While the ratio of government expenditure to Malaysia\u2019s gross domestic product is forecast to decline by a total of 1.9% from 2023 to reach a new low of 20.75% in 2028, it remains a significant contributor to the nation\u2019s economy.<\/p>\n<\/div>\n
Public procurement, while meeting many social and economic needs, is also an important policy tool for pushing innovation. Tan Sri Dr Ahmad Tajuddin Ali, Joint-Chairman (Industry) of the Malaysian Industry-Government Group for High Technology (MIGHT), cites the UK Innovation Strategy, saying that \u201cby procuring more innovative solutions, the public sector can be a driver of innovative new ideas, providing innovative firms with the foothold they need to succeed in the market, fuelling the scale-up ecosystem and facilitating wider adoption of new tech services\u201d.<\/p>\n<\/div>\n
Tajuddin observes, \u201cPublic procurement can create lead markets for innovative goods and services on a scale that makes R&D investments worthwhile for industry players and catalyses a private sector\u2019s push for innovation while simultaneously meeting public needs.\u201d<\/p>\n<\/div>\n
MIGHT has always emphasised a full ecosystem approach to industry development, with the ultimate focus of attaining and accelerating national competitiveness. These include institutional R&D funding, partnerships for industry growth, public sector procurement regulations, and private sector market expansion and innovation policies.<\/p>\n<\/div>\n
\u201cThese policies are not mutually exclusive; rather, they form an integral part of a mature innovation ecosystem. Increasingly, however, it is abundantly clear that we need to seriously consider the demand side of innovation to foster private sector product and process innovation. It is critical that this not be an afterthought.\u201d<\/p>\n<\/div>\n
\u201c\u2018Mission-oriented\u2019 public procurement is an important innovation policy instrument and underscores the necessity for government participation in innovation,\u201d he adds.<\/p>\n<\/div>\n
Malaysia has put in place a planned procurement strategy for more than 30 years; the Offset Programme is one such example.<\/p>\n<\/div>\n
\u201cIn fact, MIGHT was founded with this goal in mind, formulating procurement strategies and fostering the offset programme in its early stages,\u201d says Datuk Khalilur Rahman Ebrahim, Executive Chairman of Systems Consultancy Services and a member of MIGHT\u2019s board of directors.<\/p>\n<\/div>\n
\u201cThe offset programme ensures that a percentage of the cost of obtaining products or services, particularly for larger projects, is reinvested in the country through knowledge transfer, investment or joint ventures. Thus, procurement acts as a strategic tool for improving future capabilities and competitiveness. With the correct model and implementation emphasis, it would work,\u201d he adds.<\/p>\n<\/div>\n
While significant progress has been achieved over the decades, there is still plenty of room for improvement, with extended benefits to local stakeholders and increased cost-effectiveness of incoming foreign investments. Improvements are needed in the implementation of important industry objectives, particularly in strategically focused sectors or those that affect broad-based national security.<\/p>\n<\/div>\n
\u201cPETRONAS is an example of a government-linked entity with a commendable vendor programme and maintains an extensive vendor list. One such success story is NDE Consultancy, a home-grown Kemaman-based company that specialises in non-destructive testing, which replaces reliance on foreign expertise,\u201d Khalilur says.<\/p>\n<\/div>\n
\u201cFurthermore, the societal ramifications are important. The expansion of existing technological capabilities has a multiplier effect domestically, fostering a strong network of economic activity in which money circulates within the local economy, in many cases providing a much-needed boost.\u201d<\/p>\n<\/div>\n
The value inherent in that is that incrementally, it elevates Malaysia\u2019s collective ability and competitiveness.<\/p>\n<\/div>\n
This is especially crucial with large investments in strategic projects. Rail transport infrastructure is one such example.<\/p>\n<\/div>\n
\u201cEven project parcels awarded to local players, such as tunnel construction, should not be reduced to a brick-and-mortar job, with the tunnelling machines imported and tunnel design frequently done overseas. This presents no net gain in expertise or technology capacity except for a short-term cost advantage,\u201d he says.<\/p>\n<\/div>\n