aprivate company owned by an investmentarm of the State of Melaka, is currentlythe main buyer of tissue-culture plantletsproduced by Invitrotech Sdn. Bhd. andthe main supplier of raw materials to beused in essential-oil extraction by TropicalBioessence Sdn. Bhd.

Healol Melaka Biotech Sdn. Bhd., anewly formed company, is a joint-venturesubsidiary of Melaka Biotech HoldingsSdn. Bhd. and Healol PharmaceuticalsSdn. Bhd., a pharmaceutical distributioncompany with businesses in seven Asiancountries. With a strong marketing andsales team, it will market its herb-basedproducts via the distribution channels ofHealol Pharmaceuticals Sdn. Bhd. Someof the products manufactured by HealolMelaka Biotech Sdn. Bhd. will incorporateessential oils from Tropical BioessenceSdn. Bhd.

Malaysian Industrial Estates Bhd. is agovernment-linked company that is asubsidiary of a public-listed company,Malaysian Industrial DevelopmentFinance Bhd. Its role is to assist small andmedium-sized enterprises (SMEs) to gaina foothold in industry. MalaysianIndustrial Estates Bhd. builds industrialspace and provides SMEs with a solutionfor their accommodation needs. It hasassisted Invitrotech Sdn. Bhd. and TropicalBioessence Sdn. Bhd. by providing rent-free industrial space for the first six monthsfollowed by a 57 per cent discount in themonthly rent.

RE P L I C A B I L I T Y

This experience could be replicated inother regions of Malaysia or in othercountries, making use of the clear objec-tives and the procedure of integratedplanning and implementation and takinginto account the key factors necessary forsuccess such as the “buying-in” of all


stakeholders. The initiative was carried outusing existing government programmes,bridging gaps to realize State objectivesand targets within the national vision.

The experience also shows that the commercialization of research and development can be implemented as partof an entrepreneurship-development programme. Other States that are nowfollowing the example of Melaka andfocusing on biotechnology are Johore(Johore Biotechnology Corporation) andNegeri Sembilan (Inno Bio Ventures Sdn. Bhd.).

Initial discussions have been carriedout with representatives from Oman andYemen to set up a biotechnology entre-preneur programme using the samemodel, with modifications to suit localconditions in the respective country.

PO L I C Y IM P L I C AT I O N S

This project has led to enhanced valuecreation in the agricultural sector in linewith the National Biotechnology Policy.Through biotechnology, disease-free andvalue-added plants can be grown andcommercialized. In addition, researchcan lead to the creation of new health-care products made from naturalresources and herbs and that can bedeveloped for commercialization.

I M PAC T

Public confidence concerning the potentialbenefits of State biotechnology pro-

grammes has grown tremendously andthe Melaka Institute of Biotechnology andMelaka Biotech Holdings Sdn. Bhd. havebegun to establish brand images as centresof excellence for the commercialization ofresearch and development and for thedevelopment of entrepreneurship.

Both Tropical Bioessence Sdn. Bhd.and Invitrotech Sdn. Bhd. are still devel-oping and expanding their businesses.Both companies are expected to generatea profit in 2009.

It was planned that by the end of2007, approximately 50 farmers wouldbenefit from this programme, generatingan annual gross income of about$400,000. However, this target has notyet been achieved; mass production hasbeen slightly delayed and the number offarmers participating is less than half thattargeted. The estimated gross incomegenerated is about $100,000.

L E S S O N S L E A R N E D

The critical issues affecting sustainabilitywere addressed in this project, namely,market and marketing, funding, technology,availability of skilled workers, entrepre-neurship and government support; thusthe sustainability of the project is high.The potential market for products issuingfrom the two companies is huge, spanning not only Malaysia but alsoother countries in the Association ofSoutheast Asian Nations, and the potentialfor expansion is great.

One particular circumstance that has


helped the initiative to proceed success-fully is the fact that all the stakeholdersare motivated to promote its accomplish-ment. Furthermore, the leadership of theproject has been clear about the goals ofthe initiative and how they are to beachieved and has shown flexibility inaction and implementation.

One of the biggest obstacles encoun-tered was heavy bureaucracy in govern-ment departments and agencies. Forexample, although discussions regardingthe application for funding for TropicalBioessence Sdn. Bhd. and InvitrotechSdn. Bhd. started in March 2005, theapplication was not approved untilSeptember 2006. It was the perseveranceand patience of the then director of theMelaka Biotechnology Corporation andthe project team that enabled this success, together with the belief that theproject was important and that its accom-plishment would contribute significantlyto achieving the vision of the MelakaState government and the MelakaBiotechnology Corporation.

FU T U R E P L A N S

The Melaka Biotechnology Corporationhas several plans to improve and expandthe project, namely:

• to produce detailed documentationabout the initiative and to developa manual for a standard operatingprotocol;

• to identify food and aquacultureprojects to be implemented under

the same programme for thedevelopment of entrepreneurshipin biotechnology;

• to implement the project underthe direct umbrella of the Ministryof Entrepreneur and CooperativeDevelopment as a step towardscentralization;

• to expand the focus on biohealth-care products in collaborationwith local entrepreneurs; and

• to produce, monitor and improvethe quality of biotechnology inMalaysia as a means of boostingyields in agriculture and fisheries.

P U B L I C AT I O N S

Zamry Gafar (2008). The Success Storyof Melaka Biotechnology Corporation.Presentation at the MalaysiaInternational Food and BeveragesConference, Putra World Trade Centre,Kuala Lumpur, 10-12 July 2008.

Case Study Prepared by:

Jamaludin Abu Bakar Deputy Director (business development)Melaka Institute of BiotechnologyManager, Melaka BiotechnologyHoldings Sdn. Bhd.Tel.: (+60) 62312672E-mail: [email protected]

Zamry GafarDeputy Director (business development)Melaka Biotechnology CorporationManager, Melaka BiotechnologyHoldings Sdn. Bhd.


Tel.: (+60) 62362879E-mail: [email protected]

Project Participants:

Farida Habib Shah, former CEO,Melaka Biotechnology Corporation;Director, Melaka Institute ofBiotechnology; and Managing Director,Melaka Biotechnology Holdings Sdn.Bhd.: Initiated the formation of MelakaBiotechnology Corporation, the MelakaInstitute of Biotechnology and MelakaBiotechnology Holdings Sdn. Bhd. andspearheaded the programmes describedin this case study.

Jamaludin Abu Bakar, Deputy Directorfor Business Development, MelakaInstitute of Biotechnology, and Manager,Melaka Biotechnology Holdings Sdn.Bhd.: Responsible for project planningand troubleshooting.

Zamry Gafar, Deputy Director forBusiness Development, MelakaBiotechnology Corporation, andManager, Melaka BiotechnologyHoldings Sdn. Bhd.: Responsible for project planning, execution, development and marketing.

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