Policy Instruments for Stimulating R&D in the Enterprise Sector: The Contrasting Experiences of Two MNC Dominated Economies from Southeast Asia

The Paper undertakes a detailed survey of the various policy instruments and institutions, which two seemingly similar economies have implemented to increase R&D investments by their respective private sector enterprises. The two economies are Singapore and Malaysia, which have both shown rather good economic results and have already become developed countries or is in the definite path towards becoming one in the foreseeable future. A careful examination of their innovation policies shows some contrasting experiences. Singapore has assiduously built up a critical mass of technically trained human resource and then provided a variety of fiscal incentives. The result has been significant rises in the research intensity of its enterprise sector. It has also put into effect some imaginative policies for engineering positive spillovers from MNCs to local industry. Malaysia, on the contrary, has very similar fiscal instruments for encouraging innovation. But it suffers from a chronic shortage of technically trained human resource of the type that is required for its increasingly sophisticated enterprise sector. Despite explicit recognition of this crucial policy vacuum, nothing concrete seems to be happening in this direction.