Countries Need To Protect Fruits Of Investment And Industry 4.0

Malaysia and other ASEAN countries have many strengths that can transform them into global innovation leaders.

KUALA LUMPUR, Oct 9 — Five think tanks urged ASEAN countries to invest in knowledge-based industries to transition from manufacturing and commodities into higher income economies.

Their report, written by a collaboration between five think tanks from four ASEAN countries, argues that intellectual property rights (IPRs) are key to ASEAN’s development future.

The report, which was recently launched by Malaysian Deputy Minister of International Trade and Industry Ong Kian Ming, looked at the strengths and weaknesses of the framework of intellectual property protection within key ASEAN member states such as Malaysia, Philippines, Vietnam, Indonesia and Thailand.

It considers that most ASEAN countries were still not up to mark, would be disadvantaged, and even left behind in the race for increased foreign investment and economies better adapted to the challenges of the 21st century.

We sat down with Philip Stevens from Geneva Network, one of the co-sponsors of the report to ask him to expand on some of the findings, defend a few positions and find out how best the economies in the ASEAN region can make the leap and be prepared for Industry 4.0 or the fourth industrial revolution.

What kind of trends in intellectual property rights are you seeing and how can ASEAN compete in high value industries with its regional neighbours such as China and markets such as the EU?

Overall, the direction of travel is positive. Many ASEAN member states have recognised the importance of IPRs to their economic and social development goals and have committed to reforming policies and laws in this crucial area. Real steps have been taken to improve the framework for the protection and enforcement of IPRs, particularly trademarks and copyright.

Thailand is notable in this regard for the high-level political support it has placed behind upgrading its IPR system, with the Prime Minister and Deputy Prime Minister personally chairing IP committees. Malaysia strengthened certain IP laws in 2011, becoming a regional leader in the protection of IP according to various international indices (although still some way behind Singapore).

Nevertheless, there is still a long road to travel. Counterfeit products are still too commons in ASEAN markets, and rates of online piracy are extremely high throughout the region. There are particular concerns amongst investors about the seriousness with which ASEAN countries will protect crucial patent rights, especially within the life sciences sector.

Unfortunately, many governments – including Malaysia – have shown willingness to override patent rights via compulsory licenses, while other countries have introduced uncertainty into the patent system by discriminating against certain technologies in the granting of patents, notably pharmaceuticals and software.

Often governments look to exploit flexibilities within the patent system in the name of development, which highlights the schizophrenia at the heart of IP policymaking in countries like Malaysia.

Malaysia is on the cusp of becoming a high-income country and is looking to transition towards a more value-added knowledge-based economy: yet often it talks about IP in zero-sum terms as if it were a low-income “developing” country.

In reality, Malaysia has a lot to gain by presiding over a world-class, predictable and transparent IP system. I think this is recognised by many policymakers within the government.

What do you see are the potentials for growing patent-intensive sectors in the ASEAN region?

As ASEAN countries look to shift from low-value manufacturing towards value-added manufacturing and R&D activities in knowledge-based sectors, a strong framework for the protection and enforcement of patents is crucial. Patents are central to the business models of the highest-value industrial sectors, including the life sciences, semiconductors, manufacturing of all kinds of electronic equipment and appliances, and natural gas extraction.

In the European Union, patent-intensive sectors are responsible for 17 per cent of all employment and 15 per cent of total GDP (gross domestic product). This suggests that ASEAN countries stand to gain considerably from a high standard of patent protection and enforcement.

ASEAN countries, and Malaysia in particular, have many strengths that can transform them in time into global innovation leaders. Malaysia is notable for its regulatory quality, strong rule of law, quality of its universities and its growing high-tech clusters. It has particular potential in several patent-intensive sectors such as electronics, information and communications technology (ICT), and life sciences.

Malaysia’s patent system performs relatively well compared to ASEAN neighbours, although it is some way behind Singapore in terms of its scope and efficiency. In particular, Malaysia’s patent office can take up to four years to examine a patent, which while better than Thailand’s average of eight years, is too slow given that patents only last for twenty years from the moment of application.

Malaysia’s growing life science sector is also hurt by the government’s willingness to use compulsory licenses as a tool to promote access to medicines.

This tool has been used most frequently by least-developed countries in the midst of genuine health crises: most compulsory licenses to date were issued by African countries in the early 2000s for HIV medicines. Rather than taking the nuclear option of undermining property rights, developed countries typically resolve tensions over medicines pricing through non-coercive means.

Where within the ASEAN region do you see examples of best practices/ opportunities to improve foreign investor confidence in emerging knowledge-based industries?

Singapore is obviously the regional leader in the protection of IP, but Philippines and Viet Nam have made significant progress in recent years. The Philippines has jumped over 20 places in this years Global Innovation Index (compiled by the World Intellectual Property Organization), although it is still behind Malaysia, Vietnam, Singapore and Thailand.

All these countries have improved the framework for the protection of IP over the last ten years, despite the gaps that still exist.

Perhaps more notable is the changes of attitude in regional giants China and India. China in particular has realised that its economic future cannot be based on low-cost manufacturing and export of products and components invented elsewhere. Innovation is where the real economic value lies.

The Chinese government has made innovation a strategic objective and intends to dominate technologies of the future including AI, robotics, quantum computing and biotechnology. In order to achieve this objective, the government has made substantial improvements to its intellectual property system, unilaterally raising standards beyond the minimum required by the World Trade Organisation’s TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights) Agreement.

Although there is still a long way to go until foreign and Chinese innovators are treated equally, the overall direction of travel is positive, and demonstrates the importance future-oriented governments attach to intellectual property rights.

Regulatory data protection has been a contentious issue over the past decade, particularly in relation to regional trade agreements. Most ASEAN countries do not currently provide protection in this area. What advantage could a country like Malaysia have?

Regulatory data protection is an increasingly important form of intellectual property right to encourage investment in veterinary medicines, agricultural chemicals and biologic medicines.

In the case of biologic medicines, the protection of clinical trial data is very important since patents alone may provide insufficient protection. This is because the molecular structure of biologics is far more complex than “traditional” chemically -synthesized drugs, making it impossible to replicate an original biologic precisely.

Given that each bio-similar is slightly different from the originator, patents may offer only limited protection, as patents are granted for specific inventions and do not cover the variations that will inevitably arise in the process of developing a bio-similar.

As such, the most innovative countries in biotechnology, chemicals and veterinary medicines all have clear, legally binding rules to protect these data. This form of intellectual property right is particularly important for countries looking to enter the R&D value-chain through the provision of clinical trials and related services.

Philip Stevens of UK-based think tank Geneva Network. CREDIT: IDEAS

This is definitely the case for Malaysia.

It’s unlikely in the near term that Malaysia will produce a completely home-grown innovative biologic medicine. Rather the opportunity for Malaysian companies is to partner with international companies in various stages of the R&D cycle, from molecule screening to clinical trials. This is the entry point into de novo biotech innovation.

Upgrading regulatory data protection rules would be a signal that Malaysia is a future-oriented country, serious about become a more knowledge-oriented economy.

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