Strengthening innovation-driven inclusive and sustainable development Asia-Pacific Tech Monitor Vol. 33 No. 2 Apr - Jun 2016

Technology transfer through foreign direct investment Policy approaches in the Asia-Pacific region

Plus • Technology News and Events • Tech Ventures & Opportunities • Business Coach The Asian and Pacific Centre for Transfer of Technology (APCTT), a subsidiary body of ESCAP, was established on 16 July 1977 with the objectives to: assist the members and associate members of ESCAP through strengthening their capabilities to develop and manage national innovation systems; develop, transfer, adapt and apply technology; improve the terms of transfer of technology; and identify and promote the development and transfer of technologies relevant to the region. The Centre will achieve the above objectives by undertaking such functions as: n Research and analysis of trends, conditions and opportunities; n Advisory services; n Dissemination of information and good practices; n Networking and partnership with international organizations and key stakeholders; and n Training of national personnel, particularly national scientists and policy analysts.

The shaded areas of the map indicate ESCAP members and associate members

Editorial Advisory Board Dr. Wang Yan, Deputy Director-General, China Science of University Corporate Relations, University of Tokyo, and Technology Exchange Center (CSTEC), Beijing, Japan P.R. China Dr. Jeong Hyop Lee, Research Fellow, Science and Dr. Günter Clar, Director, Regional Strategies & Technology Policy Institute (STEPI), Seoul, Republic Innovation, Steinbeis-Europa-Zentrum, Stuttgart, of Korea Germany Prof. Rajah Rasiah, Chair of Regulatory Studies, Faculty Prof. Sushil, Department of Management Studies, of Economics and Administration, University of Malaya, Indian Institute of Technology Delhi, New Delhi, Kuala Lumpur, Malaysia India Prof. Sivanappan Kumar, School of Environment, Dr. Syahrul Aiman, Senior Research Scientist, Research Resources and Development (SERD), Asian Institute of Center for Chemistry, Indonesian Institute of Sciences Technology, Pathumthani, Thailand (LIPI), Jakarta, Indonesia Director, Trade and Investment Division, United Nations Prof. Dr. Toshiya Watanabe, Policy Alternatives Research Economic and Social Commission for Asia and the Institute (PARI), and Deputy Director General, Division Pacific (UNESCAP), Bangkok, Thailand Editorial Board APCTT-ESCAP Mr. Nanjundappa Srinivasan Dr. Satyabrata Sahu Dr. Krishnan Srinivasaraghavan Asia-Pacific Tech Monitor CONTENTS Vol. 33 No. 2 v Apr- Jun 2016

The Asia-Pacific Tech Monitor is a quarterly periodical of the Asian and Pacific Centre for Introductory Note 2 Transfer of Technology (APCTT) that brings you up-to-date information on trends in Technology Market Scan 3 technology transfer and development, technology policies, and new products and Technology Scan: Renewable Energy Technologies 8 processes. The Yellow Pages feature the Business Coach for innovative firms, as well as Special Theme: Technology Transfer through Foreign Direct technology offers and requests. Investment: Policy approaches in the Asia-Pacific region Web: www.techmonitor.net • Fostering innovation dynamics among SMEs through foreign technology investment 13 ASIAN AND PACIFIC CENTRE KyungJin Hyung FOR TRANSFER OF TECHNOLOGY C-2, Qutab Institutional Area • Technology transfer through foreign direct investment Post Box No. 4575 The implications of IPR protection in the Asia-Pacific region 20 New Delhi 110 016, India Rozilee Asid and Noor Aini Khalifah Tel: +91-11-3097 3700 Fax: +91-11-2685 6274 • The role of FDI in fostering growth in the automobile E-mail: [email protected] sector in India 25 Website: http://www.apctt.org Saon Ray and Smita Miglani • Transfer of technology by FDI to local SMEs 32 Opinions expressed by the authors A story from Indonesia are not necessarily those of APCTT. Tulus T.H. Tambunan The designation employed and • Knowledge and technology transfer of outward FDI the presentation of material in the by Thai multinational enterprises to Cambodia, Laos, publication do not imply the endorsement of any product, process Myanmar and Viet Nam 40 or manufacturer by APCTT. Chawalit Jeenanunta, Nattharika Rittippant, Pornpimol Chongpisal and Ryoju Hamada

The contents of the Tech Monitor may be Tech Events 47 reproduced in part or whole without change, provided that the Tech Monitor and the Tech Ventures & Opportunities 48 authors concerned are credited as the Managing your business source and a voucher copy of the publication that contains the quoted • Start-up Venture Creation 49 material is sent to APCTT. • Technology Transfer 52 • Venture Financing 54 This publication has been issued without formal editing. • Managing Innovation 57 • Green Productivity 59 ISSN: 0256-9957 Tech Opportunities

• Technology Offers 61 • Technology Requests 63 Introductory note lobalization of technology and production is becoming critical for Genterprises to achieve and sustain international competitiveness. One of the important channels of technology globalization is through Foreign Direct Investment (FDI) which not only brings in capital but often also facilitates transfer of advanced technology to the host country firms, thereby generating long- term and sustainable economic growth. FDI often comes with new technologies and innovations and is widely used by the transnational corporations (TNCs) to transfer and diffuse their technologies – including both hard and soft elements – to local firms in the host countries. The process thus helps enhance technological capability of domestic enterprises contributing to the country’s productivity and growth However there are many issues affecting FDI flows such as those related to strategies of the investing firms and the policies and business environment of the host countries. In this context, effective facilitation of FDI- driven technology transfer and diffusion would require proactive policy support that is capable of increas- ing the flow of knowledge, technology and resources to the receiving countries. The developing countries could effectively leverage FDI as a means to achieve technology transfer and diffusion through establishing an effective national innovation system (NIS) which would provide an interface between TNCs and local firms, support the absorptive capacities of domestic enterprises, and provide an appropriate regulatory framework covering intellectual property aspects. In addition, the countries need to ensure coherence be- tween their FDI and other relevant policies, particularly the science technology and innovation policy, to provide an enabling environment for effective technology transfer and diffusion. The Leaders of 193 member States of the United Nations have adopted in September 2015 the 2030 Agen- da comprising 17 Sustainable Development Goals (SDGs). The 2030 Agenda also provides for a Technology Facilitation Mechanism (TFM) which aims at increasing the creation and use of innovative technologies for achieving the SDGs. Towards this endeavor, FDI could play an important role in facilitating transfer of envi- ronmentally sound technologies (ESTs) that are vital for the developing and the least developed countries, particularly in the Asia Pacific. The mandate to achieve SDGs makes it imperative for member States to streamline their FDI policies and other strategies for acquiring ESTs on favourable terms towards meeting their SDG targets. The resulting spillover effects would stimulate wider diffusion of ESTs across manufactur- ing sectors in the host countries and in the region as a whole. This issue of Asia-Pacific Tech Monitor highlights key challenges, opportunities and strategies to develop and adopt appropriate policies and frameworks for promoting FDI-facilitated technology transfer, acquisi- tion and deployment in the Asia Pacific countries. The special issue also features few country-specific case studies from the region.

Nagesh Kumar Head, ESCAP South and South-West Asia Office and Officer-in-Charge, APCTT Technology Market Scan

INTERNATIONAL China is the only emerging middle-income in its 13th five-year plan. A wide range of country moving closer to this group of ad- measures has been unveiled, including Innovation in breakthrough vanced, industrialized nations. Looking at financial support, facility construction and technologies more recent history – patents filed since administrative assistance, for start-ups. 2005 – Chinese applicants account for more Japan and the United States lead a small http://news.xinhuanet.com than a quarter of patents worldwide in the group of nations that are driving innova- area of 3D printing and robotics – the high- tion in 3D printing, nanotechnology and Patent pledge financing est share among all countries. In the case of robotics, three frontier technologies that 2015 witnessed notable progress in China’s nanotechnology, Chinese applicants make hold the potential to boost future eco- IP pledge financing. Some 2,000 enterprises up close to 15 percent of filings worldwide nomic growth, a new WIPO report shows. secured 56 billion yuan with patent pledge – the third largest origin of patents. In con- all through the year. Sampling results on 20 Amid lackluster worldwide economic trast to the longer established innovating patent pledge projects showed that enter- growth, the World Intellectual Property countries, Chinese patent landscapes show prises involved generated 3.77 billion yuan Report 2015: Breakthrough Innovation a markedly stronger presence of universities in sales and 320 million yuan in profits. and Economic Growth shows how pre- and public research organizations (PROs). vious game-changing advancements According to a representative from Patent http://www.wipo.int – such as airplanes, antibiotics and semi- Administration Department under SIPO, conductors – sparked new business activ- ASIA-PACIFIC during the 12th Five-Year plan period, ity. The report probes today’s promising over 5,000 enterprises secured a total of breakthrough innovations, while urging CHINA 153.3 billion yuan with annual growth rate governments and business to step up of 58% .For example, a Shijiazhuang-based innovation-related investment. New policies to encourage heating equipment company secured Relying on an original mapping of patents innovation a loan of 80 million yuan by pledging 6 to fields of innovation, the report shows patents, effectively easing the pressure China’s State Council has announced a on the company’s fund which triggered that Japan, the U.S., Germany, France, string of new policies to encourage inno- the United Kingdom and the Republic of more R&D investment. Meanwhile, the vation as the country seeks to foster new recognition of financial institutions on pat- Korea accounted for 75 percent or more engines for growth. China will set up three of all-time patent filings in the areas of 3D ented products enhanced the popularity new “national innovation demonstration of products and the annual sales volume printing, nanotechnology and robotics. zones” in the provinces of Henan, Shan- Japanese companies are leading innova- rose to 120 thousand from 16 thousand, dong and Liaoning, bringing the number with 360 million yuan in sales, up 650%. tion in the area of robotics. Eight out of of such areas to 14, according to a state- the top ten patent applicants in the area of ment issued after a State Council meeting In a bid to speed up the perfection of IP robotics are from Japan – namely, Toyota, chaired by Premier Li Keqiang. financial service mechanism , SIPO issued Honda, Nissan, Denso, Hitachi, Panasonic, Opinions on Further Promoting IP Finan- Yaskawa, and Sony. The two others are The zones, including Beijing’s Zhongguan- cial Services in 2015 to strengthen policy Bosch, from Germany, and Samsung of cun, known as “China’s Silicon Valley,” and and professional guidance on IP pledge the Republic of Korea. Shanghai’s Zhangjiang high tech zone, financing, improve IP value assessment and have been created to pilot new ideas and analysis and strengthen risk management on While U.S. entities file collectively for development models for use nationwide. most nanotechnology patents, Samsung pledge and financing. Under the concerted is the top filer and six of the top ten filers Expansion of the program is aimed at foster- efforts of IP organs at all levels, the develop- are from Japan – Nippon Steel, Toshiba, ing trailblazers for China’s economic restruc- ment of patent pledge financing tends to be Canon, Hitachi, Panasonic and TDK. IBM, turing and transformation, according to the normal and on large scale. Latest statistic re- the University of California, and Hewlett statement. The State Council will test innova- vealed that the top 10 provinces and munici- Packard of the U.S. complete the top ten tive reforms in China’s financial hub of Shang- palities in terms of patent pledge financing list. U.S. entities also file for most 3D print- hai over three years, including exploring new amount are Shandong (8.026 billion yuan), ing patents, with 3D Systems and Strata- financial service models and simplifying Ningxia (7.146 billion yuan), Guangdong sys as the top two applicants and General foreign investment rules. Government inter- (5.894 billion yuan), Liaoning (4.192 billion Electric and United Technologies among vention will be further reduced to create an yuan), Zhejiang (3.638 billion yuan), Beijing the top ten. Three German companies – amicable environment for business start-ups (3.36 billion yuan), Inner Mongolia (3.005 Siemens, MTU Aero Engines and EOS – as and innovation, the State Council pledged. billion yuan), Fujian (2.316 billion yuan), Ji- well as three Japanese companies – Mit- To boost employment and sustain growth, angsu (2.195 billion yuan) and Sichuan (2.04 subishi, Hitachi, and Toshiba – complete the Chinese government has stressed the billion yuan). the 3D printing top ten list. role of innovation and entrepreneurship http://www.asiaiplaw.com

TECH MONITOR • Apr-Jun 2016 3 Technology Market Scan

International patent filings months with a 1-month extension at most endeavor will be to further improve our for complicated cases, defining a definite processes and culture so that we expand China’s total global patent filings jumped deadline of 5 or 10 working days for file our reach and depth effectively,” he said. 16% to 29,846 in 2015 from the previous opening for complaints against patent year, Tech In Asia reported, citing data http://www.thepharmaletter.com counterfeiting, making it publicly avail- from the World Intellectual Property able within 20 working days after admin- Organization on filings valid in 148 coun- Fund to tackle anti-microbial istrative decisions on patent infringement tries under the global Patent Cooperation resistance or patent counterfeiting. Treaty. China smartphone manufacturer In a move to encourage biotechnology Huawei filed for 3,898 patents, making it In China, patent owners may take ad- start-ups as well as tackle the threat faced the world’s most active filer for the second ministrative proceedings against patent by India from resistance to antimicrobial year running and exceeding runner-up infringement or patent counterfeiting. drugs, the Department of Biotechnol- Qualcomm by more than 60%. Huawei Different from judicial proceedings, pat- ogy (DBT) — through the Biotechnology competitor ZTE filed 2,155 patents to ent administrative proceedings are rec- Industry Research Assistance Council (BI- ommended when a simplified, cheap and come in at third place globally. While the RAC) — has invested an initial $1,00,000 to quick action is preferred against patent in- uptick in patent filings does not neces- start an India-focussed seed fund to help fringement or patent counterfeiting. The sarily translate to an increase in feasible groups in India compete for the Longitude amendments to the Measures reflect the products or innovation, it does suggest Prize. This is a £ 10 million prize offered consistent policy of the government, that China is taking international patents by Nesta, a U.K. charity, to any individual is, to strengthen patent protection more more seriously. group anywhere in the world that devel- efficiently. http://www.chinaeconomicreview.com ops an affordable, effective diagnostic test http://www.mondaq.com to detect resistance to microbes. Patent administrative law Renu Swarup, Managing Director, BIRAC, enforcement measures INDIA said the collaborations were to encour- amended Plans to develop age more biotechnology start-ups out biotechnology sector Patent Administrative Law Enforcement of India. “BIRAC, since its inception, has Measures of China was amended recent- A joint action plan has been set into supported several social entrepreneurs ly and was implemented on July 1, 2015. motion in India to help the biotech sec- and we are committed to creating an The amended Measures enhances the tor reach $100 billion by 2025. Even as the atmosphere where innovation is encour- function and power of local intellectual government is going all out showcasing aged and nurtured,” she said. BIRAC is sup- property offices against patent infringe- India’s biotech strength and capacity to at- ported by the DBT. ment and patent counterfeiting, especially tract investors, all efforts are being made Last December, the DBT laid out a strategy in exhibition and e-business field, which to strengthen the bio-cluster ecosystem whereby biotechnology would be at the involve more and more patent disputes across the country, reports The Pharma foundation of a $100-billion industry by nowadays. Letter’s India correspondent. 2025, rising from the current $7-$10 billion. For example, the amended Measures pre- Apart from setting up incubation centers The National Biotechnology Development scribes that a local intellectual property in the state of Karnataka at Dharwad, Be- Strategy, as it is called, expects to launch four office may order the exhibitor of infring- lagavi, Bidar and Mangaluru, the govern- missions in healthcare, food and nutrition, ing or counterfeit products to immedi- ment is also keen to promote the creation clean energy and education; create a tech- ately retreat exhibits from the exhibition, of the Bengaluru-Boston biotech corridor. nology development and translation net- destroy or seal related propaganda ma- The idea came about after a letter of intent work across India with global partnership. terials, and change or cover the display was signed to create the US-Indo Life Sci- boards etc. Once a local intellectual prop- ence Sister Innovation Hub, by the Center http://www.thehindu.com erty office found patent infringement or for Cellular and Molecular Platform in patent counterfeiting on any e-commerce Bengaluru, and The California Institute MALAYSIA platform, it shall inform the provider of the for Quantitative Biosciences. R&D and commercialisation e-business platform and ask them to de- India’s Department of Biotechnology grants lete or disconnect the relevant webpages. (DBT) has called for investments in cre- The amended Measures improves the pro- ating a pool of quality talent. Professor The government via Malaysian Technology ceedings in actions taken by a local intel- K Vijay Raghavan, Secretary, Department Development Corp (MTDC) Sdn Bhd has al- lectual property office, such as shortening of Biotechnology, said biotechnology in located RM60 million as grants for research the duration of investigation for patent in- India has crossed significant milestones: and development (R&D) and product com- fringement disputes from 4 months to 3 “With the experience of 30 years, DBT’s mercialisation for 2016. Of the amount, RM40

4 TECH MONITOR • Apr-Jun 2016 Technology Market Scan million is for commercialisation of the local The DOST chief also noted the eHATID billion. This was up 16 per cent from the R&Dfund, the technology acquisition fund (eHealth TABLET for Informed Decision S$4.5 billion registered the year before. (RM10 million) and business start-up fund Making of LGUs) project which was fund- But for companies such as Biomax Tech- (RM10 million). MTDC, a wholly-owned sub- ed by the Philippine Council for Health nologies and Addvalue Technologies, R&D sidiary of Khazanah Nasional Bhd, is in charge Research and Development (PCHRD) in expenditure isn’t seen as a nice-to-have; it’s of promoting the adoption of technologies partnership with Ateneo de Manila Uni- a need-to-have. The ability to come up with by local companies via commercialisation of versity. A software application for mobile new solutions, they say, distinguishes them R&D or acquisition of foreign technologies. android devices, eHATID LGU offers health from the competition - and enables contract information system and decision-making In the 11th Malaysia Plan, the Government wins that ultimately lift their bottom line. support to local government units (LGUs) doubled grants for R&D and commerciali- Biomax - founded in 2009 - has developed through an Electronic Medical Record that sation to RM500 million, compared with systems that can convert organic waste (ani- generates particular health reports for the RM297 million in the 10th Plan. At present, mal manure, food waste, slaughterhouse re- Department of Health (DOH) and the Phil- MTDC is managing five government funds mains) into organic fertiliser within 24 hours. involving R&D and commercialisation. ippine Health Insurance Corp. (PhilHealth). http://business.asiaone.com http://www.thestar.com.my http://www.manilatimes.net

PHILIPPINES SRI LANKA REPUBLIC OF KOREA Incubators, innovation centres ICT products for health care World ranking in R&D to be set up Department of Science and Technology spending Telecommunication and Digital Infrastruc- (DOST) Secretary Mario Montejo has said The Republic of Korea retained the top coun- ture Minister Harin Fernando said plans are the agency’s efforts in developing infor- try in the world for the second straight year underway to implement 64 new projects mation and communications technology in terms of investment in research and devel- for the development of the information and (ICT)-enabled products and systems are opment for its economic size. The Ministry of communication technology (ICT) sector. among its major contributions to address Science, ICT and Future Planning said that Rs. 10 billion will be allocated for the initial various health concerns. “ICT has changed the country spent 4.29 percent of its gross stage of these projects. Fernando made the way we live, and healthcare is among domestic product (GDP) in R&D in 2014, these views addressing the ‘Meet the Min- the areas that could benefit from its capa- ranking first in the world. In terms of the ister’ program ,organized by the National bility,” he added. amount invested in R&D, the United States Chamber of Commerce of Sri Lanka. He came in first, dishing out at 456-point-nine As these products and services will greatly saidplans are also afoot to implement the billion U.S. dollars in 2014, followed by China, contribute to the improvement of medi- one million app strategy and digital class- Japan, Germany and France. cal services in the Philippines, Montejo room strategy in the near future. The gov- said the DOST saw the opportunity to The ministry said that South Korea’s cu- ernment in collaboration with Microsoft, find innovative solutions to help those in mulative spending on R&D is far lower Oracle and Ericsson will soon implement a the countryside receive faster and more than those of the U.S., Japan and other project to set up innovations centres. Initial- affordable type of medical services. Mon- advanced countries because they invested ly, seven innovation centres will be set up tejo cited RxBox as one of these innovative more than two percent of their GDP in R&D and subsequently these centres will have solutions. It is a device capable of storing since the 1980s. South Korea did not reach incubators around it,” the Minister said. and transmitting patient data to allow the two percent level until 1994. health workers in remote communities to The government is also planning to secure http://world.kbs.co.kr consult with medical specialists in urban the service of leading online payment pro- vider ‘Stripe’. Stripe is an Irish technology areas. The device is equipped with a blood SINGAPORE pressure monitor, pulse oxymeter, electro- company that allows both private indi- cardiogram, fetal heart monitor, maternal SMEs’ 2014 R&D expenditure viduals and businesses to accept payment tocometer, and temperature sensor. surges over the internet. The minister said that the Sri Lankan gov- Several units of RxBox were already sent In 2014, SMEs’ R&D expenditure rose 38 per ernment had very fruitful and mutual to remote areas in the country. According cent to a new peak of S$800 million, accord- to Montejo, based on collective feedbacks, ing to data obtained from the Agency for discussion to facilitate Stripe to enter the local officials and health workers consider Science, Technology and Research (A*Star). Sri Lankan market. ICTA will work closely RxBox as an effective tool in pushing for This means that smaller firms led 2014’s with all stakeholders to conclude the pa- equitable access to quality healthcare by growth in private-sector spending on R&D perwork and approvals. everyone, regardless of social status. - which surged to an all-time high of S$5.2 http://www.dailynews.lk

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THAILAND Agri sector IT spending to grow development and innovation. Minister of 7.02% Science and Technology Pichet Durong- Panels aim for ‘innovation kaveroj chaired the opening of CEO Inno- Modernization and digitalization of the Thai vation Forum 2016, making known that economy’ agricultural sector is driving growth in IT the government will offer 300 percent THE 12 public-private steering commit- spending to 7.02 percent, research firm IDC tax deductions for private companies tees under the Pracha Rath project have reported. Thai government policies focused that invest in research, development and proposed “Thailand 4.0”, a master plan to on smart farming and enabling technology- innovation. establish an innovation economy within led innovation to transform traditional ag- a decade. Under the Thailand 4.0 plan, the riculture practices are driving the growth. On top of the 300 percent tax deduction, country will be turned into a regional inno- the ministry is also offering to limit reve- IDC said agriculture employs 39 percent vation hub by developing human resources, nue tax for small and medium enterprises of the Thai population and is the major research and development, and innovative to only 10 percent for 2 payments, to ex- source of domestic income. Farming, products, and reforming the educational, empt entity taxes for New Growth Engine however, faces many challenges, includ- legal and other systems. The focus will be businesses and to pass out Innovation Cou- ing land erosion, fertility, and poor labour on 10 business clusters, Deputy Prime Min- pons, which companies may use as funds productivity. The opportunity to build ho- when investing in innovation. For the 300 ister Somkid Jatusripitak said as the steer- listic digital capabilities that enable the percent deduction, the incentive is avail- ing committees reported their progress to establishment of smart farming utilizing able to businesses with revenue under 50 Prime Minister Prayut Chan-o-cha. third platform technologies – cloud, mo- million baht while those exceeding the The 10 clusters are robots for industry, bility and analytics and particularly ena- figure can access lesser deductions. The medical hubs, logistics and aero-industry, ble data-driven insights to drive decision program will be available for 5 years while biochemical industry, digital industry, al- making will deliver big impacts in terms the government studies its feasibility, if ternative auto industry, innovative elec- of productivity and yield. There are chal- proven to be effective it may be extended. tronic industry, high value and health lenges, however, in the area technology tourism, innovative agriculture and bio- foundations, education, and affordability. http://news.thaivisa.com technology, and food processing, he said. “The issue is not really the technology it- VIET NAM “They will drive Thailand out of the mid- self – it is available, it is about building the dle-income trap to become a high-income right ecosystem that serves the require- New trend of FDI inflow country in 20 years under the country’s ments of Thai agricultural communities strategic-economy master plan,” he said. The increasing appearance of foreign di- and delivers it in a way that is cost effective rect investment (FDI) projects in research Prasert Bunsumpun, head of the Pracha and easy to use,” said IDC Energy Insights & development (R&D) will help Viet Nam Rath steering committee on pushing new Head of WW Mining, Emilie Ditton. accelerate the transformation from a low “S-curve” industries - new industries aimed “Agricultural companies that successfully value-added production economy to a at revitalising growth in the Thai economy examine the role and treatment of tech- high value-added one. According to the - said his panel would focus on the petro- nology along with the farms, farms met- Hanoi municipal People’s Committee, chemical super-cluster and the bio-econo- rics, work practice and regional agricul- Samsung Electronics Vietnam will build a my to serve the “new agriculture”. The first ture process will differentiate themselves US$300-million R&D centre in Hoang Mai phase will push for the development of through superior financial results, attract- district. The project will replace Samsung’s the Eastern Seaboard as the petrochemical ing talent and investment,” she added. existing R&D centre at PVI Tower in Cau super-cluster by setting up an investment Giay district as the workplace for more budget worth Bt380 billion from this year Michael Araneta, Country Manager, IDC Thailand, said the process will be step by than 1,600 engineers and workers. The through 2020 funded by the private sector. centre will become Samsung’s largest R&D This would need government support in the step, finding the easiest and fast opportu- nities to make a difference will be the first project in Southeast Asia. form of tax incentives and infrastructure. steps, ultimatley it will transform farming Established in 2012, Samsung’s R&D centre The bio-economy will provide innovative in Thailand. in Hanoi is now responsible for research- means to process agricultural projects http://www.enterpriseinnovation.net ing and developing the software market such as sugar cane and cassava into value- for mobile phones and tablet products in added products such as biodiesel. This will Tax deduction to encourage Southeast Asia, accounting for 10% of Sam- require an investment of up to Bt400 bil- innovation research sung’s global revenue in this field. Vietnam- lion by the private sector over 10 years. The The Ministry of Science and Technology ese software engineers working for this government’s role will be to establish a da- has kicked off CEO Innovation Forum 2016 R&D centre have contributed to designing tabase on suitable agricultural locations. by announcing a 300 percent tax deduc- and writing software for the digital writing http://www.nationmultimedia.com tion for companies that support research, device S-Pen Montblanc - a cross between

6 TECH MONITOR • Apr-Jun 2016 Technology Market Scan

Samsung technology and Montblanc’s ment ministry will submit the draft law to tional commitments. While State-owned sophisticated expertise in writing devices. the Government next month and to the enterprises (SOEs) were undergoing a With US$300 million invested in building a second meeting of the 14th National As- thorny restructuring process, Viet Nam new R&D centre, Samsung Electronics has sembly (NA) for discussion. This will be the has recognised the private sector, mainly demonstrated that the group not only con- first time support for SMEs is legalised in or- comprising SMEs, as an important driver of siders Vietnam as a place for mobile phone der to provide a comprehensive approach. the nation’s economic development. production and assembly, but also a place SME’s account for 97 per cent of businesses http://bizhub.vn for research and development of software in Viet Nam, contribute more than 40 per applications, a field requiring more brain- cent to the gross domestic product (GDP) SME development fund power and skilled labour. The project will and generate 52 per cent of jobs. launched also help increase the added value to made- Deputy Minister of Planning and Investment A fund for small and medium-sized enter- in-Vietnam products in this field. Samsung Dang Huy Dong said Vietnamese SMEs were prises (SMEs) development with total charter plans to raise the number of Vietnamese facing several difficulties in loan, land and capital of 2 trillion VND (89.75 million USD) workers in R&D from 1,600 to 1,800. technology access and market expansion, was launched by the Ministry of Planning Samsung is not the only foreign group ex- partly explaining the private sector’s mod- and Investment (MPI) at a ceremony in Hanoi panding its investment in R&D in Vietnam. est competitiveness and vulnerability to on April 22. Functioning as a state-owned fi- Apple Inc, a rival of Samsung in the mobile policy and social vagaries, said Dong. Dong nancial organisation under the MPI, the fund phone and tablet market, is preparing to in- said support policies for SMEs were currently is responsible for managing and using finan- vest US$1 billion in building a data and R&D provided by various legal documents, with cial resources while outlining policies as well centre in Hanoi. The centre will serve Apple a majority of them being support for busi- as implementing international cooperation operations in Asia, but it is unclear where nesses in general, placing SMEs at a disad- activities to support SME development. vantage compared to large firms. and when the project will start. In fact, a few SMEs are the backbone and driving force years ago, foreign groups began to invest in At a three-day consultation conference of the economy, however, they have faced R&D activities in Vietnam. Hewlett-Packard held by the ministry in HCM City that ended tremendous challenges such as an opaque (HP), one of the world’s leading computer last Saturday, Deputy Head of HCM City’s business environment, a shortage of high- manufacturers, invested in building a R&D NA Deputy Delegation Tran Du Lich said the quality labourers and a lack of capital for centre at Quang Trung Software City in Ho draft should turn a spotlight on the strate- start-ups and business expansion, Deputy Chi Minh City in 2012, HP’s first R&D cen- gic significance of SME development in the Minister of Planning and Investment Dang tre in the Southeast Asian region. Italian country’s industrialisation process, adding Huy Dong said at the ceremony. He added scooter manufacturer Piaggio also built a that SME development support would pro- that the establishment of the fund reflects R&D centre beside its plant in Vinh Phuc mote social progress and equity. Experts at the determination of the Government and province which serves Piaggio operations the conference said the draft should define the ministry to develop the private eco- in Asia. Other multinational groups includ- the roles of local authorities in giving assis- nomic sector, giving momentum to the ing Panasonic, Yamaha and General Electric tance to businesses, as seen in other coun- nation’s economy development. also have their own R&D centres in Vietnam. tries. Business associations also agreed to set up a national SME development coun- Meanwhile, Hoang Thi Hong, director of With R&D projects, Viet Nam has the op- the fund, said that the fund is to enhance portunity to move to production with cil. Vice Chairman and General Secretary of the Vietnam Association of Small and Me- the competitiveness of enterprises through higher added value in addition to a quicker supporting them in developing competi- technology transfer process thanks to the dium Enterprises To Hoai Nam suggested that the Government should lay out the tive and environmentally friendly products, increasing presence of Vietnamese work- improving technical equipment and fine- ers in large corporations. details of the council’s functions, missions and organisational structure. Experts also tuning business management competence. http://english.vov.vn said support for business households that SMEs, which are established and operate played an important role in the economy in Vietnam in line with the country’s regu- New law drafted to fuel boom should also be considered. lations, are eligible to receive support from in SMEs The ministry’s statistics reveal that as of the the fund. The fund gives commercial banks Viet Nam is drafting a law on extending end of 2015, the outstanding loans of SMEs a mandate to loan to SMEs at a preferen- support to small and medium-sized en- accounted for just 23 per cent of the total tial interest rate of 5 percent for short-term terprises (SMEs). It is part of the Govern- outstanding loans, although they make borrowing and 7 percent for medium and ment’s determined efforts to promote the up 97 per cent of the business communi- long-term credits. At the ceremony, the development of the business community ty. Dong said legalising support for SMEs fund also inked a cooperation agreement and double the number of firms to one was not a subsidy, adding that all forms of with mandated commercial banks in 2016. million by 2020. The planning and invest- support would be compliant with interna- http://en.vietnamplus.vn

TECH MONITOR • Apr-Jun 2016 7 Technology Scan Focus: Renewable Energy Technologies

INTERNATIONAL with the magnetic component of light. It is CHINA possible to enhance the competence of ther- Solar power breakthrough Nanomaterial helps develop movoltaic cells based on the metamaterial, if thermophotovoltaic cells a nanoscopic gap is present between the re- Researchers at The Hong Kong Polytechnic Radical new properties present in a nano- ceiver and the emitter. In this configuration, University claim they have created the most material have been discovered by physi- radiative heat can be transferred between efficient solar cells of their kind in the world. cists. This discovery provides the potential them for more than ten times in an efficient After three years of research, Professor Charles to develop greatly efficient thermophoto- manner, compared to the standard materials. Chee Surya from the university’s Department voltaic cells, which in the future will be able of Electronic and Information Engineering http://www.azonano.com to harvest heat in the dark and then convert claimed on Tuesday their hybrid solar cells it into electricity. The team of researchers can convert up to 25.5 per cent of solar en- from the University of California Berkeley ergy, beating the previous record of 22.8 per and the Australian National University (ARC ASIA-PACIFIC cent set in Switzerland last September. Re- searchers estimate the efficiency boost can Centre of Excellence CUDOS) have illustrat- AUSTRALIA ed a new metamaterial, or artificial mate- reduce the cost of generating solar power rial, capable of glowing in a unique way Nanocones that help solar cells from HK$3.90 per watt to HK$2.73 per watt. when heated. These findings could help soak up more sunlight The solar cells could also be used on “wear- to develop cells that transform radiated able” technology and consumer electronics A team of researchers from Australia’s Royal heat into electricity. These cells are known due to the material’s flexible nature, and not Melbourne Institute of Technology (RMIT) as thermophotovoltaic cells. The research is just on solar panels outside buildings and created a new type of nanostructure called featured in Nature Communications. on rooftops. However, it is still uncertain if a nanocone. The new creation integrates The metamaterial used by the researchers the new product will be put on market. Re- the upside-down physics of topological help to radiate heat in a particular direc- searchers said a timetable on when the tech- insulators with the simpler plasmonics tion. This material is made up of very small nology can go into mass production remains process, leading to a nanomaterial that nanoscopic structures of magnesium fluo- to be seen, owing to numerous problems has the ability to be used in combination ride and gold. It is also possible to adjust which have yet to be ironed out. They also with silicon-based photovoltaics in order the metamaterial’s geometry to give out stopped short of revealing the cost of the hy- to improve their light absorption radiation in a particular spectral range, in brid material, adding it is difficult to work out contrast to conventional materials that Topological insulators are unique for their as the solar cells under trial were produced give off heat in all directions as a wide ability to act as insulators on the inside and in small quantities in the laboratory. conductors on the outside, and plasmon- range of infrared wavelengths. This allows Unlike conventional solar cells made from ics use the density changes in electrons the metamaterial to be used as an emitter, a single material, researchers combined that are created with photons colliding paired with a thermophotovoltaic cell. three layers of materials to maximise ef- with a metal surface. Using these two The project commenced when Dr Kruk sug- ficiency. The main layer is perovskite, a processes, the team created a plasmonic gested that the newly developed metama- mineral composed of calcium and titani- nanostructure with a core-shell that allows terial would contain these unexpected prop- um, which absorbs a broad range of the it to act as a topological insulator. erties. The ANU team then collaborated with visible light spectrum and conducts elec- scientists from the University of California The new structure could bolster the light tricity well. It is paired with a bottom layer Berkeley. These scientists have unique skills absorption of solar cells focusing incident of silicon, a traditional solar panel compo- to develop such materials. The metamate- sunlight onto silicon using the insulating nent which complements perovskite by rial is known for its exceptional behavior due core of the nanocones, which provide a very absorbing a different set of wavelengths. to its unique physical property of magnetic high refractive index that reaches the near- The research team then worked with the hyperbolic dispersion. Dispersion refers to infrared frequency range. At the same time, university’s Institute of Textiles and Cloth- how light interacts with materials, and it can its metallic shell ensures a strong plasmonic ing to create a transparent top coat with a be viewed as a three-dimensional surface response and backward light scattering texture similar to that of rose petals to help representing the propagation of electro- that doesn’t exit the visible frequency trap more light. range. Integration of these nanocone ar- magnetic radiation in varied directions. For http://www.scmp.com natural materials, like crystals or glass, the rays into silicon thin-film solar cells could dispersion surfaces contain simple forms, boost light absorption of the cell by up to 15 Rain-powered all-weather solar ellipsoidal or spherical. percent in the ultraviolet and visible ranges. cells The new metamaterial’s dispersion takes a The findings were published in the March Scientists from Ocean University of China hyperbolic form and is very different. This 25 issue of Science Advances. and Yunnan Normal University, have come is due to the material’s strong interactions http://www.hngn.com up with rain-powered all-weather solar

8 TECH MONITOR • Apr-Jun 2016 Technology Scan cells to solve the energy crisis by combining crustaceans and insects into ethanol for This boost in efficiency makes the alterna- an electron-enriched graphene electrode about the same cost as producing the tive source of energy even more attractive, with a dye-sensitized solar cell stimulated fuel from corn. Kentaro Inokuma and his especially if it will be available at the same by light and rain drops. Dye-sensitized so- research associates discovered among lower cost as existing solar panels. Scien- lar cells are thin-film photovoltaic cells that the yeasts that break down xylose, a kind tists have been working to improve the harness organic dye to absorb sunlight and of sugar, one that proved effective at energy efficiency of silicon solar cells for produce electrons, and react with rainfall fermenting the chitin-derived sugars to many years, but have basically reached the thereby creating rain-powered energy. produce ethanol. It works so well that it limit of that material’s capability. This has Ocean University of China Professor Qun- exceeds the theoretical 70% limit on con- spurred the research community to inves- wei Tang, the paper’s lead author, config- version efficiency, according to the team. tigate other options, and led to using per- ured dye-sensitized solar cells –which are The group reckons that the yeast can be ovskite in solar cells starting in 2009. At that thin-film photovoltaic cells that harness genetically modified to achieve 90% effi- time, however, perovskite structures didn’t organic dye — to absorb sunlight and pro- ciency. At that rate, ethanol would cost 50 boost efficiency by leaps and bounds. duce electrons, and can be rain-powered yen (44 cents) per liter or less to produce http://ecocidealert.com for energy production. by this method -- about the same as with corn, sugar cane or other more commonly Commonly used solar panels generate used biomass. Inokuma’s team continues EUROPE the most energy on clear, sunny days, and working to improve on its idea, using raw produce 10 to 25 percent less electricity DENMARK materials from seafood-processing plants under overcast conditions. What the Chi- Sunlight to produce biofuels nese have come up with are rain-powered and other sources. Given enough chitin, Researchers from the University of all-weather panels that can create energy producing ethanol in this way can be com- ­Copenhagen in Denmark have developed regardless of weather. mercially competitive even amid the current low crude oil prices, the scientists believe. a natural process, reverse photosynthesis, The key ingredient in the redesigned solar http://asia.nikkei.com to produce biofuels and energy from sun- panel is the “electron-enriched graphene” light. The process involves breaking down added to the top layer. This ultra sensitive plant biomass using the energy in solar feature allows the panel surface to react with REPUBLIC OF KOREA rays combined with monooxygenases ions in the rain-drops and generate rain- Solar cell with record efficiency enzyme. The resulting product can then powered energy. The technology is break- A Republic of Korean research team has be used as chemicals, biofuels or other through, in its prototype stage of develop- achieved record level efficiency in solar products. According to the researchers, ment, and still has to reach the efficiency cells, using a new formula for mixing per- the monooxygenases, a natural enzyme level of the top solar panels in the market. ovskite structures. Perovskite is an inexpen- also used in industrial biofuel production, The rain-powered panels can currently con- sive, abundant mineral, and the researchers has potential to multiply their effective- vert about 6.5 percent of the energy they have found ways to make it even more effi- ness when exposed to sunlight. absorb, whereas today’s top-of-the-line solar cient for solar power applications. The new University of Copenhagen professor Claus panels can convert up to 22.5 percent. solar cells are measured at 17.9 percent ef- Felby said: “This is a game changer, one With its atoms bonded into a honeycomb ar- ficiency, which could mean very big things that could transform the industrial pro- rangement, graphene is a two-dimensional for this clean alternative energy source. duction of fuels and chemicals, thus serv- form of carbon created by the oxidation, Researchers at the Korea Research Institute ing to reduce pollution significantly. “The exfoliation, and subsequent reduction of of Chemical Technology and Sungkyunk- immense energy in solar light can be used graphite. Unusual electronic properties allow wan University published their findings so that processes can take place without graphene to conduct electricity. What makes in the peer review journal Nature. Their additional energy inputs.” The researchers graphene bind positively charged ions with new formula involves mixing ingredients expect the method could revolutionize in- its electrons is the abundance of electrons just right, and after much experimenta- dustrial production by increasing produc- that can move freely across the treated layer, tion, they believe they have finally settled tion speed and reducing pollution. for rain-powered energy creation. on the ideal ratio to achieve maximum Fellow researcher and discoverer Postdoc http://www.inquisitr.com ­efficiency. The resulting material was de- David Cannella said: “The discovery means veloped specifically for the creation of a that by using the Sun, we can produce JAPAN high-performance solar cell. biofuels and biochemicals for things like Biofuel with crab shells The cost of solar power technology has plastics - faster, at lower temperatures and Researchers at Kobe University say they been steadily decreasing, but it’s still not as with enhanced energy-efficiency. have found a possible way to turn bits of popular as proponents would like it to be. http://biofuels-news.com

TECH MONITOR • Apr-Jun 2016 9 Technology Scan

Multi-rotor wind turbine UK The researchers tweaked the design to see concept what would produce more power. Dou- Microbial fuel cell bling the length of the electrodes, from Vestas has unveiled plans for an innova- A new fuel cell that could use carbon catalysts 4mm to 8mm was found to increase the tive wind turbine design, which aims to derived from various food wastes as a renew- power output tenfold. By stacking up three use four separate rotors to challenge the able and low-cost alternative to platinum at of the miniature microbial fuel cells, they assumption that the only way to increase the cathode to turn urine into electricity is were able to increase the power tenfold wind power output is to build ever-larger being developed by researchers from Uni- compared to the output of individual cells. turbines. The Danish turbine manufactur- versity of Bath, Queen Mary University of ing giant announced today it is working https://waste-management-world.com London and the Bristol Robotics Laboratory. with the Technical University of Denmark According to the scientists the development to install a concept demonstration unit to Solar cell material to recycle could revolutionise the way that bioenergy test the technical feasibility of the multi- light is produced, particularly in developing coun- rotor design. Scientists from the University of Cambridge tries. The research, published in Electrochimi- have discovered that a group of perovskite- “Installing a concept turbine shows that ca Acta, describes a new design of microbial based materials can recycle light, a finding innovation sometimes entails entirely new fuel cell that’s smaller, cheaper and more that could lead to large gains in the effi- thinking and new approaches,” said Jorge powerful than traditional ones. Magalhaes, senior vice president, Vestas ciency of solar cells. The group of synthetic Microbial fuel cells are devices that use the Innovation and Concepts, in a statement. materials known as hybrid lead halide per- natural processes of certain bacteria to turn “This process of continuous innovation ovskites appear to promise a revolution in organic matter into electricity. The technol- and exploration is extremely important. the field of solar energy, researchers said. ogy is said to have the advantage of work- It provides us with essential knowledge The research shows that perovskite cells ing at room temperature and pressure, as that can help us bring down our products’ have the extra ability to re-absorb these well as high efficiency, relatively low run- regenerated photons, a process known as cost of energy and integrate key technolo- ning costs. The study describes a new de- “photon recycling”. This creates a concentra- gies to solve our customers’ challenges.” sign of microbial fuel cell that overcomes tion effect inside the cell, as if a lens has been He added that the company’s goal was to two limitations of standard microbial fuel used to focus lots of light in a single spot. assess if it can build “an even more cost- cells: their cost and low power production. efficient turbine by challenging the scal- “Its a massive demonstration of the qual- The new miniature microbial fuel cell is ing rules” that state turbines have to grow ity of this material and opens the door to said to use no expensive materials for in size to increase energy output. maximising the efficiency of solar cells,” the cathode; instead it’s made of carbon said Felix Deschler from the University of The company said the multi-rotor concept cloth and titanium wire. To speed up the Cambridge. “The fabrication methods that demonstrator is now being erected at the reaction and create more power, it uses a would be required to exploit this phenom- Risø test site near Roskilde in Denmark, catalyst that’s made of glucose and oval- enon are not complicated, and that should where it will be assessed for several years. bumin, a protein found in egg white. These boost the efficiency of this technology http://www.businessgreen.com are typical constituents of food waste. ­significantly beyond what we have been able to achieve until now,” said Deschler. The study involved shining a laser on to one part of a 500 nanometre-thick sample of lead-iodide perovskite. Perovskites emit light when they come into contact with it, so the team was able to measure photon activity inside the sample based on the light it emitted. Close to where the laser light had shone on to the film, the research- ers detected a near-infrared light emission. Researchers also manufactured the first demonstration of a perovskite-based back-contact solar cell. This single cell proved capable of transporting an elec- trical current more than 50 micrometres away from the contact point with the laser; Multi-rotor wind turbine concept of Vestas a distance far greater than the researchers­

10 TECH MONITOR • Apr-Jun 2016 Technology Scan had predicted, and a direct result of multi- almost every terrestrial and aquatic habitat Oil from sugarcane for ple photon recycling events taking place on the planet) as a source of clean and sus- biodiesel and aviation biofuel within the sample. tainable energy. Last year, the group took Under the guidance of University of Illi- steps toward building a better bio-solar cell The study was published in the journal nois scientists, a research team changed by changing the materials used in anodes Science. the metabolism of sugarcane to transform and cathodes (positive and negative termi- http://indiatoday.intoday.in sugars into oils or lipids, which can then be nals) of the cell and also created a miniature used to produce biodiesel. The sugarcane microfluidic-based single-chambered de- usually contains 0.05% of oil. In less than a NORTH AMERICA vice to house the bacteria instead of the con- year of this project initiation, the research- CANADA ventional, dual-chambered bio-solar cells. ers successfully increased the oil produc- Catalyst offers efficient storage However, this time the group connected tion 20 times, up to roughly 1%. of alternative energy nine identical bio-solar cells in a 3x3 pat- Currently the oil-cane plants generate 12% tern to make a scalable and stackable bio- A group of researchers led by Professor Ted of oil, but the team aims to obtain 20%. The solar panel. The panel continuously gener- Sargent at the University of Toronto has group has also introduced additional bene- ated electricity from photosynthesis and designed an efficient catalyst for storing fits to the oil cane plants which include more respiratory activities of the bacteria in 12- energy in chemical form, by splitting water efficient photosynthesis and better cold tol- hour day-night cycles over 60 total hours. into hydrogen and oxygen, just like plants erance. This will result in higher quantities of do during photosynthesis. Oxygen is re- Even with the breakthrough, a typical oil and higher biomass production. leased harmlessly into the atmosphere, “traditional” solar panel on the roof of a During their study, the researchers consid- and hydrogen, as H2, can be converted residential house, made up of 60 cells in ered the technology, land area, and the as- back into energy using hydrogen fuel cells. a 6x10 configuration, generates roughly sociated expenses needed to convert oil- 200 watts of electrical power at a given This new catalyst facilitates the oxygen- cane biomass into a sustainable biodiesel ­moment. The cells from this study, in a evolution portion of the chemical reaction, similar configuration, would generate within different oil production situations, making the conversion from H2O into O2 about 0.00003726 watts. from 2% oil in the plant to 20%. This data and H2 more energy-efficient than ever be- was evaluated against soybean and stand- fore. The intrinsic efficiency of the new cata- The findings are currently available online ard sugarcane, which can be used to pro- lyst material is over three times more effi- and will be published in hard copy in the duce ethanol. A major benefit provided by cient than the best state-of-the-art catalyst. June edition of the journal Sensors and oil-cane plants is that the plant’s remain- The new catalyst is made of abundant and Actuators B: Chemical. ing sugars can be changed into ethanol, low-cost metals tungsten, iron and cobalt, http://phys.org offering a dual sources of fuel in one. which are much less expensive than state-of- the-art catalysts based on precious metals. It showed no signs of degradation over more than 500 hours of continuous activity, unlike other efficient but short-lived catalysts. Their work was in the leading journal Science. http://news.engineering.utoronto.ca

USA Clean energy using bacteria- powered solar panel Researchers Binghamton University have taken the next step in the evolution of bac- teria-powered energy. The researchers con- nected nine biological-solar (bio-solar) cells into a bio-solar panel. Then they continuous- ly produced electricity from the panel and generated the most wattage of any existing small-scale bio-solar cells - 5.59 microwatts. Electrolysing device that splits water into its component elements, The current research is the latest step in us- oxygen and hydrogen ing cyanobacteria (which can be found in (Credit: Marit Mitchell)

TECH MONITOR • Apr-Jun 2016 11 Technology Scan

The study also revealed that if oil-cane National Laboratory combined experimental the improvement enabled by the STPV sys- plants that contain 20% of oil in the stem and theoretical methods to study steam re- tem. The basic principle is simple: Instead of are cultivated on under-used acres in the forming ethylene glycol over MgAl2O4-sup- dissipating unusable solar energy as heat southeastern region of the US, over two- ported rhodium, nickel, and cobalt catalysts. in the solar cell, all of the energy and heat thirds of the nation’s use of jet fuel and Computational work and advanced catalyst is first absorbed by an intermediate com- diesel can possibly be replaced. characterization were performed at EMSL, ponent, to temperatures that would allow http://www.biofuelsdigest.com the Environmental Molecular Sciences Labo- that component to emit thermal radiation. ratory, a DOE national scientific user facility. By tuning the materials and configuration of Waste gas into liquid fuel Compared to the highly active rhodium and these added layers, it’s possible to emit that radiation in the form of just the right wave- Researchers from the Massachusetts Insti- nickel catalysts which achieve 100 percent lengths of light for the solar cell to capture. tute of Technology (MIT) have discovered a conversion of ethylene glycol, the steam This improves the efficiency and reduces form of bioconversion that could be used reforming activity of the cobalt catalyst was the heat generated in the solar cell. to convert waste gases to biodiesel for comparatively lower, with only 42 percent transportation. The ‘Integrated bioprocess conversion under the same reaction condi- The key is using high-tech materials called for conversion of gaseous substrates to tions. However, the use of the cobalt catalyst nanophotonic crystals, which can be made liquids’ report, published in the Proceed- rather than the rhodium and nickel catalysts to emit precisely determined wavelengths ings of the National Academy of Sciences resulted in a three-fold drop in methane of light when heated. In this test, the na- (PNAS) journal, describes the process of selectivity-a measure of the percentage of nophotonic crystals are integrated into a converting syngas – synthetic gas that ethylene glycol converted to methane. Cal- system with vertically aligned carbon nano- predominantly includes a mixture hydro- culations revealed the lower methane selec- tubes, and operate at a high temperature gen, carbon monoxide and carbon dioxide tivity for the cobalt catalyst, as compared to of 1,000 degrees Celsius. Once heated, the – into liquid lipids that can be used as fuels. the two other catalysts, is primarily due to nanophotonic crystals continue to emit a the higher barrier for methane formation. The bioconversion involves two main narrow band of wavelengths of light that steps, the first of which processes syngas The findings demonstrate that the cobalt precisely matches the band that an adjacent into acetic acid (concentrated vinegar) in catalyst leads to a higher yield of hydro- photovoltaic cell can capture and convert to an anaerobic bioreactor using bacteria. The gen, at the expense of methane, compared an electric current. “The carbon nanotubes acetic acid is then used as a substrate for to the other two. Additionally, the cobalt are virtually a perfect absorber over the en- an oil-producing yeast, which aerobically catalyst was also found to offer enhanced tire color spectrum,” Bierman says, allowing converts it into lipids. Scientists say the catalyst stability compared with the more it to capture the full solar spectrum. “All of bioprocess has been trialled successfully conventional nickel and rhodium cata- the energy of the photons gets converted at a pilot plant in China. The productivity lysts. This information could be used to to heat.” Then, that heat gets re-emitted was found to be 0.19 grammes per litre of develop efficient methods for converting as light but, thanks to the nanophotonic acid per hour, although the authors claim biomass-derived compounds into hydro- structure, is converted to just the colors that that “the system can be further optimised”. gen for petroleum refining, the production match the PV cell’s peak efficiency. of industrial commodities such as fertiliz- In operation, this approach would use a MIT owns the patent for the process, and ers, and electricity production via fuel cells. licensed GTL Biofuel to run the pilot plant conventional solar-concentrating system, with lenses or mirrors that focus the sun- outside Shanghai from September 2015. http://phys.org A larger ‘semi-commercial’ demonstration light, to maintain the high temperature. An plant, 20 times the size, is now planned for New solar cell additional component, an advanced opti- cal filter, lets through all the desired wave- construction. A team of MIT researchers has for the first time lengths of light to the PV cell, while reflect- http://www.onlynaturalenergy.com demonstrated a device based on a method ing back any unwanted wavelengths, since that enables solar cells to break through a even this advanced material is not perfect Hydrogen through steam theoretically predicted ceiling on how much in limiting its emissions. The reflected wave- reforming of biomass-derived sunlight they can convert into electricity. The lengths then get re-absorbed, helping to ethylene glycol findings were reported in the journalNature maintain the heat of the photonic crystal. Steam reforming biomass-derived com- Energy, in a paper by MIT doctoral student pounds is a promising strategy for hydrogen David Bierman, professors Evelyn Wang and The next steps include finding ways to make production. To realize the full potential of Marin Soljačić, and four others. larger versions of the small, laboratory-scale this approach, scientists must identify which In the demonstration, the team used a rela- experimental unit, and developing ways of catalyst is optimal for producing the highest tively low-efficiency PV cell, so the overall -ef manufacturing such systems economically. yield of hydrogen. To address this question, ficiency of the system was only 6.8 percent, http://news.mit.edu/2016/hot-new-solar- a team of researchers from Pacific Northwest but it clearly showed, in direct comparisons, cell-0523

12 TECH MONITOR • Apr-Jun 2016 Special Theme Technology Transfer through Foreign Direct Investment: Policy approaches in the Asia-Pacific region

Fostering innovation dynamics among smes through foreign technology investment emerging countries is simply a one-way KyungJin Hyung introduction of advanced machinery and Team Head, Technolgy Transfer & IP Financing equipment, solutions or well-systemized Korea Technology Finance Corportion (KOTEC), production know-how rather than added Gongjak APT B-901, Yeoidaero 6 gil 17, Youngdeungpogu, value through collaboration and con- Seoul, Republic of Korea (150-729) vergence of transferor and transferee Tel (82)10-5608-8500; Fax (82)0505-020-1620 in regard to co-creation, adaptation or E-mail: [email protected] sophisticated localization efforts. With such a practice, which is more or less like Abstract trade in capital goods, only a fraction of From a policy perspective, foreign direct investment (FDI) is cognitively differentiated the policy intention is achieved. from other sources of capital movement. Governments expect it to bring in technolo- Some countries attempt to make tech- gies and know-how, as well as capital, which will lead the economy to produce higher nology transfer obligatory. Although well- value-added products and service. Every country hopes to enhance their economy by intended, such policy often turns out to be adopting more innovation, and FDI serves as a primary channel to diffuse such innova- ineffective for three reasons. Firstly, there is tion more quickly. In contrast, many papers argue that FDI actually often results in a fierce competition nationally and even at disappointingly lower-than-desired diffusion. the local level within the same country to By touching upon various issues based on the writer’s experience regarding technol- attract big multinationals with advanced ogy transfer in and out of Republic of Korea, this paper proposes that fostering foreign technologies and brand power. Second, technology investment for smaller ventures is more sensible for policymakers in terms foreign firms can choose what to transfer of boosting innovation dynamics in the economy in this era of convergence. This paper suggests four pivotal elements to enhance an environment that could attract foreign and thus they may meet the requirements technology investments that will produce more effective innovation diffusion, use of by transferring old technologies that they certification scheme to select the right kind of enterprises to incentivize, enhancing do not need in their home country. Third, investment-in-kind through establishing globally acceptable technology valuation emerging countries are often not capa- standard, designing demand-driven technology matching platform, and cultivation of ble of learning and absorbing advanced efficient intermediaries that understand technology in terms of business model. technologies due to lack of experience and limited capacity. Challenges in facilitating local subsidiaries and joint ventures. It For example, although Viet Nam suc- innovation through FDI takes time for local firms to absorb it cessfully attracted Samsung Electronics through the channels of competitive hir- into their country, Samsung tends to bring rom a policy perspective, policymak- ing of skilled engineers, imitation, and in Korean vendors rather than sourcing ers expect FDI to bring in technology F reverse engineering. their supply locally, as Viet Nam lacks the and know-how in addition to job creation Enterprises from advanced econo- capacity locally to supply sophisticated that would contribute to converting their mies often try to prevent the leakage of parts and components. It takes time for economy to a higher value-added one. technologies because they are the pri- Viet Nam to build their capacity beyond There are two different dimensions on mary source of competitive advantages packaging and basic manufacturing which this perspective. The first dimension, the to sustain their investment when ventur- takes place in stages starting from basic expectation of which is easily assumable, ing into a new market. In fact, large-scale processes like injection molding, which is is a productivity increase in conventional multinationals often keep their research old technology in the Republic of Korea. industries through quick learning of and development activities in the home During the Republic of Korea’s period advanced process management, system- country and try to exploit only cheaper of rapid economic growth, a multi-staged atic training for workers to become highly labor costs and incentives provided by policy approach was effective. However, it skilled, and the introduction of sophisti- the country they are entering. From their is now difficult for other developing coun- cated machinery and equipment. perspective, the duration of time such tries to emulate the Korean approach as When such a transfer is made through advantage can be exploited will depend unlike in the past, today the old economy FDI, the expected diffusion which will upon how long and wide the technology and new economy are developing at an narrow down the technology gap often gap can remain. asymmetric pace. China is probably one happens slowly because it initially comes In addition, international technol- of the last examples of staged economic within the boundaries of wholly-owned ogy transfer that does not involve FDI in planning.

TECH MONITOR • Apr-Jun 2016 13 Fostering innovation dynamics among SMEs through foreign technology investment

of innovation often loses the attention of policymakers when the FDI is completed. That it is difficult to measure the impact of FDI over a long period of time results in policy-makers maintaining their distance from upgrades in innovation capability through international technology trans- fer through FDI. On this topic, the vast majority of the studies deal primarily with the relevance of expecting FDI as a primary channel for technology transfer. Many of them argue that technology transfer is relatively effec- tive when such transfers are made vertically (Carol et al., 2015). Furthermore, most of the research found that technology diffusion or knowledge spillover is not an automatic process. However, few papers propose advice for policy-makers in shaping pre- dictable and malleable strategy for boost- ing innovation through foreign investment. Apple’s iPhone is manufactured in traders rather than creators. Few talented This paper is primarily focused to pro- large quantities in China and exported to entrepreneurs are willing to invest the time pose the idea that there is another pos- the global market. If the profit margin of and passion over a long period of time to sible cohort of firms, innovative SMEs, the Chinese assembler and Apple in the advance their business with innovation other than big multinationals that is U.S. are compared, the Chinese assem- like research and business development possibly better suited for the purpose of bler gets a much smaller proportion of (R&BD). Rather, they tend to carry things fostering innovation in developing coun- the overall profit margin. However, China, that prove to be popular in the advanced tries through direct interaction. The next whose economy grew successfully under world and sell. Some create wealth quickly chapter will illustrate my reasoning behind staged-planning, from basic industry in that way, while other entrepreneurs try this idea. This paper will then address sev- gradually toward higher value-added to copy the strategy. A few will stay in the eral policy measures that were proved to ones, can absorb technology and inno- conundrum of serious innovation. I wish be successful in enhancing innovation vation in the end. As a result, domestic to call this avoidance behavior. dynamics on SMEs dimension in the producers are now capable of producing Governments in developing countries Republic of Korea. Finally this paper will high quality smart phones at a reasonable give incentives for FDI because FDI serves draw implications for applying the Repub- cost. This is not as easy for other countries. as a primary channel for creating jobs, lic of Korea’s policy programs to facilitating In the twentieth century, each nation attracting capital and increasing exports. infrastructure for the purpose of drawing consumed goods and services that are in Economic growth in the short term surely the desired kind of international technol- line with the countries’ respective levels contributes to higher consumption power. ogy transfer to boost innovation. of economic development. People’s desire Talented domestic entrepreneurs quickly Rise of the new economy and bring in foreign products and services grew incrementally as their economy did. implications for international However, the Internet and mobile technol- instead of trying to learn advanced tech- technology transfer ogy in combination with globalization in nology and innovation. However, if technol- the twenty-first century has brought ogy and innovation are not diffused locally, We tend to regard motivation for technol- about the trend that people get to want quite a large part of the surplus is transmit- ogy transfer in the same light as with the and consume advanced services beyond ted back to the advanced world as a result. reasons for patenting, freedom to operate the level at which their domestic entities In this circumstance, it is very hard in a certain business domain - protection can provide. Moreover, people every- for policymakers to design policies that of proprietary products or defense from where share a similar level of information would bear the desired impact in the lawsuit. For big multinational companies and desire irrespective of degree of their long run. In addition, FDI satisfies some active both in developing and acquiring nation’s economic development. policy expectations such as job creation technologies, it is actually true. For many This phenomenon proves an incentive as well as an immediate increase in capi- smaller firms, the motivation may be to talented local entrepreneurs to become tal investment. Thus, transfer and diffusion different.­

14 TECH MONITOR • Apr-Jun 2016 Fostering innovation dynamics among SMEs through foreign technology investment

The organization that I work for, Korea brand recognition and thus, they intended by allocating 100 DSLR cameras at differ- Technology Finance Corporation (KOTEC), to promote their products with patents ent angle. Once a person gets into one of is a special financial institution dedicated under the name of universities or research their studios, 100 cameras take each shot to funding SME business projects driven institutes. This pattern of purpose distribu- simultaneously. The image goes through by technology or other sources of innova- tion continues to be the same in 2016 up a rendering process. It takes several hours tion through debt guarantee and equity to when this paper was written. because the software they are using is not investment via its own unique proprietary Although this may not yet prove sig- perfect in getting full texture, and thus rating and valuation system. nificant from the perspective of statis- needs the touch of designers. When the I worked in the international business tics due to a shortage in samples and in image is corrected and filled, the company department from 2012 to 2014, where my observation time, it is proof that there prints the figure using 3D printers. primary task was to promote the transfer exists a new dimension that is not well Neither the software nor the 3D printer of establishing KOTEC’s rating and valua- considered by policy makers: certain type is the company’s proprietary technology. tion system to other countries such as Viet of technologies and innovative ideas are The company figured out an innovative Nam, Thailand, and Hungary, a program more easily transferrable and have poten- way of taking the highest possible quality which is still going well. The other task tial for serving as a catalyst from which 3D image by deploying 100 cameras at cer- was to establish channels and programs new types of innovative enterprises can tain varied angles which reduces the time for international technology cooperation evolve. needed to take a photo compared with including technology transfer between Smaller business ventures that seek an currently available 3D image scanners.­ tech-related SMEs in the Republic of innovative edge would form an industry The company was initially looking for Korea, KOTEC’s client firms, and foreign under the new economy that deserves sep- software technology to reduce time for enterprises from both developing coun- arate policy attention. When it comes to the rendering that includes image correc- tries and developed ones. The latter task new economy, popular misconception may tion by human touch. During the course has progressed a lot more slowly despite be that these types of business ventures are of collaboration with research institutes, huge efforts. primarily Internet or mobile driven ones. the company recognized plenty of other In 2014, KOTEC’s newly established Although it is in large part true, the creative ideas for new business models technology convergence centers designed new economy is not limited to the so- using other heterogeneous technolo- to provide technology transfer intermedi- called digital economy, but more for gies. For example, they could develop a ation and IP financing in the Republic of convergence between formerly separate 3D image platform where users not only Korea. I was assigned as a team head for industries. Most technology transfers that I keep their own 3D images, but also cre- the Seoul technology convergence center recently dealt with had the following three ate secondary images by blending vari- in January 2015. characteristics in common: ous digital impacts such as motion data. In 2015, my team and I, three people in  Transferees look for heterogeneous Users can create video clips by mixing their total, closed thirty-one technology trans- elements to be combined with their 3D images with the dancing motions of fer deals, namely technologies from uni- existing products for creating/tapping famous singers. versities and research institutes to SMEs new markets or new demand; The other business is mixing artificial in the Republic of Korea. Among the thirty  Those technologies have a relatively intelligence (AI) technology with figures. two, eighteen were to identify and execute short life cycle, which means new For example, a woman had a 3D figure of new business opportunities. Although ­application technologies are continu- a famous singer she liked made so that many technologies were patented, there ously generated as usage increases; she could actually interact with the fig- was no guarantee that transferees could and ure using AI technology with voice and protect their product or service simply face recognition function. She was able  Convergence often comes from direct by having those patents because most of to play with the figure interactively by collaboration between the technology those technologies were not source tech- conversing and asking it to sing a par- supplier and technology demander. nologies, but application technologies ticular song for her. If this figure could that have room for detouring1. To better illustrate, I would like to introduce be connected with IoT sensors, she could Ten were to seek R&D partners either for a recent technology transfer case example, order the figure to do certain tasks such market-based collaboration or for forming IOYS2 in Republic of Korea. The company as turning off the light by simply telling strong candidacy for government-backed was established in 2014 to make 3D fig- it to do so. research projects. The rest were to attain ures for consumers. The company figured Some people may argue that policy to credibility. Small businesses often lack out how to get high quality 3D real images foster technology transfer should aim ulti-

1Two cases, one biotechnology and the other inspection technology for organic foods, had strong potential for patent protection; however, these two transfers were also seeking new business opportunities. 2See http://www.ioys.co.kr/#!news/uhal2 for reference.

TECH MONITOR • Apr-Jun 2016 15 Fostering innovation dynamics among SMEs through foreign technology investment

mately at the absorption of the transferred of IT-driven competition is more about a  Performance-improving innovations; technologies. However, when more value creative service model, while source tech-  Efficiency innovations; and comes from creative application compared nologies and key algorithms are already  Market-creating innovations. to learning how to replicate the element dominated by global giants. technology as transferees’ own and those Extensive amounts of new product Performance-improving innovations technologies are evolving on a fast lifecy- usage data enable many of those improve- replace old products with new and bet- cle, it would be better to foster the creative ments. Producing them will reshape the ter ones. They generally create few jobs usage of earned technologies. This is dif- value chain yet again, by changing prod- because they are substitutive. Efficiency ferent from simply importing and selling uct design, marketing, manufacturing, innovations help companies make and sell finished products because the practice and after-sale service, and by creating mature, established products or services fosters secondary innovation and ideas for the need for new activities such as product to the same customers at lower prices. better application which the transferee can data analytics and security. This will drive Market-creating innovations transform then turn into its own proprietary asset. yet another wave of value-chain-based complicated or costly products so radically Most developing countries mention IT productivity improvement. The third wave that they create a new class of consumers, as an important strategic industry to nur- of IT-driven transformation thus has the new applications, or a new market. ture. However, few countries show realis- potential to be the biggest, much bigger Conventional FDI may bring about a tic progress in terms of policy execution. than the previous two (Michael, 2014). productivity increase in the first two cate- This hinges in part on the complexity of IT In new fields such as Internet of Things, gories of innovations. However, it normally industry with three different waves. Big Data, Cloud, Artificial Intelligence and Vir- has weak ties with the third category. The first wave of IT, during the 1960s and tual Reality, it is hard to foresee how develop- Figure 1 shows four different types of 1970s, automated individual activities in ing countries could gain an edge by starting value capturers that I conceptually discov- the value chain, from order processing and from efforts to earn and create source tech- ered. I put those four types into a quadrant bill paying to computer-aided design and nologies. It doesn’t make sense for a country by taking the vertical axis as the degree of resource planning (Michael and Millar, 1985). to attempt to sequentially build industries value creation potential and the horizon- The rise of internet, with its inexpensive that would buttress these three waves. tal axis as the degree of novelty in original and ubiquitous connectivity, unleashed the For small and medium sized busi- innovation. Here the value creation refers second wave of IT-driven transformation, ness ventures, value comes largely from to the whole economy, and novelty repre- in the 1980s and 1990s (Michael, 2001). generating an innovative service model sents originality of innovation. This enabled coordination and integra- out of creatively combining smart and Originators are those who come up with tion across individual activities; with out- connectivity elements into their existing original technologies through R&D or idea- side suppliers, channels, and customers; products and services. The good news is, tion. They have high potential to create value and across geography. These two waves thanks to the advent of the Internet and for the economy with innovations possessing enhanced productivity gains and growth mobile technology, information is shared a high level of novelty. Adopters are the ones in efficiency across the economy. The ele- in real time all around the world as afore- who simply borrow the innovations from ments in these two waves are easily gained mentioned and global sourcing of tech- originators for the products and services through purchase and external sourcing. nology becomes easier. that the innovation is originally designed to Now, in the third wave, IT is becom- Using technology or adopting innova- address and thus, novelty is maintained. ing an integral part of the product itself. tion is a habit of entrepreneurs as well Convergence catalysts are those who Embedded sensors, software, and connec- as a culture policymakers should look try to figure out new applications of the original innovation in an attempt to create tivity in products – computers are being to boost through having the right eco- put inside products, coupled with a prod- new markets and new consumers. They system. The next chapter will explore uct cloud in which product data is stored create and enhance the value of original types of innovations and value capturers and analyzed and some applications are technologies by integrating them into a to infer more predictable and malleable run, are driving dramatic improvements disruptive business model or combining policy target area. in product functionality and performance. them with different innovation. These It is easy to misconstrue that developing Carving out a realistic policy enterprises are active in undertaking sec- countries can gain from merely increasing niche to foster innovation in ondary or application-level R&BD activi- the production capacity and investment ties. Companies that create new markets the new era: Types of in R&D will lead to development of the IT tend to generate more new jobs. industry. This is far from reality. For sensors innovation and entrepreneurs Traders are those who simply buy and and other hardware elements, some coun- Clayton M. Christensen from Harvard Busi- sell products or services created elsewhere tries may gain a competitive advantage ness School conceptually categorized only to earn a margin by adding limited by producing those high-quality sensors three different types of innovations (Clay- value in terms of fostering a national econ- at a lower cost. However, the third wave ton and Bever, 2014): omy to be innovative.

16 TECH MONITOR • Apr-Jun 2016 Fostering innovation dynamics among SMEs through foreign technology investment

From the perspective of innovation policy, conventional FDI may have an impact on productivity increase by adopt- ing innovation practiced and proven in an advanced economy. Cultivating origina- tors is difficult and requires patient invest- ment in the economy. Incentivizing talented entrepreneurs to become convergence catalysts by leverag- ing foreign-born innovations, not trading, is a realistic innovation policy area and may have a bigger impact in creating innovation dynamics in the economy. If such dynamics are created, it also helps to increase qualified originators because their practice of crea- tively using innovation functions as a feed- back loop that provides better inspiration for them to come up with sensible innovations with higher commercialization potential. In short, it fosters a virtuous reinforcing cycle. Figure 1: Innovation quadrant The next chapter will introduce key ele- ments used in Republic of Korea’s ecosystem nologies. The venture certification system If the venture hopes to adopt technology for promoting innovation dynamics. was designed to prepare for the era of the from a different entity, the technology is knowledge-based economy by directing evaluated by credible valuation special- Critical factors to foster FTI potential entrepreneurs’ attention to the ists and the value which is the outcome Aligning incentives with the right concept of the new economy by providing of such valuation can be treated as equity to-be-innovative enterprises consorted support in accordance with the investment. Most countries have incentive programs Act on Special Measures for the Promotion If developing countries facilitate such for innovative enterprises or R&BD activi- of Venture Businesses (September 1997). a credible and professional practice using ties under targeted categories like 6Ts3. From the early 2000s, the Korean gov- globally admitted methodologies, for- Technology, as well as innovation, is a ernment began to take a more concrete eign entities that can provide technolo- broad concept, and probably any com- ‘choice and focus’ approach between gen- gies can have easier access in forming pany could describe itself as innovation- eral SMEs and ventures in terms of policy joint ventures or in regard to technology driven or technology-oriented. treatment. These efforts have shown suc- investment. This practice is different from The first thing that policymakers should cess with R&D expenditure by SMEs grow- technology licensing which primarily consider before establishing incentive pro- ing fivefold between 1997 and 2006, when takes a certain proportion of sales revenue grams is to establish a systematic process it accounted for 24% of all total firms R&D whether or not the adopting company is of selecting and certifying the right type expenditure. By 2006, 43% of all research- successful or not. In case of investment-in- of entrepreneurs with the right potential, ers worked in SMEs, up from 24% in 19974. kind, the technology provider is better off proper willingness and capability to carry out Similar to this example, policymakers in only if the enterprise’s equity value goes innovation-driven business. When it comes developing countries can establish a certi- up, which means the venture will eventu- to the selection process, it would be better to fication system for enterprises which have ally be a success. do so using standardized evaluation criteria growth-potential by learning and re-creat- Investment-in-kind is widely practiced that take granularity into account with the ing technologies in advanced economies. among venture-certified enterprises in least possible amount of subjectivity. the Republic of Korea and normally fos- During the late 1990s, the Korean gov- Invigorating investment-in-kind ters a deeper commitment by technology ernment initiated the Venture Certification practice providers and more shared risk. system for venture companies to select the If companies are certified as a venture The pivotal element for an investment- firms with high growth potential from the company, the special law allows the firm to in-kind scheme is to secure credible and application of new business ideas or tech- receive technology as capital investment. globally acceptable valuation practices. In

3IT, BT, NT, ST, ET, CT 4See p10, Terence O’Donnell (2012). “South Korea SME Innovation Support Scheme”, European Commission, April.

TECH MONITOR • Apr-Jun 2016 17 Fostering innovation dynamics among SMEs through foreign technology investment

the Republic of Korea, KOTEC provides the convenient functions for KOTEC’s staff by lawyers or technology specialists. These majority of valuation services for ventures integrating the function of sending search are the right people for the purpose of for the purpose of investment-in-kind. requests with demand information to a conventional technology transfer practice; The Malaysian government established technology holder with one click, KOTEC gathering patents to secure safety against a standardized valuation methodology in allowed technology holders to log in and potential lawsuits from third parties, troll- 2014 as a national scheme and seeks to browse demand lists so that two-way ing, or multinational buying and bulk sell- use it for international technology transfer, matching could take place. ing technologies in accordance with their as well. Toward the end of 2015, the platform strategic roadmap. further evolved in terms of function, as If technology intermediation is for Demand-driven information platform it became able to store a critical mass of smaller ventures to seek a distinguished Every country hopes to promote tech- demand and supply information. Now, a edge through international transfer, the nology transfers. What governments curation-based recommendation algo- experts should be the ones who under- normally do is to establish a technology rithm has been integrated into it so that stand both technology and business in information platform by collecting and demand and supply could be matched a balanced manner. When I worked with integrating information from technology by keywords and indicators to help users Vietnam’s State Agency for Technology holders. immediately obtain refined information. & Innovation (SATI) to foster technology In the Republic of Korea, there are It is too early to place statistical analysis cooperation among SMEs in Republic of plenty of such information platforms. In on the impact of KTMS precisely. Simply Korea and Viet Nam, I frequently heard particular, the National Technology Bank put, KOTEC’s total number of technology their experts saying that Vietnamese firms (NTB) is the largest aggregator of trans- transfer intermediation soared from 43 always emphasize their need for technolo- ferrable technologies, while other institu- cases in 2013 to 262 cases in 2015. In 2016, gies, but few can articulate what they need tions have their own technology database it is targeting 400 cases. when asked. that is easily accessible to anyone. The If a developing country can repli- I believe this can be solved when the underlying assumption is that demanders cate this type of platform that has well- intermediary can better understand each can find and match their needs by brows- expressed demand thanks to experts country’s pain-points and communicate ing such information provided mainly by who understand technology and busi- them in line with business strategy. An inventors. However, not every demander is ness in English, I believe there will be a intermediary that is capable of helping R&D intensive enough to understand the plentiful amount of supply technology entrepreneurs realize what they specifi- technology described by researchers. To information to be matched from all over cally need and convert the need into the solve this problem, NTB provides a sum- the world. Europe has the European Enter- right technology language is also a critical mary written in an easier format, although prise Network, while the ASEAN Economic part of the FTI scheme’s success. this too remains insufficient. Community will build something like this At the end of 2014, Korea Technol- eventually around technology coopera- Conclusion ogy Finance Corporation established a tion. This trend will work favorably toward Policymakers in developing countries at- demand-driven platform named KOTEC countries that are prepared for the eco- tempt to attract FDI from advanced econo- Technology Matching System (KTMS). nomic integration of the Asia-Pacific mies with the expectation that they can KOTEC is a financial institution dedicated region early on. boost innovation quickly by learning as to ventures and other technology SMEs, My team and I serve WIPO (World well as creating jobs and injecting capital.­ and it frequently interacts with its 70,000 Intellectual Property Organization) Green In the past, initial dependence upon clients during initial consultation and due as advisory board members. We advised FDI made sense because it was easier for diligence for technology business evalua- WIPO to adopt a demand-driven approach policymakers to periodically plan staged tion, and even after funding. by searching demand first for green tech- growth from basic industries to higher- The organization is well-positioned to nologies, as well as aggregating green value added sectors in an incremental get to know venture companies’ technol- technology solutions from all over the manner. However, the advent of the ogy demands and thus started to file such world, an initiative which is progressing. Internet and mobile technology compli- demand information. Because KOTEC has WIPO Green gathered demand informa- cated the policy landscape by making the capability to understand both technol- tion from Canada and Kenya recently and it much harder to design and execute a ogy and business, their staff is able to bet- is experimenting with targeted matching staged growth plan. Now, policymakers ter identify, articulate, and communicate with KOTEC’s team and other partner insti- are poised to deal with growth in differ- demands from ventures. The organiza- tutions all over the world. ent dimensions simultaneously. tion systemized the idea into a platform The good news is that disruptive inno- and technology suppliers were naturally Training the right intermediaries vation these days often comes not directly attracted to provide their technology list When it comes to technology transfer, from technology per se, but more from the to the platform. In addition to integrating most experts in many countries are patent creative secondary use of such technology

18 TECH MONITOR • Apr-Jun 2016 Fostering innovation dynamics among SMEs through foreign technology investment by creating convergence or a disruptive tion of effective intermediaries who can ogy Transfer”, Encyclopedia of Financial service model. Thanks to the Internet, interpret unarticulated business needs Globalization. mobile technology and globalization, into technology demand. technology is getting easier to source from In every strategy planning, predictabil- üMichael Porter and Victor Millar (1985). elsewhere. ity and malleability matter and I hope this “How Information Gives You Com- Smaller ventures that try to serve a mar- paper will give a useful insight to policy- petitive Advantage”, Harvard Business ket directly rather than being a part of the makers in targeting the right spot in the Review, July, pp. 149–174. supply chain for a specific global company complex innovation landscape are the ones that policymakers have to ü  Michael Porter (2001). “Strategy and pay sharp attention to. If they could estab- References the Internet,” Harvard Business Review, lish an ecosystem that fosters the flow of March, pp. 62–78. advanced innovations from foreign coun- ü  Carol Newman, John Rand, Theodore ü Michael Porter (2014). “How Smart, tries to be utilized by the right type of local Talbot, Finn Tarp (2015). “Technology Connected Products are Transforming enterprises and direct collaboration around transfers, foreign investment and pro- Competition”, Harvard Business Review, such innovation, this may help an economy ductivity spillovers”, European Economic November, pp. 66–88. have the desired innovation dynamics. Review, Vol. 76, pp. 168–187. This paper suggested several key ele- ü Amy Jocelyn Glass and Kamal Saggi üClayton M. Christensen and Derek ments such as certifying and incentivizing et al (2008). “The Role of Foreign Direct van Bever (2014). “The Capitalist’s Di- the right kind of enterprises to do such a Investment in International Technol- lemma,” Harvard Business Review, June, task by creating a credible and globally ogy Transfer”, International Handbook of pp. 60–68. acceptable technology valuation practice, Development Economics. establishing a demand-driven platform ü  IDEA WATCH (2014). “The Real Cost of that can be connected to global technol- üBeata S. Javorcik (2010). “Foreign Direct Patent Trolls”, Harvard Business Review, ogy supply information, and the cultiva- Investment and International Technol- November, p. 32. n

World Investment Report 2015 This year’s World Investment Report, the 25th in the series, aims to inform global debates on the future of the international policy environment for cross-border investment. The World Investment Report tackles the key challenges in international investment protection and promotion, including the right to regulate, investor-state dispute settlement, and investor responsibility. Furthermore, it examines the fiscal treatment of international investment, including contributions of multinational corporations in developing countries, fiscal leakage through tax avoidance, and the role of offshore investment links. The Report offers a menu of options for the reform of the international investment treaties regime, together with a roadmap to guide policymakers at the national, bilateral, regional and multilateral levels. It also proposes a set of principles and guidelines to ensure coherence between international tax and investment policies. The report shows that Foreign Direct Investment (FDI) inflows in 2014 declined 16 per cent to $1.2 trillion. However, recovery is in sight in 2015 and beyond. FDI flows today account for more than 40 per cent of external development finance to developing and transition economies. For more information, contact: United Nations Publications Customer Service C/o National Book Network 15200 NBN Way PO Box 190 Blue Ridge Summit, PA 17214, USA E-mail: [email protected] Web: https://unp.un.org

TECH MONITOR • Apr-Jun 2016 19 Technology transfer through foreign direct investment THE IMPLICATIONS OF IPR PROTECTION IN THE ASIA-PACIFIC REGION

adequacy of IPRs protection among the Rozilee Asid and Noor Aini Khalifah developing countries is one that interests School of Economics Universiti Kebangsaan Malaysia developed countries1. The term technol- 43600 UKM, Bangi Selangor, Malaysia ogy basically refers to a new solution to E-mails: [email protected]; [email protected] an existing technical problem. IPR protec- Web: http://www.ukm.my/fep/; http://www.ums.edu.my/fpep/ tion is the term commonly used to refer Abstract to protection of an idea or innovation This article explores the issue of technology transfer focusing on foreign direct invest- under a patent. Accordingly, there are ment and the possible relationship with the intellectual property rights (IPRs) policy. three inter-related elements for an inven- The article highlights the issue from the perspective of IPR reform suggested within the tion to be patented, i.e., (i) novelty (new- WTO-TRIPS agreements. The need to reform the policy is nothing less than to facilitate ness), (ii) involve inventive steps and, (iii) trade and technology transfer. While greater protection or higher patent protection industrial applicability (useful in a certain may increase foreign technology to be adopted in the growth process, the argument industry in which the patent is targeted that IPRs protection may restrict trade and strengthen the monopoly power from the to produce or manufacture and market developed countries remain ambiguous. a product). Technology transfer is considered Introduction In this article, we will explore various as one of the crucially needed factors sources or mode of technology transfer for developing countries to achieve he Asia-Pacific region is a geographi- and base our discussion on the role of higher growth. A large volume of lit- cally diverse region stretching from the T erature acknowledge the role of for- border of China-Mongolia to the north, to foreign direct investment as one of the eign direct investment, bilateral trade Australia and New Zealand in the south. methods to achieve such purpose. We either import or export of capital This region covers the spectrum of climate include the role of IPR protection into the and intermediate goods, licensing, zones of northern temperature and tropi- discussion. The important role of IPRs pro- national income, infrastructure devel- cal and sub-tropical in the southern hemi- tection in luring foreign investment from opment and other institutional fac- sphere. Akin to the diverse geographical the developed into the developing coun- tors such as IPR to directly affect the region, the economic and socio-economic tries has become a major topic discussed dimensions are also diverse. The emer- in a number of important literature. Good transfer of technology. gence of new economic powers such as IPR policy is perceived to improve innova- In this article, we discuss the role China, India, the Republic of Korea, Taiwan tion and at the same time help to secure played by foreign direct investment as one province of China and Hong Kong SAR of the know-how from being copied freely of the sources of technology transfer and China have made this region offer one of by unauthorised person or entity. As the explore this relationship within the setup the biggest technological and consumer new technology is derived through the of IPR protection. There are a number of goods market in the world. Accordingly, creation of the mind originating from the empirical research in the past offered the emergence of these new economic developed region, proper IPR protection in the literature exploring this relation- powers has attracted more technology to secure the intellectual idea become ship2 either at the group of developing transfer in terms of new investment pro- important and crucial in the developing region for example the Asian region, sin- jects from world class multinational com- economies. gle country such as China or for a group panies compared to other regions in the In the modern era of trade on new from emerging economies. Details are world. technological products, debate on the discussed in the next section.

1Reader are encourage to read articles written by Maskus and Penubarti (1995), Smith (1999, 2001, 2002), Rafiquzaman (2002), Catherine (2004), Awokuse and Yin (2010). One specific debate which is most interesting is on how the stringent of IPRs protection affect the import of China. The author (Awokuse and Yin (2010) argue that, China is the best available real example because according to them, while the stringent of IPRs protection has been improved in the country, the recorded incidence of IPRs infringement and counterfeiting cases are also high. The effect of IPRs protection on bilateral trade are ambiguous in the sense that it may induce the market power or market expansion effect as a results of higher IPRs protection offered by the trading partners. The market power and market expansion effect refer to the penetration level impact on bilateral trade i.e., reduces bilateral trade if themarket power effect exist and increases otherwise.

20 TECH MONITOR • Apr-Jun 2016 Technology transfer through foreign direct investment

IPRs in the Asia-Pacific region: lished a weaker form of IPRs protection tion for developing nations. The issue An overview favouring technological imitation instead now is centered on the need for greater of technological diffusion through inno- protection. While greater protection or Intellectual property rights have become vation. Therefore to promote the idea of higher patent protection may increase a major issue in trade negotiations in stronger IPR protection across the globe, foreign technology to be adopted in GATT (General Agreement on Tariffs the incentive to improve the efforts to the growth process, the argument that and Trade) under the Uruguay Round of innovate needs to be first secured, because IPRs protection may restrict trade and 1986-1994. The success of the negotia- for the developed countries, incentives to strengthen the monopoly power from the tions is then enforced under the TRIPS3 innovate is important as a majority of new developed countries remain ambiguous. agreements, an annex agreement technology and discovery originate from The ambiguity effect on trade, investment enforced within the establishment of them5. and growth as a results of higher IPR pro- the WTO (World Trade Organisation) in Therefore in order to secure a greater tection can be observed in many studies7. January 1995. The IPRs consist of several protected return from innovation efforts, securing The ambiguity effect of IPR protection may components i.e., patent, trademark, indus- the harmonisation of patent systems in some aspect benefits countries in the trial design, layout design of integrated across the globe is crucial and this trans- Asia-Pacific region due to developments in circuits, geographical indication (with spe- lates into one of the negotiated terms in the recent free trade agreements. Recent cial protection on product based appella- many bilateral, regional and international free trade agreements either bilateral or tion of origin) and copyrights and related trade agreements between the North and multilateral with the recent example of the rights4. Across all field of IPR protection, the South afterwards. Developing coun- Trans Pacific Partnership (TPP) agreement patent rights protection has acquired an tries are less enthusiastic on the negoti- have put a greater emphasis on the IPRs important role in the new knowledge- ated terms at the beginning because for protection into one of the sections. Across based global economy. Patent regime them an increase of IPRs protection may the Asia-Pacific region, the improvement regulates the creation and international raise the prices and royalties payment of on IPRs policy can be observed in two sig- transfer of new products and processes acquiring new technology. However, due nificant periods, i.e., before and after the and changes in the patent rights protec- to the fact that majority of the developing establishment of the WTO in 19958. In this tion can have profound effects on global nations rely on imports of new technology review, we refer to the index developed by economy efficiency and income distribu- from abroad, such concerns have urged Ginarte and Park (1997) and Park (2008) tion between innovating and imitating them to adopt the standards6. (GP&P) which cover the development of countries. For the past three decades, the nature patent rights index for 120 plus coun- The current IPR reform enforced in and linkages between patent rights and tries ­starting in 1960. The index of IPRs 1995 negotiated under TRIPS require cur- international trade has been a source of protection derived by GP&P provides a rent and future WTO members to adopt controversy and debate as to whether comprehensive index of both developed and enforce strong non-discriminatory stronger patent rights protection pro- and developing countries derived from minimum standards of IPRs protection in motes or discourages foreign investment five standardised components related to each of the protected components men- or trade. However, as the status of patent patent protection described in the patent tioned above. The institutional revamp of protection is seen as a form of trade bar- law enforced in each country9. the IPRs legislation generally do reflect rier, it becomes an issue of greater global According to Table 1, with the excep- this significance. In contrast to developed concern since trade in knowledge-based tion of Australia, Japan and New Zealand, nations, developing countries have estab- capital is an important source of innova- the index of patent rights for the remain-

2Readers are welcomed to read the article written by Lee and Mansfield (1996). This article is the first empirical research discussing the role of IPRs protection towards foreign direct investment for 14 developing countries. The author argue that the chosen country may shed some light on the controversial issue of weak IPRs protection. The author uses a random sample of 100 major U.S. firms in six manufacturing industries in 1990 for 14 developing countries. The 14 developing countries are Argentina, Brazil, Chile, Hong Kong, India, Indonesia, Mexico, Nigeria„ Philippines, Singapore, South Korea, Taiwan, Thailand, and Venezuela. 3Trade related aspect of intellectual property rights. 4Trade secret is also considered as one of the component. 5For a comprehensive discussion reader are encourage to read article written by Eaton and Kortum (1996, 2001). 6There are many empirical evidence highlighted in the literature on how imported capital from the developed nation benefited developing nations in terms of achieving higher growth and productivity. See discussion from Coe et al. (1997) and Henry et al. (2009). Both articles serve as examples of many other written evidence showing that imported capital generated from advanced countries are perceived as imported R&D and is important in improving growth and productivity. 7For example, ambiguity on bilateral trade can be found in a series of studies from Maskus and Penubarti (1995), Smith (1999, 2001, 2002), Rafiquzzaman (2002), Co (2004) and latest by Awokuse and Yin (2010a). Generally, the ambiguity effect of IPRs protection on trade is described asmarket power and market expansion effect and these two effects are found to off-set to each other. The ambiguity effect on growth is highlighted by Gould and Gruben (1996, 1997) and Falvey et al. (2006). 8In this discussion, we use the IPR index developed by Ginarte and Park (1997) and updated by Park (2008) because the authors adopt changes on IPRs directly from the law governing the IPRs across the globe. The issue of whether a country offerde jure or de facto protection once the current IPRs law is adopted is not the issue.

TECH MONITOR • Apr-Jun 2016 21 Technology transfer through foreign direct investment

Table 1: Selected Asia-Pacific country and level of patent rights index, ever those who oppose it are concerned 1990-2010 with the speed by which knowledge Id Code Country 1990 1995 2000 2005 2010 can be disseminated given strict IPR regimes i.e., a concern over the technol- 1 AUS Australia 3.28 4.33 4.33 4.33 4.33 ogy gap. Since developing nations have 2 BGD Bangladesh 1.30 1.70 1.70 1.70 1.58 limited capabilities in closing the (tech- 3 CHN China 1.33 2.12 3.09 4.08 4.21 nology) gap, increases in the transfer of 4 FJI Fiji 2.20 2.20 2.40 2.40 2.40 technology into the economy perhaps 5 HKG Hong Kong (China) 2.70 2.90 3.81 3.81 3.81 can be done by strengthening the IPR policy. Empirical evidences have high- 6 IND India 1.03 1.23 2.27 3.76 3.76 lighted on how the adoption of up-to- 7 IDN Indonesia 0.20 1.56 2.47 2.77 2.77 date technology positively affects output, 8 JPN Japan 3.88 4.42 4.67 4.67 4.67 productivity, investment and trade. 9 KOR South Korea 3.69 3.89 4.13 4.33 4.33 How IPRs protection relate to 10 MYS Malaysia 2.05 2.70 3.03 3.48 3.68 technology transfer? 11 NZL New Zealand 2.37 3.68 3.68 3.68 3.68 One may ask how IPR protection relates to 12 NPL Nepal 1.79 1.79 1.79 2.19 2.19 the transfer of technology into the devel- 13 PNG Papua New Guinea 0.00 0.00 2.57 2.77 2.77 oping countries and how IPR protection 14 PHL Philippines 2.36 2.56 3.68 3.88 3.88 may speed-up the process of such trans- 15 SGP Singapore 2.04 3.88 4.01 4.21 4.21 fer? The relationship between IPR protec- tion and technology transfer is generally 16 TWN Taiwan (China) 1.26 3.17 3.29 3.74 4.74 known to be positive, i.e., IPR protection 17 THA Thailand 1.21 2.24 2.37 2.49 3.23 will trigger the research and develop- 18 VNM Viet Nam 1.13 2.65 2.65 2.78 3.43 ment sector before it fires-up the growth Note: Data adopted from Ginarte and Park (1997) and Park (2008) process. The IPRs protection may improve innovation efforts, investment climate and ing Asia-Pacific country is recorded low of harmonising the IPR policy. The authors bilateral trade which lay a foundation for before the reform of global IPR policy in (Awokuse and Yin, 2010a) also highlight a supportive environment on transfer of 199510. The lowest patent rights index in the effective role of China’s IPRs in explain- technology. However, the controversies 1990 is shown by Indonesia with no pro- ing bilateral trade activity. These two chan- of stringent IPRs protection may provide tection covered in Papua New Guinea. nels are only examples among many other the explanation of why optimal form of IPR The improvement on the IPRs index can factors on how IPR policy may improve or protection is indeed crucial. The issue of be observed in 1995 with the exception for speed-up the process to attract transfer of optimal level of IPR protection is one of Fiji, Nepal and Papua New Guinea. Taking technology into the developing countries the many elements brought in to be im- China for example, the index increased and China is one of the many of the ’real’ plemented within the ambit of the WTO. from 1.33 in 1990 to 2.12 in 1995, 3.09 in examples in this respect. A lack of IPRs protection among the 2000, 4.08 in 2005 and 4.21 in 2010. The The amended IPRs policy at the inter- developing nations is one that devel- improvement of the index signifies the national level as enforced in TRIPS is to oped nations have great concern. There importance of IPR policy to its economy. make the policy more aligned with the are a number of articles that discussed China has its own history in the protection standards of developed countries. As this issue in the past. The alarming level of intellectual property rights. China joins highlighted by Co (2004), the agreement of weak protection of IPR and highest as a member of the WTO in late 2001 and will balance two conflicting but legiti- level of imitation among the developing as a developing country China’s reform mate concerns, i.e., the advocates of the countries has called for this reform. The on the IPR protection is surprisingly sig- agreement (i.e., the developed nations) developed countries fight for the IPRs pro- nificant to attract investment and trade11. and the opponents. The supporters tection reform by proposing and impos- As highlighted by Awokuse and Yin concern is that the issue of knowledge ing the standard minimum protection of (2010b), China received a significant creation incentives can only be realised IPRs among the signatory members is amount of foreign investment as a result if strong IPR regimes are in place. How- simply or clearly understood. It has been

9There are other studies that measure the IPRs index, see Rapp and Rozek (1990). 10Table 1 only cover 18 countries in the region. This is due to unavailable and unobserved patent rights index data. We include the patent rights index beginning in 1990 and this is sufficient to show the discrepancies of patent rights protection before the implementation of TRIPS in 1995. 11China has its first patent law in 1985 and has undergone a gradual reform with substantial revision in 1992 and 2000.

22 TECH MONITOR • Apr-Jun 2016 Technology transfer through foreign direct investment argued that a lack of protection on IPRs importance in connection with contro- the Asia-Pacific region, the implementa- may delay the development, trade and versies over IPR protection over the past tion of stringent IPRs policy need to be investment process if developing coun- decades. balanced with other supportive factors. tries opt for the weak form of its IPR policy. The controversy of IPR protection While many empirical studies indicate The reason why developed nations ask for and level of imitation activity is also a that IPRs protection has a positive effect the reform is simply related to the request subject of discussion in an article written on host country’s foreign investment and concern of their multinational corpo- by Awokuse and Yin (2010b) when they inflows, other factors such as economic rations. The willingness of big technology wrote about the role of IPR protection performance, level of own research and players or providers to serve their affiliates and foreign investment in China. Awokuse development (R&D), degree of openness in the developing nations depend on the and Yin (2010b) argue that, China is one (or trade liberalisation) and country risk level of the IPR protection provided by the of the best ’real’ examples of this aspect are also important factors in mediating host country Smith (2001). because over the past two decades, transfer of technology. The role of IPR protection on technol- China has emerged as one of the biggest ogy transfer is found to be ambiguous in recipients of foreign investment among References developing countries as discussed in vari- the developing countries and the most ous theoretical and empirical research on popular destination for multinational üAwokuse, T. O. and Yin, H. (2010a). Does trade and growth. The ambiguity of IPR firms in the world, second after the U.S. stronger intellectual property rights pro- protection on foreign direct investment Additionally, foreign investment flow into tection induce more bilateral trade? evi- is related to the theoretical relationship China is highest compared to the entire dence from China’s imports. World Devel- of IPR protection on protecting technical African continent and just behind all Latin opment, Vol. 38, No.8, pp. 1094–1104. knowledge or know-how. Without proper America combined. protection of IPRs, the process of creating The uniqueness of China is that, while üAwokuse, T. O. and Yin, H. (2010b). Intel- new knowledge or technical know-how China has significant policy reform of lectual property rights protection and the may be in jeopardy. their IPR laws since 1992 (the improve- surge in FDI in China. Journal of Compara- Various empirical studies document ment can be seen from Table 1), China tive Economics, Vol. 38, No.2, pp. 217–224. this issue in the past. The first empirical also holds the reputation of having üCo, C. Y. (2004). Do patent rights regimes study was written by Lee and Mansfield strong imitation capability. The finding (1996) which finds that IPR protection from Awokuse and Yin (2010b) shows matter? Review of International Economics. strength plays a positive role in attract- that the strengthening of IPR protection Vol. 12, No. 3, pp. 359–373. ing FDI from the developed countries. in China has a positive and significant üCoe, D. T., Helpman, E., and Hoffmaister, The authors investigate the relationship effect in attracting foreign investment. A. W. (1997). North-south R&D spillovers. between a developing country’s system They added that, while other factors The Economic Journal, Vol. 107 No. 440, of IPR and the volume and composition such as market size, regional integration, pp. 134–149. of U.S FDI. The author gathered the infor- transportation and trade cost are impor- mation from 300 U.S major listed firms tant, the role of IPR to promote technol- üEaton, J. and Kortum, S. (1996). Trade in but only managed to compile a random ogy transfer into China’s economy is ideas patenting and productivity in the sample of 100 firms regarding the per- undeniably significant. oecd. Journal of International Economics, ceptions of how IPR protection in vari- Conclusion Vol. 40, No. 3-4, pp. 251–278. Symposium ous developing countries might affect on Growth and International Trade: Em- their FDI decision into six industries, i.e., The article explores the connection of pirical Studies. chemical, transport equipment, electri- IPRs protection to transfer of technol- cal equipment, food, metal and machin- ogy. While technology transfer may be üEaton, J. and Kortum, S. (2001). Trade in ery12. Only 14 developing countries are triggered by factors on the international capital goods. European Economic Review, reported in their analysis, i.e., Argentina, demand side and supportive domestic Vol. 45, No. 7, pp. 1195–1235. ­International Brazil, Chile, Hong Kong (China), India, institutional factors, the effective role of Seminar on Macroeconomics. Indonesia, Mexico, Nigeria, Philippines, IPRs protection is no doubt significant, as Singapore, Republic of Korea, Taiwan in the case of China. Technology transfer üFalvey, R., Foster, N., and Greenaway, D. province of China, Thailand and Ven- has been and will continue to be one of (2006). Intellectual property rights and ezuela. The authors choose these coun- the main mechanisms to advance the in- economic growth. Review of Development tries because of their market size and dustrialisation process. As for the case of Economics, Vol. 10, No. 4, pp. 700–719.

12Lee and Mansfield (1996) asked three questions related to the perception regarding transfer of technology into their own subsidiary, possibility of transferring technology through joint venture or transfer of technology through licensing if the country in question has weak IPRs protection to allow them to transfer their technology. Based on their results, there is a consistent proposition that a country’s system of IPRs protection influences the volume and composition of U.S. FDI.

TECH MONITOR • Apr-Jun 2016 23 Technology transfer through foreign direct investment

üGinarte, J. C. and Park, W. G. (1997). De- üLee, J.-Y. and Mansfield, E. (1996). In- üRapp, R. T. and Rozek, R. P. (1990). terminants of patent rights: A cross-na- tellectual property protection and U.S. Benefits and costs of intellectual prop- tional study. Research Policy, Vol. 26, No. foreign direct investment. The Review of erty protection in developing countries. 3, pp. 283–301. Economics and Statistics, Vol. 78, No. 2, Journal of World Trade, Vol. 24, No. 5, pp. pp. 181–186. 75–102. üGould, D. M. and Gruben, W. C. (1996). The role of intellectual property rights in üMaskus, K. E. and Penubarti, M. (1995). üSmith, P. J. (1999). Are weak patent economic growth. Journal of Development How trade-related are intellectual proper- rights a barrier to U.S. exports? Journal of Economics, Vol. 48, No. 2, pp. 323–350. ty rights? Journal of International Econom- Inter-national Economics, Vol. 48, No. 1, pp. ics, Vol. 39, No. 3-4, pp. 227–248. 151–177. üGould, D. M. and Gruben, W. C. (1997). The role of intellectual property rights in üPark, W. G. (2008). International patent üSmith, P. J. (2001). How do foreign patent economic growth. In Dynamics of Global- protection: 1960-2005. Research Policy, rights affect U.S. exports, affiliate sales, and ization and Development, pp. 209–241. Vol. 37, No. 4, pp. 761–766. licenses? Journal of International Econom- Springer. ics, Vol. 55, No. 2, pp. 411–439. ü Rafiquzzaman, M. (2002). The im- üHenry, M., Kneller, R., and Milner, C. pact of patent rights on international üSmith, P. J. (2002). Patent rights and (2009). Trade, technology transfer and na- trade: Evidence from canada. The Ca- trade: analysis of biological products, tional efficiency in developing countries. nadian Journal of Economics / Revue ca- medicinals and botanicals, and pharma- European Economic Review, Vol. 53, No. 2, nadienne d’Economique, Vol. 35, No. 2, ceuticals. American Journal of Agricultural pp. 237–254. pp. 307–330. Economics, Vol. 84, No. 2, pp. 495–512. n

World Intellectual Property Report 2015: Breakthrough Innovation and Economic Growth

The WIPO report underlines the elements of successful innovation ecosystems: government funding for scientific research and support in moving promising technology from the laboratory to the production stage; competitive market forces that encourage firms to innovate, supported by vibrant financial markets and sound regulation; and fluid linkages between public and private innovation actors. The report also documents how innovation is increasingly linked to research at universities and public research organizations. The 3D printing, nanotechnology, and robotics fields show higher shares of academic patenting compared to the three historical cases of airplanes, antibiotics and semiconductors. Nanotechnology stands out, with academic applicants accounting for around a quarter of patenting worldwide.

The case studies document how innovation flourished as a result of knowledge sharing mechanisms – from the first clubs of amateur airplane inventors to modern open innovation models found in 3D printing and robotics research. The patent mappings carried out for the six case studies show that innovators have overwhelmingly sought pat- ent protection for their inventions in high-income countries plus China, reflecting the large size of these countries’ markets, as well as the presence of competitors with frontier technological capabilities.

The World Intellectual Property Report is published every two years, with each edition focusing on specific trends in an area of IP. Previous reports have explored the role that brands play in a global marketplace and the changing face of innovation. For more information, contact:

Media Relations Section World Intellectual Property Organization Tel: (+41 22) - 338 81 61 / 338 72 24 Fax: (+41 22) - 338 81 40 Web: http://www.wipo.int

24 TECH MONITOR • Apr-Jun 2016 The role of fdi in fostering growth in the automobile sector in india institutions and publicly funded R&D also Saon Ray add to the absorptive capacity. Senior Fellow This article examines the case of the Smita Miglani Indian automobile industry through Research Associate three cases in the passenger car segment Indian Council for Research on International Economic Relations (ICRIER) and argues that FDI played a significant Core 6A, 4th Floor role in fostering growth of this industry. India Habitat Centre In this article we examine which of these Lodi Road, New Delhi – 110003, India Tel: 91 (11) 43112400, 43112406 (D), 43112427 (D) channels of FDI worked in India’s case and Fax: 91 (11) 24620180 why? E-mails: [email protected], [email protected] The article is organized in the follow- ing way: the next section examines the Abstract automobile industry in India, starting from the beginning, followed by the two This article examines the automobile industry in India and argues that FDI played a major waves of FDI in 1983 and 1993, significant role in fostering growth of this industry. Two major waves of FDI occurred in this industry in the years 1983 and 1993. The impact of FDI in the auto industry is exam- upto the present. The second section ined in terms of output, productivity, technology transfer, exports, R&D and spillovers. examines the impact of FDI in the auto Through the three cases of Maruti-Suzuki, Hyundai and General Motors in the passenger industry in terms of output, productivity, car segment, the evolution of the firms in the country is examined. The role of FDI seen technology transfer and spillovers. The in the context of each of these firms will help in understanding how FDI has worked third section examines the three cases of in the country. Maruti-Suzuki, General Motors and Hyun- dai and discusses how that has shaped the Introduction also progressively relaxed import barriers evolution of the firms in the country. The (McKinsey, 2006). ndia’s automobile industry is an impor- fourth section discusses the technology There is a vast literature examining tant cog in the country’s growth process. requirements of the sector in future. Policy I the effect of FDI on a host economy [e.g. Automobile industry accounts for 7% of implications and conclusions are drawn in Caves (1974), Lipsey (1998)]. One of the GDP, 4% of exports as well as foreign direct the final section. major questions that this literature deals investment (FDI) inflows. The cumulative with is: What are the roles that FDI plays The automobile industry in FDI to this sector between 2009 and 2013 in development of economies? The socio India was US$ 5.5 billion. This industry employs economic impact of FDI on a given host From a modest beginning in 1940s, India’s 2.2 million people directly and 17 million economy has been examined through automobile industry has grown consider- indirectly (Klink et al., 2014). wealth creation, economic development, ably. Details are given in Table 1. All the India’s indigenous passenger car economic growth, improvement in stand- automobile segments have witnessed industry was launched in the 1940s with ard of living, improvement in productivity double-digit cumulative average growth the establishment of Hindustan Motors and supply chain benefits in case of sectors rate (CAGR) in the past decade, and the (HM) and Premier Automobiles Limited like telecommunications and banking. most has been in passenger vehicles/cars (PAL). However, the industry saw a very The main conclusion that can be drawn category. This segment has also been a slow paced growth from the 1940s till from the literature is that while there are major recipient of FDI inflows in the auto- 1980s. In 1983, the government per- many benefits of FDI, certain precondi- mobile industry for past few years. mitted Suzuki to enter the country in a tions seem necessary in host countries to In the passenger car segment, the joint venture with Maruti Suzuki, a state enable them to reap the benefits. These market share of the various companies is owned enterprise. Till that time, the auto preconditions range from infrastructure, shown in Table 2. sector in India was protected by high to environment which includes the nature Table 3 shows the major components import tariffs and production catered to of human capital, domestic fixed capital in systems in passenger cars. the demands of local automobile manu- formation, government spending, trade Box 1 shows some of the processes facturers. As part of the broader move orientation of the region, and the legal involved in assembling a car. to liberalise the economy, India opened environment. In the case of innovation, FDI in auto assembly was allowed in up the sector to (FDI) in the 1990s and public infrastructure such as educational two major waves: in 1983 and in 1993.

TECH MONITOR • Apr-Jun 2016 25 The role of FDI in fostering growth in the automobile sector in India

Table1: Automobile domestic sales trends (number of vehicles) Category 1995-96 2000-01 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Passenger vehicles 4,49,6 00 7,17,6 72 15,52,703 19,51,333 25,01,542 26,29,839 26,65,015 25,03,685 Commercial vehicles 2,15,6 38 1,50,3 55 3,84,194 5,32,721 6,84,905 8,09,499 7,93,211 6,32,738 Three wheelers 1,77,0 55 1,98,1 62 3,49,727 4,40,392 5,26,024 5,13,281 5,38,290 4,79,634 Two wheelers 26,58,288 37,45,516 74,37,619 93,70,951 1,17,68,910 1,34,09,150 1,37,97,185 1,48,05,481 Grand total 35,00,581 4,811705 97,24,243 1,22,95,397 1,54,81,381 1,73,61,769 1,77,93,701 1,84,21,538

Table 2: Sales, the market share and models of the passenger car segment Company Sales Market Models (units)in share (%) FY14 Alto (8), Swift (6), Dzire (6), Wagon R (5), Omni (2), Ertiga (2), Eeco (1), Maruti Suzuki India Ltd. 1155041 37 Ritz (1), M800 (1), Celerio (1), Estilo, A-Star, Sx4, Gypsy Hyundai Motors India Ltd. 613513 20 EON (3), i10 Grand (2), i10 (2), i20 (2), Verna (1), Santro (1), Elantra, Xcent Bolero (3), Scorpio (2), XUV500 (1), Xylo (1), Maxximo Max, Quanto, Verito, Mahindra and Mahindra Ltd. 261029 8 Vibe Rexton (SsangYong) Tata Motors 205793 7 Innova (2), Indica (2), Indigo (1), Nano (1), Sumo (1), Safari, Venture Toyota Kirloskar Ltd. 156087 5 Etios (1), Liva (1), Fortuner (1), Corrolla Honda Siel Cars India Ltd. 139393 5 Amaze (3), Honda City (1), Brio (1), CR-V Nissan Motor India Ltd. 5 Terrano, Micra, Sunny, Datsun Go Ford India Ltd. 132534 4 Ecosport (1), Figo (1), Fiesta Volkswagen 85116 3 Polo (1), Vento (1), Jetta General Motors India Ltd. 80894 3 Beat (1), Sail (1), Enjoy (1), Tavera, Spark, Cruze Renault 69131 2 Duster (2), Scala, Pulse Skoda India Auto Pvt. Ltd. 19483 1 Rapid, Laura, Fabia, Superb Fiat India Ltd. 12030 0 Grande Punte, Linea Hindustan Motors 3759 0 Ambassador Force Motors Ltd. 3493 0 Force Gurkha, Force One Mitsubishi Pajero Total (Domestic + Exports) 3092783

Source: Authors’ compilation based on Edelweiss (2014) Note: Figure in parentheses in column 4 indicate share of the model in FY14 which has been computed using data for each of the models from Edelweiss (2014). For others the share is less than 1%. Car models marked in bold are small cars, the share of which in the total was 40%. The definition of small cars varies considerably – In India, size of the car is based on the length (SIAM). Cars in this table have been classified as small if they are in the mini and compact category.

Both waves were market seeking – India as a minority stakeholder in the govern- In the period 1947-1983, the output with two million households that could ment and an investment of US$ 260 mil- growth remained limited. The models of afford cars was seen as a large and lion (McKinsey, 2006). cars sold were unchanged for decades and untapped country. In the period 1983- In 1993, the sector was opened to foreign models assembled in the country 1993, restricted FDI investment occurred global companies and approximately were primarily European. The number of in the country. Although there was no US$1.6 billion was invested by OEMs till models manufactured in the passenger formal requirement, most original equip- 2000. Despite the 1993 liberalization, the car segment was two in 1982-83, this ment manufacturers (OEMs) chose to sector was highly regulated and required rose to eight in 1994-95 and 28 in 2001- enter the country with a local partner. MNCs to achieve localization within a spe- 02. Overall, the impact of FDI in the auto Suzuki was allowed to enter the country cific time period among other things. industry in India has to be seen in terms

26 TECH MONITOR • Apr-Jun 2016 The role of FDI in fostering growth in the automobile sector in India of technology, capital and the managerial Table 3: Major components in system in passenger cars practices introduced, all of which could System Major components in system make the industry more competitive. Passenger compartment frame, cross and side Body-in-white beams roof structure, front-end structure, floor Output structure, panels The impact of FDI has been very positive in terms of output and productivity growth. Powertrain Engine, transmission, exhaust system, fuel tank Output by volume grew at 13% annually Chassis Chassis, suspension, tires, wheels, steering, brakes in 1983-1993, and 15% in 1993-2000. Cur- Interior Seats, instrument panel, insulation, trim, airbags rently, India’s car penetration is lower com- Closure Front and rear doors, hood, lift gate pared with other global markets as only 14 Miscellaneous Electrical, lighting, thermal, windows, glazing people per 1000 persons own a passenger car (compared to 35 in Thailand, 60 in China Source: Edelweiss (2014) etc. and over 450 in developed countries). investment of US$ 223 million and Daim- pany, as well as the ease of entry into, By 2021, it is expected that production in ler Chrysler began with an investment of and exit from the market; and (4) Verti- the passenger car segment will reach 10 US$ 54 million. In 1995, Honda began with cal or backward spillovers resulting from million units from the current 3 million units. an investment of US$ 120 million, while the increased demand for intermediate Hyundai invested US$ 456 million in 1996. goods manufactured by foreign owned Productivity Fiat invested US$455 million in 1997 and companies by domestic companies in the Since FDI is widely believed to be a catalyst Ford invested US$ 433 million in 1999. host nation. that promotes economic development Hence FDI brought in sufficient capital to In case of the Indian automobile sec- and many countries compete to attract build modern plants. tor, significant infusion of global technol- FDI, it becomes important for the policy ogy occurred (Tiwari and Herstatt, 2014). makers in the country to understand this Technology The first 192 cars to roll out of the Maruti effect of FDI on productivity. Haddad and The literature provides two competing Suzuki factory in December 1983 were Harrison (1993) found that foreign firms arguments on the effect of FDI on the almost entirely Japanese cars, with only exhibit higher levels of total factor pro- innovation in an economy (Saggi, 2002). tyres and batteries sourced from MRF ductivity (TFP) but their rate of TFP growth One line of reasoning suggests that inward and Chloride India respectively. This was was lower than that of domestic firms. As FDI leads to beneficial outcomes for local possible due to the use of imported semi the authors note, while there was a level firms through knowledge spillovers and knocked down (SKD) kits, and indigeniza- effect of foreign investment on the TFP of increased incentives to compete with tion was 2.76% and went up to 10% in domestic firms, such an effect was miss- the better-endowed foreign entrants. 1984. However, Maruti Suzuki was com- ing for the growth rate of TFP of domestic The other line of reasoning casts doubt mitted to 95% indigenization in five years. firms. Studies such as these using micro on the ability of FDI to increase the level data have not reached conclusive results of innovation among local firms in the This was achieved through the policy that may be valid across countries. economy, suggesting that the increased adopted by Maruti Suzuki towards its In the case of the Indian auto indus- competition that arises from the entry of vendors which included introduction of try, labour productivity has grown at an new foreign firms relegates the domes- a vendor rating system, payment to ven- annual rate of 20% since 1983. This was tic firms to less innovative market niches. dors within 15 days, and entering into partly achieved due to the exit of PAL, a Studies that have examined the impact of JVs with vendors to ensure quality and low productivity producer and due to the FDI on economic growth and absorption stability. Maruti Suzuki had imported productivity improvements in HM and capacity of the host country have listed some SKD kits which were displayed in its Maruti-Suzuki. four channels that allow for technological premises. The components were divided spillovers from FDI to the host country. into two groups, one, where vendors had Capital These are: (1) Transmission of technology the manufacturing capability (e.g. tyres, In the two waves of FDI that occurred in through imitation, subject to the legal shock absorbers and bulbs). The other the automobile sector in 1983 and 1993, system, regulations, infrastructure and group was where the technology would significant amount of FDI flowed into the human capital endowments; (2) Positive be required and in many of these com- country. Maruti Suzuki’s investment has spillovers generated through the training ponents Maruti Suzuki helped the vendor been discussed before (and was chosen of local workers by foreign-owned com- find the right collaborator. Localization due to its willingness to invest capital). In panies; (3) Increased competition due to was facilitated by 40 joint ventures (JVs) 1994, Daewoo began production with an the presence of foreign firms, subject to which were entered into by Indian ven- investment of US$ 1.3 million. Similarly, the size of the technology gap between dors and Japanese collaborators (Bhar- General Motors (GM) re-entered with an the foreign owned and domestic com- gava, and Seetha, 2010).

TECH MONITOR • Apr-Jun 2016 27 The role of FDI in fostering growth in the automobile sector in India

Box 1: Major processes in the assembly of a car High pressure die casting This facility produces the cylinder block. Aluminium ingots are loaded into furnaces and melted. These furnaces are capable of melting 800kg of aluminium an hour and are unique as they combine both the melt and holding furnace. The dies are then forced together, at which point molten aluminium is poured into the shot cylinder and fired into the dies at around 2.7m/sec. Once casting is complete, the dies open and the cylinder block is transferred to the inspection platform before being passed to Machining. Low pressure die casting This is where cylinder heads are produced. The process starts with aluminium ingots being loaded into a furnace where they are melted. The molten aluminium is then fed into the base of a die using low pressure air. The dies are used in conjunction with sand core inserts, which make it possible to cast the complicated internal shapes within the cylinder head that could not be produced using dies alone. Once the cylinder heads are cooled, sand cores are removed and cylinder heads are transferred to a Heat Treatment process to harden. Once complete, the cylinder heads are deburred and inspected prior to being transferred to Machining. Machining and tooling Machining Here the block and head cast components undergo various cutting, milling, drilling, boring, honing and reaming operations. The layout of the Machining Lines is extremely compact, with Computer Numerically Controlled (CNC) machines achieving consistent high-precision results. Although the machines have a number of automatic test features, associates still carry out manual checks at every stage to ensure a consistent level of quality is maintained. Tooling Associates maintain and control all the specialist cutting tools used within both head and block machining. Engine assembly This is where the machined engine blocks, cylinder heads and clutch and transmission cases meet with the other engine components for the final engine assembly process. First the engine blocks, clutch and cylinder heads are sub-assembled on separate lines. At this stage the pistons, crankshafts, con rods and oil pan are installed into the block and the springs and valves are built into the cylinder heads. Once the sub-assembly process is complete, modules are joined together to form the complete engine. The engine then undergoes a series of in-built process tests before being transferred by overhead conveyor to the Engine Control Centre. This houses a High Speed Server with a fully automated engine storage and retrieval facility.

There were 50 Greenfield investment foreign firms with superior technologies, that are thought to influence this type of projects in the automobile sector between or efficient new entrants (both domestic FDI are labor costs, infrastructure, trade 2000 and 2007. Maruti Suzuki paid US$ and foreign), or by other sectors of the barriers, exchange restriction and policies 397.7 million for royalty in 2010. Account- economy. Previous studies analyzing the favorable to FDI. ing for sourcing of raw materials, compo- inflow of FDI into a country are unani- The most prominent spillover impact nents and capital goods, the expenditure mous in that positive spillovers in the of FDI in India’s auto sector has been on the in terms of foreign exchange paid was host country will occur if there is an envi- components industry, which more than US$ 1.3 billion in FY 2010-11 (Tiwari and ronment conducive to the inflow of FDI. tripled from 1992-93 to 2001-02. Produc- Herstatt, 2014). These conditions refer to an environment tivity of the supplier industry increased Overall, several studies have cast that is adequate in providing human significantly with FDI. This occurred in two doubt on the view that FDI generates capital, private and public infrastructure, ways: FDI-OEMs co-located suppliers and positive spillovers for local firms. But legal protection, and public infrastruc- transferred best practices and FDI-OEMs such findings need not imply that host ture such as educational institutions and required their home country suppliers to countries have nothing significant to gain publicly funded R&D. This research also make FDI investments in India. (or must lose) from FDI. The point is that discusses the host country factors that reallocation of resources that accompa- are likely to attract export oriented FDI, R&D nies the entry of foreign firms may not which involves fragmenting the produc- FDI has been a key source of rising R&D be immediate. Resources released in this tion process geographically by different investments in developing countries process will be put to better use by either stages. The important location factors (UNCTAD, 2005). The level of formal R&D

28 TECH MONITOR • Apr-Jun 2016 The role of FDI in fostering growth in the automobile sector in India has been low in India’s automobile indus- Table 4: Components imported try. Bhattacharya et al. (2005) found that of Company Current import content the total 536 patents granted by US Pat- Maruti Suzuki India Ltd. Hot rolled/ Cold rolled coils, Galvanized and coated steel ent Office to Indian inventors between and Automotive components 1998 and 2002, only four belonged to Hyundai Motors India Ltd. Gear boxes, Engines, Electronic automotive regulator the motor vehicle category. In 2010, 28 of the 46 members of Society of Indian Tata Motors Iron and steel Automobile Manufacturers (SIAM) were Toyota Engines, Diesel engines, Gear boxes, other articles of Iron engaged in R&D. In the passenger vehi- and Steel, Spark Ignition reciprocating or rotary internal cle segment, 13 of the 20 had had regis- combustion piston engines tered R&D activity in India. Cumulative Nissan Motor India Ltd. Gear boxes, Engines, Electronic Automatic regulator R&D expenditure of the automobile sec- Honda Siel Cars India Ltd. Compression ignition internal combustion piston tor was approximately US$ 780 million in engines, other Auto components, Automatic regulating 2010-11, with an increase of 27.5% on year or controlling instruments on year basis for the 4 wheeler segment Volkswagen Hot rolled/ Cold rolled coils, Galvanized and coated steel (SIAM, 2012). The four wheeler segment and Automotive components accounts for 90% and engine manufactur- General Motors India Ltd. Steel sheets and other Auto components ers contribute 2% to the total R&D in the Source: Edelweiss (2014) automobile segment (Tiwari and Herstatt, 2014). There has been a slight increase in block may also be produced in India. designed and manufactured in India the share of R&D done by auto compo- Table 4 shows the various components (Bhargava, 2010). nents manufacturers in 2013 over 2003, imported by Indian OEMs. Hyundai Motor India Limited (HMIL) is a though more than 50% of the patents filed Till 2011, component vendors to Maruti subsidiary of Republic of Korea’s Hyundai were by Tier I suppliers. Suzuki imported steel and machine tools, Motor Company (HMC). Hyundai, in the and dies from Japan. The firm’s import early 1990s sought to globalize its produc- Exports content as a percentage of sales has tion and selected India (along with China, The export of passenger cars in value come down from 23% in 2002 to 6% in Malaysia and Turkey) as a centre for diversi- terms increased from US$ 93.7 million to 2014 (while its sales volume has increased fication. HMC was the first foreign car man- US$ 5.5 billion from 1999-2000 and 2010- approximately 2.75 times in this period). ufacturer, which was allowed to establish 11. The share of automobiles in India’s Maruti Suzuki’s localization strategy a wholly owned subsidiary in India. HMIL merchandise trade increased from 0.25% involves asking its vendors to use more was incorporated in 1996 and it commis- to 2.2% over the same period (Tiwari and local materials like steel alloy, emphasis sioned its first manufacturing plant in Herstatt, 2014). The major exporters in on using local machine tools and compo- 1998. HMIL has achieved the number two 2010-11 were Hyundai, Maruti Suzuki nents and dies are being designed in India, slot, behind Maruti Suzuki as seen also in and Nissan and small cars formed the wherever possible. Table 2. HMIL is one of the largest FDI pro- bulk of the exported passenger cars. jects in India in the automobile industry Three cases: Maruti Suzuki Within the small cars, hatchbacks (A2 (SIAM, 2012). HMIL established a state-of- or compact) were the dominant export versus Hyundai and General the art R&D facility, Hyundai Motor India items. Motors Engineering Private Limited (HMEI) as a Maruti Suzuki India Limited (MSIL) is the subsidiary of HMIL with an investment of Imports leader in the passenger car segment. As US$ 3.18 million in 2009. As firms go through various stages of seen from Table 2, the share of MSIL was GM started its business in India in 1928, localization, the import dependence may 37% in the fiscal year 2014. As discussed, assembling Chevrolet cars, trucks and come down. Prior to 2008, power train Maruti Suzuki was set up as a joint venture buses but ceased its operations in 1954. In components like engine pistons, injec- between the Government of India and 1994, General Motors India Private Limited tors as well as transmission drives and Suzuki Motor Corporation, with the gov- (GMIPL) was formed as a 50-50 JV between body components used to be imported. ernment holding a majority stake of 74%. Hindustan Motors and GM and in 1999, GM Also items such as glass mirrors, tyres, alu- Maruti Suzuki has been instrumental in bought out the Hindustan Motors interest. minium bars and electronic components bringing in fresh technology (Narayanan, In 2003, GMIPL started production of its were imported. Currently, galvanized and 1998). Suzuki has created significant R&D Chevrolet vehicles from its Halol facility coated steel, engine component systems, capacities in India, both through in-house and opened a technical centre in Bangalore. gear boxes and vehicular knock-downs are R&D and also in active cooperation with This was for R&D and vehicle engineering imported. With improvements in casting its component suppliers. The small car for activities and vehicle engine and transmis- capabilities, localized portion of an engine India as well as for global markets were sion design and engineering activities and

TECH MONITOR • Apr-Jun 2016 29 The role of FDI in fostering growth in the automobile sector in India a vehicle design studio were started in 2007. and infotainmnet content (visual safety pressure fuel injection pump and higher It has mainly specialized in production and indicators, electronic stability control, pressure (piezzo) nozzle and injectors. assembly of premium and mid-size cars in anti- lock brake system, front and side air- Some of the advancement in technology India as compared to Maruti Suzuki and bags, snooze alert with hepatitic vibration has already occurred through the imple- Hyundai Motors which have largely focused of steering wheels, driving assist mirror mentation of the BS emission norms: their resources on the small car segment. indicators etc). Reducing the weight of a these include introduction of fuel injec- Table 5 presents certain facts about the vehicle can help curb emissions and auto- tion through engine control unit (ECU), three firms. mobile design and use of certain materi- Exhaust Gas Recirculation (EGR), oxygen As the Table 5 indicates, MSIL, HMIL and als/metals can help reducing the ‘Curb’ sensor and catalytic convertor. Going GMIPL have followed different paths to weight of a vehicle without compromising forward, ECU might be replaced with On reach their current position. MSIL is still the its size and performance attributes. Board Diagnostics (OBD), heated Oxygen undisputed market leader though HMIL is Increasing government stipulations sensor for cold start. Gasoline (petrol) giving it a fair competition. GMIPL has had have given rise to developments regard- engines are less complex than diesel ones a chequered past, but has plans to make ing emissions norms and vehicular safety. and as commercialized share of gasoline India an export hub for global markets. The The emission regulatory programme in direct injection (GDi) increases, the gap in company exported 984 units in 2014 to India is modeled on the European emis- fuel efficiency between diesel and gaso- Chile and had an export target of 19,000 sion systems and Bharat Stage (BS) regu- line will reduce (Edelweiss, 2014). units in 2015. lation lag Euro emission standards by 10 Automobile safety systems can be years. India has a two tier emission norm segregated into active safety systems Technology requirement going system with a phase in top 13 cities and and passive safety systems. Active safety forward a lagged phase for the rest of the nation. systems include systems for collision In India, sales of auto components are The country is expected to Bharat Stage avoidance such as blind spot detection dominated by power train. Indian vehicles IV emission norms by 2017. This will entail and driver warning indicators as well as currently lag their global counterparts in introduction of technology such as com- vehicle stability systems such as anti-lock terms of power train technology, safety mon rail system (CRDi) which has higher braking systems (ABS) and electronic sta-

Table 5: Comparison of MSIL, HMIL and GMIPL in India Maruti Suzuki India Limited Hyundai Motor India Limited General Motors India Private Limited Sales (FY14) 1155041 613513 80894 Capacity utilization Around 80% Around 80% or more Around 25% Average localization share More than 90% Upto 90% for volume models 50-60% Market share Around 37% 15% 1% Sourcing strategy Electronic control module and Electronic parts are imported Critical components like air transmission parts bags, ABS controllers/modules, engine controllers, certain relays and switches, electronic modules Began in 1987; Exports cars to Exports Began in 1999; 2,59,811 units Began in 2014; 2,011 units over 125 countries; 1,20,388 units Number of models Yes Yes; India is hub for small car Moving to ‘vehicle design and R&D; Being upgraded from R&D (recent) development’ stage from just Yes customisation clinic to a full ‘vehicle customisation and product development centre manufacturing’ Employment 12,500 9,500 4,000

Source: Authors’ compilation based on industry sources Notes: (a) Figures pertain to FY 2014-15 (b) The localization percentage varies from model to model, according to cost advantage and flexibility in manufacturing schedules. (c) Employment figures are approximate

30 TECH MONITOR • Apr-Jun 2016 The role of FDI in fostering growth in the automobile sector in India bility control (ESC) systems. Passive driv- efficient and also use lighter and stronger in developing countries’,in Kumar, N., ing safety systems protect the driver and materials such as aluminum and high J. H. Dunning, R. E. Lipsey, J. P. Agar- the passenger from injury in case of an tensile steel. More R&D will be needed wal and S. Urata, eds. Globalization, accident and include seat belts, airbags, in future to achieve this. The Govern- Foreign Direct Investment and Tech- whiplash protector etc. Globally, passive ment and the industry must ensure that nology Transfers: Impacts on and pros- safety systems contribute to a larger pro- FDI transfers result in win-win situations pects for developing countries,(London, portion of the overall global auto safety in terms of as many parameters and all Routledge). systems industry since ABS is mandatory stakeholders concerned. üMcKinsey Global Institute (2006), New in most developed markets and ESC is Horizons: Multinational Company Invest- progressively being made mandatory. In References ment in Developing Economies. New York: India, making airbags mandatory for all üCaves, R. 1974. “Multinational Firms, McKinsey and Company. passenger vehicles has been proposed Competition, and Productivity in Host- by 2017 by the technical standing com- Country Markets.” Economica, Vol. 41, üNarayanan, K. (1998). Technology ac- mittee of the Ministry of Shipping, Road No. 162, pp. 176–93. quisition, de-regulation and competi- and Transport Highways (Edelweiss, 2014). tiveness: A study of Indian automobile Other technologies which are being üBhargava, R.C. and Seetha, (2010) The industry. Research Policy, Vol. 27, No. 2, developed for commercialization in future Maruti Story, Collins Business, New Delhi. pp. 215–228. include automatic manual transmission üBhattacharya, S., Garg, K. C., Sharma, S. systems, and other systems for hybrid and üSaggi, K. (2002), ‘Trade, Foreign Direct In- C., Dutt, B., Gupta, R. K., & Das, P., (2005). electric cars. vestment, and International Technology Indian patenting activity in international Transfer: A Survey’, World Bank Research Conclusion and domestic patent system: Contempo- Observer, Vol. 17, pp. 191–235. India is expected to become the third rary scenario. (New Delhi, National Insti- üTiwari R. and C.¬ Herstatt (2014). Aiming largest car market in the world by 2025 tute of Science, Technology and Devel- Big with Small Cars: Emergence of a Lead with 7.4 million vehicles (Goldman Sachs, opment Studies). Market in India. (Switzerland, Springer 2015). FDI has played a crucial role in the üEdelweiss (2014), Auto Components: The International Publishing). growth of this sector in India till now. It will Future “Mega Trends, Mega Factors”. Edel be interesting to see how it plays out in the Invest Research. üUNCTAD (2005). World investment re- coming years in light of the factors and port 2005: Transnational corporations trends discussed in this paper. The indus- üHaddad, M. and A. Harrison (1993). “Are and the internationalization of R&D. try is continually innovating itself to the there positive spillovers from direct for- (New York, United Nations Conference changing requirements and markets. The eign investment? Evidence from panel on Trade and Development). automobile are progressing to production data for Morocco”, Journal of Develop- of commercial vehicles as the next stage ment Economics, Vol. 42, pp. 51–74. Websites for various reasons. It will be interesting http://dipp.nic.in/ üKlink, G., Mathur, M., Kidambi, R., and to see whether and to what extent India www.business.gov.in K. Sen (2014). The Contribution of the plays the role of a hub in the passenger www.investindia.gov.in ­Automobile Industry to Technology and vehicle segment. http://www.siamindia.com/ Value Creation, ATKearney. As part of efforts to reduce emission http://www.goldmansachs.com/our- output, auto makers are working to make üLipsey, R. E. (1998). ‘The internation- thinking/pages/cars-2025-change-in-the- their internal combustion engines more alization of US MNEs and its impact fast-lane.html n

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TECH MONITOR • Apr-Jun 2016 31 Transfer of technology by fdi to local smes A STORY FROM INDONESIA

Although national data on how much Tulus T.H. Tambunan in Indonesia located foreign affiliated firms Center for Industry, SME and Business Competition Studies do subcontracting with local SMEs are University of Trisakti Grogol-Jakarta, Indonesia not available, this paper aims to examine Tel: 62-21-7375365 how has been the process of technology E-mail: [email protected] transfers from FDIs to local SMEs through subcontracting by discussing a number Abstract of cases which are Tegal metalworking Although evidence at the national level is scarce, it generally believed that foreign direct industry (in the province of Central Java), investments (FDIs) are important as a source of technology transfer for local SMEs in PT Astra International Tbk. Indonesia. It is expected that through subcontracting linkages, FDIs can facilitate SMEs to increase productivity and to improve quality of their products. Based on own previous studies and some other studies, the aim of this paper is to examine this issue. Evidence Technology transfer to local from these studies does support the view that FDIs are indeed important, although it is SMEs in Indonesia hard to generalize it for the whole country as evidence is limited. But, not all local SMEs Subcontracting between SMEs and can be accepted as suppliers to foreign companies due to a number of reasons, and the most important one is lack of basic technology. LEs Historically, formal business partnership between SMEs and LEs in Indonesia is Introduction ment that followed the industrial pyramid not so strong, certainly much weaker model adopted in Japan. In this model, compared to countries such as Japan, n Indonesia, since the ‘New Order’ small enterprises (SEs) were at the base to Taiwan province of China, and Republic era under former president Soeharto I support medium enterprises (MEs), which of Korea. During the Soeharto period, the (1966-1998) up to the present day, the then the latter supported LEs at the top of government imposed a system of protec- government has been trying to support the pyramid. Through subcontracting, the tion of local SMEs by, among other means, small and medium enterprises (SMEs) by issuing local content rules in a number of LEs (assemblers) would be the dynamic various means, including technical as- industries, including machinery, electron- agents of technology transfer to SMEs. sistance, training programs and special ics and automotive manufacturers. This However, unfortunately, industrial capital schemes. The government also local content policy was also part of im- development in Indonesia until now has has been trying to encourage production port substitution policy imposed during not been so successfully in following the linkages, especially through subcontract- this ‘New Order’ era. In these local content pattern. On the contrary, subcontracting ing between SMEs and large enterprises rules all assembling industries should use activities in the Indonesian manufactur- (LEs), including foreign direct invest- some components produced locally, and ing industry are still very limited and the ments (FDIs) or foreign companies. This local SMEs should be involved as compo- local content policy in the 1997/98 pre- effort was done first with the imposing of nents and spare parts suppliers. The gov- a system, called “local content”(LC) rules crisis period has resulted in a vertically ernment decided which products were to in the engineering industry, mainly ma- integrated production system within LEs. get priority in this policy, and introduced chinery, electronics and the automotive Although there are some, which can be fiscal incentives in line with the type of industries, as part of the import substitu- considered as successful cases, in general, priority recipient products. However, the tion policy adopted during that era, and, since the introduction of partnership regu- determination of priorities did not appear recently, after the Asian economic crisis lation, production linkages in terms of sub- to have been based on economic consid- in 1997/98, by introducing a regulation contracting arrangements between SMEs erations, including the fact that SMEs’ on partnership between SMEs and LEs. and LEs in Indonesia still have not been capacity for investment and absorption The main idea behind this regulation is developed very well especially because of of technology was low. This policy not that through partnership, especially with the lack of skills and basic technological only failed to generate extensive subcon- foreign companies, technology or knowl- capabilities of local SMEs. Hence there is tracting linkages between LEs and SMEs, edge can be transferred to local SMEs. The no strong evidence that transfer of tech- but it has also not facilitated the use of main aim of this policy is to encourage nology from LEs, including domestically subcontracting as a means for achieving industrialization in the country and also to operated foreign companies, to SMEs has the domestic diffusion of technology or encourage a pattern of industrial develop- been taken place in Indonesia extensively. knowledge.

32 TECH MONITOR • Apr-Jun 2016 Transfer of technology by FDI to local SMEs: A story from Indonesia

In general, until the present day, pro- The role of FDI (2002) and Tambunan (2006,2009). Sato duction linkages in the form of subcon- The interaction between FDIs and do- (2000) investigated subcontracting link- tracting between LEs (including FDIs) mestic firms, including SMEs, in develop- ages in the metal working and machin- and SMEs have not yet so well-developed ing countries can result in higher rates ery component industries in East Jakarta and only a small number of SME clusters of knowledge and technology diffusion, and Ceper (Central Java). In East Jakarta, (all located in Java) has established sub- thanks to a number of mechanisms, such she examined the performance of SMEs contracting relationships with LEs. Thee as imitation, increased competition, back- which have subcontracting linkages with (1990, 1997) argues that such production wards and forwards linkages, training and Japanese companies in automobile and linkages between SMEs and LEs did not human resources mobility. The knowl- motorcycles manufacturing industries. It develop smoothly during the New Order edge and technology involved takes many shows that the structure of backward link- era because of market distortions and the forms, including a wide range of hard and ages is hierarchical with assemblers at the lack of skills and low technological capa- soft elements, e.g. technologies embod- apex and with two or three tiers of subcon- bilities of local SMEs. From her own obser- ied in capital goods, and production, or- tractors below. Some of the first-tier sub- vation of practices of in Indonesia located ganizational, managerial and other skills contractors are Japanese joint-ventures Japanese affiliated firms, especially in the (UNCTAD, 2011). or locally owned large-scale component automotive industry, Sato (2000) states In Indonesia, it is generally expected manufacturers and the rest, especially the that the more common pattern in Indone- that because of the resources it brings second-and third-tier subcontractors, are sia is for both the assembling companies and the attributes embedded in it, FDI local SMEs. Subcontracting linkages of and SMEs as local suppliers of automo- can bolster technology capabilities in local the urban modern machinery industry in tive components and spare-parts though industries through the transfer of technol- Jakarta and Surabaya have reached the subcontracting are typically shallow, short ogy and spillover effects. Unfortunately, top-tier firms in Ceper. Many SMEs in Ceper term and non-exclusive, quite different evidence on this role of FDI in Indonesia, have also formed linkages with wholesal- from those found in Japan. Whereas, TAF especially at the firm level within SMEs, is ers located in smaller cities outside the (2000) concludes that the lack of success scarce. Only few studies have been done area who functions as putters-out and of local contet policy in creating strong and mostly in the 1990s, which include who intermediate orders, transmit mar- interdependence between SMEs and LEs Thee and Pangestu (1994), and Harianto ket information, and other trade credits and developing a strong domestic sup- (1996). Based on their assess on techno- to the SMEs. However, overall, the author porting industry was largely due to the logical capability of Indonesian textile, found that subcontracting networks government’s excessive interference, garment and electronics industries, Thee between SMEs in these two locations and aimed at replacing the market mecha- and Pangestu found that in an effort to Japanese companies in the automotive nisms. increase technological capability, Indo- and machinery assembling industries Hayashi’s (2002a,b) study, on the other nesian textile and garment manufacturers have not yet developed well, and so the hand, implies that the situation where established strategic alliances with their benefit for local SMEs could not be said subcontracting ties in Indonesia did not Japanese counterparts to open up a vital optimal. She states that market growth is function well in supporting SMEs has been channel of technology transfer. Similarly, a prerequisite for the expansion of effec- changing recently. Better financial access they found that business linkages with tive subcontracting networks, as one key and business continuity are important in foreign firms have been a very important condition. Another key condition to real- facilitating subcontracting transactions, technology transfer channel for electron- ize the possible further development and which can provide SMEs with support ics firms, especially for consumer electron- enhancement of subcontracting networks necessary for improving productivity. He ics and electronic components. between SMEs and LEs is that assemblers investigated subcontracting between From his study in the automotive and prime component manufacturers are SMEs and LEs by estimating production and machine industries, Harianto (1996) necessary to move their in-house manu- functions and calculating indices of total found that SMEs which are able to form facturing of components and spare parts factor productivity (TFP) based on micro- subcontracting ties with foreign firms do toward domestic outsourcing. level data from 60 metalworking and have technical and management benefits For his PhD thesis, Hayashi (2002a) machinery firms that supply their products from that. However, he concludes that in investigated subcontracting linkages to automobile, motorcycle, agricultural general subcontracting arrangements between Japanese affiliated firms and machinery and bicycle manufacturers, between SMEs and foreign firms in Indo- local SMEs in the machinery industry. His and concludes that inter-firm cooperation nesia is still weak, mainly because local research, which was primarily based on through subcontracting ties increases pro- SMEs cannot meet the required standard firm-level data and information obtained ductivity of SMEs. This evidence supports of quality due to their lack of technology from an interview and questionnaire sur- the view that subcontracting linkages are and skills. vey, shows that the subcontracting prac- an important support mechanism for the In 2000 onward there are three impor- tices in the industry generally enabled development of Indonesian SMEs. tant studies, i.e. Sato (2000), Hayashi SMEs to alleviate some constraints stem-

TECH MONITOR • Apr-Jun 2016 33 Transfer of technology by FDI to local SMES: A story from Indonesia

ming from their limited internal resources, several Japanese affiliated companies in However, based on personal opinion and to improve their capabilities and Tegal metalworking industry, Tambunan of surveyed/interviewed owners/manag- production efficiency. Provision of tech- (2006) concludes that a key to increased ers/directors of 85 companies (from all size nological and marketing support mecha- productivity among manufacturing categories and in various sectors) in Indo- nisms and improvement of production SMEs is to build their capacities through nesia, the Global Competitiveness Report efficiency were the major gains that SMEs improved knowledge or technological 2015-2016 from the World Economic obtained from subcontracting arrange- know-how, and this technology develop- Forum (WEF) may suggest that most of the ments with LEs. Subcontracting systems ment can take place through many chan- respondent did see in Indonesia-located in the Indonesian machinery industry nels, and the most important one for foreign firms as an important source of have developed as a vertical production the diffusion of knowledge/technology technology transfer. From a total of 140 mode and can be beneficial to the devel- among domestic manufacturing SMEs countries included in the report, Indone- opment of SMEs. Based on findings from is through subcontracting arrangements sia ranks 54th. In other words, this report some previous studies in Indonesia in the with FDI. However, the importance of FDI fails to provide strong evidence to sup- 1980s and 1990s, he summarized several as a source of technology/knowledge port the general view that there is a sig- types of support for SMEs as the local sup- varies across the differing subcategories nificant degree of technology transfer and pliers provided by large parent Japanese of SMEs: MEs have more capability to spillover effect from foreign companies affiliated in the machinery industry, as become FDI’s local suppliers than SEs, as to Indonesian firms. For one the respond- given in Table 1. the former have more required sources ents agreed is that, whether technology Based on evidence from his study such as knowledge on basic technology transfer will have a positive effect on the on subcontracting between SMEs and and capital than the latter. recipient firms in Indonesia will depend

Table 1: Support from parent firms to SMEs as their local suppliers through subcontracting linkages in Indonesia’s machinery industry RE project Electricity generators/ End-users Non-fiscal incentive developers suppliers Technical • provision of QC • provision of tech. support • provision of technical & • preparation for training support support & in production processes & QC support through programs in QC and technical inspection via dispatch of dispatch of experts production technologies specification experts • dispatch of suppliers to (e.g. dies making) • selection of proper foreign markets as study • frequent evaluation on production equipment tour supplier’s performance • involvement of suppliers (e.g. QCD) in design phase Financial support & • provision of • setting of favourable • setting of favourable • provision of loan price setting loans & credit payment conditions payment conditions guarantee for suppliers guarantees for • provision of loan (limited) suppliers guarantees for suppliers • price negotiation, • lending of • supply of used equipment adopting cost plus fee machinery at low cost method • price negotiation between parent & supplier firms

Supply of material • provision of raw • supply of materials • supply of materials (very • supply of materials materials limited) Management • provision of • provision of managerial • provision of managerial • preparation for training support managerial support through dispatch support programs in managerial training of experts fields (e.g. accounting) Other support • assistance in establishing • assistance in • assistance in establishing supplier firm establishing supplier supplier firms firms • supports by higher tier • assistance in finding suppliers to lower tier other customers suppliers Source: Taken from Table 12 in Hayashi (2002a).

34 TECH MONITOR • Apr-Jun 2016 Transfer of technology by FDI to local SMEs: A story from Indonesia largely on the absorptive capacity of the nated by the plate-forming business. Plasma workshops usually hire cheap, firms; that is, on their ability to understand, The comparative advantage here has unskilled labour or use family members assimilate and make effective use of the been in meeting small orders for sim- (mainly men) as unpaid workers, and the transferred knowledge or technology. ple metal products or components, owner passes basic metalworking skills This relatively low ranking does not mainly for household appliances and on to his employees, leaving the technical come as a surprise. Because the fact is handicrafts, but also for furniture, and capacity of the workshop highly depend- that probably (as data are constraint) only to a lesser extent, for parts and com- ent on the technical capacity of the owner. few domestic companies do subcontract- ponents for the general machinery and Inti workshops often re-subcontract part ing activities with FDIs, and from a total automotive industries. The small size of of their production to plasma workshops. of around 57 million SMEs in the country, workshops gives them greater flexibility, Thus the most important difference most likely only a very small fraction does and Tegal’s abundant cheap labour can between inti and plasma is that inti work- have subcontracting linkages within Indo- outweigh the advantages of more cap- shops have direct subcontracting relation- nesia located foreign firms. ital-intensive production. There is often ships with big companies, while plasma intense price competition between workshops have subcontracting arrange- Case studies workshops. ments with inti workshops (or those hav- Based on limited evidence, this section According to the size of production ing indirect production linkages with the discusses briefly some cases of subcon- and the level of production sophistica- big companies). tracting linkages between SMEs and tion, there are two types of workshop in LEs, especially FDI-based companies LEs in a number of industries, including the Tegal metal-working industry: MEs (such as KI) are very important for the Tegal machinery, automotive and electronics and LEs, known as inti; and SEs, known metal working industry as its main source manufacturers. The cases are based on as plasma. Inti workshops receive orders of technology is through subcontracting. studies conducted some years ago, as no for metal components from firms outside To access technology from KI, however, recent studies on subcontracting have the district. In particular, large inti work- local workshops must first become its sub- been done since then. shops employing up to 100 men derive contractors. It was found, however, that the majority of their income from sub- not all local workshops can easily estab- Tegal Metalworking Industry contracting work. During the 1990s there lish subcontracting relations with LEs. To (Tambunan, 2006,2009) were several companies (mostly LEs) that become a subcontractor, local firms must Tegal metalworking industry in the prov- subcontracted work to Tegal metal work- have attained a certain level of technical ince of Central Java is among few areas in shops, some foreign affiliated firms such and managerial capacity; they must show Indonesia with a long history of a metal- as PT Komatsu Indonesia Tbk, PT Daihatsu, that they have the capacity to produce working industry. It is located at the north- and some divisions of the Astra Group such high-quality components and meet strin- ern shore near the border of the West Java as PT Sanwa, PT Kubota and PT Katshusiro. gent delivery times. An audit determines province. It has been a metalworking cen- These companies often source metal com- whether they have the required machin- tre since the mid-1800s, when it was the ponents from several parts of the country, ery, manpower1, facilities2, legal standing site of several sugar processing factories mainly in West Java. Among these compa- and use of ISO standards3. After that, they and related enterprises, including loco- nies, the most prominent was PT Komatsu are requested to produce a sample com- motive repair shops and metal process- Indonesia Tbk (say from now on, KI), which ponent from technical drawings provided ing factories. The industry thrived under is a subsidiary of a Japanese company, and to them. According to the KI inti workshop the New Order’s massive infrastructure has had established subcontracting pro- owners interviewed, before an agreement and development agenda. At the begin- duction linkages with Tegal metal work- is signed, KI often asks for a trial run of the ning of the 1980s, the first subcontract- shops since 1998. This company produces mass production process, subjecting the ing activity started in the district, spark- equipment for construction and mining output to quality control tests. If they can ing government activity to develop the activities under the global trademark of produce a certain product on a regular metalworking industry further. In general, Komatsu. This includes hydraulic excava- schedule and of consistent quality, they the technical capability of the Tegal metal tors, bulldozers, motor-graders, frames and are granted a license to manufacture industry has been derived from a long his- related components, steel cast products, different items, thereby expanding their tory of family experience in metalworking as well as off-highway dump tracks. Two product lines. In the last two years, many or similar industries. most successful local inti subcontractors suppliers have been tested through initial Although metalworking involves a to KI are PT. Prima Karya and PT. Karya batch orders. But only four local enter- range of processes, the sector is domi- Paduyasa. prises were able to meet KI’s standards;

1They need sufficient manpower to have two shifts for higher productivity. 2KI, like many other LEs, requires its subcontractors to be PTs (limited liability companies), not CVs (limited partnerships). 3KI, like many other LEs, requires the use of ISO standards, even if the workshop is not officially certified.

TECH MONITOR • Apr-Jun 2016 35 Transfer of technology by FDI to local SMES: A story from Indonesia

two were included in the sample. sources of technology or knowledge are nesia’s largest integrated automotive com- Within the SE category, there are many the retail suppliers. Some domestic retail pany. In this business, ASTRA collaborates tiny enterprises (only with one to three hired market suppliers also act as knowledge with Japanese car manufacturers, namely workers, usually called microenterprises providers by informing metal workshops Toyota, Daihatsu, and Isuzu, and Honda. It (MIEs), and they are less able than larger about consumer preferences, demand and also collaborates with two giant European enterprises within the SE category to adopt new innovations. One workshop owner car companies, i.e. Peugeot and BMW. new technologies in their bid to become interviewed stated that retailers created Components for these cars and motorcy- subcontracting inti for KI. By building upon new products and commissioned them cles are produced by PT Astra Otoparts Tbk existing technical and managerial capacity, from the local small workshops. Learning (AOP), which is 80% share ownership by they are able to enter a virtuous circle in takes place through quality control, as inti ASTRA. At the end of 2013, AOP managed which quality output leads to subcontracts, workshops often build a procedure for 279 shop and drive stores as a modern re- which lead to private training provided by troubleshooting into their subcontract- tail distribution network that specifically KI. During the survey, it was found only a ing relationships. Inti workshops engage caters to the needs of various automotive very few MIEs carried out indirect subcon- in coaching plasma on quality control component products, including batteries tracting with LEs through plasma relation- standards and, in some cases, support for- (Astra International, 2013). ships with inti subcontractors. mer employees already familiar with these ASTRA has a number of foundations for While for KI, quality is the first prior- standards in starting up plasma.4 its different business segments, including ity, retailers generally emphasize low cost In overall, this case confirms that for- Dharma Bhakti Astra Foundation (YDBA) over quality. For many local workshops eign companies are indeed important for for its automotive business. YDBA has (mainly in the MIE category) which had local SMEs development, as their presence the vision to become the best institution been rejected by KI as their inti subcon- gives more opportunities not only for mar- engaged in fostering and developing tractors, the wholesalers/retail markets ket but also sources such as technology SMEs in the country, by focusing on SMEs are their only opportunity to secure their and other knowledge for capacity build- as subcontractors, vendors and workshops market. They sell to this market a limited ing through subcontracting to local SMEs. associated with ASTRA’s value chain. YDBA range of simple final products, such as However, this case shows that only a few provides SME development programs to pulleys and ships’ windows. While these local firms are able to succeed as local sub- build technical, management, marketing, retailers may demand a sample product, contractors, since foreign companies are financing, and information technology there is much less emphasis on precision. more likely to subcontract parts of their skills. In 1997, the number of SMEs trained/ Many wholesalers and retailers purchase production to local firms which already assisted by YDBA amounted to 1,717 units; goods from Tegal metal workshops for have a certain level of technology capabil- in 2000 to 1,870 units with a target of resale in stores in the cities around the ity, and these are mostly of medium-sizes. approx. 100 additional units per annum. In country. Alternatively, they sell their prod- In other words, the presence of foreign 2013, YDBA assisted approximately 8,106 ucts directly to local consumers, or, if they companies in a condition of local firms like SMEs, 512 training for mechanics, 71 self- are lucky, they can become plasma for KI’s this will only generate a dualism develop- sufficient SMEs, and 231 ASTRA subcon existing inti subcontractors. ment within SMEs. SMEs (Astra International, 2013). After winning a contract, an inti sub- It can be said that Japanese automo- contractor has access to a significant tive car manufacturers transfer their basic PT Astra International (Astra level of technical training. According to technologies and management knowl- International, 2013; Tambunan, 2006, a subcontractor of KI, training directly edge to local SMEs in Indonesia through addresses the technical needs of the work- 2007) YDBA, and for SMEs accepted as suppli- shop in meeting the production require- Astra was established in Jakarta in 1957 ers, vendors or workshops for ASTRA, ments of KI. Indonesian experts from the as a general trading company under the they continue build up their technology Jakarta KI office leading the training used a name of PT Astra International Inc. In know-how through day-to-day subcon- teaching style that clearly delivered the 1990, the company changed its name to tracting activities with ASTRA cars and necessary knowledge and emphasized PT Astra International Tbk (just say ASTRA), motorcycle assembling factories. Because practical applications, with 90% of the and listed shares on the Indonesia Stock of its aggressive activities and long expe- time spent on hands-on experience. Train- Exchange. At the end of 2013, Astra had rience in supporting SMEs, YDBA, there- ers also help the workshop in identifying 179 subsidiaries, associated companies, fore, is regarded in Indonesia as among the problems. and jointly-controlled entities spanning the best private sector initiatives provid- For workshops rejected by KI (or six business segments, with automotive as ing support to SMEs under a partnership other LEs) as inti subcontractors, the only its core business. ASTRA has become Indo- program.

4They need sufficient manpower to have two shifts for higher productivity.

36 TECH MONITOR • Apr-Jun 2016 Transfer of technology by FDI to local SMEs: A story from Indonesia

In 2006, Tambunan conducted a small volume or income increased, easier to get An overhaul facility turbine aircraft survey on 20 SMEs, producing a variety of capital or easy access to finance, and their must obtain authorization from the automotive components for ASTRA. The knowledge or skills increased. Fourth, the manufacturer (OEM authorization) and main aim was to find out not only their respondents have different experiences the airworthiness authority. To obtain problems in starting and conducting or regarding the main problems in starting authorization, a turbine overhaul facility maintaining their subcontracting rela- or conducting a subcontracting (Table 2). must have the tool, skills/competencies tionships, but also their main motivations Fifth, the majority of them have a plan to that both of the employees, adequate and the origin of initial initiative to do keep doing subcontracting for some years shop operation procedures, and spare that, and benefits they may get from sub- to come. Only one respondent said that part supplies. After solving various prob- contracting activities. The sampled firms want to seek other better opportunities lems and challenges, the process of build- were selected from various locations, i.e. in the near future. Finally, the respondents ing the turbine aircraft overhaul facilities Jakarta, Bogor and Bandung in West Java were asked to explain what steps they and transfer of technology/skills to local province, and Bekasi and Tangerang both have taken which made them be selected workers had successfully done. in Banten province. Many of them have by Astra as its subcontractors. Their expla- The lead writer was recruited as one been in the business since the 1980s, and nations are given in Table 3. of the trainees to be employed in the the others started in the 1990s and some medium-sized overhaul shop. He had after 2000. All of them before starting their PT Nusantara Aircraft Industry the opportunity to observe the whole own businesses worked in several auto- (Soekarno, et al., 2009) process of the development of the over- motive assembling LEs related to ASTRA. Soekarno, et al. (2009) reported the process haul shop and was involved in the tech- The survey reveals some most interest- of technology transfer they have directly nology transfer processes to develop the ing findings. First, their motivation to do observed related to turbine maintenance local talent capabilities. According to key subcontracting is mainly to secure their and overhaul activities in PT Nusantara resource persons interviewed, who were market, especially if currently they see no Aircraft Industry, a state owned company, engaged directly in the process, the other market opportunities. Only some of located in Bandung (West Java prvince). In technology transfer was not always easy them said that to increase their produc- 1984, General Electric (GE) won the tender and they had to overcome several chal- tion is their main driving force behind competition of aircraft turbine election (GE lenges. As summarized in the report, the their subcontracting activities. Second, CT7) for new CN 235 aircraft designed joint- first challenge was the lack of basic skills the idea was mostly their own. As they ly by the PT Nusantara Aircraft Industry and on the part of overhaul shop workers. explained, they must aggressively look CASA from Spain. As part of the agree- Education in Indonesia does not empha- by themselves for potential partners. ment, GE has established facilities turbine size vocational/practical training, which Only a very few of them said that the idea overhaul of aircraft in Indonesia, and also is a critical requirement in the industry. to establish a subcontracting came from has carried out the process of technology The industry needs certain specific skills the parent company. Third, the benefits transfer so that the facility is fully function- such as: disassembly/assembly, chemical they got varies, ranging from their busi- al, according to the standards set by the cleaning and plating, inspection (visual, ness performance improved, production factory and run by local personnel. dimensional, non destructive inspection),

Table 2: Main constraints in starting and conducting subcontracting • Hard to get trust or confidence • Company must be a legal entity • Lack of skilled human resource • Organization must be well developed with clear • Many costs during the tryout structure within the company • Lack of information • Location of potential partner is far away • Must have minimum technical capability • Requirements (e.g. ISO 9001) are hard to be met • Heavy competition from other potential subcontractors • Difficulties in administrative procedures • Difficulties in reaching an agreement that secure “win-win Solution Source: Tambunan (2007)

Table 3: Necessary steps to become a subcontractor • Your company must be known through e.g. aggressive promotion of your products • You must be able to show your business capability • First, you must be able to produce efficiently or with cost competitiveness • You must have minimum required facilities in place, including production space with necessary production tools. • You must first improve first your human resource, business organization and management and technology capability Source: Tambunan (2007)

TECH MONITOR • Apr-Jun 2016 37 Transfer of technology by FDI to local SMES: A story from Indonesia

machining (conventional and unconven- general view in the literature that the Policy, Jakarta: Centre for Strategic and tional), welding and plasma spraying, more absorptive capacity the local firms International Studies. and special processes (heat treatment, have, the more benefit the local firms will coating, painting, and shot peening). gain from a transfer of technology. ü Hayashi, Mitsuhiro (2002a). ”SME Devel- Often the industry must create its own Second, subcontracting itself is not opment and Subcontracting in Indone- vocational to meet their needs for these the guarantee of successful transfer of sia: A Comparison with Japan’s Historical specific skills. technology from FDIs to SMEs. The SMEs Experience”, unpublished PhD disserta- The second challenge was cultural in themselves must have a minimum absorp- tion, Canberra: the Australian National nature. As a technology based industry, tion capacity, i.e. they must have a basic University. the company requires certain attributes knowledge on the particular technology. ü Hayashi, Mitsuhiro (2002b). “The Role of such as planning ahead, the timeliness/ In this respect, SMEs owned by persons or Subcontracting in SME Development in punctuality, accuracy and compliance. use workers who were employees before Indonesia: Micro-Level Evidence from Unfortunately, these attributes are not in LEs or have engineer diploma are more the Metalworking and Machinery In- widely practiced in the society. It required likely to be successful as subcontractors dustry”, Journal of Asian Economics, Vol. a special effort for emphasizing these than those owned by those who have 13, No. 1, pp. 1–26. attributes to all workers. During early only primary or secondary school diplo- year of operation, many repeated inac- mas. But this is only the ‘hardware’ side, üSato, Yuri (2000). “Linkage Formation by curacies and incompliance by its work- i.e. skilled workers. In addition to that, Small Firms: The Case of a Rural Cluster ers occurred. there is also the ‘software’ side that local in Indonesia,” Bulletin of Indonesian Eco- The third challenge was the low level SMEs must also have, namely culture of nomic Studies, Vol. 36, No. 1, pp. 137–66. of English proficiency of its workforce. doing businesses, like attributes such as Most sources of technology come from planning ahead, the timeliness/punctu- ü  Soekarno, Subiakto, Sylviana Maya Western countries, and the utilization of ality, accuracy, and compliance. Unfor- Damayanti, and Putri Maharani Samsu resources such as shop operation manual, tunately, these attributes are not widely Wibowo (2009). “Technology Transfer engineering/technical documentation, practiced in many SMEs, especially in SEs Challenges in Indonesia: An Experi- and communications with technology which are mainly not well organized and ence from Industry Turbine Overhaul”, licensors require a basic mastery of the managed. The Asian Journal of Technology Manage- English language. Therefore, the role of government ment, Vol. 2, No. 1, pp. 34–38. The fourth challenge is the lack of sup- in this respect is very important, not porting industries. Ideally the overhaul ü TAF (2000). “Strategic Alliances and only in creating conducive business shop should concentrate only on the basic Development of Small and Medium- environment to attract FDIs, to make overhaul processes such as: receiving Scale Enterprises in Indonesia”, Final regulations on technology transfers inspection, disassembly, cleaning, inspec- Report, May, The Asia Foundation, and to facilitate the process, but also, tion, accumulation, assembly and perfor- Jakarta. and probably more important, to sup- mance test, while the repair process of the port local SMEs in their capacity build- üTambunan, Tulus (2006). “Transfer of repairable parts should be contracted out ing to make them ready to become local Technology to and Technology Diffusion to the supporting industries nearby. suppliers. But, government intervention among Non-farm Small and Medium En- Conclusion must not be too much as happened dur- terprises in Indonesia”, Copenhagen Jour- This study demonstrates at least two im- ing the New Order era, because, at the nal of Asian Studies, Vol. 24, pp. 105–136. end, subcontracting and other forms of portant facts regarding the role of FDIs ü  Tambunan, Tulus (2007). Pembangunan partnership between local SMEs and LEs in transfer of technology to local SMEs Industri Nasional sejak Era Orde Baru or FDI must be business-oriented, not in developing countries with some cases Hingga Pasca Krisis (Development of policy-oriented. in Indonesia. First, despite some limita- Industry since the New Order era up to tions, many foreign companies are in- Post crisis), Jakarta: Penerbit Universitas References deed important as a source of technolo- Trisakti. gy transfer to local SMEs. However, many ü  ASTRA International (2013). “Creating ü Tambunan, Tulus (2009). “Promoting SMEs, especially SEs are largely excluded New Growth Momentum”, 2013 Annual Innovation in SMEs through transfer of from the direct transfer of technology Report, Jakarta. as foreign companies are more likely to technology. Lessons from a metalwork- subcontract parts of their production to ü  Harianto, Farid. (1996). “Study on Sub- ing industry cluster in Indonesia”, Asia- local firms that already enjoy a certain contracting in Indonesian Domestic Pacific Tech Monitor, Special Feature: In- level of technological capability, and Firms,” in M. Pangestu (ed.), Small-scale novation in SME clusters, Jul-Aug 2009, these are mostly MEs. This supports the Business Development and Competition pp. 30–36.

38 TECH MONITOR • Apr-Jun 2016 Transfer of technology by FDI to local SMEs: A story from Indonesia

üThee Kian Wie (1990). “Prospects for Co- turing Industry, Institute of Developing ment, the transfer and diffusion of tech- operation in Technology”, in Kim Seung Economies (IDE), Tokyo, pp. 93–111. nology, and sustainable development”, Jin and Suh Jang Won (eds.), Cooperation Trade and Development Board Invest- ü Thee Kian Wie and Mari Pangestu (1994) ment, Enterprise and Development in Small and Medium-Scale Industries in ‘Technological Capabilities and Indo- CommissionExpert Meeting on the Con- ASEAN, Kuala Lumpur: Asian and Pacific nesia’s Manufactured Exports.’ Revised tribution of Foreign Direct Investment to Development Centre. report for UNCTAD/SAREC Project on the Transfer and Diffusion of Technology Technological Dynamism and the Ex- ü Thee Kian Wie (1997). “The Development and Know-how for Sustainable Devel- port of Manufactures from Developing of the Motor Cycle Industry in Indonesia”, opment in Developing Countries, Espe- Countries, January. in Mari E. Pangestu and Yuri Sato (eds.), cially Least Developed Countries, 16-18 Waves of Change in Indonesia’s Manufac- ü UNCTAD (2011), “ Foreign direct invest- February, Geneva. n

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TECH MONITOR • Apr-Jun 2016 39 Knowledge and technology transfer of outward fdi by thai multinational enterprises to cambodia, laos, myanmar and viet nam

Chawalit Jeenanunta, Nattharika Rittippant, Pornpimol The Boston Consulting Group (BCG) has identified 50 fast-growing companies Chongpisal and Ryoju Hamada of Southeast Asia challengers including 11 Sirindhorn International Institute of Technology, Thammasat University Thai companies (Vincent et al., 2012). We 131 M. 5 Tiwanont Rd. Bangkadi Muang Pathumthani, Thailand 12000 selected, from this list, two companies that Tel: 66 (2) 501 3505 - 20 ext 6000 / 6013; Fax 66 (2) 501 3505 - 20 ext 6014 invest in CLMV. The first company, Char- E-mails: [email protected], [email protected], [email protected], [email protected] oen Pokphand Foods (CPF), is the leading Web: http://chawalit.siit.tu.ac.th agro-industrial and food conglomerate in the Asia Pacific region. The second com- Abstract pany, MitrPhol, is Thailand’s and Asia’s big- gest sugar and bioenergy producer. The The article presents an in-depth case study on top two Thai companies who success- objective of this article is to investigate on fully invest in Cambodia, Laos, Myanmar, and Viet Nam (CLMV) and emphasize on their their technology transfer and knowledge systematic knowledge and technology transfer that lead to their success in establishing transfer and its outcome. We interviewed the business in these countries. These companies are from the natural resource-based the top executives of these two leading industries, including Charoen Pokphand Foods (CPF), the leading agro-industrial and firms during October to December 2014 food conglomerate; and MitrPhol Sugar Group, Thailand’s and Asia’s biggest sugar and bioenergy producer. The motivation to transfer the knowledge and technology is to with the focus on knowledge and tech- increase the recipient’s technological capability, especially for improving its produc- nology transfer to their branches in CLMV. tion quality and efficiency. The policy recommendation for investing country could be We present the analysis in the following on the aid of infrastructure building and industrial zone construction in CLMV. For the sections for each case with emphasize on recipient countries, the capacity building is recommended to attract more investment. the technology transfer and their mode of The ease of process for visa for professional personal exchange is also recommended knowledge transfer. in both sides. The ease of the immigration process along the border could improve the personal exchange. Case study 1: Charoen Pokphand Foods (CPF) Introduction outflows from Thailand dramatically de- Background information clined due to the effects of the Tom Yum CPF, which was established in 1978, is oreign direct investment (FDI) has Kung Crisis in 1997. The fourth stage, i.e., the leading agro-industrial and food con- been considered as a growth enhanc- F glomerate that operates a vertically in- ing tool for many countries. Thailand was recovering stage (2003–present) started tegrated business model. There are four one of the developing countries that was a new wave of outward FDI. The increas- core businesses comprising feed, farm, used to be the major recipient of FDI in- ing number of Thai enterprises investing abroad was driven by strong support food, retail, and food outlets both locally flows from developed countries from the and internationally. The company’s op- from national government, corporation past decades to 2011, as shown in Figure 1 erations are divided into two main areas: strategies, and regional integration fac- (UNCTAD, 2012). Since 2011, Thailand domestic operation (in Thailand) and in- tors. According to Chantapong (2012), started investing overseas more than the ternational operation. For domestic oper- Thai outward activities exceeded 1.5% in inflows. Outward FDI from Thailand can ation, the company vertically integrated 2011 compared to the average between be grouped into four stages (Wee, 2007). agro-industrial and food business for both During the first stage (1978–1985), Thai 2006 and 2010; the majority investment domestic sales and exports to more than investment abroad was limited and un- of Thai companies went to ASEAN (35%) 40 countries globally across five conti- dertaken by financial institutions. Dur- and CLMV (28.8%). Figure 2 illustrates nents. For international operation, it op- ing the second stage, i.e., take-off stage Thailand FDI in the CLMV countries dur- erates and invests overseas in 13 countries (1986–1996), outward FDI raised sharply ing 2011–2013 where it increases stead- by subsidiaries such as China, Viet Nam, to Cambodia, Lao PDR, Myanmar, and ily. Moreover, it shows that Viet Nam is a Turkey, Laos as well as associated compa- Viet Nam (CLMV). During the financial major recipient country of Thailand out- ny in Cambodia and jointly controlled enti- crisis, i.e., impact stage (1997–2002), FDI ward FDI. ties. In 2013, the total revenue from sales

40 TECH MONITOR • Apr-Jun 2016 Knowledge and technology transfer of outward FDI by Thai multinational enterprises

was 11.85 billion USD, which was generat- 14000 ed from Thailand operations constituting 5 billion USD or 42% of the consolidated 12000 sales and 6.84 billion USD or 58% for in- 10000 ternational operations. There are 17,125 8000 employees in the company (CPF, 2013). FDI inflows 6000 The vertically integrated business is FDI outflows categorized into four main businesses. Millions of dollars 4000 First, feed business involves the manufac- 2000 turing and sales of animal feed. Second, farm business involves animal breeding, 0 animal farming and basic meat process- 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 ing. Third, food business involves partially cooked production and fully cooked meat Figure 1: FDI inflows and outflows in Thailand, 1990 – 2013 and food products under company’s Source: UNCTAD database brand. Fourth, retail and food outlet busi- 2000 ness involves the operation of food retail 1800 outlets, restaurants, and food courts. It 1600 focuses on swine, broilers, layers, ducks, 1400 shrimps and fish. In CLMV investment 1200 Cambodia expansion, CPF is still focusing on creat- 1000 Laos ing the value chain of its core business, 800 Myanmar starting from upstream to downstream Million of dollars 600 Vietnam activities. 400 200 Countries of investment 0 CPF mainly expands in the form of a wholly 2011 2012 2013 owned (100% owned) company in the Figure 2: Net flow of Thailand direct investment to CLMV 2011-2013 CLMV countries because the company Source: Bank of Thailand statistic aims to retain complete control and own- ership of its operation. trate, powder and pellets for broilers, Myanmar Viet Nam layers, swine and ducks and livestock. In CPF has been investing in Myanmar since CPF has invested in full-scale business addition, farming such as corn, soybean 1996. The reason for the key success for activities in Viet Nam since 1993. It oper- meal and rice, and food processing such as CPF’s investment in Myanmar is its strategy ated both a fully-integrated livestock and sausage making and slaughterhouses, are to gradually grow from small business with a fully-integrated aquatic business. This also a part of CPF’s business in Cambodia. low profile to countrywide expansion. approach produced value chain from the In order to strengthen the company’s in- Lao PDR manufacturing and distribution of animal tegrated agricultural–industrial business In 2006, CPF invested in Lao PDR with a feed, to the breeding and livestock and as per the Cambodian economic growth, registered capital of 3 million USD. The aquatic animals, and to the processing the company planned to invest 700 mil- company received a trust from Lao PDR and production of meat and packed food. lion THB or 21 million USD in 2014 to to lease its land and animal farm for 20 The reason for CPF’s decision to choose build a new feed meal plant and expand years for business operation. Initially, the Viet Nam as its first investment destina- the capacity of its chicken and pork farms. company operated a production facility, tion in CLMV is because Viet Nam has a Sales are expected to reach 10 billion baht swine farms, fully integrated layer, broiler good potential as a new market. In addi- or 307 million USD. At present, CPF has tion, the government’s vision has been chicken farms and fish processing facilities. factories and farms constituting 70–80% clearly emphasizing the movement from of provinces in Cambodia. In addition, Technology transfer an agricultural country toward an indus- Cambodian government has fully sup- Firm-to-firm knowledge transfer trial country. ported CPF business because the com- Since CPF used the same finance & account- Cambodia pany brings benefits and opportunities ing and human resource systems world- CPF was established in Cambodia on April to the country and its citizens. Moreover, wide, the training and knowledge transfer 24, 1996. The company has invested in Cambodia enables foreigners to buy and became a crucial factor contributing to the feed production in the form of concen- own the land. company’s consistent system and achieve-

TECH MONITOR • Apr-Jun 2016 41 Knowledge and technology transfer of outward FDI by Thai multinational enterprises

ment. There are two types of knowledge countries. The company signed a Memo- company’s key success factor, CPF has con- transfer in CPF: knowledge transfer to in- randum of Understanding (MOU) with the tinuously improved its training process. house staff (peer-to-peer) and knowledge National Science and Technology Develop- The company has their own “Learning transfer to business partners. ment Agency (NSTDA) on R&D in food and Center” to train employees regarding job For knowledge transfer to business agriculture. One of the most significant col- knowledge and particular skills that have partners, the company tries to develop laboration between the company and gov- been specified for each staffing level. agriculture with new technology. They ernment is researching on animal-disease For CLMV training methods, CPF use proactive approach by meeting farm- outbreaks such as bird flu in poultry and believes that local people can teach their ers who are the important key in this type EMS epidemic that hit the Thai and Viet colleagues better than Thai people. Thus, of business and thereafter transfer knowl- Nam shrimp industry in 2012. The company they use the “train the trainer” technique edge to them. The company deals with and government needed to find the way whereby the foreign subsidiary will send two types of farming: non-contract farm- to effectively protect against the disease, its employees to train in Thailand, which ing (outsourcing) and contract farming. and they collaborated to provide the cor- in turn will train others in their countries. Under non-contract farming, the farmers rect and relevant information to the general Although the main training and learn- have their own land or plantation but the public. Furthermore, CPF also has collabo- ing center is still in Thailand, associated company provides farming lessons and rated with the universities both researching company in Cambodia has planned to open technology to the farmers and cultivators, for new knowledge and technology and its own learning center to train and develop and thereafter the company observes training the students. In addition, the com- employees for future growth opportunities. the production and provides advice. pany provided the scholarship for the CLMV In addition, Myanmar government and The company need not buy the product students to study and train at universities CPF have an agreement on building “Poul- directly from farmers, but they can get in Thailand such as Assumption University. try Training School” to teach farmers and the product from middlemen. Under con- people in agricultural sector by teaching tract farming, the company recruits the Knowledge transfer models 15 farmers per month without tuition fee. contracted cultivators and farmers and Personnel exchange supplies inputs, such as breeds, to them. Before undertaking a new international Results of knowledge and technology Farmers need to build facilities according investment, CPF will perform feasibility transfer to the company plan. When the products studies and set a very clear investment Product innovation reach the requirement, the company will policy for each country. At the initial point, The company has a specialized R&D team come and collect the products. The com- the company will appoint representa- to analyze customer behavior in each pany pays the farmers according to the tives at the important positions to closely country to meet consumer demand. In performance and market price. In addi- monitor operations in each country. This the CLMV countries, CPF tries to custom- tion, the company transfers knowledge includes positions such as top operation ize and innovate food products by placing to the farmers with a clear succession manager with various skills to manage and the importance on nutrition, safety, and guideline to ensure that all processes control, finance executive or accounting consumers’ taste and preferences. For meet both the company’s and the gov- manager, and support teams. The support instance, in Viet Nam, young men prefer ernment’s standard. teams are divided into three groups that to consume small eggs for erectile en- The company outsources its logistics include factory management specialists, hancement. Consequently, the company to local suppliers. However, the company poultry specialists and swine specialists. produces small eggs for its market in Viet manages the entire logistics system by using These support teams will be sent to other Nam. In Cambodia, people prefer pork, Global Positioning System (GPS) tracking countries to set up the system and facili- native chickens and white pork sausages. technology to monitor the truck’s status and ties. Once these tasks have been complet- Therefore, the company produces special to ensure timely transportation. In addition, ed, the teams will be sent back to Thailand. meal to specifically serve its Cambodian the company required the specific design In the case of problems in facility abroad, market. and layout of each truck to ensure animal support teams will be sent there to solve CPF has learnt the techniques for egg welfare and to meet the company’s standard. the problem. Furthermore, the overseas incubation in bad environment from Cam- subsidiaries must recruit local people to Collaboration with Governments, bodia. Moreover, the company conducts fill up all the needed positions. However, Universities, and Institutes R&D to improve its egg incubation tech- top management positions will be sent CPF and its subsidiaries in Thailand and nique. Furthermore, Cambodian customers from the headquarter in Thailand. overseas always emphasized the interests prefer to eat their local chicken, “Kao-Soon- of the country, the people, and the com- Kwang” breed more than Thai chicken breed. pany. Thus, the company closely examines Training Consequently, the company has conducted and collaborates with the governments to With the belief that employees are the R&D to improve the Kao-Soon-Kwang breed generate the benefits to home and host most valuable resource and truly are the to serve the market demand in Cambodia.

42 TECH MONITOR • Apr-Jun 2016 Knowledge and technology transfer of outward FDI by Thai multinational enterprises

Technological process innovation ity management system. The other interna- sequently, the company began to cultivate In order to maintain sustainability, the tional recognitions are ISO 14001:2004, ISO sugarcane and constructed a sugar factory. company focuses not only on increasing 22000:2005, OHSAS 18001:2007, FSSC 22000, The company’s initial investment was ap- its productivity and profit but also on envi- and TLS 800 (Group, 2013). proximately 70 million USD in the form of ronmental impacts to customers and soci- With years of experience, especially in a wholly owned company. The company ety. By doing so, the company encourages sugar production, the company decided to built sugar mill in 2007 and first operated technology development, innovation, and expand its business to China by engaging cane crushing on November 27, 2008. In alternative energy. For instance, the com- in a joint venture with Guangxi Nanning addition, the company invested in biomass pany in Cambodia produces biogas from East Asia Sugar Co., Ltd in Guangxi Prov- cogeneration power plant in Lao PDR. biodegradable material and waste from ince, China in 1993. In addition to sugar Technology transfer swine. Subsequently, broiler and layer business, MitrPhol Group has brought the Firm-to-firm knowledge transfer farms developed it as fuel for electricity value-added notion to China’s cane and MitrPhol conducts contract farming generation for use in company’s facility sugar industry by expanding its business with local cultivators in Lao PDR. The lo- and transferred this technology to farmers. capacity. The company invested in biomass cal farmers provide land and labor while cogeneration power plant using biogas left- Significantly improved skilled workers the company provides inputs, marketing over from sugar production process as raw The most significant improvement in CLMV and technology. With this type of invest- materials to produce steam and electricity. for CPF is in relation to farming. The local ment contract, the company can transfer In 2006, MitrPhol Group has expanded to farmers learn the methods to operate the its expertise in the form of knowledge Lao PDR under the name MitrPhol Lao Sugar modern farming system. Employing the best and technology in sugarcane plantation Company. The company group was granted practice, knowledge and technology from and production to local people. MitrPhol by the Lao PDR government a concession for company such as the closed system, farmers educated the local farmers regarding cane cane growing area of 10,000 hectors for 40 can prevent possible disease outbreaks and preparation, soil preparation, cultivation, years with the extension of another 20 years maintain suitable growing condition. Con- and ordinary practices to advance process and land for sugar factory. Recently, MitrPhol sequently, the farmers can increase efficient and techniques in sugar manufacturing Group bought 100% share of MSF Sugar, productivity and provide quality products. through training. Further, the company Australia’s third largest sugar producer, in also supported the farmers to build con- 2012. Therefore, MitrPhol Group has four nection with other members so they can Case study 2: MitrPhol Sugar sugar mills in Queensland, Maryborough work together to get better performance Group Mill, South Johnstone Mill, Mulgrave Mill, and they can help each other to solve prob- Background information and Tableland Mill. The markets are both in lems in the future. MitrPhol Sugar Group was established in Australia and Asia–Pacific countries. 1946 at Rajburi Province where it was a Cane plantation development, sugar Collaboration with Governments, small household industry producing syrup factory establishment, and bioenergy Universities, and Institutes and was sold to nearby sugar mill. A decade business development in China, Lao PDR, MitrPhol has a very good relationship with later, in 1956, the household syrup produc- and Australia are MitrPhol group’s success the Lao PDR government. They work to- ing industry turned into a sugar factory and in enhancing competitiveness in inter- gether not only for promoting sugarcane registered the company as MitrPhol Co., Ltd. national market. The company facilitates plantation but also for improving the living The company comprises five main business transfer of cane and sugar expertise to the conditions of the people in the country. groups: plantation business, sugar business, neighboring countries, which help gener- In 2005, MitrPhol signed an MOU with wood substitute material business, renew- ate and distribute income to local commu- the government for a 100 hectare con- able energy business, and investment busi- nities and benefit the economy as a whole. cession experiment area in the Suvanna- ness. The company has production plants khet Province; the company contributed Countries of investment and cane plantation areas in several regions to the government through paying taxes of Thailand such as Supanburi, Singburi, Chai- Lao PDR and concession fees. Moreover, the com- yaphum, KhonKaen, Kalasin, and Loey. Its With the support of the Thai government pany has integrated social responsibility overseas branches include China, Laos, Cam- and a warm welcome from Lao PDR, concept to its work. Thus, it conducted bodia, and Australia. The company has been MitrPhol expanded in business to Lao various projects with government agen- ranked as Thailand’s No. 1 sugar producer and PDR in 2005 and received a 100 hectare cies that led to community development. exporter. In 2014, the company was ranked concession from the government for ex- The company constructed many common as the world’s fourth largest sugar producer perimentation. In 2006, the companies infrastructures in Lao PDR, such as hospi- and the largest sugar producer in Asia. The received more land concession to culti- tals, schools, roads and reservoirs. company has been certified by many insti- vate sugarcane over 10,000 hectares for Furthermore, MitrPhol has an agree- tutes. Moreover, it is Thailand’s first sugar mill 40 years, with extension by another 20 ment with the Lao PDR government called that was awarded ISO 9001:2008 for its qual- years in the Suvannakhet Province. Con- “2+3 contract farming” policy. The contract

TECH MONITOR • Apr-Jun 2016 43 Knowledge and technology transfer of outward FDI by Thai multinational enterprises

divided benefits between villagers and edge on the ways to plant sugarcane. At company analyzed the real problem with investors: two factors contributed by vil- MitrPhol Center, there are cane-promoting local cultivators and related people. Once lagers or farm households are land and officers to introduce the career of sugarcane the problem has been identified, they labor, while three factors contributed by cultivation to people, teach farmers regard- can find appropriate solution such as MitrPhol are financial support, knowledge ing the new technology, and organize the ways to harvest sugarcane in a hilly area. and technology, and willingness to buy workshop for practical lesson for cultivating Through its sugarcane plantation in Lao products from farmers at a price higher cane. Laotian staffs were sent to Thailand PDR, MitrPhol Group faced the problem than the market price. for training at MitrPhol’s farm such as Chai- of “White Leaf Disease” because of many The company has joint development yapum, Khonkaen, Kalasin, and so on. In ad- insects living around the plantation areas. projects with several universities and dition, the knowledge related to accounting It solved the problem by letting the R&D institutes to develop new technology and is low because Lao PDR has no faculty of center research for new breeds of sugar- work for training program, such as an MOU accounting. Thus, MitrPhol sent accounting cane that are immune to the disease. with the Savannaket University for student experts to teach and train Laotian employ- Significantly improved skilled workers internship. In addition, it provides educa- ees. On the other hand, the company sends One of the most significantly improved tional support to young people. The main Laotian employees to train and work in the skills is providing primary education re- reason for the projects were to improve the sugar factory in Thailand hoping that when garding sugarcane farming, teaching sugarcane strain for a higher yield and for they return to their country they will trans- from nothing until the local people have new innovation. It has a joint project with fer the knowledge they receive to everyone adequate knowledge to cultivate sugar- many universities in Thailand such as Kaset- else. MitrPhol encourages its people, includ- cane and have the technical skills for using sart University, King Mongkut’s University ing overseas staffs, to continue their study equipment in factories. Lao PDR workers of Technology Thonburi, Khonkhean Uni- and development. Therefore, it works with are more disciplined and anticipatory. They versity, and Mahidol University, and other Khonkaen University’s professors to train have an open mind to learn new things government and public sectors. the employees in Lao PDR. and are also willing to participate in train- Results of knowledge and technology ing or activities provided by the company, Knowledge transfer models transfer such as morning talk sessions. Lao people Personnel exchange Product innovation are courageous to express their opinion There were two-directional processes One of the successful development pro- during these sessions. Through training by of knowledge transfer between the firm jects is “White Leaf Disease Testing Kit,” MitrPhol, the employees can also improve and its subsidiaries. The case of knowledge which was a project with BIOTEC. With this accounting skill, without having the real transfer from MitrPhol to its subsidiaries kit, cultivators can check the disease be- curriculum in the university. includes its FDI in Lao PDR. Thai top man- fore planting cane buds; thus, it is a good agers were sent to Lao PDR to manage and way to prevent the spread of the disease. Conclusion and policy control all the management system and recommendation improve the production process. In addi- Technological process innovation We present top two companies from the tion, cane promoting officers were sent For process innovation, as the conse- natural resource-based industries that in- to promote sugarcane cultivation in Lao quence of knowledge transferred from vest in CLMV based on the list of 50 South- PDR. As Savannakhet shared broader with operation abroad, MitrPhol obtained the east Asia challengers and Thailand’s FDI Thailand, the transportation between two new innovation in machinery, technology statistics to investigate their knowledge countries is convenient. The distance from and automation. One of the new innova- and technology transfer of FDI outflow. the nearest mill of MitrPhol sugar facto- tions from Lao PDR is a cane peeling ma- The first company is the leading agro- ries in Thailand to the border of Lao PDR is chine. Instead of using more than 30 work- industrial and food conglomerate in the 150 km. If there is any problem at the factory ers to perform this task, they developed Asia Pacific region. The second company in Lao PDR, Thai engineers from nearest the new machine to help them to quickly is Thailand’s and Asia’s biggest sugar and mill will be sent for as short as a one-day peel the cane. Another new technique is bioenergy producer. The summary of trip to fix the problem. Moreover, Thai em- tying sugarcane together into a bundle these cases are shown in Table 1. ployees were sent to China and Australia before planting to make it strong and for For the firm-to-firm level knowledge to learn and transfer back the knowledge it to not fall, especially in a hilly area. In ad- transfer, all of these cases experience for the development of sugar production. dition, the local farmers proposed a small systematic knowledge transfer. The process for cleaning sugarcane by shaking Training motivation to transfer the technology and sorting it with a machine. MitrPhol established a “MitrPhol Center” at and knowledge is to increase the recipi- Lao PDR, which focuses on training employ- New knowledge ent’s technological capability, especially ees. Because Lao PDR is new to sugarcane First, MitrPhol faced the problem of cane for improving the quality and efficiency. plantation, they have relatively little knowl- cultivation in a different area. Thus, the The recipients have strong motivation to

44 TECH MONITOR • Apr-Jun 2016 Knowledge and technology transfer of outward FDI by Thai multinational enterprises

Table 1: The summary output of cross-case comparison

Topic CPF MitrPhol

• 100 % own company in Cambodia Lao PDR, • 100 % own company in Lao PDR Countries of investment Myanmar, Viet Nam Technology Transfer Firm-to-firm level knowledge • Same Finance & Accounting and HR system. • Transfer knowledge and technology in transfer • 2 types of knowledge transfer; in-house staff sugarcane plantation and production which and business partner the company’s expertise to local farmers • 2 types of farming with business partner; non-contract farming and contract farming • Outsource its logistics to local suppliers Collaboration with • Thailand • Thailand government, universities or o MOU with NSDTA on R&D in food o Joint project with many universities in institutes agriculture Thailand • Internship training program with many o Co-project with BIOTEC universities • CLMV • CLMV o Collaborate with government about o MOU with government for cultivate animal-disease outbreaks such as Bird flu sugarcane in poultry and EMS epidemic in shrimp o Do agreement called “2+3 contract farming” policy with government o MOU with Savannaket University for student internship. Knowledge Transfer Models Personnel exchange • Thailand → CLMV • Thailand → Lao PDR o Top Operation Manager and Account o Top managers were sent to manage and Managers control the management system and the o Support Team production process o Factory Staff Team o PR team promoting cane plantation • Poultry Training School in Myanmar teaching by Thai staff Training • CLMV → Thailand • Lao PDR → Thailand • Train the trainer techniques o “MitrPhol center” • New learning center in Cambodia Lao people were sent to train and workshop • Training in Thai universities sponsored by for practicing in real farm of company the company (MBA) • On-the-job training

Results of Knowledge and Technology Transfer Product innovation • Customize and innovate food product for • High yield sugar cane breed local consumers’ taste and preferences White Leaf Disease Resistant sugar cane o Small eggs product in Vietnam breed o Native chickens (‘Kao-Soon-Kwang’ specie) and white pork sausages in Cambodia Technological process • Biogas from biodegradable material • Sugar cane peeling machine innovation • Sugar cane planting technique by bundling sugar cane to prevent the damage from the typhoon • Sugar cane cleaning machine White Leaf Disease checking kit

TECH MONITOR • Apr-Jun 2016 45 Knowledge and technology transfer of outward FDI by Thai multinational enterprises

Table 1: (Continued)

Topic CPF MitrPhol

New Knowledge • Harvest sugar cane in hilly area — New breed of sugar cane that is immune to the disease such as White Leaf Disease Significant improvement skill • Modern farming for local farmers • Primary education about sugar cane farming • Technical skills for using equipment in factory Accounting skill

Source: author receive the knowledge and technology ship along the bordering countries by References because they would like to join the global providing the aid on infrastructure build- üChantapong, S. a. S. T. (2012). Thai Direct production network, which provide ing and industrial zone construction. The Investment in the Neighboring Countries: them higher and stable income. More- process for visa for professional personal An Important Step to AEC, Focused and over, they would like to improve their exchange should be quick and easy. For Quick (FAQ) Issue 71. Bank of Thailand. skills. The obstacles to match between CLMV, the vocational training school is üGroup, M. P. (2013). Sustainability Report providers and recipients are that there needed to increase the skill matched are no existing firms in the business that 2013. with the demand market. The government the providers are looking for in those needs to improve the utility, healthcare üUNCTAD. (2012). “Towards A New Gen- countries. eration of Investment Policies”, World system, and welfare to maintain the labor The mode of knowledge transfer Investment Report. Geneva. in the countries and attract FDI. includes both personnel exchange and üVincent Chin, A. K., Michael Meyer, Evelyn formal training. These companies send the Acknowledgement Tan, and Bernd Waltermann (2012). The Thai management team to set up the back Companies Piloting a Soaring Region: office and supplier training. They also pro- This paper was supported by Economic 2012 BCG Southeast Asia Challengers: vide formal training in Thailand as a part Research Institute for ASEAN and East Asia The Boston Consulting Group. of human resource development. These (ERIA). We would like to express special help closing the gap on knowledge and thanks of gratitude to the top executives üWee, K. H. (2007). Outward foreign direct technology between the firms. from CPF (Thailand and Cambodia), and investment by enterprises from Thailand. The policy recommendation for Thai- MitrPhol who provided us their valuable UNCTAD Transnational Corporation, Vol. land could be creating a positive relation- time for in-depth discussion. 16, No. 1, pp. 89–133. n

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For more information, contact: The ASEAN Secretariat Public Outreach and Civil Society Division 70A Jalan Sisingamangaraja Jakarta 12110, Indonesia Tel: (62 21) 724-3372, 726-2991; Fax: (62 21) 739-8234, 724-3504 E-mail: [email protected] Web: http://www.aseansme.org

46 TECH MONITOR • Apr-Jun 2016 Tech Events

2016 47301 Petaling Jaya, Malaysia Tel: +603 8928 0577, Fax: +603 8920 9344 Aug 21–23 7th World Renewable Energy Technology Congress & Expo-2016 E-mails: [email protected], [email protected] New Delhi, Contact: WRETC Secretariat Web: http://must.edu.my/icdi2016/ India F1-F2, Pankaj Grand Plaza Mayur Vihar-I New Delhi - 110091, India Sep 26–29 PHARMA + BIO ASIA 2016 Tel: +91-11-22758149 Kuala Lumpur, Contact: Protemp Group 38-3 , (2nd Floor) Fax: +91-11-43019379 Malaysia Jalan PJU 5/9, Dataran Sunway E-mail: [email protected] Kota Damansara Web: http://wretc.in 47810, Petaling Jaya Selangor Darul Ehsan Malaysia Sep 6–8 International Conference on Sustainable Development 2016 Tel: +603 6140 6666, Fax: +603 6140 8833 Kuala Lumpur, Contact: Convenors/Coordinators Malaysia Ontario International Development Agency 364 Moffatt Pond Court Oct 19–21 China Wind Power 2016 Ottawa Ontario, K2J 0C7, Canada Beijing, Contact: Beijing Exhibition Co., Ltd. CCID Tel: + 1 613 612 7615 China Tel: 010-68450820 68451467 E-mail: [email protected] Fax: 010-68455499 Web: http://www.ontariointernational.org/ICSD_2016_Malaysia.html E-mail: [email protected] Web: http://www.chinawind.org.cn/cwp2016/ Sep 7–9 Renewable Energy India Expo Greater Noida, Contact: Rajneesh Khattar Group Director, UBM India Oct 19–21 INTERSOLAR INDIA 2016 India Mob: +91 9871 726762 Mumbai, Contact: Bombay Exhibition Centre - NSE Exhibition Complex E-mail: [email protected] India Highway, Goreagon (East) Mumbai - 400 063, India Web: http://www.renewableenergyindiaexpo.com Tel: +91 22-6645 0123 Fax: +91 22-6645 0101 Sep 14–16 3W EXPO 2016 Bangkok, Contact: TechnoBiz Communications Co., Ltd. Oct 21–23 IEEE 2016 International Conference on Power and Thailand 2521/27, Lardprao Road Shanghai, Renewable Energy Khlongchaokhunsingha China Chen Li Wangthonglang E-mail: [email protected] Bangkok 10310 ‘Web: http://www.icpre.org Thailand Oct 26–29 Eco Expo Asia Tel: +66 2-933 0077 Hong Kong, Contact: Exhibitions Department Fax: +66 2-955 9971 China Hong Kong Trade Development Council Sep 17–19 Renewable Energy and Energy Efficiency Myanmar 2016 Unit 13, Expo Galleria Yangon, Contact: United Business Media (M) Sdn Bhd Hong Kong Convention & Exhibition Centre Myanmar A-8-1, level 8, Hampshire Place Office 1 Expo Drive, Wanchai, Hong Kong, China 157 Hampshire 1, Jalan Mayang Sari Tel: (852) 2584 4333 50450 Kuala Lumpur, Malaysia E-mail: [email protected] Tel: +603 2176 8788 Web: http://www.hktdc.com/fair/ecoexpoasia-en/ Fax: +603 2164 8786 E-mail: [email protected] Nov 15–16 BIOPHARMA INDIA 2016 Web: http://www.renewableenergymyanmar.com Mumbai, Contact: Terrapinn Holdings Ltd India 4th Floor, Welken House, Sep 19–21 11th World Congress on Biotechnology 10-11 Charterhouse Square New Delhi, Contact: OMICS International London EC1M 6EH India Fax: +1-650-618-1414 UK Tel: +1-650-268-9744 Tel: +44 (0)20 7608 7030 E-mail: [email protected] Fax: +44 (0)20 7608 7040 Web: http://www.biotechnologycongress.com Nov 18–20 7th Asia-Pacific Innovation Conference Fukuoka, Japan Sep 19–24 WORLD RENEWABLE ENERGY CONGRESS & EXHIBITION 2016 Fukuoka, Contact: Mitchell AdamsCentre for Transformative Jakarta, Contact: WREN (World Renewable Energy Network) Japan InnovationSwinburne University, Indonesia 147 Hilmanton Australia Lower Earley E-mail: [email protected] Reading, RH6 4HN Web: http://ap-ic.org/apic-2016/ UK Tel: +44 118 961 1364 Nov 24–26 SOLARTECH ASIA 2016 Fax: +44 118 961 13765 Bangkok, Contact: N.C.C. Exhibition Organizer Co., Ltd. - NEO Thailand Queen Sirikit National Convention Center Sep 20–22 RENEWABLE ENERGY WORLD ASIA 2016 60 New Rachadapisek Road, Klongtoey, Seoul, Contact: PennWell Conferences & Exhibitions Bangkok 10110 Republic of Korea 1421 S. Sheridan Road Tulsa, Oklahoma 74112 Thailand USA Tel: +66 2203 4260-2 Tel: +1 (918) 835-3161 Fax: +66 2203 4250-1 Fax: +1 (918) 831-9497 Sep 20–22 GUANGZHOU INTERNATIONAL SOLAR PHOTOVOLTAIC Nov 28–30 1st Technology Innovation Management and Engineering Guangzhou, EXHIBITION 2016 Bangkok, Science international conference (TIMES-iCON2016) China Contact: Guangzhou Grandeur Exhibition Services Co., Ltd Thailand Contact: Dr. Sotarat Thammaboosadee Room 2303-2305, The 4th Tower Conference Secretary Dong Jun Plaza, No.836 of Dong Feng Dong Road E-mail: [email protected] Yuexiu District Tel: +668-1402-3627 Guangzhou, 510080, China Web: http://times-icon.org Tel: +86 2022074185 Dec 29–30 9th International Conference on Envirotech, Fax: +86 20-82579220 Bangkok, Cleantech and Greentech (ECG) Sep 24–25 1st International Conference on Disruptive Innovation Thailand Contact: Conference Secretariat Kuala Lumpur, (ICDI2016) Fax: +91-9001087697 Malaysia Contact: ICDI 2016 Secretariat E-mail: [email protected] Malaysia University of Science & Technology (MUST), Web: http://wasrti.org

TECH MONITOR • Apr-Jun 2016 47 Tech Ventures & Opportunities

Business Coach Tech Opportunities

Start-up Venture Creation 49 Technology Offers 61 l Managing your business l Chitin and chitosan (India) l Doing business in India l Retort pouch technology (India)

Technology transfer 52 l Sugarcane juice powder technology (India) l Licensing of IP rights l Herbal pesticide (India) l IP assignment and licensing in Thailand l Gel-o-fuel (India)

l Titanium dioxide nano needles (India) Venture Financing 54 l Starting a business l L(-) Malic acid production technology (Hungary) l Venture capital for MSMEs l Metal reclamation technology in electroplating (Hungary)

Managing Innovation 57 Technology Requests 63 l Sector-based innovation in Thailand l Proper utilization of CO2 from gas fields (Bangladesh) l Technology and innovation promotion l Full cereal and health bar extrusion line (India) in Malaysia l Micropropagation of potato cultivation (India) Green Productivity 59 l Copper sulphate from copper scrap and waste (India) l Green industry initiative l Medical disposables (India) l ‘Green Factory’ - SME exit strategy in l Technologies and products to produce healthier, well green growth era styled hair (United Kingdom)

Technology Resources and Networks of APC T T

Technology Opportunities Business Information Innovation Systems www.technology4.sme.net www.businesss-asia.net www.nis.apctt.org

Biotechnology Network Traditional Medicine Latest Innovations & www.binasia.net Network News www.apctt-tm.net www.techmonitor.net

48 TECH MONITOR • Apr-Jun 2016 Business Coach Start-up Venture Creation Managing your business Venture Creation Start-up Records management

SME Corporation Malaysia http://www.smecorp.gov.my

Records management, or RM, is the practice of maintaining the re- � Identifying, classifying, and storing records; cords of an organization from the time they are created up to their � Coordinating access to records internally and outside of the eventual disposal. This may include classifying, storing, securing, organization, balancing the requirements of business confi- and destruction (or in some cases, archival preservation) of records. dentiality, data privacy, and public access; and

A record can be either a tangible object or digital information: � Executing a retention policy on the disposal of records which for example, birth certificates, medical x-rays, office documents, are no longer required for operational reasons; according to databases, applicationdata, and e-mail. Records management is organizational policies, statutory requirements, and other primarily concerned with the evidence of an organization’s activi- regulations this may involve either their destruction or per- ties, and is usually applied according to the value of the records manent preservation in an archive. rather than their physical format. Records management principles and automated records man- Definitions of records management agement systems aid in the capture, classification, and ongoing In the past, ‘records management’ was sometimes used to refer management of records throughout their lifecycle. Such a system only to the management of records which were no longer in eve- may be paper based (such as index cards as used in a library), or ryday use but still needed to be kept ‘semi-current’ or ‘inactive’ may be a computer system, such as an electronic records man- records, often stored in basements or offsite. More modern usage agement application. tends to refer to the entire ‘lifecycle’ of records from the point of ISO 15489:2001 states that records management includes: creation right through until their eventual disposal. The ISO 15489: � setting policies and standards; 2001 standard defines records management as “The field of man- agement responsible for the efficient and systematic control of � assigning responsibilities and authorities; the creation, receipt, maintenance, use and disposition of records, � establishing and promulgating procedures and guidelines; including the processes for capturing and maintaining evidence � providing a range of services relating to the management of and information about business activities and transactions in and use of records; the form of records”. The ISO defines records as “information cre- ated, received, and maintained as evidence and information by � designing, implementing and administering specialized sys- an organization or person, in pursuance of legal obligations or in tems for managing records; and the transaction of business”. The International Council on Archives � integrating records management into business systems and (ICA) Committee on Electronic Records defines a record as “a re- processes. corded information produced or received in the initiation, conduct or completion of an institutional or individual activity and that Managing physical records comprises content, context and structure sufficient to provide evi- Managing physical records involves different disciplines and dence of the activity.” The key word in these definitions is evidence. may draw on a variety of forms of expertise. Records must be Put simply, a record can be defined as “evidence of an event”. identified and authenticated. This is usually a matter of filing and retrieval; in some circumstances, more careful handling is Practicing records management required. A Records Manager is someone who is responsible for records management in an organisation. The practice of records manage- Identifying records ment may involve: If an item is presented as a legal record, it needs to be authen- � Planning the information needs of an organization; ticated. Forensic experts may need to examine a document or artifact to determine that it is not a forgery, and that any damage, � Identifying information requiring capture; alteration, or missing content is documented. In extreme cases, � Creating, approving, and enforcing policies and practices items may be subjected to a microscope, x-ray, radiocarbon dat- regarding records, including their organization and disposal; ing or chemical analysis. This level of authentication is rare, but � Developing a records storage plan, which includes the short and requires that special care be taken in the creation and retention long-term housing of physical records and digital information; of the records of an organization.

TECH MONITOR • Apr-Jun 2016 49 Start-up Venture Creation Business Coach

Storing records discarded as refuse. Most organizations use processes including pulverization, paper shredding or incineration. Records must be stored in such a way that they are accessi- ble and safeguarded against environmental damage. A typical Commercially available products can manage records through paper document may be stored in a filing cabinet in an office. all processes active, inactive, archival, retention scheduling and However, some organisations employ file rooms with specialized disposal. Some also utilizes RFID technology for the tracking of environmental controls including temperature and humidity. the physical file. Vital records may need to be stored in a disaster-resistant safe or vault to protect against fire, flood, earthquakes and conflict. Managing electronic records In extreme cases, the item may require both disaster-proofing The general principles of records management apply to re- and public access. Civil engineers may need to be consulted cords in any format. Digital records (almost always referred to to determine that the file room can effectively withstand the as electronic records) raise specific issues. It is more difficult weight of shelves and file cabinets filled with paper; historically, to ensure that the content, context and structure of records some military vessels were designed to take into account the is preserved and protected when the records do not have a weight of their operating procedures on paper as part of their physical existence. ballastequation(modern record-keeping technologies have Particular concerns exist about the ability to access and read transferred much of that information to electronic storage). electronic records over time, since the rapid pace of change in In addition to on-site storage of records, many organizations technology can make the software used to create the records operate their own off-site records centers or contract with com- obsolete, leaving the records unreadable. A considerable amount mercial records centers. of research is being undertaken to address this, under the head- Circulating records ing of digital preservation. The Public Record Office Victoria (PROV) located in Melbourne, Australia published the Victorian Tracking the record while it is away from the normal storage area Electronic Records Strategy (VERS) which includes a standard for is referred to as circulation. Often this is handled by simple written the preservation, long-term storage and access to permanent recording procedures. However, many modern records environ- electronic records. The VERS standard has been adopted by all ments use a computerized system involving bar code scanners, or Victorian Government departments. A digital archive has been

Start-up Creation Venture radio-frequency identification technology (RFID) to track move- established by PROV to enable the general public to access per- ment of the records. These can also be used for periodic auditing manent records. to identify unauthorized movement of the record. Disposal of records Electronic tax records Disposal of records does not always mean destruction. It can Electronic Tax Records are computer-based/non-paper versions also include transfer to a historical archive, museum, or private of records required by tax agencies like the Internal Revenue individual. Destruction of records ought to be authorized by Service. There is substantial confusion about what constitutes law, statute, regulation, or operating procedure, and the records acceptable digital records for the IRS, as the concept is relatively should be disposed of with care to avoid inadvertent disclosure of new. The subject is discussed in Publication 583 and Bulletin 1997- information. The process needs to be well-documented, starting 13, but not in specific detail. with a records retention schedule and policies and procedures Businesses and individuals wishing to convert their paper records that have been approved at the highest level. An inventory of the into scanned copies may be at risk if they do so. For example, it is records disposed of should be maintained, including certification unclear if an IRS auditor would accept a .jpg, .png, or .pdf format that they have been destroyed. Records should never simply be scanned copy of a purchase receipt for a deducted expense item.

Global Brand Database The Global Brand Database makes it easier to search around 11,820,000 records relating to internationally protected trademarks, appellations of origin and armorial bearings, flags and other state emblems as well as the names, abbrevia- tions and emblems of intergovernmental organizations. The Global Brand database allows free of charge, simultaneous, brand-related searches across multiple collections. The Database page lets you easily search multiple brand-related data sources and receive instant feedback, letting you explore the brand landscape in a new and powerful way. For more information contact: World Intellectual Property Organization 34, chemin des Colombettes CH-1211 Geneva 20, Switzerland Web: http://www.wipo.int/branddb/en/

50 TECH MONITOR • Apr-Jun 2016 Business Coach Start-up Venture Creation Doing business in India Venture Creation Start-up

Invest India http://www.investindia.gov.in

To do business in India, following options are available to foreign subsidiary company has the maximum flexibility to conduct busi- companies: ness in India when compared with a liaison or branch office and has following salient features: Setting up a non-corporate entity � Funding can be done via equity, debt (foreign as well as local) Liaison office: A liaison or a representative office can be opened and internal accruals in India subject to approval by Reserve Bank of India. Such an � Indian transfer pricing regulations apply office can undertake liaison activities on its company’s behalf. A liaison office can also undertake: � Repatriation of dividends is allowed without approvals

� Representing parent/group companies in India Joint Venture with Indian partner: Foreign companies can also set up joint venture with Indian or foreign companies in � Promoting import/export in India India. There are no separate laws for joint ventures in India and � Promoting technical/financial collaborations on parent com- laws governing domestics companies apply equally to joint pany/group’s behalf ventures. � Coordinating communications between parent/group com- Foreign Institutional Investors: FII’s can invest in India in finan- panies and Indian companies cial markets such as pension funds, mutual funds, investment Branch Office: Foreign companies can conduct their business in trusts and asset management companies or their power of at- India through its branch office which can be opened after obtain- torney holders. FII’s can invest in all securities in primary and ing a specific approval from Reserve Bank of India. A branch office secondary markets including the equity and other instruments can undertake following activities: of companies which are listed or are to be listed on stock ex- changes of India. � Import & export of goods

� Rendering professional or consultancy services Entry and investment routes � Carrying out research work in area which its parent company is engaged � Foreigners can directly invest in India either on their own or as a joint venture, with a few exceptions with regard to invest- � Promoting technical/financial collaborations on behalf of par- ment limits and sectors. ent company/ overseas group company � No government approval is required for FDI in virtually all sec- � Representing parent/group companies in India and acting as tors except a small negative list formulated by government. buying/selling agent in India Sector specific guidelines are formulated by government giv- � Providing IT services and developing software in India ing sectoral investment caps if any.

� Providing technical support for products supplied by parent � If an investment does not qualify for automatic approval, FIPB company/group considers the proposal. Project office: If a foreign company is engaged by an Indian com- � Use of foreign brands names/trademarks is permitted for sales pany to execute a project in India, it may set up a project office in India. without obtaining approval from Reserve Bank of India subject � Indian capital markets are open to FII’s and Indian companies to prescribed reporting compliances. As applicable in case of a are allowed to raise funds from international capital markets branch office, a project office is treated as an extension of foreign � Foreign technology collaborations are allowed with agree- company and is taxed at the rate applicable to foreign companies. ments on Setting up a corporate entity � Technical knowhow fees � Payment for designs and drawings Wholly owned subsidiary: Foreign companies can set up wholly owned subsidiary companies in India in form of pri- � Payment for engineering services vate ­companies subject to FDI guidelines. A wholly owned or a � Other royalty payments

TECH MONITOR • Apr-Jun 2016 51 Technology Transfer Business Coach Licensing of IP rights

World Intellectual Property Organization (WIPO), Switzerland http://www.wipo.int

Licensing of intellectual property rights - a vital also protected in the other country or countries of interest to you. component of the business strategy of your SME If your intellectual property is not protected in such other country or countries then you would not only not be able to license it, You may be interested in starting a new business, expanding an but also you would have no legal right to put any restriction on existing business (extending your territory or the nature of busi- its use by anyone else. ness) or improving the quality of the goods or services of your SME and thereby its market position. In many situations, licensing Technology licensing and joint ventures of intellectual property rights is an effective tool for achieving these business goals. If your SME is interested in: A licensing agreement is a partnership between an intellectual � improving the quality of your product or manufacturing a property rights owner (licensor) and another who is authorized to new product by using the rights owned by others in the form use such rights (licensee) in exchange for an agreed payment (fee of a patent, utility model, or know-how protected by a trade secret, then acquiring such rights through a technology licens- Technology Transfer Technology or royalty). A variety of such licensing agreements are available, which may be broadly categorized as follows: ing agreement may be the right solution, or

� Technology License Agreement � entering a market or extending your existing market for a product for which your SME owns the rights to a pat- � Trademark Licensing and Franchising Agreement ent, utility model or know-how protected by a trade secret, � Copyright License Agreement then authorizing another to use your process or product In practice, all or some of these agreements often form part of through a technology licensing agreement may be the right one single contract since in transfers of this nature many rights solution. are involved and not simply one type of intellectual property By a technology licensing agreement the licensor authorizes right. You may also come across licensing agreements in other the licensee to use the technology under certain agreed terms circumstances, such as, during a merger or acquisition, or in the and conditions. It is, therefore, a contract freely entered into course of negotiating a joint venture. between two parties and contains terms and conditions so All of these mechanisms either on their own or in combination agreed. will provide your SME, as a licensor or licensee, a wide variety of A joint venture may consist of any variety of business relation- possibilities in conducting business in your own country or else- ships that involve two or more enterprises pooling their re- where. As an intellectual property owner and a licensor, your SME sources with the objective of implementing a common business can expand its business to the frontiers of your partners’ business purpose. Often, in such agreements, one party will contribute and ensure a steady stream of additional income. As a licensee, technology or know-how of which he is the proprietor and the your SME can manufacture, sell, import, export, distribute and other party may contribute financial and expertise of his own market various goods or services which it may be prevented from to the project. The joint venture will, therefore, often include a doing otherwise. license agreement concluded by the parties concerned to regu- In the international context, a formal licensing agreement is pos- late the use of the proprietary information and compensation sible only if the intellectual property right you wish to license is for its use.

WIPO GREEN Database WIPO GREEN consists of an online database and network that brings together a wide range of players in the green technology innovation value chain, and connects owners of new technologies with individuals or companies looking to commercialize, license or otherwise access or distribute a green technology. These technologies are available for license, collaboration, joint ventures and sale. For more information, access: https://webaccess.wipo.int/green/

52 TECH MONITOR • Apr-Jun 2016 Business Coach Technology Transfer IP assignment and licensing Technology Transfer in Thailand

ASEAN Intellectual Property Association http://www.aseanipa.org

The assignment, or license agreements, of IP objects must be Patent made in writing, contain minimum requirements, and not be Patent Assignment – the assignment must be made in writing and contrary to specific prescriptions in regard to the related rules. registered in compliance with the requirements, procedures and Most types of IP objects shall be registered with the related au- conditions as prescribed by the relevant Ministerial Regulations, thorities in order to make them valid and enforceable in Thailand. in order to make it valid and enforceable. The Patent Office regis- The important rules and regulations in relation to the three main ters the assignment for any pending and registered patents, and IP objects, i.e. 1) trademark, and 2) patent are as follows: there is no specific deadline for registering the patent assignment in Thailand. The application to register the assignment must be Trademark separately submitted with the Patent Office, together with the Trademark Assignment – the assignment must be made in writing agreement which transfers the patent for each assigning patent. and registered with the Trademark Office, in order to make it valid Patent Licensing – the license agreement must be made in writ- and enforceable. The Trademark Office accepts the registration ing, and registered in compliance with the requirements, proce- assignment for any pending and registered trademarks, and there dures and conditions as prescribed by the Ministerial Regulations, is no specific deadline for registering the assignment in Thailand. in order to make it valid and enforceable. An important rule relating to trademark assignment is prescribed In granting a license, according to Section 39 of the Patent Act: 1) under Section 50 of the Trademark Act, whereby all associated the patentee shall not impose upon the licensee any condition trademarks shall be transferred, or inherited, only as a whole. or restrictions, or any royalty term which unfairly limits competi- The assignment cannot be registered only for some associated tion. Conditions, restrictions or terms which tend to unfairly limit trademarks, and partial assignment is not allowed. In addition, competition are prescribed in the Ministerial Regulation No. 25 the cancellation of filed/registered license agreements relating (B.E. 2542), issued under the Patent Act B.E. 2522, and these in- to assigned trademarks is always a prerequisite, before the as- clude for example: a) prescribing the licensee to provide material, signment is granted in Thailand. for use in the production, from the holder of the patent, or from Trademark Licensing – the license agreement and any sub-license the distributor, which the holder of the patent has prescribed or agreement must be made in writing and registered with the permitted, except where it can be proved that it has to be pre- Trademark Office, in order to make it valid and enforceable. To scribed so that the product produced gives the result as stipulated register a sub-license agreement, the main license agreement under the patent, or it is a material which cannot be acquired must also be registered. If the license agreement is subject to a from another source; b) prescribing conditions or restrictions of renewal, such renewal must be re-registered in order to maintain the licensee concerning the hire of persons for the production its validity. of the invention, except where it can be proved that such has to be prescribed, so that the product produced gives results which A registrable license agreement, according to Section 68 of the are in accordance with the patent; c) prescribing that the licensee Trademark Act, shall at least provide the following: 1) conditions sells, or distributes more than half of the product produced, to and terms of the agreement between the trademark proprietor the holder of the patent; d) prescribing that the licensee limits and the person applying to be an authorized licensee, which must the quantity of production, sale or distribution; e) prescribing actually enable the former to control the quality of the goods that the licensee discloses the invention, which the licensee has manufactured by the latter; and 2) the goods on which the li- improved, or to allow the patent holder to seek interest from the censed trademark is to be used. said invention without prescribing a suitable remuneration for The license agreement can include all pending and registered the licensee; f) prescribing that the licensee exercise the rights trademarks in Thailand. However, the Trademark Office will only under the patent to pay remuneration for the use of the invention register the licenses of registered trademarks. The license agree- according to the patent, after the patent expires, etc.; and 2) the ment for pending trademarks can be registered, only after it is patentee shall not require the licensee to pay royalties for use of granted registration, and without the requirement to enter into the patented invention after the patent has expired. Conditions, a new license agreement. There is no deadline for registering a restrictions or terms concerning royalties, which are contrary to license agreement in Thailand. this provision, are null and void.

TECH MONITOR • Apr-Jun 2016 53 Venture Financing Business Coach Starting a business Source of funds

SME Corporation Malaysia http://www.smecorp.gov.my

How much money do you need? of security or collateral. This involves mainly borrowing from fam- ily or friends, a credit card, line of credit and other similar means. It depends on your type of business and how quickly you plan to expand. You should sit down and write out how much your Secured debt, on the other hand, refers to loans where you are expected expenses will be for at least the next 24 months and required to put up some form of collateral in exchange for the how much you project to bring in as far as income on a monthly loan, for example, mortgage on the house or refinancing your basis. There are several companies that can help you get started car, among others. For secured debts, you need to be able to as- with funding your business. sure the lender about your ability to meet your payments either through your business or other means. To secure such debt is Venture Financing Venture You can refer back to your business plan or start asking yourself some cases you will need to present a solid business plan, evi- what type of expenses do you need the money for? Generally, for dence of your experience and of your ability to repay. a start up business, there will be a few costs involve: Family and friends: Raising finance from family and friends � Cost of sales: Product inventory, raw materials, manufac- can be rewarding for both parties: you get the finance to start turing equipment, shipping, packaging, shipping insurance, or expand your business, while your family and friends have the warehousing satisfaction of helping you while earning interest on their spare � Professional fees: Setting up a legal structure for your busi- cash. Family and friends may accept more flexible terms and con- ness, trademarks, copyrights, patents, drafting partnership ditions that are better suited to your business than those offered and non-disclosure agreements, attorney fees for ongoing by commercial banks. consultation, retaining an accountant Often arrangements with family and friends are informal and � Technology costs: Computer hardware, computer software, based purely on trust and verbal assurances. However, a formal printers, cell phones, PDAs, website development and mainte- written agreement is strongly advised in order to minimise dis- nance, high-speed internet access, servers, security measures, putes in the future. Preserving your relationships with friends and IT consulting family is as important as pursuing your business opportunity. � Administrative costs: Various types of business insurance, Personal loan: Financing a business with personal loans means office supplies, licenses and permits, express shipping and that you borrow the money personally to invest it in your busi- postage, product packaging, parking, rent, utilities, phones, ness. This is typically used at start-up or early stages where the copier, fax machine, desks, chairs, filing cabinets – anything business has not established enough history or performance to else you need to have on a daily basis to operate a business be able to secure a loan on its own merit. � Sales and marketing costs: Printing of stationery, marketing Mortgage loan: Another source for financing a business is a materials, advertising, public relations, event or trade show home mortgage loan. Some banks allow you to mortgage or re- attendance or sponsorship, trade association or chamber of finance your house. This may be a risky move as if you are unable commerce membership fees, travel and entertainment for cli- to make the scheduled payments, you risk losing your home. It is ent meetings, mailing or lead lists therefore crucial that you are confident on your continued ability � Wages and benefits: Employee salaries, payroll taxes, benefits, to make all payments scheduled. workers compensation Insurance loan: Another source of loan could be from your in- No matter what your business type, take into account everything surance policy. If you have been paying for a life insurance policy you will spend, from the moment you dig in to the startup process, that builds up a cash value you are entitled to take up a loan on through the time you’re ready to sell a product or service. the cash value amount. Many insurance companies will loan you money with the cash value as security. This is a rather expensive Financing with debt method of financing a business and also means reduced benefits Financing a business with debt involves securing a loan. This can be if you are unable to clear the loan and interests accrued. in the form of either unsecured or secured debt. Unsecured debt Credit cards: Credit cards can also be a source for financing refers to a loan taken without having to put up any specific form a business when you are first getting started. However, this is

54 TECH MONITOR • Apr-Jun 2016 Business Coach Venture Financing

­another expensive method as the rates charged can be high and lend you money. Banks also normally need collateral as security. Venture Financing it could also affect your credit rating, required for other sources If you have a solid business plan and the lender agrees, this can of financing. often be the cheapest (interest rate-wise) loan sources available. The risk is that besides the fact that it’s often hard for a startup Government small business loans to qualify - since there’s little evidence you’ll be profitable - if you There are a variety of government small business loans and pro- do get a loan, it can be like a ticking time bomb if your business grams that can be used in financing a business, including those isn’t doing well. specifically for Bumiputeras and micro entrepreneurs. Most of Equity financing these loans are administered by the Financial Institutions like the Development Financial Institutions (DFIs) and the commercial Equity Financing is borrowing where the investor/financier be- banks. While some are directly administered by the department/ comes a part-owner of the business in the process. This could be agency involved. Funding from these sources may be relatively through venture capital or issuing shares. easier to secure as the government department/agency guaran- tees your loan, if you are approved. Venture capital Venture capitalists do not want to remain in your business forever. Grants: There are often a variety of government grant programs Generally, they want to see an exit strategy that will see them for specific types of startup businesses. For more information, out in about 5 years, with a high return on their investment as search online on government websites. Unless they’re reputable, their reward. don’t pay money to sites that tell you they’ll give you a big list of where you can get grant money. The risk is that - While grants In terms of areas of interest, venture capitalists are interested in are rarely required to be paid back, accountability is higher, and both high technology and various other industries. Normally they you might have to work within a difficult deadline, to show your fund businesses which have already been launched and have progress. If you do not achieve the progress you indicated in your probably reached profitability. proposal, there may be some sort of penalty. The angel investor, on the other hand, is a special type of venture capitalist. Usually an individual with substantial funds, the ‘angel’ Bank loans provides capital to start-up companies and takes a personal stake Banks lend money to existing businesses but for a start-up, it in the venture. Depending on the individual ‘angel’, their requests may be very difficult to get a bank loan as they do not have a for any form of control or a quick return on investment will dif- track record. Banks require a sound business plan and must be fer. However, similar to regular venture capitalists, they seek high convinced of the viability of your business before they agree to returns on their investment for the risks they take on.

Market Validated Technologies Directory The Market Validated Technologies Directory is a compendium of a tedious and comprehensive market validation exercise on selected R&D outputs from seven public universities. The universities are Universiti Sains Malaysia (USM); Universiti Malaya (UM); Universiti Kebangsaan Malaysia (UKM); Universiti Putra Malaysia (UPM); Universiti Teknologi Malaysia (UTM); Universiti Islam Anta- rabangsa Malaysia (UIAM) and Universiti Teknologi MARA (UiTM). The exercise involved 358 R&D outputs with a two-fold objective: validate market for and marketability of R&D outputs before the products (R&D Outputs) are offered to industry for commercial undertakings. The Market Validation exercise came about as the result of the introduction of Market Validation Fund (MVF) under Budget 2012 initiatives. The Fund’s mandate is to “ensure commercial viability of products (R&D outputs) through market valida- tion”. By definition, market validation is the process of objectively evaluating the market for an offering and understanding the target market and required features before making the investment to build it and bring it to the market. The market validation exercise undertakings involve seven steps: Selection of R&D Outputs; Technology assessment; Operational assessment; Capability assessment; Market analysis (both primary & secondary data fieldwork); Model of commercialization including financial modeling, where appropriate and Recommendation for either Market-Go/Conditional Market-Go or No Go. The Market Validated Technolo- gies Directory provides a brief and a snapshot on what the technology is about, the potential users, market; IP status; start-up requirements; ROI/IRR and recommendation for commercialization. For more information, contact: MVF Unit Malaysian Technology Development Corporation Level 8-9, Menara Yayasan Tun Razak Jalan Bukit Bintang 55100 Kuala Lumpur, Malaysia Tel: 603 – 2172 6000 / 6117 Web: http:www.mtdc.com.my

TECH MONITOR • Apr-Jun 2016 55 Venture Financing Business Coach Venture capital for MSMEs

Small Industries Development Bank of India (SIDBI) http://smallb.sidbi.in

Venture Capital is emerging as an important source of finance for the national and the state levels. They tend to be relatively small small and medium-sized firms, especially for starting the busi- — they typically do not exceed US$ 5 million. ness and business expansion. An entrepreneur usually starts the The Small Industries Development Bank of India (SIDBI) is the main business with his own funds, and those borrowed from banks. It public financial institution involved in VC funding operations. is during expansion that they find it difficult to raise funds. SMEs SIDBI operates through wholly owned subsidiary, SIDBI Venture have traditionally been dependent on Bank finance for expansion Capital Limited (SVCL). It co-finances state-level funds, and some- and working capital requirements. However, in the recent past, times co-invests with private sector VCs on a case-by-case basis. bankers have curtailed lending to SMEs due to the greater risk of Since 2006, some new VCs are also operating at the SME level, non-performing assets (NPAs) in a downturn. Thus, even though such as Helion Venture Partners, Erasmic Venture Fund(Accel India many SMEs have profitable projects and expansion plans, they Venture Fund), SeedFund, and Upstream Ventures. While technol- Venture Financing Venture find it difficult to get finance for their projects, as bankers may ogy remains the most sought after investment fields, interest has not be willing to fund high risk projects. been shifting from internet companies to other types of opera- In order to provide financial support to such entrepreneurial tal- tions—especially ICT enabled services and bio-technology. ent and business skills, the concept of venture capital emerged. A few VCs also operate at the early-stage, including Erasmic Ven- Venture capital is a means of equity financing for rapidly-growing ture Fund, Seed Fund, Infinity Venture, IFI sponsored facilities such private companies. Finance may be required for the start-up, ex- as Swiss Tech VCF, and the government schemes such as SIDBI VC pansion or purchase of a company. Venture capitalists comprise and Gujarat VF. Early stage VCs seek smaller deals, typically in the of professionals in various fields. They provide funds (known as US$ 1 - 3 million range. However, they rarely go below the half mil- Venture Capital Fund) to these firms after carefully scrutinizing lion dollar mark, where there is a strong appetite for financing, but the projects. Their main aim is to earn higher returns on their very few opportunities. Possible sources of smaller investments investments, but their methods are different from the traditional are represented by local public-sector facilities, business angels, moneylenders. They take active part in the management of the business incubators funds, and isolated cases of seed VCFs, such company as well as provide the expertise and qualities of a good as the microventure schemes like Aavishkaar India Micro Venture bankers, technologists, planners and managers. Capital Fund (AIMVCF). Venture capital for MSMEs in India Benefits of VC over other funding methods Traditionally, Venture Capitalists in India have shied from the MSME sector. The non-corporate structure and small size of ma- Venture capital has a number of advantages over other forms jority of MSMEs in India makes the Venture Capitalists and Pri- of finance: vate Equity Players reluctant to investing in them due to higher � It injects long term equity finance which provides a solid capital transaction costs and difficulties in exits out of such investments. base for future growth. However, the VC scenario in India is rapidly changing. Alternative � The venture capitalist is a business partner, sharing both the funding like VC is picking up in the India, including in the MSME risks and rewards. Venture capitalists are rewarded by business sector. Moreover, the VCs are expanding their reach into areas success and the capital gain. besides the traditional VC sectors like Information Technology (IT); nowadays interest in sectors like clean energy, healthcare, � The venture capitalist is able to provide practical advice and as- pharmaceuticals, retail, media, etc. is also growing. sistance to the company based on past experience with other companies which were in similar situations. In recent years, the government controlled financial institutions have initiated positive and progressive measures to provide MS- � The venture capitalist also has a network of contacts in many MEs access to funds at a reasonable and affordable costs and areas that can add value to the company, such as in recruiting without any usual hurdles. Venture capital funding institutions key personnel, providing contacts in international markets, have been floated to induct fund at low cost, share the risk and introductions to strategic partners, and if needed co-invest- to provide management and technology upgradation support ments with other venture capital firms when additional rounds to these enterprises. Government-funded schemes exist at both of financing are required.

56 TECH MONITOR • Apr-Jun 2016 Business Coach Managing Innovation Sector-based innovation Managing Innovation in Thailand

National Innovation Agency, Thailand http://www.nia.or.th

Bio-business of Thai SMEs innovative business. The project will stimulate the development of innovative projects and build up the awareness With the objective of enhancing local competency and com- for development of innovation culture within SMEs firms. petitiveness in bio-business, our main focus is on promoting the development of innovative technologies and commercialization The “Innovation Coupon” is the new mechanism of financial sup- of high value-added products in various areas, such as functional port for SMEs, which can support both on the productivity and food, nutraceutical, cosmeceutical, medical food, rice products, the consultancy services. The 100,000 bath coupon (90% of total and biomedical products and treatments. The National Innova- expense) allows SMEs to pay for the services of feasibility study tion Agency focusses on strategic fields of development which in- project and the 400,000 bath coupon (90% of total expense) to clude several herbal- and bio-products, wherein innovation could support SMEs for implementation project stage. SMEs can ap- be applied to improve food quality and integrated health benefits. ply maximum 2 coupons in one period of time. It means they can apply for both feasibility and implementation project in the Eco-solutions same time. NIA has put emphasis on the development of alternative energy Scope of Innovation coupon will covers one of the following: sources, diversification and renewable sources. Escalating envi- � Assessment of new technology ronmental problems in the last decade also call for innovation in environmentally friendly technologies and products, including � Early stage R&D and prototyping waste-to-energy technology, energy saving processes, and bio- � Adoption and development of new products/ processing tech- based materials. Furthermore, we promote and support the de- nology/ applications/ practices/ operations velopment of local renewable energy and related industry sectors. � Upgrading of existing products/ processing technology/ Our strategic areas of development focus in this fileds. ­applications/ practices/ operations

� Waste management facilitates development and improve- ment of products, processes, services and consumption pat- Criteria terns to allow eco-friendly and efficient use of natural resourc- All local SMEs can apply for innovation coupon if they meet the es, including effective waste management systems. following criteria:

� Eco-products focuses on commercial development of new � Physically present and registered in Thailand products, processes or services based on material sciences, � Have at least 30% local shareholding recycling technology and eco-designs. � Have fixed assets not more than 200 million bath or group employment size not exceeding 200 employees Design and solutions “Design and Solutions” combines different areas of knowledge to Project Goals develop an innovation into a viable commercial product. Design The innovation coupon will facilitate SMEs to create their innova- involves the combination of technology, culture, and manage- tive business. It can supports wide range of capability upgrading ment to create higher-value products. initiatives that enable SMEs to successfully compete and grow their businesses locally and globally. Innovation coupon will lead Innovation coupon to drive the new mechanism of collaboration between “Innova- For many years, Thai SMEs were still not fully competitive on their tion Service Provider (ISP)” and SMEs to develop the process of development innovative business. They lacked marketing capabil- innovation development in Thailand. ities and product and services development. They had low-quality Outputs of this project: labour and used not up-to-date technologies, as well as, they have focusing only on the “Differentiation of original product”. � Generate the innovative project more than 200 projects a year NIA has cooperated with Federation of Thai Industries (FTI), to � Generate more than 500 ISP create the innovation coupon project for build up the capability � Generate 12,400 million baht for economic value added

TECH MONITOR • Apr-Jun 2016 57 Managing Innovation Business Coach Technology and innovation promotion in Malaysia

SME Corporation Malaysia http://www.smecorp.gov.my

1-InnoCERT certification programme tion system and processes is ready to comply with the requirement. 1-InnoCERT certification programme is initiated by SME Corp. Malaysia Companies with difficulties in scoring higher than 700 can at- to promote and develop innovative companies in Malaysia as endorsed tend regular sessions of pre-certification training to understand by the Jawatankuasa Tindakan Penyelarasan Inovasi Negaraand the the 1-InnoCERT criteria, and on how to become more innovative. National Innovation Council, chaired by the Prime Minister on 29th Upon reaching a score of more than 700, the company can apply October 2009. It is aimed at fostering innovative enterprise through for an on-site innovation audit to be conducted at their premise. harnessing and intensifying home-grown innovations and R&D. On-site innovation audit is compulsory to ensure that companies applying for the 1-InnoCERT certifications are indeed innovative The main objective of the certification is to encourage entrepreneurs and complies with the requirement of the 1-InnoCERT criteria. to venture into high technology and innovation-driven industries. With more SMEs participating in such activities, it will eventually lead Upon a successful passing of the on-site audit, the company to them being more competitive and would help in Malaysia achiev- can then officially apply to be certified as a 1-InnoCERT certified company. However, the approval is subject to acceptance by

Managing Innovation ing its objective in becoming a high income nation by the year 2020. the 1-InnoCERT Approval Committee, which oversees the over- The certification awarded under the Programme identifies and all certification Program. Please take note that minimal fees are verifies innovative companies through an internationally-recog- chargeable for the 1-InnoCERT certification (RM5,000.00 for first nised innovation standard (OECD Oslo Manual V3) and the cer- time certification and RM3,000.00 for renewal of certification). tification process is developed from similar process practised in Korea’s Innobiz (Innovation SME) Certification Programme. Certi- Enabling ePayment for SMEs and micro fied companies under the programme will be given a fast-track enterprises access when applying for incentives to fund and market their Enabling ePayment for SMEs and Microenterprises is a Project products and services as offered by the government. under the Digital Malaysia initiative aimed to increase the adop- Application criteria for SMEs tion of ePayment among SMEs. Due to the cost constraint and 1. SMEs incorporated under the Companies Act 1965 / Registra- intricate process of ePayment, SMEs and Micro Enterprises are tion of Business Act (1956) and fulfil the new­definition of SMEs facing difficulties in acquiring ePayment capability. With this ini- (Guideline on New SME Definition (click)); tiative, SMEs and Microenterprises are being enabled to accept ePayment via means of simplifying the acquisition process and 2. Must undergo SCORE Certification by SME Corp. Malaysia and lowering its cost. It will also accelerate the adoption of ePayment achieved a 3-Star Rating and above; with the distribution of affordable Point-of-Sale (POS) terminals. 3. At least 60% of the equity held by Malaysians; By 2020, the Project is expected to generate 1,125,000 million ePayment 4. Valid business; acquire business license from the Local Au- merchant outlets points enabled by Electronic Funds Transfer thority and operating in a valid business premise; Point-of- Sale (EFTPOS) terminal, whilst, the project’s target for 2012 5. At least two (2) years in business (able to provide 2 years is 25,000. Audited Financial Statement); and The ePayment merchant outlets points targeted are the opera- 6. Product and services must be commercialised for at least two tors of `pasar tani’, small restaurant, night market, flea market and (2) years. cottage industries, amongst others. SMEs and Microenterprises must fulfill the following criteria to 1-InnoCERT certification process participate in this programme: The 1-InnoCERT certification process involves a two-stage assessment. Potential innovative companies are required to conduct an On-line � Registered under Business Act 1956 or Company Act 1965; Self-Assessment (www.1-innocert.my) to gauge on their readiness � Fulfilled the definition of SMEs and Microenterprises; to be certified as a 1-InnoCERT company. Upon completing the self- � At least 60% Malaysian equity; assessment, the on-line system will generate a Technology Innovation System Evaluation Index, ranging a score from 0 to 1,000. A scoring of � Valid business license from Local Authority; and higher than 700 is an indication that the company’s internal innova- � Subscribe to only 1 of approved Third Party Acquirer (TPA)

58 TECH MONITOR • Apr-Jun 2016 Business Coach Green Productivity Green industry initiative Productivity Green United Nations Industrial Development Organization (UNIDO), Austria http://www.unido.org

In the last few years, keeping with its mandate, the United Nations Chemicals Management Industrial Development Organization (UNIDO) coined the con- UNIDO works with projects, policies and regulations, institutions cept Green Industry to place sustainable industrial development and sectoral capacity-building, development of preventative ap- in the context of new global sustainable development challenges. proaches and new business models such as Chemical Leasing, to Green Industry means economies striving for a more sustainable assist enterprises reducing risks and impacts associated to the pathway of growth, by undertaking green public investments and use of chemicals. implementing public policy initiatives that encourage environ- mentally responsible private investments. Chemical Leasing (ChL) Resource Efficient and Cleaner Production (RECP) Chemical Leasing (ChL) is a strategy which creates a business en- Taking care of materials, energy, water, waste and emissions makes vironment to tackle the challenges of the changing global context good business sense. RECP is the way to achieve this. RECP covers and offers solutions for sound management of chemicals and the application of preventive management strategies that increase reduction of emissions to the environment. UNIDO plays a lead- the productive use of natural resources, minimize generation of ing and coordinating role for the implementation and further waste and emissions, and foster safe and responsible production. development of ChL.

Cleaner Production (CP) Corporate Social Responsibility (CSR) RECP uses CP to accelerate the application of preventive environ- Nowadays, requirements for the integration of environmental mental strategies to processes, products and services, to increase concerns, human rights issues, fair labour conditions and good efficiency and reduce risks to humans and the environment. It -ad governance in industrial development are significantly affecting dresses, a) Production Efficiency: optimization of the productive the business sectors in developing and transition countries. This use of natural resources (materials, energy and water); b) Environ- is referred to as Corporate Social Responsibility (CSR). In this con- mental management: minimization of impacts on environment text, UNIDO works on a framework for small- and medium-sized and nature through reduction of wastes and emissions; and, c) firms (SMEs) that helps translate CSR principles into a relevant Human Development: minimization of risks to people and com- SME perspective, thereby enhancing their competitiveness and munities and support for their development. market access. The Stockholm Convention and Persistent Organic Pollutants (POPs) Water Management The Stockholm Convention is a global treaty to protect human UNIDO’s Water Management programme provides services to health and the environment from chemicals, Persistent Organic transfer the best available environmentally sound technologies Pollutants (POPs), that remain intact in the environment for long and environmental practices to improve water productivity in periods of time, become widely distributed geographically, ac- industry, as well as prevent discharge of industrial effluents into cumulate in the fatty tissue of humans and wildlife, and have international waters (rivers, lakes, wetlands and coastal areas). adverse effects to human health or to the environment Protecting water resources for future generations is amongst the top priorities. The Montreal Protocol (MP) The Montreal Protocol is an international environment treaty Energy designed to protect the ozone layer by phasing out the produc- Energy access is linked a global challenge needing to be tion of a number of substances believed to be responsible for ­addressed; it has links in social development and poverty ozone depletion. Since 1989, a time table establishes the different ­alleviation, ­environmental degradation and climate change, phase-outs; for example, it has been agreed to initially phase- and food security. It is a defining issue of our time. UNIDO aims out hydro-chlorofluorocarbon (HCFC) – a chemical compound to provide access to modern energy services for the poor, with containing hydrogen – by 2015, with a final phase-out by 2030. emphasis on renewable energy projects. The Organization further In its daily work, UNIDO focuses on cost-effective ways to reduce helps to increase productivity and competitiveness by improving ozone-depleting substances (ODS), such as freons, halons and industrial energy efficiency projects, and works on reducing GHG chlorofluorocarbons (CFC), in the areas of refrigeration, plastic emissions through capacity-building projects for climate change foams, halons, solvents, fumigants and aerosol. in general, and Kyoto Protocol mechanisms in particular.

TECH MONITOR • Apr-Jun 2016 59 Green Productivity Business Coach ‘Green Factory’ - SME exit strategy in green growth era

APEC SME Innovation Center (SMEIC), Republic of Korea http://www.apec-smeic.org

The Republic of Korean government is strongly promoting a low- Also from an environmental perspective, if their small corporate carbon, green growth policy that minimizes use of resources and scale and comparatively simple production facilities are taken into environmental pollution while utilizing it as an engine for economic account and the wastes minimization programs practiced in the growth. Green growth is a new paradigm that was suggested to max- United States, U.K. and Netherlands are applied, SMEs can more imize environmental and economic synergy effects by responding to easily pursue technological alternatives and secure profit-creating energy and environmental problems, the increasing mandatory cli- opportunities as well as reduction of wastes. Furthermore, in the mate change burden, high oil prices, exploitation of environmental green growth era, SMEs should actively respond to changes in com- markets, etc., with economic polices. The green paradigm transition petition conditions. Due to the characteristics of the green industry, era requires SME manufacturing process innovation that coincides first, dynamic SMEs should pursue a rapid market advance. Second,

Green Productivity with low-carbon green growth, i.e. ‘Green Factory’ management. SMEs should exert utmost efforts for development of core technol- ‘Green Factory’ means an low-carbon economic era-type facility ogies, narrow the technological gap with advanced countries and equipped with eco-friendly design and manufacturing processes accelerate localization of parts. Third, SMEs must secure overseas that efficiently improve greenhouse gas emission, environmental source technologies and patents and resolve technical barriers. pollution and energy consumption. In other words, ‘Green Factory’ is Fourth, SMEs should secure and nurture excellent manpower greenizing process, green-izng workplace and green-izing product. through industry-academia-research institute cooperation in First, green-ization improves the manufacturing process efficient- line with the green growth era when development of excellent ly and reduces consumption of energy and resources. Second, manpower is more important than ever before. Fifth, SMEs have to it also pursues high efficiency in all areas of the manufacturing advance into the world, which has already grown into a large, sin- workplace, installing solar cells on the factory roof, replacing mo- gle market, to secure new outlets for their products and services. tors with 3-phase induction motors and fluorescent lamps with Unlike other growth paradigms, low-carbon, green growth will LED lamps, etc. Third, it improves product design in a way that not develop by itself in response to the market. Therefore, the uses less energy when producing and using the products, devel- government should support diverse policies, including desig- ops products with a longer life span, and facilitates recycling of nation and cultivation of green-specialized research institutes, afteruse waste materials. cultivation of green technology design centers, supply and tech- SMEs, viewed from a green growth perspective, despite being small nology development of green facilities and equipment, support in scale, are equipped with a centralized power-type organizational for global green partnerships, support for green technology in- structure. So, manager influence is greater and employee participa- formation development and exchanges and cultivation of green tion in low-carbon, green growth is stronger compared with large production and environmental manpower. enterprises, assuming that communication is smooth. As for the To grow green SMEs equipped with global competitiveness, the SMEs that have organic relationships with large enterprises, their government should also establish long-term goals and, in parallel, active utilization of SCM would facilitate their acquisition of new continuously implement complementary revisions to processes to technologies as well as introduction and establishment of a green achieve the goals. In order for SMEs to develop the necessary com- management system. Furthermore, as several such companies are petitiveness in the paradigm transition, they must be made aware collocated in a particular area (industrial complex, etc.), cooperaton of the potential and benefits of low-carbon, green growth and man- and strategic alliances between enterprises become easier. agement in a low-carbon economy, i.e. ‘Green Factory’ management.

Home-grown innovation The Network for Drugs, Diagnostics, Vaccines and Traditional Medicines Innovation (ASEAN-NDI) brings together researchers from 10 ASEAN countries to create products that combat diseases like tuberculosis (TB), malaria, dengue, and parasitic infections. For more information, contact: Bernadette Ramirez World Health Organization E-mail: [email protected]

60 TECH MONITOR • Apr-Jun 2016 Technology Offers

Chitin and chitosan Advantages Description Sugarcane juice powder is a novel substitute to replace the Chitin and chitosan are important byproducts form the shell of commercially available soft drinks that contain only sugar, artificial shellfishes. Chitin is the most important organic constituent of the chemicals, colours and flavouring agents and devoid of nutrients.

INDIA exoskeletal material of invertebrates and the important economi- Environmental Aspects ▼ cal source of this material is the shrimp processing industry. Chitin Cleaner production and its derivatives, chitosan find various industrial applications Development Status like, biotechnology, food processing, pharmacy and medicine. Pilot plant, Commercial prototype, Fully commercialized Advantages Transfer Terms Chitin and its derivatives, particularly chitosan find industrial ap- Consultancy, Technical services, Technology licensing plication in various fields namely flocculation, paper making, tex- tile printing and sizing, ion exchange chromatography, removal of For the above three offers, contact: metal ions from industrial effluents, manufacture of pharmaceu- Central Institute of Fisheries Technology, CIFT Junction, ticals and cosmetics and as an additive in food industry. Matsyapuri, Willingdon Island Cochin 682029, India Environmental Aspects Tel: 00914842666845 Waste utilization E-mail: [email protected] Development Status Pilot plant, Fully commercialized Herbal pesticide Description Transfer Terms The technology provides a sprayable biopesticidal composition Consultancy, Technology licensing comprising Photorhabdus luminescens for controlling and eradicating various agricultural pests. It is for the first time that the Retort pouch technology insecticidal activity of P. luminescens is used without its symbiotic Description carrier nematode. In the present technology the actively growing The technology relates to a ready-to-serve fish curry in retortable cells of P. luminescens are encapsulated in sodium alginate beads pouch. The technology provides a method for preparing the and examined for their ability to infect insect hosts. Several ready-to-serve fish curry in retortable pouch with excellent laboratory and field testing programme were carried out to storage stability and quality with a shelf life of more than one evaluate and assess the product. year at ambient temperature. Advantages Advantages l Better alternatives to the conventional chemical compositions. The technology provides a method for preparing the ready-to- l Extremely effective in controlling the spread ofCeratovacuna serve fish curry in retortable pouch with excellent storage stability langiera. and quality: l Effective for both soil and aerial applications. l The ready-to-serve fish curry is thermal processed and do not l Useful for crops such as cabbage, cotton, pulses, peas, sugar- require any further processing before consumption. cane, bamboo, grapes, citrus, mango and guava. l Capable of being applied with commonly used agricultural l The thermal processing conditions have been standardized for this product in order to make it safe for consumers equipment like sprayers and dusters. l Results are comparable to chemical insecticides. Environmental Aspects l Environment friendly. Energy efficiency Development status Development Status Laboratory model Pilot plant, Fully commercialized Legal Protection Transfer Terms Patent applied for Consultancy, Technical services, Technology licensing Transfer Terms Sugarcane juice powder technology Technology licensing Description Contact: A process for preparation of spray dried sugarcane juice pow- Skyquest Ventures der/granule formulation. It is a general food product. The spray 501, Krishna Complex, dried sugarcane juice possesses consumer acceptable qualities Opp. Devashish School, and commercial value. Bodakdev, Ahmedabad 380054, India

TECH MONITOR • Apr-Jun 2016 61 Technology Offers

Tel: +91 79 40054111 L(-) Malic acid production technology E-mail: [email protected] Description Gel-o-fuel The new technology of the Hungarian leading biotechnology centre produces only the biologically active L(-) form. This new Description biosynthesis process of L(-) malic acid has proved to be more effi- NCL scientists have developed a polymer based gel that can absorb cient and cost effective than the presently used ones. organic solvents like methanol, ethanol etc. and can act as a porta- ble fuel source. The gel can be polymerized in situ from the selected Advantages monomers and does not require any external gelling agent. This technology has some significant advantages in comparison Advantages with the traditional fermentation and chemical production. Firstly, l Effective, flexible, compact source of fuel. downstream operations become cheaper by the high conversion rate l No soot, pleasant blue flame. and lack of bypass products. Secondly, the very intensive technology l Higher burning efficiency. decreases the investment expenditures. Thirdly, it is an environment l Existing gels use a commercial polymer (expensive) while friendly production, which does not have any effect on human health. Gel-o-fuel uses cheaper, easily available raw-materials. Environmental Aspects l Liquids that is trapped in the 3D matrix of the gel is turned in Cleaner production to soft solids-easy and safe to transport. Development status Development Status Laboratory model Laboratory model Transfer Terms Legal Protection Technology licensing, Research partnerships Patent Transfer Terms Metal reclamation technology in Technology licensing electroplating

Titanium dioxide nano needles Description HUNGARY Description Our client is a SME in Hungary. It can be used to recover the metal NCL’s technology involves a one-step electrochemical process for waste, which arises during the silver-, copper-, tin-, nickel-, eventu- ▼ ally zinc plating process and it can be recycled into the electroplat- the synthesis of pure rutile Titanium dioxide (TiO2) nanoneedles, with high aspect ratio, at room temperature. Nanoneedles with ing process. The investment returns in 3 or 4 years. aspect ratio of =10 can be produced with very good control over Advantages the morphology of the resulting TiO2. l an economical method, the investment returns in 3 or 4 years Advantages in a medium-sized enterprise, l Less energy intensive (process carried out at room l an environmental friendly method, dangerous emission temperature) (quantity of galvanic sludge) can be radically reduced, l Ability to synthesize phase-pure rutile TiO2 l the metal loss of the electroplating can be reduced to 1-2 %, l Reduced time for synthesis (as this process avoids any forma- l costs of deposition of the dangerous waste (galvanic sludge) tion of intermediate amorphous powder or anatase phase and can be reduced,

hence doesn’t need heat treatment to from rutile TiO2) l the equipment works automatically, expensive labour force is l Easier, cheaper, quicker process (when compared to previous not necessary. methods of synthesis) Environmental Aspects Development status Waste utilization Laboratory model Development status Legal Protection Fully commercialized Patent Legal Protection Transfer Terms Know-how Technology licensing Transfer Terms Technology licensing For the above two offers, contact: National Chemical Laboratory (NCL), A208, PAML Building, For the above two offers, contact: Dr Homi Bhabha Road, Pune 411007, India H-6701 PO Box 1191. Szeged, Hungary Tel: 91-20-25902982 Tel: +36-62/562-782 E-mail: [email protected] E-mail: [email protected]

62 TECH MONITOR • Apr-Jun 2016 Technology Requests

Proper utilization of CO2 from gas fields Copper sulphate from copper scrap and Description waste We need investment to utilize properly a silent derivative from the Description oil and gas field (4% derivative), assumed a remarkable printing We need consultancy for Copper Sulphate manufactured from ink will be possible to produce from this wastage and also indi- Copper Scrap / waste / Ash. rectly help to make a green environment. Area of Application Area of Application Many sectors including Chemical industries Environment Project Type BANGLADESH Studies Available Start-up ▼ Environmental Impact Studies (EIA/EIS) Assistance sought from potential partner Project Type Turnkey supply of plant and machine Start-up Contact: Mr. J J Patel, 211, Akshat Tower, Nr Pakwan S G Highway, Bodakdev Contact: Ahmedabad, India, 380054 Seek Investor Mirpur, Dhaka, Bangladesh 1216 Tel: 09904809004 Tel: 008801710962792 E-mail: [email protected] E-mail: [email protected] Full cereal and health bar extrusion line Medical disposables Description Description We are a company that is looking at setting up an entire cereal Medical disposables (surgical dressing) flakes extrusion line. At the next stage we will be setting up the Area of Application same for health bars. Health and medical Area of Application Project Type

INDIA Food processing equipment Expansion/Modernization ▼ Project Type Contact: Start-up Drug Authority Contact: Near Mandi Samitte, Moradabad Road, Mannagar, Kanth, Kottaram Agro Foods Moradabad, India 244501 No.9 &10, 3’rd Cross, Muneshwara Block, Harlugatte village, Kudlu Tel: 05912220061 Gate, Bangalore, India 560068 Fax: 05912220061 Tel: 00919686202763 E-mail: [email protected] E-mail: [email protected] Technologies and products to produce Micropropagation of potato cultivation healthier, well styled hair Description Description We need technology for micropropagation potato cultivation. We are working with a leading manufacturer of personal care Area of Application devices that is searching for truly innovative technologies and Agriculture products to produce healthier, well styled hair. Studies Available Area of Application Feasibility report Hair care Project Type Transfer Terms Start-up Joint venture, Technology licensing Assistance sought from potential partner Contact: Yes Strategic Allies Contact: 113 High Street, Berkhamsted, United Kingdom, HP4 2DJ

ROC Tel: 004401442860634 KINGDOM UNITED CD 149 Salt Lake, Kolkata- 700064, West Bengal, India, 700064 E-mail: [email protected] Tel: 918334006710 E-mail: [email protected] ▼

TECH MONITOR • Apr-Jun 2016 63 PUBLICATIONS from APCTT

PERIODICALS (Free access at www.techmonitor.net) q Asia Pacific Tech Monitor (4 issues/year) (e-version) q VATIS Update (4 issues/year) Biotechnology (e-version) New and Renewable Energy (e-version) Food Processing (e-version) Ozone Layer Protection # (e-version) Waste Management (e-version)

Indian Rupees* US Dollars* BOOKS (India, Bhutan and Nepal) q Managing Innovation for the New Economy: Training Manual, 2002 1,000.00 50.00 Volume 1: How to Guide & Quick reference materials Volume 2: Articles & Lectures q Regional Capacity-building for the Adoption of ISO-14000 and 600.00 30.00 Transfer of Environmentally Sound Technology: Training Manual, 2000 q Small Rural Industries in the Asia Pacific Region: Enhancement of 600.00 30.00 Competitiveness of Small Rural Industries in a Liberalized Economic Environment and the Impact of Poverty Alleviation, 2000 q Technology Transfer and Technological Capacity-building in Asia and the Pacific ¦ Volume 1: Big Countries and Developed Economies, 1999 600.00 30.00 ¦ Volume 2: ASEAN, NIEs, SAARC and the Islamic Republic 600.00 30.00 of Iran, 1999 ¦ Volume 3: Least Developed and Pacific Island Countries and 600.00 30.00 Economies in Transition, 1999 ¦ Volume 4: Emerging Issues in Regional Technological Capability- 600.00 30.00 building and Technology Transfer, 1999 q Rural Industrialization as a Means of Poverty Alleviation: Report of 600.00 30.00 the Regional Seminar on the Enhancement of Partnerships among Governmental, Non-governmental and Private Sector Entities for the Promotion of Rural Industrialization for Poverty Alleviation, 1999 q Institutional Development for Investment Promotion and Technology 500.00 25.00 Transfer, 1999 q Ozone Depletion Substances Phase-out Technologies: Problems & 300.00 15.00 Issues on Technology Transfer, Absorption and Generation, 1998 q Development and Utilization of S&T Indicators: Emerging Issues in 300.00 15.00 Developing Countries of the ESCAP Region, 1998 q ODS Phase-out: A Guide for Industry, 1998 500.00 25.00 q Proceedings of the Consultative Meeting on Technology Management 800.00 40.00 Education and Training for Developing Countries, 1997

Notes: Amount less than Rs 500 should be sent through a demand draft only. Otherwise, payment should be made by cheque/demand draft/ UNESCO coupon in favour of the Asian & Pacific Centre for Transfer of Technology, payable at New Delhi. # Six issues per year. A print version for distribution to a select target group is supported by the Ozone Cell, Ministry of Environment & Forests, Government of India. * Amount to be sent to APCTT with the order for covering costs and handling charges.