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This article first appeared in Forum, The Edge Malaysia Weekly on April 16, 2018 - April 22, 2018

Countries are increasingly recognising that knowledge-based economies are the wave of the future. To bolster economic growth and global competitiveness, governments must effect a framework that attracts investment, creates high-value jobs and facilitates access to cutting-edge technology. Intellectual property (IP) is critical to achieving each of these outcomes. This is a timely calculus for Malaysia.

Malaysia is a country on the move. Since the Asian financial crisis in the late 1990s, Malaysia has experienced accelerated economic growth, averaging 5.8% year on year. Yet, Malaysia runs the risk of getting stuck in the middle-income trap. According to World Bank estimates, out of the 101 economies considered middle income in 1960, only 13 became high-income markets by the early 2000s. To continue its upward trajectory — one that will set Malaysia apart from its regional peers and propel the country toward success as a knowledge economy — the government must embrace more robust IP protection.

The government has invested in IP. The US Chamber of Commerce releases an annual International IP Index, which benchmarks the IP environment in 50 global economies. Over the six editions of the report, the index celebrates the steps taken by the Malaysian government to bolster its IP regime. Fundamentally, the government recognises that an effective IP framework begins with educated entrepreneurs and consumers at its core.

The 2018 Index highlights the ways the Malaysia Intellectual Property Office (MyIPO) heralded IP as critical to the success of its national innovation plans. As such, the government has invested in programmes to facilitate IP awareness and utilise IP as a commercial asset. The government has also put in place more advanced IP protection, such as mechanisms to combat online piracy, created new criminal standards for IP infringement and empowered customs officials with the authority to detain counterfeit goods.

Yet, Malaysia is currently at risk of ceding the ground it has gained. Last September, the government issued a government-use licence (GUL) on an innovative Hepatitis C medicine. The GUL sends a troubling signal to foreign innovators and domestic creators alike that IP rights in the Malaysian market may be taken away at the discretion of politicians; mandatory licences deeply undercut the legal certainty that robust IP systems provide and that innovators rely on to take the risks inherent in investment in new products, services and technologies.

The US Chamber recently led a delegation to Kuala Lumpur to discuss the damaging implications of the GUL and to urge Malaysia to reverse course. The chamber emphasised that, in order to enjoy the benefits of full-fledged participation in the global innovation economy, the Malaysian government must create an environment that welcomes investment from innovative and creative industries, rather than one that drives them away. Ultimately, the markets that respect innovation the most are those that foster it in turn. The index makes this point clear.

While some countries view IP as a cost that comes at the end of the innovation equation, the index illustrates how IP is critical to the very first steps of the innovation life cycle. When countries invest in IP on the front end, economies are more likely to attract foreign investment, create access to venture capital and generate high-value jobs. Each of these factors, in turn, leads to greater economic development, such as increased inventive activity, greater knowledge and technology outputs, and a stronger overall business environment. This virtuous cycle can place countries such as Malaysia on the path to becoming true knowledge-based economies.

If Malaysia wants to be an economic player on the world stage, the government must once again lead on IP. With a strong IP system in place, Malaysia can hurdle the middle-income trap and transform itself into a globally competitive innovative and creative economy.

Patrick Kilbride is vice-president of Global Innovation Policy Center (GIPC), US Chamber of Commerce

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