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REPUBLIC OF INDONESIA AGENCY FOR THE ASSESSMENT AND APPLICATION OF TECHNOLOGY BOGOR AGRICULTURAL UNIVERSITY BANDUNG INSTITUTE OF TECHNOLOGY
REPUBLIC OF INDONESIA PREPARATORY SURVEY
ON NEW ACADEMIC RESEARCH CLUSTER PROJECT
IN
INDONESIA
FINAL REPORT
MARCH 2014
JAPAN INTERNATIONAL COOPERATION AGENCY
Chiyoda Corporation
Mitsubishi Corporation
Battelle Japan
Nippon Koei Co., Ltd.
KRI International Corporation OS
JR
14-017
0
Currency Convertion (January 2014)
Exchange Rare: US $1 = JPY 104.71
US$1 = Rp.12,180
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PREPARATORY SURVEY ON
NEW ACADEMIC RESEARCH CLUSTER PROJECT
IN INDONESIA
Draft Final Report
Table of Contents
Table of Contents ............................................................................................................... i
List of Abbreviation ....................................................................................................... viii
Executive Summary ....................................................................................................... xvi
Introduction: Present Situation, Problem Areas and Necessity of New Academic
Research Cluster ............................................................................................................... 1
Chapter 1. Competitiveness Analysis for Indonesian Biocluster and Survey for
Industrialization Promotion ............................................................................................ 14
1.1 Overview ................................................................................................................................... 14
1.1.1 Background on New Academic Research Cluster Project on Bioresources ....................... 14
1.1.2 Why University Research Park Development Matters for Bioresources Development ..... 15
1.2 Competitiveness Analysis for Indonesian Biocluster ................................................................ 18
1.2.1 Pharmaceutical Industry Platform ...................................................................................... 18
1.2.2 Agriculture and Food Platform .......................................................................................... 22
1.2.3 Industrial Bioproducts Platform ......................................................................................... 25
1.3 Survey of High Potential Sector for Research and Investment ................................................. 27
1.3.1 Approach to Informing Identification of Targets of Opportunity for Industrialization ...... 27
1.3.2 Pharmaceutical Industry Platform ...................................................................................... 28
1.3.3 Agriculture and Food Platform .......................................................................................... 34
1.3.4 Industrial Bioproducts Platform ......................................................................................... 37
1.4 Research Subjects ..................................................................................................................... 40
1.4.1 Agency for the Assessment and Application of Technology (BPPT) ................................. 41
1.4.2 Bogor Agricultural University (IPB) .................................................................................. 46
1.4.3 Bandung Institute of Technology (ITB) ............................................................................. 51
1.5 Operation and Management Models for R&D: Best Practices to Inform NARC Activities ..... 57
1.5.1 Stage 1: Awareness and Relationship Building Among and Between Industry and
Academia .................................................................................................................................... 58
1.5.2 Stage 2: Project-driven, One-on-One Industry-University Applied Research and
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Technology Development Mechanisms ...................................................................................... 62
1.5.3 Stage 3: Strategic Partnering to Address a Broad Transformative Initiative ...................... 65
1.6 Commercialization Models: Best Practices to Inform NARC Activities .................................. 70
1.6.1 Importance of Going Beyond Technology Transfer with Complementary Technology .... 70
1.6.2 Incubation Services are Critical ......................................................................................... 72
1.6.3 Incentives for Start-ups and SME Strategy ........................................................................ 73
1.6.4 Proactive Marketing and Outreach..................................................................................... 73
Chapter 2. Information Gathering and Analysis of Existing, Preceding and Similar
Clusters ........................................................................................................................... 75
2.1 Examples of Clusters in Japan, Asia, Europe, and USA ........................................................... 75
2.1.1 Examples of Clusters in Asia ............................................................................................. 75
2.1.2 Example of Biocluster in Japan ....................................................................................... 184
2.1.3 Example of Biocluster in Europe and the US .................................................................. 195
2.2 Investment Trend of Bioindustry Capitals .............................................................................. 198
2.2.1 Investment and R&D Activities Trend of the World in Biopharmaceutical .................... 198
2.2.2 Investment Trend of Japanese Bioindustry Companies and Institutions ......................... 202
2.3 Best Practice of Successful Cluster Development Overview .................................................. 204
2.3.1 Agriculture and Food Oriented Clusters .......................................................................... 205
2.3.2 Biorefining and Biofuels Oriented ................................................................................... 208
2.3.3 Biopharmaceutical Products Oriented Clusters................................................................ 213
2.4 Batam Polytechnic .................................................................................................................. 217
2.4.1 Outline of Batam Polytechnic .......................................................................................... 217
2.4.2 Batam Techno Park .......................................................................................................... 217
Chapter 3. Legal Framework ........................................................................................ 219
3.1 Legal Background ................................................................................................................... 219
3.1.1 Legal Basis of the Project ................................................................................................ 219
3.1.2 Legal Capacity of BPPT and State Universities as NARC Project Implementation
Agencies.................................................................................................................................... 219
3.1.3 Legal Issues on Project Sites ............................................................................................ 223
3.1.4 Other Legal Issues ............................................................................................................ 224
3.1.5 Issues of Current Legal Status ......................................................................................... 225
3.2 Legal Issues on PPP Scheme with Subsidy ............................................................................. 226
3.2.1 Applicability of PPP Regulation ...................................................................................... 226
3.2.2 Legal Issues on PPP Procurement .................................................................................... 227
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3.3 Legal Issues on Hybrid Scheme .............................................................................................. 229
3.3.1 Applicability of PR54/2010 and GR6/2006 ..................................................................... 229
3.3.2 Legal Issues on Hybrid Procurement ............................................................................... 230
3.4 Alternative Legal Basis ........................................................................................................... 231
3.4.1 Joint Venture between Government and Private Entities ................................................. 231
3.4.2 Special Economic Zone (SEZ) Framework ..................................................................... 232
Chapter 4. Incentive Policy .......................................................................................... 235
4.1 Overall Incentive Policy for Research and Industrialization .................................................. 235
4.2 Examples of Incentives in Other Countries ............................................................................ 241
4.2.1 Singapore ......................................................................................................................... 241
4.2.2 South Korea ..................................................................................................................... 244
4.2.3 Taiwan .............................................................................................................................. 245
4.2.4 India ................................................................................................................................. 249
4.3 Examples of Necessary Incentives (Incentives for Start-ups and SME Strategy) .................. 251
4.4 Present Situation of Bioresource Use and Intellectual Property in Indonesia ......................... 258
4.4.1 Present Situation of Bioresource Use in Indonesia .......................................................... 258
4.4.2 Present Situation of Intellectual Property in Indonesia .................................................... 267
4.5 Direction of Incentives from the Viewpoint of Target Market ................................................ 275
4.5.1 Health Products Platform ................................................................................................. 276
4.5.2 Biofuels and Bio-based Chemicals Platform ................................................................... 280
4.5.3 Agriculture and Food Platform ........................................................................................ 281
4.5.4 Responses towards this Platform ..................................................................................... 283
4.6 Considerations of the Incentive Scheme in Indonesia ............................................................ 283
Chapter 5. Demand Creation and Introduction of Company to Indonesia ................... 287
5.1 Examination of the Field of Tenant Target .............................................................................. 287
5.2 Major Research Theme Using Bio Diversity .......................................................................... 288
5.2.1 Study Theme (Using Bio Diversity) of BPPT .................................................................. 288
5.2.2 Study Theme (Using Bio Diversity) of IPB ..................................................................... 290
5.2.3 Study Theme (Using Bio-Diversity) of ITB .................................................................... 295
5.3 Interviews to Enterprises and Search for Possible Tenants Candidates .................................. 298
5.3.1 Preparation and Result Evaluation of Potential Tenants List ........................................... 298
5.3.2 Companies Interview Results........................................................................................... 303
5.4 Marketing Activity through ―BIO JAPAN 2013‖ ................................................................... 307
5.4.1 Outline of ―BIO JAPAN 2013‖ ........................................................................................ 307
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5.4.2 Marketing Activities of JICA Study Team ....................................................................... 308
5.5 Qualitative Market Survey about ―Private Sector‘s Interest to be Involved in NARC‖ ......... 310
5.5.1 About Survey ................................................................................................................... 310
5.5.2 Summary of Results and Fact Findings ........................................................................... 311
5.6 Bio Venture and Small and Middle Enterprises (SMEs) Status in Indonesia.......................... 314
5.6.1 Situations of Bio Ventures and SMEs in Indonesia .......................................................... 314
5.6.2. Policy for Promotion of BioVentures .............................................................................. 314
5.7 Interview Results and Potential Tenant Candidates ................................................................ 316
5.7.1 Possible Tenants for NARC ............................................................................................. 316
5.7.2 Anchor Tenants ................................................................................................................ 316
5.7.3 Demand Risks and Points to Reduce Risks...................................................................... 317
5.7.4 Current situation in Japanese Life science enterprises ..................................................... 319
Chapter 6 Market Forecast ........................................................................................... 321
6.1 Investment Trend for Research and Development of Promising Sector ................................. 321
6.1.1 Life Science Market Trend in the World .......................................................................... 321
6.1.2 Outlook of Japanese Pharmaceutical Manufacturing Industry......................................... 323
6.1.3 Indonesian Health Care Market ....................................................................................... 326
6.2 Analysis on Competitive Position of Indonesian Bio Cluster ................................................. 328
6.2.1 Technological Accumulation in Herbal Medicines .......................................................... 328
6.2.2 Superiority on Vaccination Production in Indonesia ..................................................... 329
6.2.3 Huge Market in Indonesian Food Industry ...................................................................... 330
6.2.4 World Largest Palm Oil Producer .................................................................................... 330
6.2.5 Summary of Indonesian Bio Cluster Superiority Analysis .............................................. 331
6.3 Setting-up of Project Scale ...................................................................................................... 332
6.3.1 Installation Procedure of Project Scale ............................................................................ 332
6.3.2 Incubation Center Configuration ..................................................................................... 332
6.3.3 Estimation of the Number of Researchers in Venture Companies ................................... 334
6.3.4 Study of Research Clusters .............................................................................................. 344
6.3.5 Demand Forecast for Research Center ............................................................................. 348
Chapter 7. Facility Planning, Operation and Project Cost Estimation ......................... 351
7.1. Site Planning .......................................................................................................................... 351
7.1.1 Sites of 3 Counterparts ..................................................................................................... 351
7.1.2 BPPT-NARC .................................................................................................................... 353
7.1.3 IPB-NARC ....................................................................................................................... 355
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7.1.4 ITB-NARC ....................................................................................................................... 360
7.2 Condition for Facility Planning............................................................................................... 362
7.2.1 Standard Room Size ......................................................................................................... 362
7.2.2 Study of Incubation Center Size ...................................................................................... 362
7.2.3 Total Required Area for NARC Laboratories................................................................... 362
7.2.4 Rentable Room and Total Building Area Study ............................................................... 362
7.2.5 Necessity of P2 and P3 level Laboratory ......................................................................... 363
7.3 Preliminary Design ................................................................................................................. 364
7.3.1 Construction Planning ...................................................................................................... 364
7.3.2 Facility Planning .............................................................................................................. 372
7.4 Main Instruments in Common Laboratory .............................................................................. 376
7.5 Unit Price Setting of Land and Rental Laboratory .................................................................. 378
7.5.1 Unit Price of Land Leasing Rate ...................................................................................... 378
7.5.2. Unit Price of Rental Laboratory ...................................................................................... 379
7.6 Operation Planning ................................................................................................................. 380
7.6.1 Biocluster Operation ........................................................................................................ 380
7.6.2 Operating Structure .......................................................................................................... 381
7.6.3 Organization ..................................................................................................................... 381
7.6.4 Policy of Incentives for Tenants ....................................................................................... 384
7.6.5 Tenants Support ................................................................................................................ 386
7.7 Project Cost Estimation........................................................................................................... 388
7.7.1 Cost Estimation of Construction ...................................................................................... 388
7.7.2 Cost Estimation of Operation and Maintenance (Outsourcing) ....................................... 389
7.7.3 Income Estimation of Laboratory Rental Fee and Land Leasing Fee .............................. 394
Chapter 8. Project Structure ......................................................................................... 396
8.1 Basic Project Structure ............................................................................................................ 396
8.1.1 Research Activity Partnership .......................................................................................... 396
8.1.2 NARC Facility Development and Operation ................................................................... 396
8.2 Project Scheme Alternatives ................................................................................................... 398
8.2.1 Alternative 1: PPP Scheme ............................................................................................... 398
8.2.2 Alternative 2: Hybrid Scheme .......................................................................................... 400
8.2.3 Alternative 3: Concession Scheme ................................................................................... 402
8.2.4 Alternative 4: Outsourcing Scheme ................................................................................. 403
8.3 Evaluation of Project Scheme Alternatives ............................................................................. 405
8.3.1 Comparison of Project Scheme Alternatives .................................................................... 405
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8.3.2 PPP Scheme and Hybrid Scheme ..................................................................................... 409
8.4 Role and Responsibilities of Project Partners ......................................................................... 413
8.5 Management of NARC Facilities ............................................................................................ 416
8.5.1 Tenant Relations ............................................................................................................... 416
8.5.2 Profit Sharing for Public Counterparts ............................................................................. 419
8.6 Conclusion and Recommendations on Project Scheme Discussion ........................................ 420
8.7 Stakeholder Analysis ............................................................................................................... 421
8.7.1 Counterpart Organizations (BPPT, IPB and ITB) ............................................................ 421
8.7.2 Financial Conditions of Counterpart Organizations ......................................................... 423
8.7.3 Other Organizations Concerned ....................................................................................... 425
8.8 Implementation Program ........................................................................................................ 427
8.8.1 Innovation Ecosystem as Supreme Implementation Program Target ............................... 427
8.8.2 Biocluster Implementation ............................................................................................... 434
Chapter 9. Financial and Economic Analysis ............................................................... 438
9.1 Methodology ........................................................................................................................... 438
9.2 General Assumptions of the Financial Analysis and Economic Analysis ............................... 439
9.3 Financial Analysis ................................................................................................................... 440
9.3.1 Anticipated Revenue ........................................................................................................ 440
9.3.2 Estimated Expenditure ..................................................................................................... 442
9.3.3 Financing Condition ......................................................................................................... 444
9.3.4 Conditions of Accounting, Tax and Incentives ................................................................ 445
9.3.5 Result of Financial Analysis ............................................................................................ 446
9.3.6 Sensitivity Analysis .......................................................................................................... 448
9.4 Economic Analysis.................................................................................................................. 449
9.4.1 Basic Assumptions Employed for the Analysis ............................................................... 449
9.4.2 Economic Cost of the Project ........................................................................................... 450
9.4.3 Economic Benefit of the Project ...................................................................................... 451
9.4.4 Results of Economic Analysis .......................................................................................... 454
Chapter 10. Risk Analysis and Mitigation Measures ................................................... 460
10.1 Methodology of Risk Analysis .............................................................................................. 460
10.2 Draft Risk Matrix under PPP Scheme and Hybrid Scheme .................................................. 460
10.3 Important Risks and Measures for Risk Mitigation and Reduction ...................................... 461
10.4 Financial Impact of Major Risks ........................................................................................... 464
10.5 Contracts Necessary for Project and Major Contents of Contracts ....................................... 466
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10.5.1 PPP Project ..................................................................................................................... 466
10.5.2 Hybrid Project ................................................................................................................ 468
Chapter 11. Environmental Impact Survey .................................................................. 475
11.1. Regional Characteristic Analysis at 3 Sites .......................................................................... 475
11.1.1 Proposed Site for BPPT-NARC ..................................................................................... 475
11.1.2 IPB-NARC ..................................................................................................................... 478
11.1.3 ITB-NARC ..................................................................................................................... 481
11.2. Examination of the Condition to be Given for Construction and Operation of NARC ....... 484
11.2.1 Preliminary Examination of Possible Environmental and Social Impacts ..................... 484
11.2.2 Scoping of Possible Environmental and Social Impacts ................................................ 485
11.2.3 Required Actions in Further Step ................................................................................... 496
Chapter 12. Implementation Procedure and Schedule.................................................. 510
12.1 Implementation Procedure ................................................................................................ 510
12.1.1 PPP Scheme ................................................................................................................... 510
12.1.2 Hybrid Scheme ............................................................................................................... 513
12.1.3 Comparative Summary .................................................................................................. 515
12.2 Implementation Schedule ...................................................................................................... 516
Chapter 13. Ex-ante Evaluation of Project Effects ....................................................... 519
13.1 Quantitative Effects .............................................................................................................. 519
13.2 Qualitative Effects ................................................................................................................ 520
Appendix ...................................................................................................................... 521
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List of Abbreviation
A*STAR Agency for Science, Technology and Research (Singapore)
AAALAC Association for Assessment and Accreditation of Laboratory Animal Care
International (Taiwan)
ABLE Trade Association for Biotech Industry (India)
AIST National Institute of Advanced Industrial Science and Technology (Japan)
AMDAL Analisis Mengenai Dampak Lingkungan: Environment Impact Assessment
APBN Anggaran Pendapatan dan Belanja Negara (Indonesia)
API Active pharmaceutical ingredients
ASEAN Association of Southeast Asian Nation
AsiaSEED Asia Science Education for Economic Development, Registered Non‐Profit
Organization Asia SEED
ATP Pertamina Advance Technology Division (Indonesia)
BABE Bioavailability & Bioequivalence
BAC PT. Bogor Anggana Cendekia, IPB (Indonesia)
BAKOSURTANAL Badan Informasi Geospasial: National Coordinating Agency for Surveys and
Mapping (Indonesia)
BAPETEN Badan Pengawas Tenaga Nuklir: Nuclear Energy Regulatory Agency
(Indonesia)
BAPPENAS Badan Perencanaan Pembangunan Nasional: National Development
Planning Board (Indonesia)
BATAN Badan Tenaga Nuklir Nasional: National Nuclear Energy Agency
(Indonesia)
Biotech Corp Malaysian Biotechnology Corporation Sdn Bhd
BIOTEK National Biotechnology Executive Board (Malaysia)
BIPP Biotechnology Industry Partnership Program (India)
BIRAC Biotechnology Industry Research Assistance Council (India)
BKPM Badan Koordinasi Penanaman Modal: Indonesian Investment Coordinating
Board
BMS Biomedical Sciences
BOT build-operate-transfer
BPIPO Biotechnology & Pharmaceutical Industries Program (Taiwan)
BPPT Badan Pengkajian dan Penerapan Teknologi: Agency for the Assessment and
Application of Technology (Indonesia)
BRC Biopharmaca Research Center (Indonesia)
BReAD Baking Research and Development Unit, IPB (Indonesia)
BSL Biosafety Level
BSN Badan Standardisasi Nasional: National Standardization Agency (Indonesia)
BSRC Biomedical and Sport Research Center (Indonesia)
BT biotechnology
ix
BTO build-transfer-operate
BUMD Badan Usaha Milik Daerah (Indonesia)
BUMN Badan Usaha Milik Negara (Indonesia)
CAGR Compound Annual Growth Rate
CCMB Centre for Cellular and Molecular Biology (India)
CED Center for Entrepreneurial Development）Center for Entrepreneurial
Development
CEO Chief Executive Officer
CFD computational fluid dynamics
CFIC Center for Federal Drug Administration and Industry Collaboration
CFTRI Central Food Technology Research Institute (India)
cGMP current Good Manufacturing Practice
CiBOR Center of Innovation for Biomaterials in Orthopedic Research
CIMIT Center for Integration of Medicine & Innovative Technology Technology）
CIO Chief Incubation Officer
CoEs Centers of Excellence
CPI Consumer Price Index
CREATA Center for Research on Engineering Application in Tropical Agriculture, IPB
(Indonesia)
CRI Creative Research Initiative (Korea)
CROs contract research organizations
CRP Competitive Research Program (Singapore)
CSA Clinician Scientist Award (Singapore)
CSIR Council of Scientific and Industrial Research (India)
CTC Centre for Technology Commercialization
DBT Department of Biotechnology (India)
DCB Development Center for Biotechnology (Taiwan)
DEI Development and Expansion Incentive (Singapore)
DEN Dewan Riset National: National Research Board (Indonesia)
DFBO design, finance, build and operate
DHF Design History File
DNA deoxyribonucleic acid
DPR Dewan Perwakilan Rakyat: parliament (Indonesia)
DSCR Debt Service Coverage Ratio
DSI Data Storage Institute (Singapore)
DST Department of Science and Technology (India)
DTD Double Tax Deduction (Singapore)
DTP diphtheria-tetanus-pertussis
ECER East Coast Economic Region (Malaysia)
EDB Economic Development Board (singapore)
EIA environmental impact assessment
EIF European Investment Fund
e-KTP National Electronic ID Card (Indonesia)
x
ELSI Ethical, Legal and Social Implications
Equity-IRR Equity-Internal Rate of Return
ERA European Research Area
ESVF Early-Stage Venture Funding Scheme (Singapore)
EWT Environmental and Water Technologies
FDA Food and Drug Administration (US)
FDI Foreign Direct Investment
FIIA Foreign Investment Implementation Authority (India)
FIRR Financial Internal Rate of Return
FMD Facilities Management Department
FTC Fast Track Committee (India)
GCA Government Contracting Agency
GCIC Global Cardiovascular Innovation Center (Cleveland Clinic in the US）
GDP Gross Domestic Product
GDP PPP GDP by Purchasing Power Parity
GIIC Greenland International Industrial Center (GIIC)
GLP Good Laboratory Practice
GMP Good Manufacturing Practice
GPP Geothermal Power Plant
GR Government Regulation (Indonesia)
HBC Herbal Biotech Centre (Malaysia)
HbSAg hepatitis B virus antigen
HBSP Hsinchu Biomedical Science Park (Taiwan)
HepB Hepatitis B
HGB Hak Guna Bangunan: Right for Construction
Hib hepatitis B and Haemophilius influenzae type b
HIV Human Immunodeficiency Virus
HNTE High and New Technology Enterprise (India)
HPI Heartland Plant Innovations
HPLC high performance liquid chromatography
HQ headquarter
HSP Hsinchu Science Park (Taiwan)
HSR-CRGs Health Services Research Competitive Research Grants (Singapore)
IA Investment Allowance (Singapore)
ICRISAT International Crop Research Institute for Semi-arid Tropics (India)
ICT Information and Communication Technology
IDEC Yokohama Industrial Development Corporation (Japan)
IDM Interactive and Digital Media
IDMA Indian Drug Manufacturers Association (India)
IDP Incubator Development Program (Singapore)
IICT Indian Institute of Chemical Technology (India)
IICT Innovation Incubation Centre
IIT Indian Institute of Technology
xi
ILSC Institute for Life Sciences Centre (India)
IME Institute of Microelectronics (Singapore)
IMRE Institute of Materials Research and Engineering (Singapore)
INSINAS Insentif Riset Sinas (Funding support from the National Research Incentive)
(Indonesia)
INTECH Initiatives in New Technology (Singapore)
IP Intellectual Property
IPB Bogor Agricultural University
IPR Intellectual Property Right
ISO International Organization for Standardization
IT Information Technology
ITB Bandung Institute of Technology
ITTO International Tropical Timber Organization
IVD in vitro diagnostics
Jabodetabek Greater Jakarta: Jakarata, Bogor, Depok, Tanggerang, and Bekasi
JBA Japan Bioindustry Association
JJC Jakarta Japan Club
JNCASR Jawaharlal Nehru Centre for Advanced Scientific Research (India)
JV Joint Venture
KA-ANDAL Kerangka Acuan-Analisis Dampak Lingkungan: TOR for EIA
KABB Kansas Alliance for Bioenergy and Biorefining
KBA Kansas Bioscience Authority
KDDF Korea Drug Development Fund
KIST Korean Institute of Science and Technology
KKPPI Committee on Policy for the Acceleration of Infrastructure Development
(Indonesia)
KOTRA Korea Trade-Investment Promotion Agency
KRIBB Korea Research Institute of Bioscience & Biotechnology
KRW Korean Won
LAN Local Area Network
LAPAN Lembaga Penerbangan dan Antariksa Nasional: National Institute of
Aeronautics and Space (Indonesia)
LAPTIAB Center for Technology for Pharmacy and Medical
LC-MS liquid chromatography-mass spectroscopy
LIPI Lembaga Ilumu Pengetahuan Indonesia: Indonesian Institute of Sciences
LP Lembaga Penelitian: Institute of Research, IPB (Indonesia)
LPM Lembaga Pengabdian Masyarakat: Institute of Community Services, IPB
(Indonesia)
LPPM Lembaga Penelitian dan Pengabdian kepada Masyarakat: Institute of
Research and Community Empowerment of IPB (Indonesia)
MAS Marker Assisted Selection
MEC Ministry of Education and Culture (Kementerian Pendidikan dan
Kebudayaan or Kemdikbud) (Indonesia)
xii
MEST Ministry of Education, Science and Technology (Korea)
METI Ministry of Economy, Trade and Industry (Japan)
MEXT Ministry of Education, Culture, Sports, Science and Technology (Japan)
MIT Massachusetts Institute of Technology
MKE Ministry of Knowledge Economy (Korea)
MNC's multinational corporation
MOF Ministry of Finance (Indonesia)
MOST Ministry of Science and Technology (Korea)
MOTIE Ministry of Trade and Industry (Korea)
MP3EI Masterplan Percepatan dan Perluasan Pembangunan Ekonomi Indonesia:
Master Plan for the Acceleration and Extension of the Indonesian Economic
Development (Indonesia)
MPA Metropolitan Priority Area (Indonesia)
MRI magnetic resonance imaging
MSC Multimedia Super Corridor (Malaysia)
MSU Michigan State University (US)
NARC The New Academic Research Cluster
NBC National Biotechnology Committee (Singapore)
NBP National Biotechnology Programme (Singapore)
NBP National Biotechnology Policy (Malaysia)
NBRA National Biotechnology Regulatory Authority (India)
NBTB National Biotechnology Board (India)
NCBC North Carolina Biotechnology Center
NCER Northern Corridor Economic Region (Malaysia)
NCP National Contact Point (Russia)
NHRI National Health Research Institutes (Taiwan)
NMITLI New Millennium Indian Technology Leadership Initiative
NMR Nuclear Magnetic Resonance
NPO Nonprofit Organization
NRA National Research Agenda
NRDP National R&D Program (Korea)
NRE National Lab Focused on Renewable Energy (US)
NRF National Research Foundation (Singapore)
NRL National Research Laboratory (Korea)
NSC National Science Council (Taiwan)
NTD New Taiwan Dollar
O&M Operation, Maintenance
OCS Office of Chief Scientist (Israel)
OECD Organisation for Economic Co-operation and Development
OGM Operational Guidelines Manual for The Implementation of Public Private
Partnership in Infrastructure Provision (Indonesia)
OPPI Organization of Pharmaceutical Producers of India (India)
OTF Ohio Third Frontier
xiii
P3K Pusat Penelitian dan Pengembangan Kewirausahaan: Enterpreneurship
Research and Development Center, IPB (Indonesia)
PD Presidential Decree (Indonesia)
PE Precision Engineering
PIC Productivity and Innovation Credit (Singapore)
PIs Principal Investigators (Singapore)
PMK Minister of Finance Regulation (Indonesia)
PMT Project Monitoring Team
PPP Public Private Partnership
PPSHB Pusat Penelitian Sumberdaya Hayati & Bioteknologi: Research Center for
Bioresources and Biotechnology, IPB (Indonesia)
PR Presidential Regulation (Indonesia)
PRTR Pollutant Release and Transfer Register
PSIF Private Sector Investment Finance
PT Perseroan Terbatas (Indonesia)
PT. BLST PT. Bogor Life Science and Technolog, IPB (Indonesia)
PT. PBN PT. Pustaka Bhakti Nusantara, IPB (Indonesia)
PTBH BadanHukum: Legal Entity (Indonesia)
PTBHMN BadanHukumMilik Negara: State-Owned legal Entity (Indonesia)
PTBHP BadanHukumPendidikan: Education Legal Entity (Indonesia)
PTBLU BadanLayananUmum: Public Service Entity (Indonesia)
PTNBH Perguruan Tinggi Negeri Badan Hukum: the autonomy in the form of legal
entity (Indonesia)
PTUPT Unit PelayananTeknis: Technical Implementation Unit (Indonesia)
PUSPIPTEK Pusat Penelitian Ilmu Pengetahuan dan Teknologi
R&D research and development
R&TD Research and Technology Development
RDA R&D Tax Allowance (Singapore)
RIEC Research, Innovation & Enterprise Council (Singapore)
RIS Regional Innovation System
RISC Research Incentive Scheme for Companies (Singapore)
RISE R&D Incentive for Start-up Enterprises (Singapore)
RISTEK Kementerian Riset dan Teknologi: Ministry of Research and Technology
(Indonesia)
RITE Research Institute of Innovative Technology for The Earth
RM Malaysian Ringgit
RNA Ribonucleic acid
Rs India Rupee
S&T Science and Technology
SBIRI scheme Small Business Innovation Research Industry (India)
SBRC Surfactants and Bioenergy Research Center
SCORE Sarawak Corridor of Renewable Energy (Malaysia)
SDC Sabah Development Corridor (Malaysia)
xiv
SEAFAST Southeast Asian Food and Agricultural Science and Technology
SEM scanning electron microscopy
SEZ Special Economic Zone (Indonesia)
SFAz Science Foundation Arizona
SFE Supercritical Fluid Extraction
SIC supra incubation center (Taiwan)
SII Statute for Industrial Innovation (Taiwan)
SIMTech Singapore Institute of Manufacturing Technology
SIRO Scientific & Industrial Research Organizations (India)
SME Small & Medium Sized Enterprise
SPC Special Purpose Company
SPRING Standards, Productivity, and Innovation Board (Singapore)
SPRING SEEDS Startup Enterprise Development Scheme (Singapore)
sq. ft. square feet
sq. m. Square meter
SRG Strategic Research Group
STaR Singapore Translational Research
STEM science, technology, engineering and mathematics
STI Science, Technology and Innovation
STSP Southern Taiwan Science Park (Taiwan)
SUI Statute for Upgrading Industries (Taiwan)
TBP Tuas Biomedical Park (Singapore)
TCR Translational & Clinical Research (Singapore)
TDB Technology Development Board (India)
TECS Technology Enterprise Commercialization Scheme (Singapore)
THRIP Technology and Human Resources for Industry Program
TIBS Training in Biotechnology Scheme (Singapore)
TIDCO Tamil Nadu Industrial Development Corporation Ltd. (India)
TLO Technology Licensing Office
TNPCB Tamil Nadu Pollution Control Board (India)
TPM Technology Park Malaysia Corporation Sdn Bhd (TPM)
TPMB TPM Biotech Sdn Bhd (Malaysia)
TRIPS Agreement on Trade-Related Aspects of Intellectual Property Rights
T-UP Technology for Enterprise Capability Upgrading Initiative (Singapore)
UGM Gajahmada University
UKL Upaya Pengelolaan Lingkungan Hidup: environmental management plan
UN ECLAC United Nations Economic Commission for Latin America and the Caribbean
UNESCO United Nations Organization for Education, Science and Culture
UNIDO United Nations Industrial Development Organization
UPL Upaya Pemantauan Lingkungan Hidup: environmental monitoring plan
VAT value added tax
VC venture capital
xv
VDI/VDE Verein Deutscher Ingenieure/Verband Deutscher Elektro-techniker: German
Association of Engineers/Association for Electrical, Electronic
&Information Technologies
VGF Viability Gap Fund (Indonesia)
VLP virus -like particles
WACC Weighted Average Cost of Capital
WHO World Health Organization
YBIRD Yokohama Bio Medical R&D (Japan)
xvi
IndustrialBioproducts
AgriFoodProducts
Health Products
BiomassOil cropsStarch andsugar crops
Pharmaingredients
Phytochemicals
Functional food
Biofuels
Bio-based chemicals
Vaccines
Diagnostics
Herbal medicines
BiopharmaceuticalsValue-added food
Enhanced and new crops
Soil enhancement
Analog foods
Executive Summary
Competitiveness Analysis and Survey for Industrialization Promotion
NARC on Bioresources offers significant industry development platforms for advancing
targeted opportunities for industrialization in Indonesia around university-associated research
parks. In order to gain the maximum impact of the resources invested as well as to clearly
define to industrial partners the value of NARC research parks, it is recommended that particular
attention be given to fostering ―Signature Platforms‖ in key areas of industrial bioscience. It is
anticipated that the developed facilities would facilitate joint research projects between
the research institutions and industry, be able to house industry research operations,
incubate new business ventures based on commercializable technology, and encourage
the growth of a research park environment. Three key Signature Platforms stand out as
high potential sectors for advancing the development of industry collaborations around the new
academic research clusters in bioresources for Indonesia:
-Pharmaceutical platform involving bioprospecting for natural products and herbal
medicines; the production of diagnostics, vaccines and antibiotics; and pharmaceutical raw
materials.
-Agriculture and Food platform involving primary agricultural improvement and
diversification as well as value added food products.
-Industrial bioproducts platform focused on bio-oils, biofuels and biorefining operations
with a particular emphasis on adding-value to palm oil as a principal feedstock.
Bioresource Core Competency Platforms for Indonesia
xvii
As shown in the figure above, each platform provides opportunities for R&D-driven development in
a distinctive set of potential products. However, there is also considerable synergistic overlap
between the platforms, as indicated in the Venn diagram intersections.
Proposed Actions to Advance NARC Industrialization Promotion
Analysis of Indonesia‘s industry position across the industry areas and their associated market
niches leads to a focused set of proposed activities have been identified in consultation with the
three NARC institutions for bioresources. The table below presents the key development
challenges confronting Indonesia in each of the target markets and the proposed actions for the
NARC.
Target
Industry
Platform
Target Market Key Challenges for Indonesia Proposed Actions for NARC
Ph
arm
aceu
tica
l In
du
stry
Pla
tfo
rm
Herbal Medicines
Reaching significant scale in
identification and assessment of herbal
medicines
Improving quality standards in line
with ASEAN harmonization
Increased analytical lab capacity for
identifying and characterizing bio-active
ingredients
More rigorous efficacy studies involving
high-throughput laboratory-based in vitro
studies as well as human-based clinical
studies
Longer term -- Increased synthetic
chemistry capabilities to advance natural
product drug discovery and development
Bio-pharmaceuticals
for Diagnostics,
Vaccines and
Antibiotics
Growing focus on biologics for drug
treatment
Shift to more complex biosimilar
production in generics
Address need for increased capacity for
bio-scale-up facilities and expertise
Offer incentives to further partnerships
with foreign biopharmaceutical
companies at NARC sites – including
relaxation of foreign ownership limits
Pharmaceutical Raw
Materials
More than 90% of raw materials used
to manufacture generic drugs in
Indonesia are imported – so value
added and wealth creation in Indonesia
is low
Very competitive global industry
Increased government R&D funding to
advance competitive advantages for
Indonesia through development of novel
active pharmaceutical ingredients,
innovative formulation technologies or
novel drug delivery methods
Ag
ricu
ltu
re a
nd
Fo
od
Pla
tfo
rm
Agricultural
Improvement &
Diversification
Raising agricultural productivity
Addressing environmental challenges
of soil erosion and climate change
Improved facilities to advance plant
breeding and seed development for
improved and diversified crops
Supporting growing tropical fruits
markets for export growth – improve
post-harvest technology, food safety, pest
and disease control
xviii
Target
Industry
Platform
Target Market Key Challenges for Indonesia Proposed Actions for NARC
Value Added Food
Products
Having local industry keep pace with
growing local demand for healthier
foods
Need for specialized laboratory equipment
as well as scale-up processing
technologies to characterize, separate,
purify and process bio-active chemicals in
crops and developing new
health-promoting food products
Indu
stri
al
Bio
pro
du
cts
Pla
tfo
rm
Palm Oil Bioproducts
Increase value-added activities in
Indonesia beyond milling stage to
generate higher production value
across the full range of bioproduct
development opportunities
Enhance yields of palm oil in
Indonesia
Pilot broader processing of palm oil within
Indonesia
Increase yields through improved
agronomy, fertilizer usage and improved
plant varieties of palm trees
Consider testing and validation facilities
The NARC program envisions investing in the development of Signature Platforms at each
institution focused on applied research and technology commercialization with industry partners.
By providing such unique capabilities, innovation and societal benefit can be accelerated in
support of regional and national the goals.
Legal Framework
Legal Basis of the Project
Since many of Research and Development (R&D) activities are not profitable, the government
supports/incentives are inevitable to promote R&D activities. Therefore, it is important to select
the legal basis which makes it possible for government to provide supports/incentives for the
development/construction of R&D facilities. JICA Study Team proposed two project scheme
alternatives. One is the PPP Scheme with government subsidy and another is Hybrid Scheme
which is the combination of public private investment. The legal basis for the above-mentioned
two project schemes alternatives are as follows:
(1) PPP scheme, based on the Presidential Regulation (―PR‖) No.67 of 2005 (which has been
amended by PR No.13 of 2010 and PR No.56 of 2011),
(2) Hybrid scheme, Presidential Regulation No.54 year 2010 on Government Procurement of
Goods/Services and Government Regulation No.6 year 2006 on State/Regional Assets
Management.
Legal Capacity of BPPT and State Universities as NARC Project Implementation
xix
Agencies
The current PR67/2005(PPP scheme) does not prescribe state university as a Government
Contracting Agency (GCA) for PPP project. If the state university cannot be a GCA, BPPT shall
be the only one GCA under PPP regulation. In this case, the right and obligation of the project
would be shared only between BPPT and SPC under PPP contract. Separately from PPP contract,
BPPT would share the right and obligation with state universities based on the cooperation
agreement. On the contrary, both BPPT and Universities can be a GCG under Hybrid scheme.
Legal Issues on Project Sites
The land of NARC BPPT site is owned by the State. Regarding to the interview to BPPT, the
right to use the land is hold by RISTEK and shall be transferred to BPPT and/or a private
company. RISTEK need prior approval from MOF for the contribution of the land to a private
company. NARC IPB site is owned by the State and IPB is given the right to use the land. IPB
also need prior approval from MOF for the contribution of the land to a private company.
In terms of ITB, the ownership of the land where NARC project is proposed to be conducted is
currently under Bekasi Regency. Bekasi Regency and ITB had the agreement, ―Cooperation
Agreement between Government of Bekasi District and Bandung Institute of Technology about
ITB Campus Development and Education Development Activities, Training Research and
Community Social Responsibility in Bekasi District (Bekasi-ITB Agreement) and ITB shall be
given the right to use the land of Bekasi Regency based on the Bekasi-ITB Agreement.
Bekasi-ITB Agreement prescribes that Bekasi Regency shall hand over the management of land
and building to ITB for the purpose of educational development activities, training research and
community service in Bekasi. However, it does not prescribe about sub-leasing the land to the
third parties. In order for a private company to use the land, Bekasi-ITB Agreements should be
amended before the procurement process would start.
Also, Bekasi-ITB Agreement prescribes that the ownership of the building on the land which
Bekasi lend to ITB shall be transferred to Bekasi Regency. If the NARC facility were owned by
Bekasi Regency, it would be difficult to set the collateral on the NARC facility, which makes
difficult for the private business entity to get finance. ITB need to amend Bekasi-ITB
Agreements in this issue as well to keep the ownership of NARC for the private business entity
during the project period.
Legal Issues on PPP Scheme with Subsidy
PR 67/2005 does not prescribe ―Infrastructure for Innovation and R&D activity‖ as its targeted
infrastructure. Based on the legal review, the list of infrastructures prescribed in PPP regulation
is not conclusive. However, it commented that Ministry of Finance most likely would not
xx
provide VGF unless ―Infrastructure for Innovation and R&D activity‖ would be listed in PR
67/20051. BPPT supported by JICA Study Team prepared the Amendment Proposal to KKPPI
and submitted it to KKPPI. BPPT and Study Team were informed that the concerned
government ministries are currently collecting information for the amendment of PR67/2005.
The actual amendment of PR 67/2005 is scheduled in 2014.
Legal Issues on Hybrid Scheme
In order to implement Hybrid scheme in the project, mainly two types of contracts need to be
made; one is EPC contract for the construction of Incubation and Support Center and another is
BOT contract for DBFO of Research Center (including design of Incubation and Support
Center). It seems to be no legal obstacle for this EPC procurement.
On the other hand, GR6/2006 allows the utilization of state or regional government property for
private as BOT scheme with the following condition.
- The facility which private develop shall provide the public services
- Not funds are provided from State and Regional government‘s budget.
Since the BOT contract of Research Center would provide public services and would not use
require public budget, it would clear the above-mentioned conditions. Also no other major legal
obstacles are found.
(1) Budgeting for Construction of Incubation Center and Support Center
For the hybrid Scheme, not only BPPT but also IPB and ITB can be GCA. If the all parties above
have a role of GCA, each party needs to apply for the budgeting of construction of Incubation
Center and Research Center. If only BPPT would have the role of GCA, only BPPT would apply
for the budget for the construction of above-mentioned facilities. In this case, the assets funded
by APBN (using BPPT‘s budget) will become the State assets (barang milik negara) registered
under BPPT‘s name as the asset user (pengguna barang).
(2) Budgeting for Non-academic Facility for Universities
IPB and ITB (with its status as PTBH) are allowed to propose for funding from APBN for the
implementation of higher education. However, there is no express provision for funding for
non-academic purposes (although generally IPB and ITB are allowed to conduct investment
with commercial motive). It is assumed that IPB and ITB are allowed to propose for APBN
support for its investment as long as the program is approved in the APBN discussion. If the
1 See APPENDIX 3-1 for the Legal Review by HJ.
xxi
investment by IPB and ITB is using the funding from APBN, then the procurement of the goods
and services must follow PR 54/2010 (as amended).
(3) Joint Procurement
In elucidation of PR 54/2010, the joint procurement contract is conducted in order to implement
goods/service procurement, which fund originated from several ministries, government agencies
(BPPT), regional government, government institution (IPB and ITB), with different source of
funds. PR 54/2010 states that the responsibilities for budget in joint procurement contract, is to
be regulated in a certain joint funding agreement between the parties.
(4) Possibility of B to B Contract between GCA and the Private
There is a question if BPPT and Universities can have Business to Business contract for the
Research Center since there is no subsidy injection. On the assumption that the land constitutes
"State assets" or "region‘s assets" (i.e. land owned by the state or by regional government), then
BPPT/IPB/ITB cannot establish business to business contract for BOT of the research center as
well as O&M.
Incentive Policy
Current Incentive Laws and Regulations for R&D
The following table shows the list of laws and regulations regarding to incentives for R&D in
Indonesia.
Laws/Regulations Numbers Covered Area Outline of Incentives
Law of Government of Indonesia No
18 of 2002
National system of research,
development and application of
science and technology
Tax relief, risk mitigation, rewards
and recognition, or other incentives
that can encourage funding for R&D
activities
Government Regulation No. 35 year
2007
Allocating some portion of revenue
of business entities to improve the
capability of engineering, innovation
and technology diffusion
Tax incentive, customs, and/ or
technical assistance for R&D
Law of Government of Indonesia
No. 36 of 2008
Income Tax Gross income deduction for R&D
activities costs
Government Regulation No. 93 of
2010
Donation for national disaster,
donation for research and
development, donation for education
facility, donation for sport coaching,
and social infrastructure
development cost which are
deductible from gross income
Gross income deduction for donation
for R&D activities
Government Regulation No. 52 of Income tax incentive for capital Reduction in net income by 30% of
xxii
2011 investment in certain areas and / or
certain regions (1st amendment
Government Regulation No. 62 of
2008, 2nd amendment of Government
Regulation No. 1 of 2007)
the capital investment, charged for 6
years respectively by 5% per years;
Acceleration of depreciation and
amortization imposition of income
tax on dividends paid to foreign tax
subject by 10%, or a lower rate
under the applicable agreement of
double taxation avoidance losses
compensation for longer than 5 years
but not more than 10 years .
Minister of Research and
Technology of Republic of
Indonesia Regulation No. 1 of 2012
Technical assistance for research and
development to business entities
Placement of experts, and / or
utilization of laboratory facilities in
R & D institutions
SEZ
There are several facilities in the SEZ that can be enjoyed by investor or business entity which
conduct business activities. Every taxpayer which conducts business activities in the SEZ will
get facility of income tax and also can be added in accordance with zone characteristics. Tax
facility also may give to the investor in certain period in the form of reduction of building tax.
Import of goods to SEZ may get facilities in the form of:
(1) Suspension of import duties
(2) Exemption of tax, to the extent such goods are raw materials and production supporting
materials
(3) Exemption of value added tax or sales tax on luxury goods for taxable goods
(4) No admission for import income tax
In addition, every taxpayer which conducts business activities in SEZ may be given incentives in
the forms of exemption or reduction of regional tax and tax retribution in accordance with laws
and regulations in tax. However, it necessary to have discussion and negotiation with the
relevant government authorities, such as Ministry of Finance for the fiscal incentives and Local
Government for the simplify procedures, by each SEZ executing organization separately.
Since no platform for the figures on listed possible incentives above, the actual incentives in
surrounding countries below may be utilized as a reference for the negotiation.
Considerations of the Incentive Scheme in Indonesia
In order to attract industries to conduct R&D in Indonesia, it is important to have incentives such
as tax deduction. It is more important to know the current incentive setups for R&D activity of
neighboring countries than other area of the world since neighboring counties would be major
competitors for Indonesian R&D business.
xxiii
JICA Study Team selected Singapore, Malaysia, and Taiwan for comparative analysis to know if
there is comparative advantage in terms of incentives for R&D activities in Indonesia (See the
table below). JICA Study Team found there is various types of incentives for R&D in
neighboring counties not only tax incentives but also grant/subsidy type of government support,
fund for R&D and so on. Especially it is critical that grant/subsidy type incentive for R&D
activity is missing in Indonesia while neighboring countries provide various types of
grant/subsidy for R&D.
Singapore Malaysia Taiwan Indonesia
Tax Incentive e.g. 150% of R&D
expenditure can be
deducted
e.g. 100% of capital
expenditure for R&D can
be deducted within 10
years. In-house R&D can
claim 200% super
deductions for
non-capital expenditures
e.g.35% of taxable
income within 5 years
e.g.100% of R&D
expenditure can be
deducted
Grant/Subsidy e.g. Cash grant of up to
S$20,250 for at least
S$150,000 worth of
qualifying R&D
expenses during the
first 3 years of start-up
activities
e.g. Exploratory
Research Grant Scheme
for Explore new ideas &
concepts catalyst for new
discoveries & inventions
-Prototype Research
Grant Scheme for
research for product
development prior to
commercial launch
e.g. Subsidies 50% of
research budget for
Small Business
Innovation Research
-Subsidies to the
set-up of R&D centers
by multinational
corporations up to
NT$5 million each
year, and 50% of the
research budget
e.g. Research of
National Innovation
System (more than
Rp 500 million per
year per proposal)
Patent , Fund,
Human
Resources
e.g Deduction of patent
registration fees.
-Training allowance for
5-year in-employment
PE training program.
Relevant to med-tech
companies
e.g Techno Fund to
develop products &
technologies for
pre-commercialization
stage Max: $1.6Million
Pilot scale production
e.g. A Science Park
tenant company can
apply to the Division
of Business Services
of the Science Park
Administration to
issue new stocks
regarding innovative
technology
know-how‘s.
e.g. Technical
assistance by
placing the experts
and utilizing
laboratory facilities
in R&D institution
To bring the R&D activities of the world class technology and science industries in Indonesia
would give enormous impact for the development of Indonesian economy. However, the current
incentive system does not have enough comparative advantage among neighboring countries.
JICA Study Team recommends establishing the following incentive policies.
Proposal based on the Comparison of Incentive Policies among Neighboring Countries
(1) Creation of Grant/Subsidy type incentives for R&D activity
xxiv
The neighboring counties have various types of grant/subsidy incentive policy for R&D
activities. In order to compete with those neighboring counties, JICA Study Team recommends
the Government of Indonesia (GOI) to consider establishing more grant/subsidy type incentives
for domestic and international companies especially for NARC users whose R&D is approved
by GOI as strategically important for industrial development of Indonesia. This role might be
initiated by RISTEK.
(2) Stronger Tax Incentives at least to the level of Singapore and Malaysia
The current tax incentive policy of Indonesia is still less competitive comparing Singapore and
Malaysia. JICA Study Team recommends GOI to increase the level of tax incentive at least to the
level of Singapore and Malaysia which allow deducting 150-200% of R&D expenditure. It is
also provide strong incentives to R&D industries if tax is exempted for the initial several years of
operation for NARC users. This role might be initiated by Ministry of Finance.
Proposals for Incentivizing by Using Comparative Advantage of Indonesia
(1) Privilege for Utilization of Biodiversity Natural Resources in Indonesia
Current Indonesian policy for bio resource is biased for protection and giving impression of
closed for the utilization of bio resources, which make international firms hesitate for initiating
R&D activity utilizing biodiversity in Indonesia. Therefore, it is important to shift the policy
direction to utilize bio resources more actively. By permitting the domestic and international
firms using NARC facility to utilize bio resources not only for research purpose but also for
subsequence commercial purpose, it would provide tremendous incentives for high technology
and science oriented firm to utilize NARC facilities for their R&D activities. This role might be
initiated by RISTEK.
(2) Incentive for Commercializing Research Output originated from NARC
Having co-research with Indonesian public research institutions (BPPT, IPB and ITB) and
private firm and sharing intellectual property right among those parties in NARC, the incentives
should be also provided even it moves from research stage to commercial stage as long as the
project still sustain the conditions for receiving incentives during R&D. In other words, if the
privilege such as tax reduction would be given even after the commercial stage by utilizing the
result of NRAC‘s co-research output, the private firm who is currently considering only the
construction of production line in Indonesia may seek the opportunity for R&D activity as well.
This role might be initiated by MOF.
Demand Creation and Introduction to NARC
xxv
Demand Creation and Introduction to NARC have been conducted through several ways; (1)
Clients List of Chiyoda Corp. and Mitsubishi Corp., (2) Interview in Indonesia done by JICA
Study Team and Counterparts, (3) Business Matching Talk at the ―Bio Japan 2013,‖ and (4)
Local market survey by local consultants in Indonesian.
In interviews, future research theme, request on NARC, possibility of participation were asked
to possible tenants companies. Through interviews, about ten companies in Japan and about 30
companies in Indonesia showed their interest to NARC respectively, even though incentives and
government policies were not clear when interviewing.
Policy for Promotion of Bio Ventures
In Indonesia, policies for bio venture promotion are not enough, nor SMEs promotion. Although
in Japan, recognition of bio venture promotion is not high, the METI is the main governmental
organization to promote creation of venture enterprises and provision of development policy as
follows:.
- Fund for ventures by SME promotion agency
- Funding by Industrial innovation agency
- Angel taxation
- Fund taxation for overseas investors
- Supporting technology development and trial manufacturing by the New Energy and
Industrial Technology Development Organization (NEDO)
Local governments in Japan provide various menus for supporting venture enterprises.
Demand Risks and Plans to Minimize the Risks
(1) Bio Diversity
Research theme done by Indonesian universities and institutes are studied and summarized in the
chapters of this report. In actuality, however, bio diversity is not utilized enough as yet. In
Nagoya protocol, bio resources are prohibited to move in and out of the countries. In NARC
project, utilization and offering of bio diversity is expected to be approved. Many universities
and companies outside Indonesia are expecting to do research and to make products, and finally
to export these products to ASEAN markets.
(2) Largest Market in Islamic Regions
Indonesia has more than 200 million populations which is the largest market in ASEAN region.
xxvi
The market is also the largest among Islamic regions. In Indonesia, foods are processed
according to halal rules. It is possible to expand their market of food and pharmaceuticals to
other Islamic regions.
(3) Collaboration of Industrial and Academic Fields in Research, Product Development and
Production
Major Indonesian pharmaceutical and food enterprises have already collaborated with
universities that have interests in collaboration for products development and production.
However, SMEs of pharmaceutical, food and energy companies except a part of major
companies do not generally have recognition of importance for academic and industrial
collaboration.
(4) Competitive Position of Indonesian Bio Cluster
The competitive positions of Indonesian Bio Cluster are summarized as follows:
- Indonesia is the largest exporter of palm oil in the world. In addition, from now on, many
kind of new products development of palm oil and varieties of production activities are
expected.
- Human resources from BPPT, IPB and ITB are provided to NARC project.
- As Indonesian market is the largest ASEAN countries, big profits are promised if succeeded
in Indonesia.
- NARC becomes a bridge or networking between Japan and Indonesian companies and
universities. They want expand business development. Especially Indonesian companies
want to collaborate with Japanese companies to introduce Japanese technologies and to
expand their market.
(5) Fulfillment of Incentives
Incentives for tenants must be fulfilled with possible tenant requests. One Japanese possible
tenant needs an experimental farm and another needs a big pond for cultivation of fish. For the
purpose of inviting many possible tenants, it is necessary not only to provide incubation and
research center, but also to consider individual requests of possible tenants.
Requests on NARC from Potential Tenants Companies
-Many of companies demand subsidy of research fund and incentive even including Japanese
companies.
-Some Japanese and Indonesian Companies want to collaborate each other.
xxvii
-Japanese Pharmaceutical Companies : Conduct ‖ Clinical study‖ in Indonesia.
-The importance of training opportunity and training center, human resource development
-Recruiting Professional Researchers & Engineers
-Dormitory, Experimental Animal Supply Center, High quality Water and Electricity
-Production Facility first, Expansion and R&D secondary in especially Japanese large
pharmaceutical companies
-Some companies demand the importance of Support Center in terms of Patent Management
and Preservation IP (By Japanese Companies strongly) and Quality Control Center ( By
Indonesian companies)
To prepare “Action Plan” to Gather More Possible Tenants for Long Term Basis
(1) To disseminate NARC to Indonesian and other countries enterprises
-Press Release & Seminar for NARC Dissemination
-Maximum utilization of domestic bio-industry conferences and exhibitions
-Participation into international conferences and exhibitions (including Taiwan, Singapore
and Japan, etc.): Poster session, Writing articles, Request related persons to introduce NARC
-Continuation of individual interviews, company by company basis
(2) To clarify attitude and policy of Indonesian governmental support on bio-industry (same as
Singapore, Taiwan and Japan, etc.)
(3) To provide ―Incentives‖ to attract tenants in the forms of tenants oriented
(4) New Matching System: To collect partners effectively
-Possible to co-research and co-development with national institutes, universities and
companies (Indonesian and Japanese Enterprises want collaboration each other)
Market Forecast
World Pharmaceutical Market
Growth rate of world Pharmaceutical Market was: 6.7%(2007～2011) by following reasons;
- Increase of aged population
- Increase of chronic disease
- Increase of market opportunity in developing countries
- Medical-payment system reform
Japanese Pharmaceutical Market
As Japanese government has put in stress into reduction of medical care budget in terms of
xxviii
preventive medical care, promotion of generic medicines, etc., growth in Japanese market will
not be expected. However, Japanese market has following stand point;
- Japanese Market Share: NO.2 of the world market
- New Medicine Development: Ranked 3rd ( US, UK, Japan, Switzerland…）
Indonesian Market
(1)Pharmaceutical Market in Indonesia
Market researches show that the overall pharmaceutical market in Indonesia has reached US$ 5
to 6 billion in 2012 and the size of the market is expected to grow at the rates of 7.6% to 9.0%
annually over the next 5 to 7 years. In 2012, each share of generic prescription drugs and
over-the-counter medicines was approximately 40% of the total pharmaceutical market.
The remaining 20% of the Indonesian pharmaceutical market in 2012 was comprised of patented
prescription drugs.
(2)Food Market
In the food and the beverage market of Indonesia, the increase of market continues by income
increase accompanying national economic growth. A processed food and soft drink market are
especially fast-growing. In the processed food and the soft drink market, although the major
local food companies are maintaining the first place, major foreign companies, such as Nestle
which has marched out for many years, have also secured the fixed position.
- Process Food Market: US$20 Billion in 2010
(3) Bio Diesel Market in Indonesia
Indonesia‘s biodiesel sector maintained a healthy growth in 2012. Biodiesel production
increased from 1.575 billion liters in 2011 to 2.2 billion liters in 2012. Exports of biodiesel
registered a strong export growth of 22 percent from 1.225 billion liters in 2011 to 1.5 billion
liters in 2012 – with nearly 90% being exported to Europe. World production of palm oil is
expected to increase by 32% to approximately 60 million tonnes by 2020.
Analysis on Competitive Position of Indonesian Biocluster
Following items are competitive position of Indonesian biocluster.
-Technological Accumulation in Herbal Medicines
-Superiority on Vaccination Production in Indonesia
-Huge Market in Indonesian Food Industry
-World Largest Palm Oil Producer
Furthermore, Indonesia has following competitive and superiority points;
xxix
-Marketability: the Indonesian market with future economic growth or population of 200
million have a big predominance in comparison with foreign countries, and its market is
attractive.
-Human Resources: although in Indonesia, cheaper labor force is available, bio-industry is not
a labor intensive one and needs skilled labors, engineers, etc. In order to secure human
resources, the talented people from BPPT, IPB and ITB, and graduates from the universities
can be provided.
-Cluster location: Those planned site are a big market, Jakarta as hinterland.
BPPT in Serpong, IPB in Bogor and Deltamas of ITB
Facility Planning, Operation and Project Cost Estimation
Action to be taken by Indonesia and/or Japan concerning with facility planning
(1) To decide the site for NARC Facility by coordinating with concerned authorities
(2) To agree with Ministry of Finance on the land use for NARC Facility
(3) To proceed to move peoples using proposed land as farming, stock farming and etc.
(4) To coordinate among stakeholders in the proposed sites for NARC Facility
(5) To plan the construction of approach road in budget and time schedule
(6) To confirm the capability and present connecting points for infrastructure
(Electricity, Water, Swage, Communication and etc)
(7) To coordinate laws and proceedings in related government, regency and aviation
(8) To take countermeasure on any risk of construction with monitoring
(9) To consider expansion of research center site when the demand is increased
Consideration of Facility Planning
(1) Location
The candidate site of BPPT-NARC is located at PUSPITEK in Serpong, Tangerang, Banten, and
has 27.3ha. The candidate site of IPB-NARC is located at Dramaga Campus in Bogor West Java,
and has 10.8ha. The candidate site of ITB-NARC is located at Delta Mas Industrial Park, Bekasi
West Java, and has 40.0ha.
(2) Design Concept
1) To design facilities in eco-friendly consideration with earth environment and surrounding
landscape (eco-friendly)
2) To design facility considering fusion of Indonesian and Japanese joint technologies
3) To design facility considering with economic and cost-saving (Smart Facility)
xxx
4) To design facility with safety and comfortableness to protect from experiment accidents)
To design facility to be opened to society and having easy accessibility
(3) Facility Planning
For ITB and IPB 3-storey building with 25 Rental Laboratories consisting of 1)11 rooms @ 52
sq. m rental space for laboratory, 2) 8 rooms @ 104 sq. m rental space for laboratory and 3) 6
rooms @ 52 sq. m rental space for office.
Each floor area is 1,000 m2
and total area is 3,000 m2 for a building prototype.
Because NARC-BPPT is a coordinator for the counterparts, the Integrated Support Center will
be added to NARC-BPPT building with floor area of 1,000 m2.
(4) Research Center/Park in General
NARC will lease the land of Research Center to companies with larger research equipment and
production. The facility will be built by the company itself. The facilities that NARC provides
are the ground pavement, electricity and water with basic infrastructure. Research center area is
4.7 ha based on the examples of existing models in other Asian countries.
(5) Operating Structure
Operation of Incubation Center, which constitutes the cluster as the main facility, is to have the
organization system shown below. Directors will be placed for each of 3 main centers, overall of
facilities will be managed by a Vice-president. Integrated Support Center cares tenants who are
the residents in each facility in a cross-sectoral manner. The center will coordinate joint research
and business matching and advise regarding law and intellectual property to the tenants. In case
of establishing SPC, a management department will be established in Integrated Support Center.
(6) Tenants Support
Incubation manager has the role to lead person who aims entrepreneurship and independence or
young company to the achievement of business, advising against various consultation such as
knowhow of entrepreneurship and management. At the beginning of business, the manager
SPC President
Integrated Support Center
援センター
Director A
Director B
Director C
Vice-president IPB-NARC
ITB-NARC
BPPT-NARC
gra
xxxi
supports to make business plan of how to solve funding problem, provides information of
subsidies and loan, and introduces fund.
Incubation manager is a professional to support the person who aims entrepreneurship and
establishment, from the beginning of plan to entrepreneurship or establishing. Main role of
incubation manager is as follows:
1)Industry-university cooperation
2)New business development
3)Strategy development of intellectual property
4)Market expansion (Business matching)
5)Funding support
6)Human resources support
IPB and ITB Incubation Center Building: Floor Plans Site Plan and Section
xxxii
BPPT Incubation Center and Integrated Support Center Building Floor Plans and Section
Project Cost Estimation
(1)Initial Costs Estimation (Rp. Million)
BPPT-NARC IPB-NARC ITB-NARC Total
1.Civil Work（Research Center）
Civil Work Total 31,101 34,102 33,764 98,968
2.Building Work (including parking area)
Building Work Total 70,599 55,048 55,048 180,696
3.Research Equipment
Equipment Total 12,667 17,594 14,779 45,040
Civil/Building/Equipment Total 114,367 106,744 103,591 324,704
4.Transaction Advisory Cost
Total 15,000 15,000
Grand Total 339,704
(2)General and Administrative Expense (Rp. Million)
Cost Item Cost
Maintenance and Replacement Cost 1,992
Utility Cost ( Electricity, Water) 1,298
Labor Cost for NARC (I.S. center, Incubation center) 3,451
Outsourcing Cost (security, cleaning, maintenance) 1,858
Sub total 8,599
Overhead Cost (5% of above items) 430
xxxiii
total 9,029
(3)Income of Laboratory Rentable Fee (Incubation Center)
BPPT-NARC IPB-NARC ITB-NARC
Rentable area (m2) 1,612 1,612 1,612
Rentable rate (US$/ m2) 18 18 18
Sub Total (US$) 29,016 29,016 29,016
(4)Income of Land Leasing Fee (Research Center)
BPPT-NARC IPB-NARC ITB-NARC
Land leasing area (ha) 3.87 3.87 3.87
Leasing rate (US$/ m2) 1.5 1.5 1.5
Sub Total (US$) 58,050 58,050 58,050
Total (US$) US$174,150
Project Structure
Among four project scheme alternatives envisaged for the project implementation, the PPP
Scheme (Alternative 1) is considered best suitable because it follows the PPP framework
(PR67/2005) specifically prescribed for Public-Private Partnership projects just like NARC
where the private sector is responsible to the whole project scope including construction and
operation but needs significant government support to enhance the financial viability. The
scheme ensures the single process that covers preparation, procurement and government support
such as VGF; therefore it is attractive to private investors. Only downside is that the current PPP
regulation is not applicable to the R&D facilities and requires an amendment which is currently
under formal consideration of the government upon BPPT‘s request.
xxxiv
Alternatively, the Hybrid Scheme, which involves in-kind government contribution by dividing
project scope, is considered the second best alternative. The merit of using the scheme is that it is
applicable under the current regulatory setting (GR06/2006). Since the procurement is
two-folded, contractual setting is more complicated and running risk of delay in implementation.
Unlike VGF managed by MOF, the ordinary national budget is used for the public construction
portion, so that it may be affected by the budget constraints of BPPT (and/or IPB/ITB).
Alternative 1: Public Private Partnership (PPP) Scheme
Private
SPC
PPP
Agreement
GCA(BPPT)
MoF
Operation
Company
Construction
Fee
Construction
Company
Operation Fee
Financial
Institution
Loan
VGF
Private
Investors
Equity
State
Univ.
Profit Sharing
Right to use
the land
Land & Profit
sharing agreement
Profit
sharing
Right to
use the land
Cooperation agreement
Tenants(Incubation/
Support Center)
-Rent lab/office spaces-Use common instruments
Tenants(Research Center)
-Rent land lots-Construct and use own research facilities
Incubation/Support Center
Research Center
Rent Fee Rent Fee
Finance
Build Private
PrivateOperate
Private Public
PrivateDesign
xxxv
Pros and cons of the both scheme alternatives are summarized below.
Private
BOT/BTO
Agreement
GCAConstruction
Company
MoF
APBN
Private
Contribution
Operation
Company
Construction Fee
Construction Fee Construction
Company
Operation Fee
Financial
InstitutionLoan
Alternative 2: Hybrid Scheme
Incubation/Support Center
Research Center
Tenants(Incubation/
Support Center)
-Rent lab/office spaces-Use common instruments
Rent Fee Rent Fee
O&M
Tenants(Research Center)
-Rent land lots-Construct and use own research facilities
Public
Finance
Build Private
PrivateOperate
Public Private
Support /Incubation Center
Research Center
Design Private
Pros
Cons
PPP Scheme Hybrid Scheme
Framework specifically tailored for Public-Private Partnership
Single framework covers preparation,procurement, and government support (VGFand guarantee) process of the project
Attractive to private investors
Uncertainty in PPP regulation amendment byGOI
Applicable under the current regulatorysetting
Complexity in process and contractual settings forthe public investment and the private DFBOT
APBN budget / ODA funding constraints
Asset ownership issue from construction by APBN
Longer time for operation (with ODA loan case)
Private operator who’s free of facility investment(for Support/Incubation Center) may tend to over-spec design which may lead to construction costincrease borne by the Public.
xxxvi
Financial and Economic Analysis
Financial Analysis
In the financial analysis, the project‘s financial viability and sustainability was evaluated based
on the estimated capital investment and O&M cost, predicted project revenue and other
assumptions. Cash flow analysis has been conducted under both PPP scheme and Hybrid scheme
proposed in the ―Chapter 8 Project Structure‖. The detail of the prediction of revenue and
expenditure is explained in the main report.
Based on the revenue and expenditure of the project for 20 years of project period, the cost is
basically larger than the revenue.
Under PPP scheme, the difference between the revenue amount and cost will be subsidized by
(1)VGF (Viability Gap Fund) so that the SPC can make a reasonable profit.
Under Hybrid scheme, the public side procures the building of the integrated support center and
incubation center, and because of that financial support, the SPC can make higher profit in the
business. Therefore, the excess profit will be returned back to counterparts during an O&M
phase by means of (2)Private Contribution. The fee amount is determined by mutual agreement
in the contract.
The 70% of initial cost is assumed to be procured by PSIF loan of JICA, and the rest of 30% is
procured by the equity of SPC. For the financial analysis, the expected cost of equity is assumed
to be 15% based on the answers from possible investors.
Result of Financial Analysis
(1) Result of Financial Analysis under PPP Scheme
Rent Fee of Research
Center
Repayment of Capital
Investment Cost
Rent Fee of Incubation
Center
O&M Cost
TAX payment
Government Support
(VGF)
Revenue Cost
Public : IS center +Incubation Center
(55%)
Rent Fee of Research
Center
Private: ResearchCenter + Research Equipment (45%)
Rent Fee of Incubation
Center
O&M Cost
TAX payment
Private Contribution
Revenue Cost
Basic Concept
of VGF Calculation
Basic Concept of
Private Contribution
(1)
(2)
xxxvii
Under the condition of retaining the Equity IRR of SPC at 15.0%, the necessary VGF amount
becomes 42% of total CAPEX. The VGF amount is less than 50% of total investment cost as
regulated by the Presidential Regulation. The necessary VGF amount under the said
assumptions satisfies the regulation rule.
The DSCR value starts at 1.10 in 5th year, and gradually increases as the project proceeds up to
8.61 in the 20th year.
The real subsidy amount, which is calculated by subtracting the total tax payment from the initial
capital cost by GOI (VGF amount), becomes Rp.72,879 million at present value. The discounted
rate is set at 8.4%/year based on the 20 years national bond rate of Indonesia in 2013.
(2) Result of Financial Analysis under Hybrid Scheme
Under the condition of retaining the Equity IRR of SPC at 15.0%, the payment of land lease fee
from SPC to the public becomes Rp.1,345 million. The Private Contribution is a fixed rate with
adjustment with corporation to the CPI rate, each year.
The DSCR value starts at 1.03 in 5th year, and increases up to 10.31 in the 20th year.
The real subsidy amount becomes Rp.83,545 million at present value. Compared with the PPP
scheme, the real subsidy amount under Hybrid scheme is Rp.10,643 million higher. The
difference mainly came from the delay of the operation for half year.
Economic Analysis
Research and development cluster area is typically located with associated manufacturing
clusters. Development of NARC is expected to induce manufacturing areas development (such
as industrial park). In this analysis, three industrial parks having land area of 10 ha each are
assumed to be developed near the three planned NARC sites.
Economic analysis of NARC project was made incorporating costs and benefits of
above-mentioned industrial parks. The discount rate to be used is the 12%, which is the
commonly used value for economic analysis in the country.
(1) Direct Economic Benefit
Manufacturing industries located inside the associated industrial parks purchase intermediate
goods and services outside the industrial parks, processes them using their own equipment and
labor, and then sell their products outside. Value of gross output can be divided into ―added
value‖ and ―intermediate consumption (input cost).‖ Of which, added value refers to the
additional value created at a particular stage of production. Value added can be divided into
operating surplus, payment of taxes, and worker‘s compensation (wage and salary). These
value added resulting from the economic activities of locators in the associated industrial parks
xxxviii
is considered as direct economic benefit of the project.
Based on the past record of each industrial sector, the economic benefits generated within the
associated industrial parks were calculated to be Rp. 529 billion per annum (BPPT-NARC:
Rp.131 billion, IPB-NARC: Rp.121 billion and ITB-NARC: Rp. 277 billion).
(2) Induced (In-direct) Economic Benefit
Inter-industrial linkages may influence industrial structure and economic development in a
country. Production activities in one sector may have effects that directly and indirectly induce
those in other sectors. A unit increase in final demand for an industry in the associated industrial
parks with strong inter-industrial linkages can induce a larger increase in production and thus
promote economic development even outside the associated industrial parks.
Such indirect economic effect (value added induced outside the associated industrial parks) was
estimated to be Rp. 873 billion based on the above-mentioned direct economic benefit and
inverse matrix calculated using Input-Output Table with 66 economic sectors of Indonesia 2008.
Results of Economic Analysis
(1) Calculation of Economic Internal Rate of Return
The calculated EIRR was 24.7%, which exceeds the economic opportunity cost of 12%. In
addition, ENPV (Economic Net Present Value) discounted at rate of 12.0% was worked out at
Rp. 1,818 billion.
These calculation results proved that the NARC and associated industrial parks development
projects are feasible from the economic point of view.
(2) Sensitivity Analysis
Economic benefit-cost analysis is based on forecasts of quantifiable variables such as capital
cost, O&M cost and benefit scenario. The values of these variables are influenced by a great
number of factors, and the actual values may differ considerably from the forecasted values.
It is therefore useful to consider the effects of likely changes in the key variables on the viability
of a project. Sensitivity analysis was made using following adverse scenarios; 1) increase in
capital cost +20%, 2) decrease in economic benefit -20%, and 3) worst case, a) + b).
EIRR of all alternative cases exceed the 12%, and the economic viability of the NARC project is
considered robust under the various adverse scenarios.
Risk Analysis and Mitigation Measures
The risk analysis was conducted in the following method.
(1) Risk matrix is made for both PPP scheme and Hybrid Scheme to recognize the risks under
xxxix
different contract condition.
(2) The risk mitigation (reduction, transfer, avoidance) method is considered for identified major
risks.
(3) Financial impact of several risks is estimated by anticipating the change in the revenue and
cost. The result is described in the sensitivity analysis of financial analysis in ―Chapter 9.3.6
Sensitivity Analysis.‖
In this study, two risk matrixes are made assuming the NARC Project is implemented under PPP
scheme or Hybrid scheme, as the characteristics of risks and the proper entity which owns risk is
different in each case.
The risks with lower probability and lower financial impact could be owned by the SPC without
any mitigation measures. The characteristics and its mitigation methods of important risks in the
10 risk categories; 1) Site Risk, 2) Design, Construction and Commissioning Risks, 3) Sponsor
Risks, 4) Financial Risks, 5) Operation Risks, 6) Revenue Risks, 7) Interface Risks, 8) Political
Risks, 9) Force Majeure Risks, 10) Asset Ownership Risks, which have the middle or high
impact and/or probability.
The evaluated alternative cases in the sensitivity analysis and the related major risks, which have
been identified in the Risk Matrix are shown in the following table.
Case Condition Related Risk identified in the Risk Matrix
Case1:
Reduction of Occupation Rate for I.S. center, incubation center and Research center. (-10%)
- Decrease in the demand volume on Incubation Center - Decrease in the demand volume on Research Center - Development of other competitive public facility in the same region
Case2:
Cost increase (Capital cost and O&M cost, + 10%)
- Increase in construction cost due to designing issues - Design brief risk - Construction cost increase - O&M cost overrun risk - Increase in energy costs - Increase in maintenance and replacement cost of research equipment
Case3:
Delay of starting operation (1 year, with 20 years of project period)
- Delay and cost increase of Land Acquisition - Delay in completing construction works - Delay in achieving planning approval
Case4:
Decrease in IDR value by exchange rate change (-20%)
- Foreign exchange rate risk - Economic Downturn in Indonesia
Regarding the Case 1 condition, the financial loss by decrease in occupation rate of 10% makes
the worst financial loss on the cash flow. Therefore, the control of service level and securing the
incentive for tenants is considered as the key factor to secure the profitability of the business.
xl
For the Case 2, risk of cost increase (+10% of CAPEX and OPEX) could be transferred or shared
with the construction company and outsourcing company with careful contract designing.
For Case 3, the delay of operation start (1 year) makes the second highest impact, and the
financial condition is especially worsened in the early period of the project. The control of
construction work to start the work, and arrangement of tenants for early operation start-up is
what the SPC needs to focus on at the beginning stage of the Project.
The impact of Indonesian Rupiah devaluation risk (Case 4) is slightly smaller than the other
cases. The SPC should decide if they take risk or mitigate applying financial instruments or
linking rental fee of some tenants to the value in foreign currency.
Contracts Necessary for Project and Major Contents of Contracts
PPP Project
Contractual Framework of PPP Project
Prior to conducting procurement process, BPPT, IPB and ITB shall make Cooperation
Agreement. Since only BPPT can be GCA, those three parties need to have agreement for
scope of work, risk sharing and procurement, etc. The most important contract for the project
is PPP contract between BPPT (GCA) and Private company (SPC). This contract would
specify the right and obligation of GCA and SPC during the project period.
Additional contract, Land and Profit Sharing Agreement, is required for this project. Since IPB
and ITB cannot be a part of PPP Contract, those two universities would not have direct
xli
contractual relation with the Private without the Land and Profit Sharing Agreement. This
agreement basically prescribes that the universities would provide land to the project and
would be shared the profit from the project.
Hybrid Project
In case of Hybrid Scheme, the different contractual arrangement is required. Since the
construction of Incubation and Support Center shall be done by Public and that of Research
Center shall be done by the Private, at least two contracts are required; one is EPC contract and
another is BOT contract. EPC contract shall be based on Presidential Regulation No.54 Year
2010 on Government Procurement of Goods/Services (herein after ―PR54/2006).
1) Single GCA (BPPT)
In case of BPPT as single GCA, BPPT, IPB and ITB shall make Cooperation Agreement.
Since only BPPT can be GCA, those three parties need to have agreement for scope of
work, risk sharing and procurement among three parties for both EPC and BOT contract.
Contractual Framework of Hybrid Project (BPPT as Single GCA)
2) Joint GCA (BPPT, IPB, ITB)
When BPPT, IPB and ITB are joint GCA, Cooperation Agreement shall be required to
cooperate toward joint procurement. The BOT contract and EPC contract shall be made
between GCA (BPPT, IPB and ITB) and the Private.
xlii
Contractual Framework of Hybrid Project (BPPT, IPB and ITB as GCA)
Environmental Impact Survey
Preliminary Examination of Possible Environmental and Social Impacts
(1) Possible Impacts on Medicine Manufacture Sector
By research activity on medicine manufacture sector, various types of chemicals will be used.
For producing of new vaccines and antibiotics, pathogenic bacteria will be handled. These
materials for experiment may increase risks on health to surrounding residents if appropriate
measure is not adapted. The NARC should develop regulations to handle these materials on
measure to control transportation, storage and usage of these materials should be established.
The introduction of simple Pollutant Release and Transfer Register (PRTR) system is
recommended to manage the materials for experiment with information disclosure to the
concerned stakeholders. Waste from research center should be also treated and disposed under
proper way by each tenant to avoid environmental pollution by generated solid waste. In case
that generated waste is categorized as B3 waste which should be handled by specific way
under Indonesian regulation, the SPC should instruct and manage the way of solid waste
disposal by tenant. Environmental pollution by wastewater may occur if wastewater is treated
in an unsuitable way. Regarding The NARC is expected to have centralized wastewater
treatment system to treat organic pollutant, but treatment of specific materials should be
conducted by each tenant to avoid impact to surrounding environment.
xliii
(2) Possible Impacts on Agriculture and Food Production Sector
One of the important matters to be examined for research activity on agricultural and food
sector is gene recombination experiment. If such experiment is implemented, the products
should be controlled carefully to avoid disordered spreading of generated gene resources. In
agricultural and food processing sector, various chemicals will be used, and insects carrying
disease germs may be handled. Therefore, proper management of these materials should be
planned and implemented same as medicine manufacturing sector. In this sector, some research
activity may be implemented under outdoor condition. IPB can use their deep experiences on
this matter to avoid environmental pollution such as soil erosion, water pollution and impacts
on biodiversity of surrounding area due to experimental activity.
(3) Possible Impacts on Bio Industrial Sector
The scale of the impact is not large, but air pollution due to combustion test of produced fuel
should be controlled. Generated waste by producing of biofuel such as residue of raw materials
should be treated, cooperating with local solid water management system after checking
hazardousness of the waste to avoid environmental pollution by solid waste. Wastewater from
the research facilities will include oil substances. Therefore, tenant or NARC should have
proper treatment process of wastewater such as simple oil separator. It is considered that the
risk is not so serious, but generation of odor in the process of generating biofuel may be
affected to surrounding area, so the impact is recommended to be examined.
Required Actions on Environmental Impacts in Further Step
(1) Conducting of EIA under Indonesian Regulation
In the Environmental Ministry Regulation No. 05/2012, type and size of the project to be
implemented EIA is designated. Based on the regulation, development of NARC is categorized
as a project for construction of building. For this type of project, if the project alters equal or
more than 5 ha of land, or constructing of building, of which total floor space is equal or more
than 10,000 m2, such project should conduct EIA study. Therefore, for development of NARC,
EIA including evaluation of the following impacts should be conducted, and approval to
commence the project should be obtained.
Type of Project Scale Items to be Examined
Construction of buildings
- Area of land, or
- Building
> 5 ha
>10.000 m2
a. Land acquisition
b. Carrying capacity of the land
c. Levels of daily water needs
d. Waste generated
e. Effects of development on the surrounding environment
(vibration, noise, air pollution, etc.)
xliv
f. The number and type of trees that may be missing.
g. Social conflicts due to land acquisition
h. Structure of buildings and basement causing problems and
disorders caused stakes to aquifer water source nearby
i. Traffic condition
j. Parking needs of visitors.
k. Inundation / flooding issue
Note: Above criteria is extract of the regulation.
(2) Environmental Consideration by JICA Guidelines for Environmental and Social
Considerations
In case that NARC development needs assistance by Japanese fund, the following
environmental and social consideration should be conducted based on the JICA Guidelines for
Environmental and Social Considerations has been applied since April 2010.
Projects must comply with the laws, ordinances, and standards related to
environmental and social considerations established by the governments that
have jurisdiction over project sites (including both national and local
governments).
Appropriate follow-up plans and systems, such as monitoring plans and
environmental management plans, must be prepared.
Projects must be adequately coordinated so that they are accepted in a
manner that is socially appropriate to the country and locality in which they
are planned.
Hereafter, to satisfy the above requirements, environmental management plan and
environmental monitoring plan should be developed. The contents to be included in the
environmental management plan are shown in the following tables.
Contents to be Included in Environmental Management Plan
(pre-construction phase and construction phase)
Item Contents Location Remark
Involuntary
resettlement
- Survey plan on income of affected farming
households by agricultural activity
- Consultation plan on alternative measures for
livelihood restoration
- Examination on alternative measures for income
restoration
Construction
site and
relevant area
BPPT-NARC
only
Impact on
local economy
- Construction work schedule for mitigating traffic
congestion
Construction
site and
relevant area
-
Public health - Construction workers‘ public health management
plan for reducing risk on infectious disease
Construction
site -
xlv
Item Contents Location Remark
Soil erosion - Surplus soil disposal plan Construction
site -
Ecological
system
- Construction work facilities allocate plan for
avoiding cut of wood land by temporary facilities
Construction
site -
Air pollution - Air pollution control plan with water sprinkle for
prevention of scattering of dust
- Construction vehicle maintenance plan for checking
exhaust apparatus condition
Construction
site -
Water
pollution
- Countermeasure on turbid water discharged by
construction work such as construction of settling
pond
Construction
site -
Solid waste - Measure on disposal of constriction waste and
municipal solid waste from lodging house
- Hazardous waste disposal plan by contracting with
enterprises specialized in hazardous waste
management
Construction
site
-
Noise and
vibration
- Examination of countermeasures for reducing noise
level such as setting of noise barrier
- Examination of construction working time
Construction
site -
Accident - Planning of safety measures and accident
prevention plan
Construction
site and
relevant area
-
Contents to be Included in Environmental Management Plan
(operation phase)
Item Contents Location Remark
Public health - Hazardous waste management plan following
―Government regulation of the Republic Indonesia
No.74/2001 on Hazardous and Toxic Substance
Management‖
NARC site
-
Ecological
system
- Maintenance plan of greenery area in NARC site NARC site -
Air pollution - Obligation for tenants of NARC on submission of air
pollution control measures
- Air pollution control measure on combustion test
using bio fuel
NARC site
ITB-NARC only
Water
pollution
- Obligation for tenants of NARC on submission of
water pollution control measures
- Construction and operation guidelines for tenants of
NARC to construct wastewater pre-treatment system
considering characteristics of wastewater discharged
from each tenant
- Construction and operation plan of wastewater
treatment system of NARC
NARC site
-
Solid waste - Obligation for tenants of NARC on submission of
solid waste management plan
- Hazardous waste management plan following
―Government regulation of the Republic Indonesia
No.74/2001 on Hazardous and Toxic Substance
Management‖
- Guidelines for sub-contracting with special enterprises
on hazardous solid waste disposal
- Municipal solid waste disposal plan by NARC
NARC site
and relevant
area
-
Noise and
vibration
- Obligation for tenants of NARC on noise and vibration
control plan
NARC site -
Accident - Obligation for tenants of NARC on accident NARC site -
xlvi
Item Contents Location Remark
prevention measures
- Obligation for tenants of NARC on emergency
response plan in accidental cases
- Chemicals management plan following ―Ministry of
Manpower Decree No. 187/MEN/1999 on chemicals
control at work place‖ and ―Regulation of the Minister
of Trade No. 04/M-DAG/PER/2/2006 on Distribution
and Monitoring of Hazardous Materials‖
Implementation Procedure and Schedule
The implementation procedure of the PPP Scheme and the Hybrid Scheme is summarized in the
table below. The critical path that the PPP Scheme depends on in its implementation process is
the amendment to the PPP Regulation, whereas that of the Hybrid Scheme is obtaining access to
the national budget appropriation for the public construction. Procurement of the private partner
will take similar flow for both schemes. However, the bid evaluation of Hybrid Scheme applies
Scoring System which takes into account the technical evaluation to determine the winning
bidder; whereas VGF amount is only bidding parameter in the PPP Scheme procurement.
PPP Scheme Hybrid Scheme
1 Regulatory Basis PPP Regulation (PR67/2005), etc
(Amendment required)
State and Regional Asset Management
Regulation (GR06/2006)
Government Procurement Regulation
(PR54/2010), etc.
2 Budgetary
Appropriation
In-principle approval of VGF by MOF APBN budget for the public construction
(Incubation and Support Centers)
3 Procurement for Private Partner
Special support for
proponent bidder
None
(The project is considered solicited)
None
(Regulation does not provide such treatment)
Prequalification Yes Yes
Bidding Method Two-envelope Method Two-envelope Method
Bid Evaluation Evaluation for PPP contract tender
- Technical: Pass or Fail
- Winning bidder: Only financial
bid is evaluated
Scoring System
- Technical: Pass or Fail
- Winning bidder: Comprehensive
evaluation of technical and financial
proposals (financial: 70-90%)
Bidding Parameter Required VGF amount
(Lowest bid wins)
Annual private contribution amount
(Highest bid takes highest financial scoring)
4 Other
Procurement
None
(Private partner is responsible to
construction works)
Procurement for the public construction
- Supported by the private partner
- Tender documents, PQ and Public tender
5 Operation and
Management
With appropriate contract conditions, the both scheme can ensure the same operation and
management setup. (The Private is responsible to the whole operation and the Public does
monitoring.)
xlvii
Assuming a favorable scenario in which the amendment to PPP Regulation is legalized in June
2014, the operation of NARC will commence in the first quarter of 2018. In the Hybrid Scheme,
it should be noted that the procurement process takes place two times for the BOT contract and
the public construction separately, which take longer period than in the PPP Scheme.
Ex-ante Evaluation of Project Effects
Regarding to the evaluation of the Project impact, the counterparts and the JICA Study Team are
planning to adopt the following Evaluation Indicators. The Ex-Post Evaluation could be
conducted at 4th year of the Project, which is after 2 years of the construction completion. The
draft project effectiveness indicators are planned as follows;
Effect Indicators Target
PPP Scheme Hybrid Scheme
1. Occupancy rate of the Integrated Support Center, Incubation Center and Research Center
I.S. Center and Incubation Center
70%, 4th year
(80%, 8th year)
60%, 4th year
(80%, 8th year)
Research Center 40%, 4
th year
(100%, 8th year)
30%, 4th year
(90%, 8th year)
2. Increase in employment in Research Center
BPPT/ITB: 47.5 people/ha IPB: 156.3 people/ha
399 people, 4th year
(998 people, 8th year)
299 people, 4th year
(898 people, 8th year)
3. FIRR (Financial Internal Rate of Return), NPV (Net Present Value)
Cost: Project cost Revenue: Project revenue
FIRR: 14.4% NPV: Rp. 83,619
million
FIRR: 15.1% NPV: Rp. 85,628
million
4. EIRR (Economic Internal Rate of Return), ENPV (Net Present Value)
Cost: Economic project cost Benefit: Increase in surrounding manufacturing area
EIRR: 24.7% ENPV: Rp. 1,834
billion -
The following indicators are the draft operation indicators of the Project, which should be
monitored every year to evaluate the service level provided by SPC. The target number of each
indicator is to be described in the Output Based contract made between SPC and counterparts.
Operation Indicators Target
Number of cooperative researches conducted between counterparts and tenants in NARC
To be fixed in the contract
Number of innovation technologies which has been consulted by the specialist of intellectual property in Integrated Support Center
Number of Business Matching Events by NARC
Usage frequency of Research Equipments
xlviii
List of Actions to be Taken by Indonesian Side
Actions to be taken by Indonesian side with target completion date are summarized as follows:
Issues/Topic Actions to be Taken Responsible
Party
Target
Completion
Date
Industrial
Promotion
Policies
and
Mechanism
Relationship
Building Between
Industry and
University
Hold ―Intellectual
Exchanges‖ on key topics
to identify market needs of
industry and R&D
capabilities
Develop ―Site Miners‖ at
each NARC campus to
help in matchmaking with
industry requests for
technical assistance and
applied research
BPPT, IPB, ITB By mid-2015
Applied Research
&Commercialization
Support
Establish a NARC
proof-of-concept fund to
advance
university-business
research discoveries
Offer a matching grant
program for
industry/university applied
research projects
BPPT, IPB, ITB
RISTEK
EKUIN
BAPPENAS
Min. of
Education
By opening
of NARC
R&D Incentives Research and Development
Tax Credit
Patent Box –Lower
corporate tax rate from sale
of Indonesia patented
products
Tax Credits for Hiring
Scientists and Engineers
EKUIN
BAPPENAS
By opening
of NARC
Industrial
Promotion
Actions
Related to
Target
Markets
Pharmaceutical
Industry Platform:
Herbal Medicines
Increased analytical lab
capacity for identifying
and characterizing
bio-active ingredients
More rigorous efficacy
studies involving
high-throughput
laboratory-based in vitro
studies as well as
human-based clinical
studies
Longer term --Increased
synthetic chemistry
capabilities to advance
BPPT After
opening of
NARC
xlix
Issues/Topic Actions to be Taken Responsible
Party
Target
Completion
Date
natural product drug
discovery and development
Pharmaceutical
Industry Platform:
Bio-pharmaceuticals
for Diagnostics,
Vaccines and
Antibiotics
Address need for increased
capacity for bio-scale-up
facilities and expertise
Offer incentives to further
partnerships with foreign
biopharmaceutical
companies at NARC sites
–including relaxation of
foreign ownership limits
BPPT
BAPPENAS
EKUIN
After
opening of
NARC
Pharmaceutical
Industry Platform:
Pharmaceutical Raw
Materials
Increase government R&D
funding to advance
competitive advantages for
Indonesia through
development of novel
active pharmaceutical
ingredients, innovative
formulation technologies
or novel drug delivery
methods
EKUIN
RISTEK
Min. of
Education
By opening
of NARC
Agriculture and
Food Platform:
Agricultural
Improvement &
Diversification
Improve facilities to
advance plant breeding and
seed development for
improved and diversified
crops
Support growing tropical
fruits markets for export
growth –improve
post-harvest technology,
food safety, pest and
disease control
IPB After
opening of
NARC
Agriculture and
Food Platform:
Value Added Food
Products
Need for specialized
laboratory equipment as
well as scale-up processing
technologies to
characterize, separate,
purify and process
bio-active chemicals in
crops and developing new
health-promoting food
products
IPB By opening
of NARC
Industrial Bio
products Platform:
Palm Oil Bio
Products
Pilot broader processing of
palm oil within Indonesia
Increase yields through
improved agronomy,
ITB After
opening of
NARC
l
Issues/Topic Actions to be Taken Responsible
Party
Target
Completion
Date
fertilizer usage and
improved plant varieties of
palm trees
Consider testing and
validation facilities
Actions
Related to
Industrial
Promotion at
Each NARC
Site
Pharmaceutical
Industry Platform
Development of pilot Good
Laboratory and Good
Manufacturing Practices
scale-up infrastructure for
the production of human
biologic products in
volumes required for
conducting Phase I and
Phase II clinical trials with
attraction of Contract
Research Organizations for
conducting clinical trials
BPPT After
opening of
NARC
Agricultural and
Food Industry
Platform
Advanced plant sciences
and crop improvement
research and development
center with modern
analytical lab resources,
modern environmentally
controlled growth
chambers and fields
IPB By opening
of NARC
Industrial Bio
product Platform
Development of an
integrated bio refinery
operation working in both
biochemical and
thermochemical
conversion technologies
ITB After
opening of
NARC
Legal (PPP Regulation) Amendment of PPP
regulation (PR67/2005)
(To include R&D facility
as a targeted facility)
BPPENAS,
EKUIN, MOF,
other concerned
Ministries
Jun, 2014
Incentive policy Expansion of Incentive
Polity for R&D activity
MOF, RISTEK By Opening
of NARC
(2018)
Project Scheme Determination of Project
Scheme (Weather the
scheme based on PPP
regulation or Hybrid)
BPPT, IPB, ITB Immediately
Budgeting Budgeting for VGF (under
PPP regulation) or
Construction of incubation
BPPT, IPB, ITB
(MOF)
PPP(VGF):
by the early
2016
li
Issues/Topic Actions to be Taken Responsible
Party
Target
Completion
Date
center and support center
(hybrid)
Budgeting for the cost for
procurement
Hybrid(APB
N): by the
end of 2016
Organizational Setup Organizational setup (e.g.
Government Contracting
Agency as BPPT, IPB, and
ITB?, three party
agreement, project team
formation)
BPPT, IPB, ITB Immediately
Procurement of Consultant (PPP) Selection of
transaction advisor
BPPT, IPB, ITB By beginning
of 2015
Demand Creation Prepare detailed ―Action
Plan‖ to gather more
possible tenants for long-
term basis
BPPT, IPB, ITB, Immediately
Demand Creation Disseminate the
information of NARC to
enterprises of Indonesian
and other countries
-Press release and seminar
for NARC dissemination
-Maximum utilization of
domestic and international
bio-industry conferences
and exhibitions
-Continuing individual
interviews, company by
company basis
BPPT, IPB, ITB, Immediately
Demand Creation Clarify attitude and policy
of Indonesian
governmental support
including incentive
mechanism on bio-industry
BPPT, IPB, ITB, Immediately
Demand Creation Create new matching
system to collect partners
effectively
- Opportunity to
co-research and
co-development with
national institutes,
universities and companies
BPPT, IPB, ITB, Immediately
Expansion of Research Center Prepare expansion of
research center site when
the demand increases
BPPT, IPB, ITB
and Private
Follow the
increasing
demand from
lii
Issues/Topic Actions to be Taken Responsible
Party
Target
Completion
Date
2018
Determination of NARC site
location
Decide the site for NARC
Facility by coordinating
with concerned authorities
(BPPT and IPB with MOF,
ITB with Bukasi regency)
Agree with Ministry of
Finance on the land use for
NARC facility
MOF, RISTEK
BPPT, IPB, ITB
Bekasi regency
Immediately
Plan and Budget for new
approach road
Plan the construction of
approach road about
budget and time schedule
BPPT, IPB, ITB
and concerned
authorities
By August
2014
Capacity and Connection Confirm the capacity and
present connecting points
for infrastructure
(electricity, water, sewage,
communication and so on)
BPPT, IPB, ITB
and concerned
authorities
By the end of
2014
Administration and Proceeding Coordinate laws and
proceedings with related
government, regency,
aviation and etc.
BPPT, IPB, ITB
and concerned
authorities
By June,
2016
(starting
from 2015)
Risk Management Take countermeasure on
any risk of construction
with monitoring
BPPT, IPB, ITB
and Private
During
construction
period
Coordination of Stakeholders Complete the resettlement
of peoples using the land
proposed for project site
for farming, stock farming
and etc.
Coordinate among
stakeholders in the
proposed sites for NARC
facility
(PPP)RISTEK
BPPT, IPB, ITB
(Hybrid)SPC
By the end of
2014
Environment Impact
Assessment (EIA)
Conduct EIA based on
Indonesian EIA regulation
(Each NARC development
plan alters equal or more
than 5 ha)
SPC By the
commencem
ent of NARC
Developmen
t
Compliance on
Environmental Consideration
by JICA Guidelines for
Environmental and Social
Considerations
Implement Environmental
and Social Considerations
in line with JICA
Guidelines:
Comply with the laws,
SPC Before
requesting
Japanese
fund for
NARC
liii
Issues/Topic Actions to be Taken Responsible
Party
Target
Completion
Date
ordinances, and standards
related to environmental
and social considerations
established by the
governments that have
jurisdiction over project
sites (including both
national and local
governments).
Follow-up plans and
systems, such as
monitoring plans and
environmental
management plans, must
be prepared.
Coordinate the projects
so that they are accepted in
a manner that is socially
appropriate to the country
and locality in which they
are planned.
development
, if necessary
liv
1
Introduction: Present Situation, Problem Areas and Necessity of New
Academic Research Cluster
0.1 Background of NARC Project
Both governments of Indonesia and Japan agreed on ―Metropolitan Priority Area (MPA) Initiative‖
to promote further growth of Jakarta metropolitan area acting as a driving force for Indonesian
economy as a prospective area suitable for more attractive industrial investment, while the nation
has been achieving stable economic growth in recent years. Included in the projects under MPA
Initiative are not only improvements of hardware infrastructure such as transportation systems but
also preparation of research and development facilities aimed at furthering progress of
industrialization and fostering human resources. For preparation of facilities at universities and
research institutions, plans have been so far implemented for expansion and improvement of
research facilities at national universities (lending of funds to Bogor Agricultural University,
Bandon Institute of Technology, etc.), preparation of the center for conservation of biotic diversity
(grant of funds to Indonesia Science Academy: LIPI) and construction of the center for microbial
resources (technical corporation to LIPI). Although such preparation and improvement of
facilities at universities and research institutions have been displaying important functions in
bio-related fundamental researches; shortage is seen of the research and development bases
connecting results of such fundamental researches to industrial development; few of their bases
are effectively functioning enough for industrialization. Thus preparation of research and
development cores is needed and regarded as an urgent issue in order to promote industrialization
of research and development results through industry-university cooperation.
2
Source: MP3EI
Figure 0.1.1 MP3EI Chart Explaining Relationships among Public, Academics and Markets
0.2 Position of Project in Development Policy for Industrial Sector in Indonesia
―Master Plan for Acceleration and Expansion of Economic Development (MP3EI)‖ , which is the
national development plan from 2011 to 2025, provides for the theme to invest the scheme
promoting innovation-oriented economic growth based on human resources through improving
productivity as a policy toward achievement of target value of US$15,000 for per capita GDP in
2025. The research and development cluster project (hereinafter called ―Project‖) is intended to
create research and development cores to promote industrialization of research and development
outputs. Project is also positioned as one of the five flagship projects among 45 projects covered
by MPA (MPA is positioned as one of the accelerators of MP3EI).
3
Source: MP3EI
Figure 0.2.1 Increased Productivity to Competitive Excellence
The purpose of NARC is, as shown in Indonesian MP3EI, to promote ―creation of a cluster to
found the innovation-based economy by reinforcing cutting-edge technology.‖
MP3EI describes economy developments has been supported by mineral resources, then by
industrial, capital, and technology, then will be transformed to innovation and human capital
(Figure 0.0.3). Present Indonesian economy is booming with mainly assembly industries like
automobiles, but would lose its international industrial competitiveness by higher wages caused
by higher quality of life achieved. Innovation by industrializing and commercializing R&D
outputs will create new high-value-added industries and foster resources for competitive human
resources and job opportunities.
0.3 Outline of New Academic Research Cluster
Details of New Academic Research Cluster project are described in each chapter of this report
stressing importance of the project for Indonesia. Brief introduction of outline, especially of
overall concept, of the project, herewith has been prepared.
INNOVATION - BASED
ECONOMY
NARC as
Igniter
4
Original concept of NARC starts with MP3EI:
NARC will ignite Indonesian movement to innovation-based economy as directed in MP3EI
By bridging R&D/academic sector and industrial sector with 3 functional elements
5
Source: MP3EI, JICA Study Team
Figure 0.3.1 Introductory Chart of NARC Project
Phase-1 Creating System of Bio Cluster Phase-2 Enhancing Bio Industry
*R&D Firm
Existing
IndustryUniversity
Research Institute
BPPT
IPB
ITB
Sales
channelstoCustomer,
Consumer
*Supplier
（Instruments, Material,
Services）
*Bio Specialty Firm
（R&D, Manufacturing,
Marketing, Sales）
Joint Research
Products,
Services
En
tre
pre
ne
urs
hip Alliance, M&A,
Commissioned research
Patent saleTechnology Licensing
Organization
(TLO)
Products,
Services
Venture
Incubation
Industry-academia
collaboration
Attracting
Foreign Bio Firm
Foreign
Bio Firm
NARC Bio/Life Science Innovation Eco System
SPC
P - 1 P - 2
GOJ GOI
Investors
Production Factories
Academics
R&D Companies
Small Businesses
To the goal of creating an innovation eco system where stakeholder interact each other
Where academic, public, and private sector can support each other to share benefits
6
Above chart explains about New Academic Research Cluster project (hereinafter called as
NARC) with its connection to MP3EI, its future goal, its function, and its stakeholder.
As outlined in this chart, NARC is to ignite new movement of Indonesia for moving toward the
next phase of economy; that is, innovation-based economy as designed in MP3EI.
Its goal is to create an ―Innovation Eco System,‖ where every stakeholder can link each other, rely
on each other, interact with each other, and flourish together by industrialization of outputs
through joint research and development activities by Indonesian and overseas academic sectors.
As the first NARC for JABODETABEK area, utilizing its potentiality of bio and life science
resource, NARC Bio/Life Science Innovation Eco System is intended as the goal of this project.
0.4 Function of Project
(1)Concept of the project
The research and development cluster is constructed to perform the function of bridging between
academic research institutions such as existing universities, etc. and the industrial circle.
Hardware facilities and software operation of this cluster are equipped with three functions
consisting of each stage from research results through industrialization thereof for the purpose of
―industrialization of research results‖ and its concept is shown in the chart below,
New Academic Research ClusterInitial
Relations
Future
Relations
Microbial
Resource
Center ※ Bio
Industries
Existing
Laboratories
Other
Industries
Business
Incubation
Centers
Research
Centers
Existing
Academic
Institutions
Integrated
Support
Center
※Project Supported by JICA
Bridging Academic and Industry Sectors
For High Value Innovation
7
Source: JICA Study Team
Figure 0.4.1 Bridging Function of NARC
(2)Outline of the project
This cluster is composed of Integrated Support Center which acts as the core of bridging,
Incubation Center which promotes venture undertaking and joint research, and Research Center
which is the complex of research enterprises aiming at commercialization and industrialization.
Integrated Support Center is located only on the site of BPPT-NARC which becomes the core
execution organ. The size of facilities is planned as described in the following chapters.
8
Table 0.4.1 Outline of the Facilities Included in the Project1
Facilities
Agency for the Assessment and Application of Technology (BPPT), located at Puspiptek Serpong Science and Technology Park
Bogor Agricultural University (IPB), located at Darmaga Campus
Bandung Institute of Technology (ITB), located in Bekasi
Integrated Support Center 1,092 ㎡ ― ―
Incubation Center (land) (building)
1.0ha 3,276㎡
1.0ha 3,276㎡
1.0ha 3,276㎡
Research Center 4.7ha 4.7ha 4.7ha
Note: Integrated support center will be located only at BPPT-NARC site.
Source: JICA Study Team
Source: JICA Study Team
Figure 0.4.2 Location of the Facilities in JABODETABEK
0.5 Overseas Research Activities of Japanese Companies and Position of Indonesia
In recent years, overseas research bases of Japanese companies in China and Korea decreased, in
comparison with former years, but increased in other Asian areas. China used to be the target of
1 The following three sites were selected and the detail of each institutions will be described in the following chapters:
-Agency for the Assessment and Application of Technology (Badan Pengkajian dan Penerapan Teknologi, BPPT）at Puspiptek
Serpong、Science and Technology Park (Pusat Penelitian Ilmu Pengetahuan dan Teknologi）
-Bogor Agriculture University (Institut Pertanian Bogor, IPB ) Darmaga Campus
-Bandung Institute of Technology（Institut Teknologi Bandung, ITB）at Bekasi
ITB-NARC
ITB-NARC
BPPT-NARC
9
R&D bases as a huge market, but the target is now on Southeast Asian nations for faster
economic growth as the next target. The area continues to be the target of R&D bases of Japanese
companies. Indonesia, among them, is the biggest and is expected to be a major target of R&D
activities.
Source: Ministry of Economy, Trade and Industry, ―Research Trend in Industries,‖ July 2012
Figure 0.5.1 Location of Overseas Research Bases from Japan
Source: Ministry of Economy, Trade and Industry, ―Research Trend in Industries,‖ July 2012
Figure 0.5.2 Reasons of Overseas Japanese R&D Bases
Reasons of overseas research bases:
- R&D to reflect local market needs,
MEXT: Ministry of Education, Culture, Sports, Science and Technology, 2010
USA Europe China Korea India Other Asia Others
Research in 2007
Research in 2010
10
- R&D cost reduction,
- Connection with local enterprises and academic entities,
- Competitive local human resources
Indonesia fits best among all the ASEAN nations with these reasons. As shown in the following
figure, the ratio of overseas R&D expenditure by various sectors shows 14% by pharmaceuticals
at the top, manufacturing 3.1%, chemical industry 1.4%, and transportation equipment 1.4%.
Investment on overseas research activities is very high in pharmaceuticals. A recent trend has
shown shift focus from chemical synthetic pharmaceuticals to bio pharmaceuticals. Such a trend
can positively affect the transfer of research functions to Indonesia.
Source: Ministry of Economy, Trade and Industry, ―Research Trend in Industries,‖ July 2012
Figure 0.5.3 Industry-wise Japanese R&D Investment
0.6 Necessity of NARC
As discussed above, establishment of new industrial cluster is necessary in order to promoting
the creation of cluster of innovation-based economy by reinforcing cutting-edge technology and
bridging the academic research institutions and industrial circles, and responding to the needs of
Japanese companies for their overseas R&D activities. Moreover, in order for such cluster to be
competitive considering the increasing competition among similar facilities in neighboring
countries, strategic investment by the Indonesian government to support the cluster is inevitable.
All Industry
Manufacturing
Chemical
Steel
General Machinery
Electric Machinery
Transport Equipment
Telecommunication
Pharmacy
11
Such supports include 1) Financial support to the development of cluster such as Viability Gap
Funding in order to reduce the level of tenant fee so that the fee can be attractive compared to
other countries; and 2) various inventive mechanisms for companies such as tax exemption and
inventive on intellectual properties to promote the R&D activities of the companies.
As the last summary of this introductory chapter, the necessity of The New Academic Research
Cluster (NARC) from view points of 4 stakeholders (private and public sectors of both Indonesia
and Japan.) with SWOT matrix is described below.
Overall relationships of stakeholders with activities incurred by NARC are explained in the Chart
below:
Source: JICA Study Team
Figure 0.6.1 Stakeholder Roles
Existing issues for these 4 stakeholders can roughly be summarized as follows:
Stakeholder Roles
SPC: Facility Construction/ Initial Operation for 20years
Central Government
Big Enterprises
Small/Medium/Venture
Enterprises
Local Government
BPPT IPB ITB Others
StudentsResearchers
Integrated Support/ Incubation/Research Center
Technology Licensing, Matching, Research Events, Business Consulting
Incentives
R&D jobs
Entrepreneur
Fund, Policy
Operate
Tenants
Promotion
Talent
Job Training/Education
Supply ResourcesFund Raising
Licensing
Commercialization
Linking/Networking
12
(1) Government of Indonesia
Strength :Powerful momentum toward developing economy and becoming one of top
leading countries
Weakness :Less chances of acquiring trials and investment for transferring into next
economic phase
Opportunity :Opportunity for change by using private and foreign investment and
knowledge for transition
Threat :Being kept behind with competing countries because of middle-income trap
and stagnating before reaching leading position by failing in transition out
of the present economy into next phase
(2) Private Sector of Indonesia
Strength :Passion and willingness to improve the society
Weakness :Not enough opportunity and environment to create new intellectual property
and use it for new industrialization
Opportunity :Being supported by governments and connected with overseas, opportunity
for realizing development by increasing competency of human resources and
by utilizing bio and other resources
Threat :Without support from in and out of country, no initiation of innovative R&D
and continuation of stagnated situation
(3) Government of Japan
Strength :Experience of transition management from developing stage into developed
country
Strong willingness to support international projects with various aids and
incentives
Weakness :Not many trials for new types (supports for transition of economy from
industry-oriented to innovation-oriented one) and levels of overseas aids and
cooperation
Opportunity :Chances of growing together with other countries while securing mutual
merits
Threat :With just exporting only goods or projects, losing international standpoints
and not expecting supports by other countries
13
(4) Private sector of Japan
Strength : Knowledge and expertise of innovation and marketing
Willingness to international cooperation for mutual prosperity
Weakness :Difficulty in establishing long and reliable relationship for development of
social infrastructure with other countries
Opportunity :By partnering with public/private sector in other countries, opportunity for
merging with development of local social infrastructure for a long period of
time
Threat :Limitation of single and separate effort of each private company and
possibility of being lost in a transition of society
NARC can deal with the above-mentioned elements by reinforcing strength and opportunity, and
improving weakness and treat as follows:
Reinforcement of
Strength
:Ignition and acceleration of transition from the present
industry-oriented Indonesian economy into innovation-based
economy by industrializing R&D outputs through international
cooperation
Improvement of
Weakness
:By introducing this new type of international PPP aid scheme,
promoting involvement of multi-stakeholders and creating merits
for all stakeholders by creating innovation
Expansion of Opportunity :By utilizing past ODA properties of academics and R&D facilities,
opportunity for further success and reinforcement of ODA by this
social PPP infrastructure project for industrialization
Exclusion of Threat :By tracking on a long-term scenario of international cooperation,
establishing stable and reliable relationships and mechanism of
mutual prosperity
Why this can come true will be explained in the following chapters, which will prove this new
idea of NARC can definitely be a model of future international innovation aid mechanism.
14
Chapter 1. Competitiveness Analysis for Indonesian Biocluster and
Survey for Industrialization Promotion
1.1 Overview
1.1.1 Background on New Academic Research Cluster Project on Bioresources
The New Academic Research Cluster (NARC) on Bioresources is part of activities under the
Metropolitan Priority Area (MPA) program, a cooperation agreement between the Governments
of Indonesia and Japan that was signed on December 10, 2011. The objective of the MPA is to
transform areas in Greater Jakarta (Jabodetabek) to be more attractive and more suitable for direct
investment and industrial development by accelerating infrastructure development.
The NARC is a science and research based infrastructure project scheme under the MPA. The
essence of NARC is an integrated physical environment where researchers and industries can
mutually conduct research, technology development, information exchange, mutual cooperation
and manufacturing of bioresource-based products to encourage industrialization and increase
national economic growth. The NARC program includes research and development,
revitalization of existing facilities, establishment of new commercial research and development
facilities, and human resource development.
The NARC on Bioresources will consist of three specific locations aligned with three individual
bioresource research institutions:
-Agency for the Assessment and Application of Technology (BPPT), located at Puspiptek
Serpong Science and Technology Park
-Bogor Agricultural University (IPB), located at Darmaga Campus
-Bandung Institute of Technology (ITB), located in Bekasi.
The success of NARC as a science and research-based economic development infrastructure
project depends upon an effective program for promoting industrialization. This requires
aligning research institution capacities and industry development potential to identify specific
targets of opportunity for industrialization within each of the three core clusters.
The key assessments needed to set out an effective program for industrialization promotion
include:
-Identifying high performance bioresources industry sectors that would benefit from research
and development
15
-Identifying research institution assets and focus areas that can support research and
development leading to bioresource industrialization
-Advancing operation and management models for research and development
-Setting out paths for commercialization
1.1.2 Why University Research Park Development Matters for Bioresources Development
The importance of university research parks for advancing bioresources industry development is
inter-related with the growth of the globally integrated knowledge-based economy. In the past, a
nation‘s natural resources and proximity to markets were critical factors for business location. But
with the rising importance of knowledge workers and innovation, competitiveness for economic
growth depends on its ability to attract and facilitate industry, university and other research-driven
interactions. More and more man-made factors involving such factors as the presence of
university research and talent development drivers, as well as the depth and openness of a region‘s
research drivers to industry collaboration are critical factors for development. Also, while
natural resources remain an important asset, increasingly innovation and knowledge-assets play a
key role in driving value-added development incorporating these resources – thereby maximizing
development value for national and regional economies.
An interesting paradox is that the more globally integrated the world‘s economy has become, the
more local research and development (R&D) know-how, entrepreneurial culture, and workforce
skills matter for economic success. A 2009 Harvard Business Review article by Harvard
Professors Gary Pisano and Willy Shih refers to this phenomenon as creating
geographically-based ―industrial commons.‖ As they explain, ―Once an industrial commons has
taken root in a region, a powerful virtuous cycle feeds its growth. Experts flock there because
that‘s where the jobs and knowledge networks are. Firms do the same to tap the talent pool, stay
abreast of advances, and be near suppliers and potential partners.‖ 2
Perhaps one of the best known approaches for place-based strategies to advance technology hubs
is the establishment of university research parks. According to the National Research Council in
its study of research park best practices:
“Research parks are seen increasingly around the world as a means to create dynamic clusters
that accelerate economic growth and international competitiveness. They are widely
considered to be a proven tool to encourage the formation of innovative high technology
companies. They are also seen as an effective means to generate employment and to make
2 Pisano and Shih, op cit.
16
existing companies more competitive.” 3
Research parks are real estate developments in which land and buildings are used to house public
and private research and development facilities, high technology and science-based companies,
and support services. By providing a location in which researchers and companies operate in
close proximity, research parks create an environment that fosters collaboration and innovation
and promotes the development, transfer and commercialization of technology. As shown in
Figure 1, ideas flow between the technology generators and the companies located in the research
park. In addition, the innovations technology, and knowledge generated by the companies and
research institutions lead to the creation of new start-up companies. Most research parks are
affiliated with one or more universities; however, research parks have also been developed in
close proximity to national laboratories or other sources of technology and innovation.
Source of innovation
(University, federal laboratories, private R& D facilities)
Job Resources Job Resources
Research Park Tenants Business Incubator
Growth
Graduates and Spin-Offs
Source: Adapted from: ―Positioning Research Parks for Success‖, Guy T. Mascari. Economic
Development Commentary, Vol. 23, No. 4, Winter 2000, p. 38
Figure 1.1.1 Research Park Concept
The Association of University Research Parks defines a university research park as a
property-based venture, which has:
-Master planned property and buildings designed primarily for private/public research and
development facilities, high technology and science based companies, and support services
-A contractual, formal or operational relationship with one or more science/research
institutions of higher education
3 National Research Council, ―Understanding Research, Science and Technology Parks: Global Best Practices‖, 2009.
17
-A role in promoting the university's research and development through industry partnerships,
assisting in the growth of new ventures and promoting economic development
-A role in aiding the transfer of technology and business skills between university and industry
teams
-A role in promoting technology-led economic development for the community or region.
For bioresources development, the presence of a signature development complex is especially
important. Among the key added value of having a university research park for bioresources
development are the following:
-Enabling access to specialized lab space. Bioresource development requires highly
specialized lab space, including provision of wet-lab facilities that meet clean room
requirements for sterility. In addition, there is often expensive equipment needed for analysis
and pilot production activity. This specialized lab space is expensive to construct and is not
adequately supported by the commercial real-estate market because of its perceived
specialized use. So, by offering available wet-lab space, along with specialized equipment,
bioresource-focused research parks and other development complexes can be important
resources for attracting and supporting commercial bioresource development.
-Offering close physical proximity and linkages between bioresource product and venture
development and research. Unlike other technology fields, product development in the
bioresources draws more frequently on advances in the basic sciences generated by research
institutions, such as for advances in new drug targets, identification of plant improvements,
advances in biomedical instrumentation for imaging or diagnostics, and identification of
improved medical approaches for treating diseases. Moreover, because of the strict regulatory
environment surrounding the introduction of new therapies and devices for medical treatment,
bioresource research institutions are critical in undertaking clinical research. Therefore,
having physical locations with close ties to bioresource research organizations can provide an
important competitive advantage of proximity.
-Nurturing and fostering new bioresource start-ups. Combining the proximity to research
drivers with the availability of bioresource wet-lab space can foster new bioresource venture
formation that helps move research discoveries with high commercial potential into the
marketplace with a variety of assistance services—such as market analysis, proof of concept,
business planning, management team recruitment, and venture financing attraction.
18
-Accessing talent. An important ingredient in the success of a region in the bioresources is to
have an environment that generates, attracts, and retains talent – pools of specialized workers
in bioscience and bioresource utilization. Bioresource-focused developments close to
university and academic health centers can serve as an important intersection of
complementary talents, from bioscience researchers to bioresource company managers to
technicians. More directly, they can leverage students for internships and co-op programs
creating new relationships; increasingly, research parks are also becoming sites for advanced
training programs and specialized educational programs in the bioresources. Finally, through
innovation support activities (such as incubators and testing and applied research facilities),
these bioresource-focused development complexes can be places where more senior faculty
and postgraduate researchers can effectively interface with bioresource entrepreneurs and
existing and emerging companies.
1.2 Competitiveness Analysis for Indonesian Biocluster
1.2.1 Pharmaceutical Industry Platform
(1) Herbal Medicines
1) Definition of Market Niche
An herb is a plant or plant part used for its scent, flavor or therapeutic properties. The
value of herbs for medicinal purposes is that plants synthesize a wide variety of chemical
compounds that have biological function. Chemical compounds in plants mediate their
effects on the human body through processes identical to those already well understood
for the chemical compounds in conventional drugs; thus herbal medicines do not differ
greatly from conventional drugs in terms of how they work. Scrutiny of medical
indications by source of compounds has demonstrated that herbal medicines and other
natural products found among living organisms (such as microbes) are used to treat 87%
of all categorized human diseases, including their use as antibacterial, anticancer,
anticoagulant, antiparasitic, and immunosuppressant agents, among other applications4.
Typically herbal medicines are provided as nutritional supplements, where the active
ingredient for medicinal purposes is identified and then extracted into tablets, capsules,
and powders, as well as drinks and energy bars.
Often the active medicinal ingredient found in herbal medicines can be the basis for what
is known as natural product drug development. The small active molecules identified by
4 Newman DJ, Cragg GM, Snader KM, ―Natural products as sources of new drugs over the period 1981–2002,‖ Journal of Natural Products, 2003, pages 1022–1037.
19
herbal medicine provide a lead for developing a synthetic chemical agents for
pharmaceuticals.
This could involve producing synthetic versions of the simplified bioactive molecules
found in herbal medicine or using the bioactive molecule to guide the production of
synthetic small molecule libraries that are more amenable to high throughput screening.
Modern automated fractionation and characterization methods to improve screening, new
molecular modeling programs to guide modification of natural products, and engineering
strategies for production of natural products in organisms are helping to make natural
product drug discovery and development once again a rational path for industrial
application.
2) Existing Market and Competitive Position of Indonesia
Indonesia is an ideal market the production and use of herbal medicines.
There is a strong cultural acceptance of herbal medicines for treating diseases. Indeed,
there is even a specific Indonesian word for herbal medicine, Jamu.
On the production side, the significant diversity of plants in Indonesia offers a wide range
of opportunities for herbal medicine development. This has lead to significant value in
ethnobotany study since herbal medicines have a long tradition of use in Indonesia and,
because of the nation‘s extensive biodiversity, are richly available. The Indonesia
Ministry of Health in its 2007 Report on National Policy on Traditional Medicines
reported that there are approximately 40,000 species of plants in Indonesia and among
them at least 9,600 species of plants have been used as medicines. In addition, there are
400 ethnic groups in Indonesia that possess traditional knowledge, accumulated over
centuries, regarding the use of plants for medicinal purposes.
It is reported that there are already over 1,200 producers of herbal medicines in Indonesia.
This is an area of particularly significant small and mid-sized business development and
an active sector for development in rural areas of Indonesia.
Among the competitive challenges for Indonesia to grow its herbal medicine industry are:
-Reaching significant scale in the identification and assessment of different plants used
traditionally for herbal medicines.
- Improving the quality standards of herbal medicine producers, particularly in light of
ongoing Association of Southeast Asian Nation (ASEAN) harmonization efforts to
standardize technical requirements on safety, efficacy, stability, good manufacturing
practices and labeling related to herbal medicines. It is expected that these
20
harmonization regulations will be put in place in 2014 and fully implemented by
2015.
(2) Biopharmaceuticals for Diagnostics, Vaccines and Antibiotics
1) Definition of Market Niche
Biopharmaceuticals involve therapies, medical products and diagnostics that are
produced or engineered using biotechnology methods and technologies. Among the
common biopharmaceuticals on the market today are vaccines, biotech-engineered
antibodies, protein-based and nucleic-acid-based drugs, and other biologics involving
cell or tissue based products (e.g. stored packed Red Blood Cell units).
The production process of biopharmaceuticals varies significantly from traditional
chemical-based pharmaceutical drugs. Biopharmaceuticals are manufactured in living
systems such as microorganisms, plants, or animal cells using fermentation systems that
grow or scale-up the biological-based product. A growing area of biopharmaceuticals
for emerging nations is the equivalent of producing generic chemical-based
pharmaceuticals for vaccines, diagnostics and biotech-engineered therapies that have
come off patent. This generic impersonation of biopharmaceuticals is called
―biosimilars‖.
Unlike generic chemical-based pharmaceuticals, biosimilars are far more difficult to
produce, reflecting both the greater molecular complexity of a large molecule biologic,
such as a therapeutic protein or monoclonal antibody, and a major difference in
production process involving fermentation of cell lines or what is often referred to as
bio-scale-up manufacturing. In fact, the generic biopharmaceutical manufacturer will not
have access to the original cell line, nor will the generic biologic manufacturer know the
exact fermentation or purification process used. So the imprecise nature of getting to an
exact copy will result in far greater testing requirements. The Economist reports that the
cost of a biosimilar might reach as much as $100 to $150 million5.
2) Existing Market and Competitive Position of Indonesia
The near term focus for biopharmaceuticals in Indonesia is for vaccines to treat
communicable diseases. The World Health Organization reports that communicable
diseases continue to be the major cause of morbidity and mortality in Indonesia. Plus,
the possibility of emerging diseases with epidemic or pandemic potential is a major
concern in Indonesia.
Indonesia stands out in having a state-owned company, PT Bio Farma, serving as a
5 ―Attack of the Biosimilars,‖ The Economist, October 23, 2010, page 78.
21
producer of vaccines, sera and diagnostic products. Bio Farma was the first ASEAN
based vaccines manufacturer to achieve WHO prequalification status, enabling
participation in UNICEF tenders for DTP, DTP-HepB, HepB, measles and oral polio
vaccines. Bio Farma remains active in vaccine development, with its recent development
of a pandemic flu vaccine in collaboration with the Biken Institute of Japan and a
pentavalent child vaccination with support from the GAVI Alliance, which contains five
antigens in one shot and protects against diphtheria-tetanus-pertussis (DTP), hepatitis B
and Haemophilius influenzae type b (Hib).
Bio Farma is also active in exporting, with a reported 60% of its products sold as exports.
This potential to serve the global market is significant. In 2010, both the adult vaccine
market and pediatric vaccine market exceed $12 billion, and both are expected to grow
significantly in the 8 to 10 percent annual range over the next few years. In addition,
there are substantial advances in vaccines that are nearing market introduction for unmet
needs in malaria, dengue fever, herpes, and diabetes, among other conditions.
Worldwide the vaccine market is dominated by five companies - Sanofi,
GlaxoSmithKline, Merck & Co., Pfizer, and Novartis – who hold close to 80% of the
world market. Several of these companies market vaccines. In addition, the Novartis
Institute for Tropical Diseases has established a clinical research initiative in Indonesia
focused on treatments for tuberculosis, dengue fever and malaria in collaboration with the
Eijkman Institute and the Hasanuddin University Clinical Research Institute.
(3) Pharmaceutical Raw Materials
1) Definition of Market Niche
The making of a chemical-based pharmaceutical drug requires two types of raw
materials:
-Active pharmaceutical ingredients (API), which are the active chemical components
providing the pharmacological activity of a drug. Active ingredients include those
components of the product that may undergo chemical change during the manufacture
of the drug product and be present in the drug product in a modified form intended to
furnish the specified activity or effect.
-Excipients, or non-active materials that help to package and deliver a drug. Examples
of excipients include fillers, extenders, diluents, wetting agents, solvents, emulsifiers,
preservatives, flavors, absorption enhancers, sustained-release matrices, and coloring
agents.
22
Firms involved in producing pharmaceutical raw materials act as a bridge between the
upstream chemical industry and the downstream pharmaceutical drug industry.
2) Existing Market and Competitive Position of Indonesia
Estimates suggest that well over 90% of the more than 1,000 raw materials used to
manufacture drugs in Indonesia are imported. Two key sources are China and India.
Not having pharmaceutical raw materials produced in Indonesia is a concern for the
overall competitiveness of Indonesia‘s pharmaceutical industry. It raises risks for
Indonesia from currency fluctuations as well as changing internal demand patterns within
other nations and other nations‘ shifting export strategies.
A challenge for Indonesia in advancing pharmaceutical raw material production is that it
must meet Good Manufacturing Practices (GMP) for safety and quality assurance. This
raises the cost of market entry.
In addition, price controls on pharmaceuticals raise barriers for new participants entering
the pharmaceutical raw material industry.
Finally, new Indonesian participants in manufacturing pharmaceutical raw material
would need to compete with the established strong production capacity found overseas,
especially in China, the world‘s largest producer of pharmaceutical raw materials. Over
the years, China‘s pharmaceutical raw materials manufacturers have been very active in
exporting.
1.2.2 Agriculture and Food Platform
(1) Agricultural Improvement and Diversification
1) Definition of Market Niche
Agricultural improvement is focused on achieving rising levels of crop productivity in
the face of mounting challenges posed by plant pathogens, pests, salinity, drought,
flooding, nutrient deficiency or toxicity of soil.
In addition, agriculture needs to keep pace with shifting consumer demand and
purchasing power and global market opportunities. Basic staple commodities such as
rice or maize do not lend themselves to generating higher incomes for farmers or meeting
the consumer demand of a rising middle class. The focus of value-added agriculture is
to diversify crops via identification of niche market opportunities and to increase farm
incomes.
2) Existing Market and Competitive Position of Indonesia
23
Food crops in Indonesia comprise slightly over 7 percent of gross domestic product and
rose by nearly 30% in real terms from 2004 to 2010. As noted, agriculture remains an
important economic driver for Indonesia. The value of its production has increased
faster than population growth and it is a major employment sector for Indonesian
workers.
Reflecting this growth in agriculture, farmer incomes in Indonesia have risen
significantly over the past decade, and have been an important contributor to lowering
poverty in the country.
Generating increasing agricultural productivity is of particular importance to Indonesia
since the nation has limitations on its agronomic land. At just 0.23 ha per person, which
is a third of the world‘s average, agronomic land is a particularly scarce resource so
having high agricultural productivity is a critical factor. Pressing more land into
production is considered to be a poor option for the nation since it would require
deforestation and the loss of critical biodiversity (which, as noted above, is relevant to
development of other economic sectors).
Current rice yields in Indonesia of 5 tons per ha in 2009 compare favorably with other
nations, such as Thailand, India and Malaysia, though it is below the 6.6 tons per ha
achieved by China. Yet in recent years there have been relatively low productivity gains
in yields for rice. In comparison, fruit and vegetable output has not only been growing,
but has been recording significant growth in yields.
One particular challenge facing Indonesia in raising agricultural productivity is that its
crop production is based on quite small farms using predominantly manual labor and little
mechanization.
Indonesia is also facing considerable environmental challenges in regards to maintaining
its existing agricultural productivity, particularly for rice production, including:
-Soil erosion: Due to intensive rice cultivation practices, particularly in irrigated land,
there is a tendency toward declining soil quality in rice producing provinces. Heavy
application of inorganic fertilizers over long periods of time has resulted in worsened
soil structure and significant water pollution, particularly in Java. In swampy land, the
problem lies mainly in the high level of acidity due to improper land and water
management practices.
-Climate change: Already maximum and minimum temperatures have steadily
increased with impacts on rainfall detected across Indonesia, with some areas
decreasing, while others have experienced increases. The date of Monsoon onset has
24
also changed in many parts of Indonesia with increasing delays in some regions.
The implications of climate change for rice production are of significant concern. The
rice-rice system, which is the current cropping pattern used in most of the rice growing
areas, may no longer be the most effective production approach in the near future. As
the second planting depends heavily on irrigation water, under extreme drought years this
might become increasingly limited and lead to major production losses.
Also the rising temperatures from climate change impact on rainfall patterns and in the
length of seasons is causing concerns about the development of crop pests and diseases.
At the same time, agro-food production in Indonesia continues to diversify with strong
growth in fruits and vegetables in recent years. While domestic consumption of fruits
and vegetables is on the rise, Indonesian production of tropical fruit is a growing area of
exports. Today, Indonesia is first in the world in the exports of coconuts and third in the
world in pineapple, papayas and other tropical fruit exports. Still, in overall trade of
fruits and vegetables, Indonesia has not kept-up with demand and has also been held back
by weak marketing linkages between expanding and modernizing urban food retailing
and the base of small-scale farmers in Indonesia.
(2) Value Added Food Products
1) Definition of Market Niche
The quality of food has acquired a renewed emphasis with the increased awareness of
optimal nutritional requirements and the consequences of poor nutrition (such as obesity
or vitamin deficiency). The food industry has responded with foods engineered for
nutritional advantages. Examples include fiber enhancements for yogurt, probiotic
ingredients, omega-3 enriched eggs, and specialized sports drinks to name just a few.
At the same time, illness from pathogen contaminated foods, and the concern of
bioterrorism resulting in contaminated food sources, have also increased. This need for
enhanced food safety and security is providing opportunities for the development of
pathogen detection systems, fast turn-around diagnostics technologies, decontamination
technologies and advanced packaging systems.
2) Existing Market and Competitive Position of Indonesia
The food industry in Indonesia is a significant economic driver. Food products comprise
7.3% of gross domestic product, grew by 35% in real terms from 2004 to 2010 and
involve over 5,000 business establishments.
Market research studies note a trend towards healthier food consumption, especially
25
amongst middle- and upper-income Indonesians and urban residents, who are more
exposed to health issues. Rising health consciousness was partly driven by increasing
coverage of health issues in newspapers, magazines and on television. In addition,
packaged food manufacturers continued to invest heavily in launches of new health and
wellness brands and promotional activities that emphasized the health benefits of their
products. 2012 continued to witness a number of products launched with vitamin
fortifications, healthy ingredients, suitability for weight watching, lower sugar, lower
cholesterol, and lower fat content characteristics in both retail packaged food and
foodservice outlets.
Multinationals have a strong foothold in the Indonesian food products industry. This
includes Heinz ABC Indonesia, Kraft Foods Indonesia and So Good Food. In 2012, these
multinationals continued to invest heavily in new launches and promotions. For example,
Heinz ABC launched ABC KecapPedas or spicy soy sauce and held road-shows in major
cities as well as in-store promotions in modern retail outlets. Besides launching Oreo in
new orange ice cream flavor, Kraft Foods actively promoted its packaged food products
through social media such as Facebook and Twitter. Meanwhile, So Good Food had just
established its fourth processing factory, adding larger production capacity to meet
consumers‘ demand.
1.2.3 Industrial Bioproducts Platform
(1) Palm Oil Bioproducts
1) Definition of Market Niche
Advancing the full range of bioproduct development opportunities from palm oil. Palm
oil can be separated into a wide range of distinct oils with different properties. This
versatility has seen palm oil replace animal and other vegetable oils in a wide variety of
products. Today it is: 6
-used as a cooking oil
-the main ingredient for most margarine
-used in confectionary, ice cream and ready-to-eat meals
-the base for most liquid detergents, soaps, and shampoos
-the base for lipstick, waxes, and polishes
-used as an industrial lubricant
-used as a biofuel.
6 Source: World Wildlife Fund. http://wwf.panda.org/what_we_do/footprint/agriculture/palm_oil/about/
26
2) Existing Market and Competitive Position of Indonesia
Indonesia is the top palm oil producer in the world producing 18 million tonnes (40%) of
the global production of 45 million tonnes.
More than 70% of Indonesia‘s palm oil is exported. The main destinations countries are
India, the Netherlands, Malaysia, Italy, Singapore, Germany and China.
While large scale private companies produce over 50% of Indonesian palm oil, a
significant share representing 35% of palm oil production is still with small land holders,
but their yields are lower than for corporate and government plantations.
In 2007, a report prepared for the Stern Review estimated the return from palm oil
land-use as ranging from US$960/ha to US$3,340/ha. This was in comparison with
smallholder rubber, rice fallow, cassava, and one-off timber harvesting which yielded
US$72/ha, US$28/ha, US$19/ha and US$1,099/ha, respectively. Specifically, land-use
returns for palm oil were estimated as including7:
-US$ 960/ha for low yield independent growers;
-US$ 2,340/ha for high yield independent growers;
-US $2,100/ha for supported growers; and
-US $3,340/ha for large scale growers.
There is considerable room to significantly enhance yields of palm oil in Indonesia. In
Indonesia, palm oil yields averaged 3-4 tonnes/ha, however, various estimates of
potential yields are up to 8.6 tonnes/ha.
Currently most of the palm oil leaves Indonesia with no value-added beyond the milling
stage (which produces crude palm oil and has to be done close to the plantations to avoid
spoilage). About 60% of production is shipped in crude form, with limited value-added
by the country of origin.
Current Indonesia government policies are encouraging biodiesel production from palm
oil. The government has set minimum requirements for the use of biodiesel in
transportation and electricity production of 20% by 2025. In addition, export duties are
lower on biodiesel from palm oil than on crude palm oil. And a range of incentives have
been put in place including VAT exemption, investment tax incentives, simplified
licensing procedures and loan interest subsidies.
Among the leading players are Bakrie Sumatra Plantation, London Sumatra, Astra Agro
Lestari, SMART and Darmex. In 2011, 49 private companies were granted investment
7 Ibid
27
approval with a total investment of $US 1.5 billion and a combined production of 96.5
million tons.
1.3 Survey of High Potential Sector for Research and Investment
1.3.1 Approach to Informing Identification of Targets of Opportunity for Industrialization
The first step in assessing targeted opportunities for industrialization around university-associated
research parks is to consider how Indonesia is positioned in bioresource-based industry today in
areas of development with linkages, or potential linkages, to university research and development
activities and capabilities.
The approach undertaken for identifying potential industrialization targets used field work to
understand the potential opportunity set relative to the research activities and capabilities found
across BPPT, ITB and IPB. In addition, Battelle analysts examined market research, academic
publications and intellectual property data in comparison to identified research institution
capabilities. Based on Battelle‘s review, three key industry platforms stand out as high potential
sectors for advancing the development of industry collaborations around the new academic
research clusters in bioresources for Indonesia:
-Pharmaceutical platform involving bioprospecting for natural products and herbal
medicines; the production of diagnostics, vaccines and antibiotics; and pharmaceutical raw
materials.
-Agriculture and Food platform involving primary agricultural improvement and
diversification as well as value added food products.
-Industrial bioproducts platform focused on bio-oils, biofuels and biorefining operations
with a particular emphasis on adding-value to palm oil as a principal feedstock.
An assessment of each of the above platforms was performed in terms of their respective potential
for industrialization based on review of market research reports and other studies on bioresources
industries. It is particularly important in considering the potential for industrialization to
distinguish between two development pathways: industrialization to provide domestic production
that substitutes for imports, and industrialization that develops growing industries with the
potential to serve export markets. In addition, outreach to industry was undertaken, incorporating
interviews with key industry representatives, to learn of their interests and needs going forward.
28
For each of the specific platforms, an industry platform profile has been developed that considers:
-Target market niches
-Types of development Impacts expected for Indonesia
-Fit to a university research park
-Target markets to be served
-Market size and growth
-Industry development barriers and issues in Indonesia
1.3.2 Pharmaceutical Industry Platform
The pharmaceutical industry is focused on the development and production of medicines and
diagnostics that save, sustain and improve lives. The traditional pharmaceutical industry, which
was predominant through most of the 20th century, relied upon on identifying small chemical
molecules to act mainly as blockers or inhibitors of biological processes involved in disease.
Much of the discovery of traditional pharmaceuticals was based on identifying the active
ingredient from long-standing remedies or by serendipitous discovery. Bioactive natural products
and phytochemical compounds have been a traditional source of a significant majority of
marketed drugs.
More recently, the advent of biotechnology has reshaped many aspects of biomedical
development from the way we study medicine, discover and develop therapeutics, and diagnose
and treat diseases and medical conditions. Simply put, biotechnology involves techniques to
understand and manage the machinery of living things. It was launched by two key discoveries in
the 1970s involving the manipulation of living cells at a molecular level, including moving
genetic information from one living cell to another, a technique known as recombinant DNA, and
fusing cells to produce disease-fighting antibodies, or what is known as monoclonal antibody
technology. This has lead to a new class of drugs, known as biopharmaceuticals that directly
utilize biological agents, such as proteins, antibodies, DNA and RNA, as therapeutic
interventions.
Biotechnology has also changed the way targets for new drugs are developed even for small
chemical agents. Now drugs are developed based on research which elucidates how diseases and
infections are controlled at the molecular and physiology level. This knowledge is then used to
identify new potential targets for intervention in disease pathways. These modern biotechnology
methods for drug discovery and development have been supported by a range of new technologies,
such as computer-aided modeling, combinatorial chemistry techniques involving the generation
of large collections, or libraries,‖ of compounds by synthesizing all possible combinations of a set
29
of smaller chemical structures or ―building blocks,‖ and use of high throughput screening in
which hundreds or thousands of chemical targets can be analyzed for bioactivity. Moreover,
computer modeling and computational chemistry techniques are assisting in the pharmacological
study of drugs to improve drug design for absorption, distribution, metabolism, excretion and
toxicity. Thus, today drug discovery can be much more targeted and go from a detailed
understanding of the biological processes and related proteins to the structure of proteins to
designed chemical agents to act on the disease process.
In Indonesia, the pharmaceutical market is dominated by generic prescription drugs and
over-the-counter medicines based primarily on traditional small molecule, pharmaceutical
chemical agents. Generic drugs are those that have typically been developed by another
producer/innovator, are no longer protected by a patent, contain the same active substance as the
original drug, and have the same quality, safety and therapeutic efficacy as the original patented
product. Over-the-counter medicines, meanwhile, do not require a prescription, because they are
generally considered to be sufficiently safe for the general public to determine when to use.
Market research studies estimate the overall pharmaceutical market in Indonesia to have reached
$US 5 to $US 6 billion in 2012 and the market is expected to grow over the next 5 to 7 years at a
healthy rate of 7.6% to 9% annually. In 2012, the share of generic prescription drugs and
over-the-counter medicines were each approximately 40% of the total pharmaceutical market.
The remaining 20% of the Indonesian pharmaceutical market in 2012 was comprised of patented
prescription drugs. These patented drugs are nearly all supplied by foreign pharmaceutical firms.
The basis for these patented drugs is an environment with a robust new drug discovery and
development capacity, and few Indonesian companies or universities have the capacity to
discover new chemical or biological agents, especially based on modern biotechnology methods.
It is also expensive to discover and develop new patented prescription drugs, with a high failure
rate along the way, and so the price of patented prescription drugs can be quite high. Finally,
there are concerns about intellectual property protection in Indonesia for foreign-developed drugs,
which serves as a disincentive for many foreign companies to bring patented prescription drugs to
Indonesia.
While there is not significant activity in Indonesia in modern biotechnology approaches for the
discovery of novel drugs, there are still areas of research and development that can support the
pharmaceutical industry in Indonesia, both to meet local needs as well as for generating exports.
These three market niches for industrialization in pharmaceutical drugs include:
(1) Herbal medicines
(2) Biopharmaceuticals for diagnostics, vaccines and antibiotics
(3) Pharmaceutical raw materials
30
(1) Herbal Medicines
Table 1.3.1 Target Markets and R&D Collaboration Fields for Herbal Medicines
Target Markets for
Indonesia
Industrialization
Herbal medicines offer opportunities for expansion within Indonesia as well
as for export to other nations.
There is already a well established market in Indonesia for herbal
medicines. It is estimated that the size of the herbal medicine market in
Indonesia is valued at between $US 1 billion to $US 2.7 billion annually,
and covers a wide range of products.
Indonesian herbal medicines are also becoming an export producer for
Indonesia, now reaching above $US 200 million. Key nations importing
Indonesian herbal medicines include South Korea, Taiwan and Hong Kong.
There is also trade with Middle East and Russia.
The worldwide market for herbal medicines is estimated to be over $US 7
billion and is growing at a moderate rate of approximately 4% annually.
Among the major uses are for enlarged prostate conditions, cognitive
disorders and menopausal symptoms.
Another industry application of herbal medicines is to guide drug discovery
and development. Natural products continue to comprise a large share of the
top selling drugs worldwide. Comparisons of the information presented on
sources of new drugs from 1981 to 2007 indicate that almost half of the
drugs approved since 1994 are based on natural products. Thirteen natural
products related drugs were approved from 2005 to 2007, and five of these
represented the first members of new classes of drugs. Moreover, the
pipeline is not dropping off. Over 100 natural product derived compounds
are currently undergoing clinical trials and at least 100 are in preclinical
development.8
Fit for Industry
R&D
Collaborations
with Universities
Universities can offer many high value-added services for advancing herbal
medicine, including:
Conducting the ―ethnobotany‖ studies of various plants to learn of
the traditional human uses of plants for medicinal purposes. This
8 Allan Harvey, ―Natural Products in Drug Discovery,‖ Drug Discovery Today, October 2008, page 894.
31
represents a well-recognized and effective way to discover future
medicines.
Identifying and characterizing the bioactive ingredient using
analytical chemistry techniques.
Screening the bioactive ingredient against various diseases.
Advancing extraction approaches that can be standardized.
Studying the toxicology of the bio-active ingredient
Advancing the formulation of the bio-active ingredient within a
nutritional supplement or medical products
Testing the bio-activity within a nutritional supplement or medicinal
product.
Industrialization
Barriers for
Indonesia
Gaining acceptance of herbal medicine requires rigorous efficacy studies.
This calls for both laboratory-based in vitro studies as well as human-based
clinical studies. These need to be conducted at a very high standard to gain
acceptance for
Source: JICA Study Team
(2) Biopharmaceuticals for Diagnostics, Vaccines and Antibiotics
Table 1.3.2 Target Markets and R&D Collaboration Fields for Biopharmaceuticals for
Diagnostics, Vaccines and Antibiotics
Target Markets
for Indonesia
Industrialization
Vaccine production is a significant public health need within Indonesia. By
virtue of advancing local capacity, Indonesia can also serve many in the
developing world as is currently being done by Bio Farma. Globally the
vaccine market stands at more than $25 billion and is expected to have
healthy annual growth of 7% or higher. The leading vaccines include those
for pneumococcal, influenza, diphtheria, whooping cough, polio, chickenpox
and HPV. Meanwhile, a number of important vaccines are making their way
through later stage clinical trials, such as for dengue and malaria.
Looking to the future, Indonesia will face the need to shift towards more
biosimilar production. Biotechnology-based drugs are growing in
importance. By 2014 the top six best-selling drugs will be biotech products
compared to five in 2008 and just one in 2000, plus biotech drugs will account
32
for 50% of the top 100 drugs in 2014, compared to just 28% in 2008 and 11%
in 2000.9 New biopharmaceuticals for treating blood disorders, cancer,
infectious diseases, autoimmune diseases, inflammatory diseases, and
diabetes comprise much of the global clinical pipeline for new therapeutics
and are expected to reach the marketplace within the next decade.
Fit for Industry
R&D
Collaborations
with Research
Institutions
Since biopharmaceuticals require expert knowledge of biological processes
and biology-driven scale up manufacturing, there is a strong fit for industry to
leverage the expertise and facilities found in universities and other research
institutions to advance the development of even biosimilars. Novel
biopharmaceutical development is even more dependent upon university and
research institution knowledge and often requires access to clinical partners
for access to biospecimens and knowledge of diseases.
Having the NARC on bioresources focus on biopharmaceutical development
and production in collaboration with local companies is endorsed by local
industry in Indonesia. There is currently a lack of facilities to expand
production, particularly for vaccines and diagnostics.
Industrialization
Barriers for
Indonesia
Given the more sophisticated requirements of biopharmaceuticals, few local
companies have the expertise to produce them.
Potential partnerships with foreign biopharmaceutical companies present
challenges due to:
Market access barriers in Indonesia
Foreign ownership limits for activities in Indonesia
Patent coverage and implementation of TRIPS.
Source: JICA Study Team
(3) Pharmaceutical Raw Materials
Table 1.3.3 Target Markets and R&D Collaboration Fields for Biopharmaceuticals for
Pharmaceutical Raw Materials
Target Markets for
Indonesia
Industrialization
The advancement of pharmaceutical raw material industrialization in
Indonesia is largely an import substitution strategy in the near term.
The growth prospects for the industry are driven by the overall growth
9 EvaluatePharma, ―Biotech Set to Dominate Drug Industry Growth, June 17, 2009.
33
potential of pharmaceuticals in Indonesia. Various market research studies
estimate the overall pharmaceutical market in Indonesia to have reached
$US 5 billion to $US 6 billion in 2012 and this market is expected to grow
over the next 5 to 7 years at a healthy rate of 7.6% to 9% annually. In
2012, the share of generic prescription drugs and over-the-counter
medicines were each approximately 40% of the total Indonesian
pharmaceutical market. So, this seems very promising for advancing
pharmaceutical raw materials manufacturing.
The key customers for pharmaceutical raw material production in Indonesia
would be Indonesian pharmaceutical firms manufacturing chemical-based
drugs in Indonesia, which are primarily generics.
It is not clear whether international pharmaceutical companies
manufacturing in Indonesia would source their raw materials from
Indonesian suppliers.
One way to support both local and international companies would be to
attract foreign investment in new joint ventures for pharmaceutical raw
material production. This is what happened in the Chinese market, where
by 2012 foreign owned companies had nearly one-quarter of the market for
pharmaceutical raw materials. Examples of such foreign industry
investment in China for pharmaceutical raw materials include DSM from
the Netherlands as well as BASF and Bayer Group from Germany entering
into separate joint ventures in China.
Over time, as patent expirations mount and the growth of generic drugs
advances, there is a growing global contract manufacturing market for
pharmaceutical raw materials that Indonesian firms could target for exports.
This is especially the case if specific niches can be identified in novel APIs
or drug delivery materials and technologies. The size of the global contract
manufacturing market for pharmaceutical raw materials is estimated to be
well over US$ 50 billion in 2012 and its growth over the next several years
is expected to be in the 5% to 7% range.
Fit for Industry
R&D
Collaborations
with Universities
Since most products manufactured by the industry are generic, competition
is intense and profit margins are narrow. It is therefore essential that
enterprises develop products with differentiation in new fields or distinctive
bulk pharmaceuticals with special usage.
34
Universities may play an important role in advancing competitive
advantages for Indonesian pharmaceutical raw material companies through
the development of novel active pharmaceutical ingredients, innovative
formulation technologies or advancing novel drug delivery methods such as
through the use of nanotechnology.
Industrialization
Barriers for
Indonesia
For Indonesia to become a player in pharmaceutical raw materials the
national government would need to provide investments in R&D and
production incentives.
Source: JICA Study Team
1.3.3 Agriculture and Food Platform
Agriculture and food is a significant sector of Indonesia‘s economy. ―The Master Plan for
Acceleration and Expansion of Indonesia Economic Development 2011-2025‖ indicates the
importance of agriculture and food as an economic driver in Indonesia, aiming to position
Indonesia ―as one of the world‘s main food suppliers, as a processing center for agriculture.‖
The recent OECD Review of Agricultural Policies: Indonesia 2012 sets out the importance of the
agricultural sector in Indonesia:
- With an average value of agricultural production at $US 66 billion in 2007-2009, Indonesia is
the world‘s 10th largest agricultural producer.
- Employment in agriculture remains stable at approximately 42 million workers, representing
40% of total employment in Indonesia in 2009.
- Overall, between 1990 and 2009, agricultural output increased by 97%, compared with a
population growth of 29% over the same period indicating a significant increase in production
per capita.
- In rice production, Indonesia is the third largest producer in the world after China and India.
Indonesia is practically self-sufficient in rice production with occasional imports playing a
marginal role in meeting domestic demand. Rice production increased more than four times
from 1961 to 1990, and has since been growing more in line with Indonesian population
growth.
-At the same time, fruit and vegetable production has grown significantly. From 1990 to 2010,
fruit production increased 2.5 times and vegetable production doubled.
The continued advancement of the agriculture and food sector in Indonesia, though, faces many
threats and development challenges, which places significant importance on two focus areas for
35
industrialization:
- A continued need for agricultural productivity improvement via plant breeding, soil
enhancement and biocontrol agents, as well as diversification into broader range of
higher-value agricultural products such as fruits and vegetables.
- Opportunities for value-added agriculture to create higher nutritional-value food products and
to improve food safety.
(1) Agricultural Improvement and Diversification
Table 1.3.4 Target Markets and R&D Collaboration Fields for Biopharmaceuticals for
Agricultural Improvement and Diversification
Target Markets for
Indonesia
Industrialization
Generally, the focus on agricultural improvement is largely a domestic
industrialization focus for Indonesia.
One of the key products of agricultural improvement is developing
enhanced seeds to address changing environmental conditions.
The seed industry is dominated by government agencies or state
companies that produce and multiply seed for rice and other crops.
The private seed industry in Indonesia focuses on estate crops for
spices, hybrid corn and some high-value horticultural crops. In
horticulture, private companies are active in providing seeds for
production that is exported or processed into high-valued products
under contracts with local farmers.
There is an export opportunity with the continued strong demand for
tropical fruits. According to a UN Food and Agriculture Organization
presentation on Market Prospects, Opportunities and Challenges for
Tropical Fruits, there should be significant growth in fresh tropical fruit
demand:
A significant development is the increasing share of fresh
compared to processed fruits traded, taking advantage of advances
in post harvest technology.
These developments have enabled tropical fruits to compete at the
upper end of the market, maximizing earnings through the sales of
36
fresh fruit in a segment where unit prices are at a premium.
Tropical fruit markets have evolved significantly. Price
premiums based on novelty have been replaced by quality based
premiums.
Major challenges for future market growth are related to
coordinated management of the field-to market-supply chain.
Issues related to food safety, pest and disease control as well as
quality should find a proper balance between cost and demand.
Fit for Industry
R&D
Collaborations
with Universities
University and research institutions efforts in plant science offer significant
opportunities for addressing the need for rising agricultural productivity
and advancing agricultural diversification. Plant sciences offers a broad
scientific discipline incorporating a range of plant/ botanical research
including plant breeding, developmental and cell biology, biochemistry
and physiology, morphology and structure, systematics, plant-microbe
interactions, and ecology. Applied plant science engages crop
development and plant improvement, including breeding and improved
soil conditions.
Industrialization
Barriers for
Indonesia
There do not appear to be significant barriers. Government policy in
Indonesia is currently supportive of agricultural improvement. Since 2000
agriculture policy in Indonesia has reintroduced and greatly expanded
fertilizer and seed subsidy programs and placed an emphasis on extension
services with the establishment of a unified extension service and increase
in the number of extension workers.
One limitation for agricultural improvement is the low level of research
and development investment in Indonesia. Agricultural research intensity
– defined as the ratio of public and private R&D expenditures over total
agricultural output – stood at 0.27% in 2009, which stands at the lower end
among Asian nations.
Source: JICA Study Team
(2) Value Added Food Products
37
Table 1.3.5 Target Markets and R&D Collaboration Fields for Biopharmaceuticals for Value
Added Food Products
Target Markets for
Indonesia
Industrialization
Value-added food products represent both a domestic and export market
opportunity for industrialization.
It is estimated that the global functional foods market will be $90.5 billion
in 2013, while the world market for functional foods and drinks is expected
to reach $130 billion by 2015. Market growth is fueled by product
innovation and increasingly health-conscious consumers with higher
disposable incomes.
Fit for Industry
R&D
Collaborations
with Universities
To advance functional foods and food safety requires knowledge of food
and nutritional sciences, microbiology, biotechnology and analytical
chemistry. Research is critical for characterizing, separating, purifying,
and processing bio-active chemicals in agricultural commodities and
byproducts and developing new technologies to create health-promoting
foods, as well as for identifying and mitigating food pathogens.
This often will require specialized laboratory equipment as well as
scale-up processing technologies.
Industrialization
Barriers for
Indonesia
None identified
Source: JICA Study Team
1.3.4 Industrial Bioproducts Platform
Plant and animal biomass resources have been used by humans for many thousands of years,
primarily for food and feed. Notably, some crops have provided a fiber feedstock, while forest
biomass has been the primary resource for the pulp/paper industries, and plant oils/animal fats
have been the raw materials for the oleochemical industry. More recently, the flexibility of plant
biomass, in combination with modern advancements in processing and conversion technologies,
is driving rapid progress in the utilization of biomass as a feedstock for a variety of new and
expanded industrial uses. This industrial bioprocessing is greatly expanding product opportunities
from renewable resources.
Among the industrial uses of biomass are: electricity generation via direct combustion and
gasification applications; bioderived oils and sugars are being used in the manufacturing of a
38
range of liquid biofuels; and manufacturing of innovative materials, including specialty
chemicals and plastics. In addition to the use of biomass as an industrial feedstock, plants also are
being modified to produce specialized human health products such as functional foods and
nutraceuticals and as ―factories‖ for the production of pharmaceutical and industrial products.
For Indonesia, the principal biomass feedstock for industrial products is found in its agricultural
production of palm oil derived from the fruit of the oil palm tree. Oil palm trees produce the
highest oil yield of any current oil seed crop. They have 10x the oil yield of soybeans for
example.
There are other emerging opportunities as well for industrial bioproducts in Indonesia. An
exciting area is in micro/macro algae development, which has the potential to be even more
productive per hectare than palm oil. These efforts in algae development are still in the nascent
stage and so do not represent a prime target for industrialization at this time.
For the near-term, targeting palm oil for its full range of bioproducts can be of significant value in
the industrialization of Indonesia.
Palm Oil Bioproducts
Table 1.3.6 Target Markets and R&D Collaboration Fields for Biopharmaceuticals for Palm Oil
Bioproducts
Target Markets
for Indonesia
Industrialization
Indonesia‘s biodiesel sector maintained healthy growth in 2012. Biodiesel
production increased from 1.575 billion liters in 2011 to 2.2 billion liters in
2012. Exports of biodiesel registered a strong export growth of 22 percent
from 1.225 billion liters in 2011 to 1.5 billion liters in 2012 – with nearly
90% going to Europe.
World production of palm oil is expected to increase by 32% to almost 60
million tonnes by 202010
.
Demand for palm oil has increased in recent years as many developed
economies are shifting away from the use of trans-fats, to healthier
alternatives. Palm oil is often used as a substitute for trans-fat as it is one of
the few highly saturated vegetable fats that are semi-solid at room
temperature, and is relatively low cost.
There is considerable room for further penetration of palm oil in biodiesel
10 Best report source is ―The Economic Benefit of Palm Oil to Indonesia‖. 2011. Produced by World Growth.
39
production (where it has a low level of usage currently, despite high yield of
oil).
A hundred kilograms of oil seeds typically produce 20 kilograms of oil,
while a single hectare of oil palm may yield 5,000 kilograms of crude oil, or
nearly 6,000 liters of crude oil that can be used in biodiesel production. At
$400 per metric ton, or about $54 per barrel, palm oil is competitive with
conventional oil.
Biodiesel consumption is predicted to increase significantly globally with
various nations implementing blend mandates. Blending targets for
bio-diesel ranging from 2 percent in the Philippines to 10 percent in the
European Union, by 2020. The OECD estimates if such blending mandates
are enforced an extra 4 million hectares of oil palm would be needed to meet
European Union requirements alone. A further one million hectares may be
needed to satisfy China‘s requirements, making bio-fuel production even
more attractive.
Although palm oil currently accounts for less than 5 percent of the world‘s
bio-diesel production, demand is likely to increase as economies adopt
policies that encourage the use of bio-fuel. Despite a relatively low market
share, palm oil is often used as feedstock in bio-diesel production, and as
feedstock represents the major cost of production, a bio-diesel industry is a
viable option for Indonesia.
However, we heard in Indonesia that many biodiesel plants are mothballed.
Fit for Industry
R&D
Collaborations
with
Universities
There is significant room to improve yields through improved agronomy,
fertilizer usage and improved plant varieties in Indonesia (and that route is
certainly preferable over trying to press more land into production at the
expense of the environment and national biodiversity conservation).
Industrialization
Barriers for
Indonesia
There is considerable controversy surrounding palm oil and environmental
impacts. Key concerns relate to deforestation for expanded plantations and
the resulting loss of wildlife habitat. There is a significant anti palm oil
lobby globally.
Source: JICA Study Team
40
1.4 Research Subjects
Each of the industry platform areas is connected to the three institutions involved in the new
academic research platforms for bioresources. To understand these connections, Battelle has
organized an assessment for each institution that examines their specific capabilities, assets,
existing industry connections and needed investments in the bioresources industry platform areas.
The assessment also illustrates key interests, resources, ongoing industry collaborations and
facilities found at the universities.
This assessment includes a review of the publications by faculty. This publications analysis
considered publications from 2008 to 2013 across 23,000 peer-reviewed journals monitored by
Thomson Reuters through its Current Contents Connect service. It is important to note that the
emphasis on publications varies from institution to institution, with BPPT not placing a strong
emphasis on publications, but more on successful project results. So publications should be
viewed as only one indicator of scholarly capacity. From 2008 to 2013/3rd
Quarter, the number
of peer-reviewed publications generated by institution was:
-BPPT: 87 peer reviewed journal articles
-IPB: 270 peer reviewed journal articles
-ITB: 726 peer reviewed journal articles
Much of the intelligence presented in assessing the research institutions is based on field
interviews conducted over the week of August 19th to August 23
rd to further understand, probe and
analyze the areas of focus and emphasis. At that time, considerable amount of presentations
and materials were shared with the project team.
Below is a summary of the alignment of each of the three institutions by specific target
opportunity areas within the three bioresources platform:
Table 1.4.1 Alignment of the Three Istitutions by Specific Target Opportunity Areas within the
Three Bioresources Platform
BPPT IPB ITB
Pharmaceutical Industry Platform
Herbal Medicine
Biopharmaceuticals for Diagnostics, Vaccines and
Antibiotics
Pharmaceutical Raw Materials
41
Agriculture and Food Industry Platform
Agricultural Improvement and Diversification
Value Added Food Products
Industrial Bioproducts Platform
Palm Oil Bioproducts
Source: JICA Study Team
1.4.1 Agency for the Assessment and Application of Technology (BPPT)
(1) Overall Assessment
BPPT offers capabilities and assets across all areas of bioresources industry platforms and
specific industry focus areas. While not all of equal depth, it appears that BPPT would be an
active contributor across all of the targeted areas of industrialization identified.
Generally, a key strength of BPPT is its existing facilities and laboratories. These facilities are
currently sufficient to carry out collaborations with industry, though many could use to be
updated.
The main missing infrastructure component at BPPT is collaboration space for working with
bioresources industry.
Currently, BPPT has many industry collaborators and often is involved in government sponsored
projects and consortiums which also involve industry partners. Since it is a more
project-oriented research institution rather than a traditional academic institution, the culture of
BPPT is well-suited to working with industry on defined projects, with firm timelines and specific
deliverables.
(2) Herbal Medicine
Table 1.4.2 BPPT‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Herbal Medicine
Identified Research Thrust Identification of lead compounds from plants,
microbes and endophytes (screening and
ethnobotany) – Herbal Extract Center.
Herbal medicine development for cancer and
degenerative disease applications
Functional chemical extraction and formulation
Design and engineering of manufacturing and
processing equipment.
42
Engaged Centers or Programs LAPTIAB -- Center for Technology for Pharmacy
and Medical
Core Competencies Compound identification and characterization
Extraction technologies and standardization
processes
Testing for efficacy
Signature Facilities and Laboratories Analytical laboratories and integrated lab
operations
Animal research facilities
Publications Activities No extensive body of peer-review publications in
herbal medicine since 2008
Existing Business Linkages Major collaboration with KRIBB of Korea in which
350 compounds have already been screened.
Investment Needs
Source: JICA Study Team
(3) Biopharmaceuticals for Diagnostics, Vaccines and Antibiotics
Table 1.4.3 BPPT‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Biopharmaceuticals for Diagnostics, Vaccines and Antibiotics
Identified Research Thrust Development of domestic antibiotic production
Nano-medicine
Generic diagnostic kit and rapid assay test strips for
infectious diseases (Dengue, HIV and Malaria)
Engaged Centers or Programs LAPTIAB -- Center for Technology for Pharmacy
and Medical
Core Competencies Recombinant proteins
Diagnostic kit development
Medical equipment testing and quality assurance
Some nanoscience
Signature Facilities and Laboratories Pilot fermentation scale-up plant with
bioreactors of various sizes -- 20L, 75L, 500L
and 2500L bioreactors (although 20 years old).
Animal research facilities
Publications Activities Two peer reviewed articles in clinical immunology
and infectious disease – one on TB meningitis and
the other on allergen exposure
43
Existing Business Linkages None identified
Investment Needs
Source: JICA Study Team
(4) Pharmaceutical Raw Materials
Table 1.4.4 BPPT‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Biopharmaceuticals for Pharmaceutical Raw Materials
Identified Research Thrust Development of domestic production of active
compounds and excipients to reduce imports
(using fermentation and chemical extraction and
purification platforms)
Fermentation platform for beta lactam,
macrolide, Vitamin B12, statin derivatives and
enzymes (protease, xilanase, lipase).
Chemical and purification platform for: pharma
grade NaCl, chitosan, pragellatinized /modified
starch from cassava and corn
Engaged Centers or Programs LAPTIAB -- Center for Technology for Pharmacy
and Medical
Core Competencies Analytical chemistry
Fermentation/scale up
Signature Facilities and Laboratories Pilot plant fermentation for antibiotic
fermentation-based production (beta lactan)
Publications Activities One peer-reviewed article in pharmaceutical sciences
since 2008
Existing Business Linkages None discussed
Investment Needs
Source: JICA Study Team
(5) Agricultural Improvement and Diversification
44
Table 1.4.5 BPPT‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Biopharmaceuticals for Agricultural Improvement and Diversification
Identified Research Thrust Aquaculture (grouper and tilapia breeding and
improvement + functional feed + vaccines)
Probiotic poultry feed
Biopesticide development
Soil improvement materials and microbial
inoculants
Biopesticide development (for Cocoa
applications) Sago plant domestication and
seedling production
Biopeat biofertilizer for soil Ph improvement
Cocoa seedling improvement via micrografting
Biopesticide for IPM in Cocoa
Engaged Centers or Programs LAPTIAB -- Biotech Center, Center for Agricultural
Cultivation Technology
Core Competencies Plant improvement
Micropropagation
Biofertilizer and biopesticide
Signature Facilities and Laboratories Good quality growth chambers
Small scale-up greenhouse and outside field plot
Pilot plant for biofertilizer production
Pilot plant for plant micropropagation and
seedlings (2 million)
Publications Activities No peer reviewed publications
Existing Business Linkages PT Perkebunan Nusantara XII, PT Perkebunan
Nusantara VIII for work in cocoa biopesticide
Investment Needs
Source: JICA Study Team
(6) Value Added Food Products
45
Table 1.4.6 BPPT‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Biopharmaceuticals for Value Added Food Products
Identified Research Thrust Post harvest processing technologies
Development of sago-based noodles and
production technology to reduce wheat imports
―Bisku Neo‖ ready-to-eat, packaged
immunomodulatory emergency food.
Engaged Centers or Programs LAPTIAB -- Biotech Center, Center for Agricultural
Cultivation Technology
Core Competencies Food science and nutrition
(emerging) Nutrigenomics for functional food
Signature Facilities and Laboratories None identified
Publications Activities No peer reviewed articles identified
Existing Business Linkages CV Putra Sentosa Tulehu (for Sago noodle)
PT. Tiga Pilar Sejahtera Tbk (for
immunomodulatory emergency food)
Investment Needs
Source: JICA Study Team
(7) Palm Oil and Other Bioproducts
Table 1.4.7 BPPT‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Biopharmaceuticals for Palm Oil and Other Bioproducts
Identified Research Thrust Industrial enzyme production and novel enzyme
identification from microbes (clean room
production)
Improvement of oil palm production via genetic
engineering (seeking to lower saturated fatty
acid content and increase yield via chloroplast
transformation)
Biolubricants development
Jatropha for bioenergy
Bioethanol from starch project (in Lampung)
Early detection system development for basal
stem rot in oil palm
Engaged Centers or Programs Center for Bio Industrial Technology
46
Core Competencies Enzymes for industrial bioprocessing (pulp and
paper xylase)
Oil palm plant improvement
Signature Facilities and Laboratories
Publications Activities Six peer reviewed journal articles from 2008-2013
addressing topics of oil extraction, biodiesel
production and energy balance of palm oil biodiesel
Existing Business Linkages Mitsubishi Chemical Corporation (MCC) Japan
and PT. Bakrie Brothers. (Palm oil fatty acid
modification)
RITE (Research Institute of Innovative
Technology for The Earth), Japan and
AsiaSEED( Asia Science Education for
Economic Development ), Japan for palm oil
yield enhancement via chloroplast
transformation.
PT Astra Agro Lestri for palm stem rot
Investment Needs
Source: JICA Study Team
1.4.2 Bogor Agricultural University (IPB)
(1) Overall Assessment
Bogor Agricultural University (IPB) is an active research university in bioresources. It
offers a number of outstanding research centers that have a strong track record in industry
collaboration. While not a research leader in pharmaceutical sciences, which is not
surprising given that it has neither a medical school nor a pharmacy school, it still is a national
leader in herbal medicine leveraging its substantial strengths in agricultural and biosciences.
In the platform areas of agriculture and food and industrial bioproducts, IPB brings an
extensive research portfolio, capabilities and facilities that offer significant value for industry
collaborations.
(2) Herbal Medicine
47
Table 1.4.8 IPB‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Biopharmaceuticals for Herbal Medicine
Identified Research Thrust Ethnobotany/bioprospecting
Bioactive ingredient characterization/ analytical
chemistry
Extraction and process standardization
Toxicology
Efficacy (in vitro and in vivo animals)
Product development/manufacturing for human and
livestock products.
Engaged Centers or Programs Biopharmaca Research Center (BRC) – a Center of
Excellence in Herbal Medicine with significant scale
including a stand-alone integrated facility and that
engages nearly 60 researchers/staff, including 38
PhDs.
Core Competencies Medical plants
Extraction and process standardization
Product development for human and livestock
health products
Analytical chemistry
Integrated lab operations
Signature Facilities and Laboratories BRC – animal testing
BRC analytical labs
BRC small scale GMP fill and finish
BRC- medicinal garden and herbarium.
Publications Activities 22 publications identified as addressing medicinal
properties of plants.
Existing Business Linkages Extensive industry connections with Indonesian
SMEs involving a wide range of activities from
product evaluation, raw material advice and product
development. Has a number of products that it
produces until company labels for distribution.
Investment Needs High throughput screening
Clinical nutritional and efficacy trials
Metabolomics, metabolomics and biomarker ID
NMR Spectroscopy
48
BRC larger facilities for pilot scale and co-space
with industry (extraction, concentration, quality
control also).
Source: JICA Study Team
(3) Agricultural Improvement and Diversification
Table 1.4.9 IPB‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Biopharmaceuticals for Agricultural Improvement and Diversification
Identified Research Thrust Yield improvement
Disease resistance
Adaption to marginal land, land with high
aluminum
Diversification into fruits and vegetables –
includes assisting with new crop introduction
and building relationships between buyers and
farmers
Composting and microbiology for soil
enhancement
Horticulture (papaya, tomatoes, chili peppers,
eggplant, pumpkin, pineapples, onions) – 20
varieties released
Grains (sorghum for wheat replacement, rice,
corn)
Starch (Cassava, Potato)
Livestock (Balinese cattle breeding/line
purification)
Aquaculture (catfish, tilapia, feed/probiotics).
Engaged Centers or Programs Centre for Tropical Horticulture Studies
Core Competencies Germplasm collection and characterization
Marker assisted breeding (for yield, pest and
pathogen resistance)
Breeding for morphology and quality
characteristics
Extension (participatory breeding and release)
and training.
49
Signature Facilities and Laboratories Germplasm repository
Research farm and greenhouses
Small scale seed production and packaging
CTS has two field stations
Publications Activities 33 publications in plant sciences
22 publications in agronomy
13 publications in aquatic/fishery sciences
Existing Business Linkages PT BISI International Tbk (Hybrid Seeds)
Rice Farmers Association
Investment Needs Poor growth chamber/culture facilities
Aging lab equipment and poor quality labs
currently
Scaling seed production (foundation seed) and
distribution (10 ha needed with 1 ha of
greenhouse space) + redundant power system
Post-harvest, cold storage facilities
Isolation greenhouse facilities where can
introduce pests
Need more land for field research
Need an entomology facility
Source: JICA Study Team
(4) Value Added Food Products
Table 1.4.10 IPB‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Biopharmaceuticals for Value Added Food Products
Identified Research Thrust Analog rice (offers a platform for functional
foods)
Food diversification, such as cassava flour,
sweet potato flakes, soy products
Process development for better safety and
quality of food
Palm Oil Processing
Engaged Centers or Programs Southeast Asian Food and Agricultural Science and
Technology (SEAFAST) Center involving 50-100
personnel (circa 49 engaged PhD‘s)
50
Core Competencies New food product development
Sensory Evaluation of Foods
Thermal processing of Foods
Product testing/analysis
Process inspections & validation
Post-harvest and cold-chain development
Packaging & labeling
Signature Facilities and Laboratories Packaging center
ISO Lab for functional food evaluation
Food production pilot plant
Extruder for analog rice production
SEAFAST: food quality and
safety/microbiology and chemistry; food
biotech lab; bacterial fermentation lab, animal
assay lab, sensory evaluation center, fats and oils
pilot plant and food pilot plant)
SEAFAST GMP production and packaging
SEAFAST Incubator facility with a few tenants
SEAFAST distance education facility and food
production/safety training – extension type
work.
Publications Activities 16 publications in food sciences and nutrition
Existing Business Linkages BASF – analog rice with anti-cancer
functionality
SEAFAST working with: PT Sari
Husada/DANONE; PT Makin; PT Otsuka; PT
Indofood Sukses Makmur, PT Coca Cola
Indonesia, an PT Ajinimoto.
Investment Needs Larger scale facilities for business incubation
Food marketing and project financing
SEAFAST noted need for better analytical
equipment and larger pilot scale facilities
Source: JICA Study Team
51
(5) Palm Oil and Other Bioproducts
Table 1.4.11 IPB‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Biopharmaceuticals for Palm Oil and Other Bioproducts
Identified Research Thrust Selection of palm oil varieties for enhanced fatty
acid expression (C16 and C12)
Palm oil surfactants and cleaning chemicals and
bio-jetfuel from palm oil
Jatropha for biofuel
Micro and macro algae for biofuels
Initial lingo-cellulosic and crop residue biofuel
research
Engaged Centers or Programs Surfactants and Bioenergy Research Center
(SBRC)
SEAFAST
Core Competencies Breeding and cultivation techniques for various
biofuels crops
Research on bioenergy processing and
technology
Signature Facilities and Laboratories SBRC labs and pilot plant
SEAFAST fats and oils pilot plant
Publications Activities Not a strong presence in publications
Existing Business Linkages Cargill plantation JV (oil palm breeding stock)
Oil company sponsors of surfactant research
Korean company and SBRC on algae
Investment Needs Self-sufficient through significant industry support
Source: JICA Study Team
1.4.3 Bandung Institute of Technology (ITB)
(1) Overall Assessment
Bandung Institute of Technology (ITB) is a leading research university in Indonesia. Its
activities in bioresources are found primarily in pharmaceutical industry platform and
industrial bioproducts, though there are activities focused on plant improvement and food
sciences. Still, this is an emerging area of strength, particularly compared to the very strong
applied physics and material sciences strength found at ITB.
52
The industry interactions in bioresources are also emerging, with noted activities in industrial
bioproducts. School of Pharmacy also brings close connections to industry applications and
developments.
In addition to faculty enhancement, there is a strong need for modernized and more fully
equipped bioresources laboratories at ITB. While known for having some of the most
sophisticated equipment among Indonesia‘s universities, there is a noticeable lack of
integrated lab facilities and scale up facilities at ITB in the bioresources.
(2) Herbal Medicine
Table 1.4.12 ITB‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Biopharmaceuticals for Herbal Medicine
Identified Research Thrust Among plant species working with includes:
Rutaceae, Liliaceae, Myrtaceae, Piperceae,
Zingiberaceae, and Combretaceae.
Wide range of medical conditions studied,
including anti-neurodegenerative, anti -diabetes,
anti-hypertension, antioxidant,
anti-hyperlipidemia, anti-inflammation,
cosmetics: hair growth stimulants, anti aging.
Engaged Centers or Programs Life Sciences Center
School of Pharmacy
Core Competencies Extraction
Toxicology & Efficacy Testing
Chemical synthesis (medicinal chemistry)
Signature Facilities and Laboratories Drug Toxicity and Safety -- Animal Testing
Publications Activities Less than 5 publications across plant sciences,
chemistry and biology on herbal medicines
Existing Business Linkages None identified
Investment Needs Lacking integrated lab
Source: JICA Study Team
(3) Biopharmaceuticals for Diagnostics, Vaccines and Antibiotics
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Table 1.4.13 ITB‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Biopharmaceuticals for Biopharmaceuticals for Diagnostics, Vaccines and
Antibiotics
Identified Research Thrust Vaccine Development, including:
- Tuberculosis
- Hepatitis B
Development of reagents for diagnostics
Engaged Centers or Programs School of Life Sciences and Technology
School of Pharmacy
Life Sciences Center
Core Competencies Genetics and molecular biology
Pharmacochemistry
Biomedical engineering capabilities for sensors,
robotics and micro-electronic research in School
of Electrical Engineering and Informatics
Bioinformatics capabilities in School of
Electrical Engineering and Informatics and
School of Mathematics and Natural Sciences
Signature Facilities and Laboratories NMR facility
Mass Spectroscopy
Publications Activities 5 publications in immunology and 14
publications in clinical immunology addressing
infectious diseases and vaccines
Existing Business Linkages Working in Ministry of Health Consortiums
involving PT Bio Pharma
Investment Needs Lacking integrated lab and bioprocessing scale up
facility
Source: JICA Study Team
(4) Pharmaceutical Raw Materials
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Table 1.4.14 ITB‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Biopharmaceuticals for Biopharmaceuticals for Pharmaceutical Raw
Materials
Identified Research Thrust Designing and synthesizing porphyrin and
chlorophyll -compound to treat cancer and
chemical study of existing cancer medicines.
Designing and synthesizing quinine derivate
compound as anti-malaria and stereo selective
reagent.
Production of excipient (starches, cellulose,
jelly, alginate, carageenan, dyes).
Advancing new drug delivery systems
Engaged Centers or Programs School of Pharmacy
Core Competencies Analytical Pharmacy
Medicinal Chemistry
Bioequivalence testing
Pharmaceutical biology
Pharmaceutics
Signature Facilities and Laboratories Animal testing facilities
Publications Activities 5 publications in pharmacology & toxicology
Existing Business Linkages n.a.
Investment Needs Lacking scale up facility to enhance
synthesis/production
Source: JICA Study Team
(5) Agricultural Improvement and Diversification
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Table 1.4.15 ITB‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Biopharmaceuticals for Biopharmaceuticals for Agricultural Improvement
and Diversification
Identified Research Thrust Bio-fertilizer (Life Science Center)
Developing new varieties
Adapting plants to environmental stresses
Engineering plant cultivation
Improving plant growth, quantity and
reproduction
In vitro plant propagation of vetiveria
zizanioides and evaluation of oil synthesis on
root
Optimization for scale up production of vetiver
oil
Engaged Centers or Programs School of Life Sciences and Technology
Core Competencies Plant Sciences and Biotechnology
Signature Facilities and Laboratories n.a.
Publications Activities Less than 5 publications in plant sciences
Existing Business Linkages n.a.
Source: JICA Study Team
(6) Palm Oil and Other Bioproducts
Table 1.4.16 ITB‘s Research Thrust, Core Competencies, Existing Business Linkages and
Investment Needs for Palm Oil and Other Bioproducts
Identified Research Thrust Biodiversity of micro and macro alga
Thermal and catalytic conversion
Microbial biotechnology for bio-based
industrial enzymes
Lignocellulosic biofuels from crop/palm
residues
Ethanol from cassava
Bioethanol from lignocellulosic biomass
Xylitol production from lignocellulosic biomass
Green diesel
Biohydrocarbon (bio-gas)
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In vitro plant propagation of Vetiveria
zizanioides and evaluation of oil synthesis on
root (in vitro plantlet).
Environmental health (toxicology of human
exposure to pollutants)
Water quality and treatment
Engaged Centers or Programs Biorefining Research and Innovation Center
Life Sciences Center
Environmental Engineering Study Program
Core Competencies Chemical engineering
Agrotechnology and bioproduct technology
Microbial biotechnology
Plant sciences and biotechnology
Ecology
Environmental Engineering
Signature Facilities and Laboratories Industrial bioenzymes development involving
collection of microbial organisms and integrated
lab using NMR, Mass Spec, X-ray
crystallography
Algae development including culture collection
of macro and micro algae and photobioreactors
for algae production
Integrated bioethanol lab involving
pre-treatment, analytical lab (HPLC) and
lab-scale bioreactor
Catalyst development, characterization, and
testing for green diesel and biohydrocarbons
Currently developing a 3000ltr photobioreactor
for algae.
Publications Activities 16 publications in chemical engineering with
strong focus on production of enzymes and
biodiesel
12 publications in biotechnology and applied
microbiology with focus on biofuels and
bioproducts
17 publications in environmental engineering
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15 publications in ecology
Existing Business Linkages Bio-based enzymes – many industrial
collaborations across paper recycling,
cosmetics, bio-fertilizers
Environmental engineering active in
consultation to industry
Investment Needs Lack of organic chemical synthesis labs – both
lab space and equipment
No gene sequencing capabilities – send out to
Korea for analysis
Need scale-up and piloting facilities for biofuels.
Want to develop an integrated biorefinery
system that would allow for first extraction of
functional phytochemicals and then rest used for
fuels and oils.
Source: JICA Study Team
1.5 Operation and Management Models for R&D: Best Practices to Inform NARC
Activities
The operations and management of the NARC needs to incorporate best practices for leveraging
university research to advance industrialization. The identification of bioresources industry
platforms that align opportunity areas for industry development in Indonesia with university
capabilities is just a starting point. In order to realize the industrialization potential of these
bioresources platforms, there must be mechanisms in place to advance collaboration at the
research and development stage.
An important challenge is the need for efficient access to the research capabilities of the
university and for collaborators to recognize complementary activities. Currently, in many cases
professors are conducting their work in independent labs that are often not well linked to the work
of other labs. Building a critical mass of complementary research activities still appears to be a
challenge. Further advancing a recent trend in some Indonesian research institutes toward
establishing research centers of excellence within a subject area would significantly facilitate the
visibility of research by professors as well as provide for efficient paths to innovation partnerships.
The Biopharmaca Research Center at IPB may be one such model example.
In the case of the Biopharmaca Research Center, partnership with industry is a core element of the
operating model. This model may be expanded and facilitate by research parks around this
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university and the other NARC institutions.
One leading U.S. university known for its ability to connect with industry on research and
development is Georgia Tech. Dr. Steven Cross, Executive Vice President for Research at
Georgia Tech, explains that university‘s approach in advancing an ―industry facing research
strategy‖:
Georgia Tech defined an industry facing research strategy focused both on leading edge,
use-inspired research and economic development. While most universities pursue a linear,
sequential flow of discovery-based research followed by occasional declaration of
intellectual property and subsequent licensing or company formation/spin-out; Georgia
Tech pursues a concurrent strategy centered on the core research areas … [with] alignment
to strategic markets within the region, and the existence of industry partners interested in
working with the Institute…. Concurrency means that teams of faculty, graduate students,
application and economic development experts, and professional staff work together to
define and pursue grand challenges, foster early engagement with industry, and accelerate
the maturation and transition of technology to the marketplace11.
This need for university-industry collaborations in research and development are particularly
important in the bioresource field given its close connections between university research and
industry product development. An OECD study entitled The Bioeconomy to 2030: Designing a
Policy Agenda notes that ―the advantages of collaboration are greater network involvement in
problem solving and testing, a reduction in transaction costs to acquire new knowledge, and a
reduction in licensing costs when firms can access knowledge produced by the collaborative
network at low or no cost.‖ 12
To address the mechanisms for advancing industry-university collaborations, it is best to consider
a continuum of engagement actions between industry and universities to advance bioresources
development in three stages:
-Stage 1: Awareness and relationship building,
-Stage 2: Technology problem solving and new technology development,
-Stage 3: Strategic partnering to address a broad transformative initiative.
1.5.1 Stage 1: Awareness and Relationship Building Among and Between Industry and
11 Steven Cross, ―Strategic Considerations in Leading an Innovation Ecosystem,‖ Journal on Business Review, 2013, vol. 2, no. 3,
104-109. 12 IBID, page 171.
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Academia
Raising awareness and building relationships is a foundational building block for establishing
stronger collaborations between industry and academia. All too often, organizational silos exist
that limit how industry and academia understand the opportunities for engagement and
collaboration with one another. A wide range of activities are available for advancing improved
awareness and relationship building that can serve each of the bioresources platforms areas
including:
-Hold symposiums and regular workshops on key topics of interest that profile
industry identified market needs and share research and development activities
across industry and universities.
Among best practices in this regard is the North Carolina Biotechnology Center‘s (NCBC)
support for Intellectual Exchange groups. The exchange groups are organized by NCBC to create
a ―dynamic research and information-sharing environment‖ and have been organized by special
interest areas, which currently include bioprocessing and process development, plant molecular
biology, virology, immunology, chromatin and RNA. In total, Intellectual Exchange groups have
approximately 40 meetings per year, with thousands of attendees. The NCBC also supports in
collaboration with the Center for Entrepreneurial Development, a bi-monthly Biotech Forum to
provide a meeting place for entrepreneurs, executives, professionals and academicians actively
involved in the biotechnology industry. Each forum consists of a 75 minute panel followed by a
networking reception. Plus, NCBC, together with CED, holds an annual life sciences conference.
Another example on a national level is found in Russia with its National Contact Point on
―Biotechnology, Agriculture, Forestry, Fisheries & Aquaculture and Food,‖ which since 2003 has
been active in promoting Russian science integration into European Research Area (ERA). It
carries out providing information exchange between researches, representatives of SMEs and
multipliers for promotion and development of R&TD co-operation in the Russian Federation and
EC countries. Through its coordination and organization of meetings, workshops, and seminars as
well as facilitating relationship building, the Bio-NCP of Russia has initiated and played the key
role in the establishment of Russian National Technology Platforms in industrial biotechnology,
plants for the future, food for life, forestry, animal health and fisheries and aquaculture.
-Develop “site miners” at each university and for larger companies to help in
matchmaking around specific needs and requests for information. Site miners can
serve as a cornerstone approach for translating collaboration within a varied,
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multi-organizational context. One specific activity would be to support the
development and follow up of symposiums and regular workshops, but the power of
site miners goes well beyond just identifying key staff capabilities and supporting
matchmaking.
A successful collaborative initiative that has broadly embraced the use of site miners is the Center
for Integration of Medicine & Innovative Technology (CIMIT), a clinically-based consortium of
Boston-area hospitals and engineering schools that supports translational research by
multidisciplinary teams for medical device and clinical technology applications. CIMIT involves
physicians from Harvard teaching hospitals who collaborate with scientists and engineers from
MIT, Charles Stark Draper Labs, Northeastern University and Boston University, as well as a
wide range of industry partners. CIMIT demonstrates that it is possible to systematically facilitate
the process of addressing real market opportunities through innovative technology solutions.
According to CIMIT in its detailed explanation of its business model13, the most unusual,
inventive and productive of CIMIT‘s facilitation roles is the use of site miners. These individuals
have proven to be the key to penetrating the multiple isolated member institutions, and connecting
people and ideas across the cultural walls of these institutions and even across the boundaries
separating departments within them. They literally ―mine‖ the institutions for projects and people
deserving CIMIT‘s attention and help. The core reason for the effectiveness of this site miner role
is perhaps not obvious. Involvement via a site miner avoids activating the natural institutional
antibodies of an institution to the ―invasion‖ of an external entity. Co-investment in the role
creates a sense of shared ownership of success by the institution (and its CEO) together with
CIMIT. Site miners provide far greater visibility for the value of CIMIT within each member
institution. In addition, site miners serve as role models for interdisciplinary careers, and can
advocate effectively within their own institutions for the career advancement (academic
promotion) of interdisciplinary faculty who would otherwise fall into the cracks between
departments and promotion committees.
It is also important to provide information tools for industry to be able to quickly learn about
research activities underway and capabilities and interests of researchers at academic institutions.
Harvard has created profiles for this purpose and many other universities are mirroring this effort.
Furthermore, academic institutions should be encouraged to publish all trials/studies underway in
a way that can be easily searched.
-Offer sabbaticals and stipends for academics to spend time in industry as well as for
industry scientists to spend time in academia. There is no better way to build
13 The CIMIT business model can be reviewed at: http://www.cimit.org/about-cimit-model.html.
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relationships than to create the experience of working together. It allows not only a
sharing of knowledge, but a better appreciation of the culture and specific
requirements found between the worlds of academia and industry.
Visiting scientists programs are not at all unusual within academia. They are often used by
specialized research centers to provide broader exposure to unique methods and techniques to the
research community as well as to establish broader collaborations. It is less typical to have
industry scientists spend time in academia. It is particularly important for industry scientists to
gain exposure to research leaders and to the technology transfer processes at different universities.
Another approach is the use of visiting scientists from academia to industry. This is particularly
important to do if academia is to learn about the market opportunities and the requirements facing
industry in bringing innovation to the marketplace. Technology transfer staff at universities
should also be part of this effort so that they can get a better understanding of the drivers for
industry product development efforts and industry licensing practices.
-Pursue pro-active university policies to support and encourage collaborations.
University policies can have significant impact on the willingness and interest of
researchers to pursue industry collaborations. Universities should ensure that
promotion and tenure policies provide incentives for researchers to pursue industry
partnerships and intellectual property generation.
Another critical issue is addressing conflicts of interest. Across all technology areas, universities
need to focus on effectively managing conflicts of interest rather than being too restrictive and
seeking simply to eliminate them. It is important for universities to provide straight-forward
processes for disclosing conflicts, counseling and assisting researchers as they seek to address
conflicts, and taking seriously conflict of management committees to oversee the process. In the
life sciences, managing conflict of interest needs to also take into account the more complicated
situations found in clinical innovation involving the physician-patient-subject relationship, which
places increased demands for disclosure and managing potential conflicts.
Finally, it is important for universities to have predictable and streamlined processes in which
industry can take ownership of intellectual property from sponsored research with universities
and for licensing technologies. For instance, the University of Minnesota allows a company
sponsoring research at the university to pre-pay a fee and receive an exclusive worldwide license
at a set royalty rate. Similarly, the University of North Carolina has put in place the Carolina
Express License, which offers a ―standard‖ license agreement for university developed
technology to ease the burden and time requirements on negotiations, involving reimbursement of
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patent expenses and standard royalty fees.
1.5.2 Stage 2: Project-driven, One-on-One Industry-University Applied Research and
Technology Development Mechanisms
For industry-university partnerships to take root, they must be results driven. Information sharing
and relationship building are useful activities, but they fail to drive the bottom line for industry
interest and involvement—generating new products, sales and jobs. In today‘s global knowledge
economy where innovation drives competitive advantage for industry, this means that the
research capabilities and technology advances of academia must be matched to the short-term,
time sensitive and product-driven needs of industry.
Far too often, the academic research capabilities and technology advances are potentially
interesting to industry, but still at too early a stage for industry to invest in further research and
development. This is the much-cited ―valley of death,‖ which results in states and regions failing
to realize their full economic development potential.
There are two discrete targets for bridging the ―valley of death‖—one driven by university basic
research discoveries and the other from industry market needs. First, for advancing university
basic research discoveries, it is critical to assess the potential of that discovery to support a new
start-up venture or new product line for an existing corporation. Here, the innovation gap is proof
of concept funding to validate the discovery‘s commercial benefit. For instance, a new research
discovery of a key drug target may need to have some animal testing completed to address its
efficacy before it can be advanced as a new drug candidate for clinical testing. Second, for
responding to industry driven market needs, bridging the ―valley of death‖ has its starting point in
advancing an application or solution in response to a market need identified by an existing
company. In this case, the innovation gap is adequate funding for applied research to develop an
approach to address the solution needed.
Establish a NARC proof-of-concept fund to advance university-business research
discoveries. Proof-of-concept funding provides the testing and development to demonstrate that a
research discovery has commercial potential and in doing so is integral for establishing the value
of the discovery. Often, proof-of-concept funding mechanisms provide a staged funding approach
to moving promising life science university research towards commercialization.
Among the most well-known proof-of-concept centers are those based at specific universities,
such as Deshpande Center for Technological Innovation at MIT and the Von Liebig Center at
University of California San Diego. Each of these combines proof of concept funding with active
due diligence and business review and strong linkages to entrepreneurial mentoring. To give a
sense of impact, the Deshpande Center since its launch in 2002 has invested $11 million across 90
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projects, which has resulted in 26 start-ups, $350 million in venture capital raised and 400 jobs to
date.
A broader statewide effort is that of the Georgia Research Alliance‘s VentureLab program,
supported through state appropriations. VentureLab is focused on starting up new companies from
university research through identifying promising technologies, conducting due diligence, and
supporting proof-of-concept and venture start-ups. It provides for a rigorous and staged
assessment of commercialization potential through a three phase grant process:
-Up to $50k grant: Is it commercially feasible to support a new company,
-Up to $100k matching grant: Prototype development (matching funds to validate in
marketplace required),
-Up to $250k loan: Executed license + management team in place.
To facilitate the process, GRA supports ―VentureLab‖ managers at each participating campus,
who focus on recruiting and overseeing the efforts of serial entrepreneurs to move the VentureLab
process forward.
The results of GRA‘s VentureLab program have been outstanding. $19 million of state funds
deployed since 2002 resulting in the formation of 108 active companies, $460 million of
additional funds attracted and over 500 jobs created.
Another interesting way to enable proof of concept efforts to move forward is how Brazil enables
university researchers to dedicate themselves to advancing innovations with commercial potential.
Under Brazil‘s 2004 Innovation Law, university researchers may take leaves of absence of up to 3
years to create a start-up company, while maintaining their benefits and career rights.
Offer a matching grant program for industry/university applied research projects. A proven
means of fostering greater industry-university collaborations in applied research to address
market needs of companies is a matching grant program. Such programs help build relationships
between academic researchers and companies and provide support for activities that may lead to
investments of private capital and commercialization of new technologies.
One example is the efforts underway in South Africa. South Africa supports several
complementary programs designed to encourage innovation in private industry, crossing several
sectors including but not limited to biopharmaceuticals. Among these are the Technology and
Human Resources for Industry Program (THRIP) 14, which provides a 50 percent funding
match to foster collaboration between industry and higher-education institutions, with the
additional goal of facilitating the movement of research personnel between industry and academia.
14 See http://thrip.nrf.ac.za/
64
The program supports on average 2,400 students per year15.
An excellent example of a focused effort in spurring major industry-university collaborations in
applied research is the Science Foundation of Arizona – which was modeled after Science
Foundation Ireland. Founded in 2006, Science Foundation Arizona (SFAz) is a unique 501(c)3,
public/private, non-profit organization created from the collaboration of three Arizona CEO
business organizations—Greater Phoenix Leadership, Southern Arizona Leadership Council, and
Flagstaff 40 (including the City of Flagstaff)—along with the Legislature and Executive Branch
of the State government.
SFAz‘s purpose is to diversify and strengthen Arizona‘s economy by:
-Establishing significant industry and university R&D partnerships,
-Attracting and retaining world-class talent and jobs,
-Creating a competitive advantage through science and innovation,
-Enabling Arizona to compete effectively in a Global Economy, and
-Increasing access to quality science, technology, engineering and mathematics (―STEM‖)
education to grow a pipeline of future talent.
SFAz funds performance-based, competitive grant programs. It offers an applied research grant
program with industry, known as the Strategic Research Group (SRG) grants. These grants seed
strategic collaborations between Arizona‘s non-profit research-performing institutions and
industry partners in order to create economic advantages for the state, with the intent of anchoring
industry R&D, creating commercial products, and increasing the probability of attracting major
federal research funding and large group grants. These grants require a 50/50 match from the
industry partners.
From 2007 to 2010, SFAz funded 29 Strategic Research Group grants, for a total of $48.5 million.
In return, SRG grants are already making significant contributions, including:
-Leveraging an additional $86.9 million in funding, thereby leveraging state funds by
nearly two to one
-Generating 374 scientific publications
-38 patents either issued or applied for
-Three technology licenses
-Eight new companies created
-861 direct job-years from just the research activities
15 http://www.southafrica.co.za/about-south-africa/science-and-technology/
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What stands out about the SRG grants is the cutting-edge technology they are advancing through
industry-university partnerships. Among the life sciences industry-university partnerships being
advanced are:
-Cancer Diagnostics. Top university researchers in chemical genomics have teamed up with
private sector companies in Tucson to develop a personalized cancer test to identify a
course of treatment with the best chance of success for individual patients.
-Accelerating FDA Drug Approval. Cooperation between pharmaceutical companies and
the Critical Path Institute in Tucson on the establishment of a Center for Federal Drug
Administration and Industry Collaboration (CFIC) to expedite FDA drug approval.
-Valley Fever Diagnostics. Development of newer, faster and more effective diagnostics for
Valley Fever at TGen North in Flagstaff.
-Green Fuel Cells. The long-term future of aviation depends on the ability of planes to use
alternate fuel. For this purpose, Boeing and top university researchers are working to
develop the first biofuel-driven fuel cells to power electrical systems of commercial
airliners.
1.5.3 Stage 3: Strategic Partnering to Address a Broad Transformative Initiative
Beyond the one-on-one, project-driven assistance for proof-of-concept funding and applied
research, there is an increasing focus by states and regions to advance their leadership and
develop an international reputation in the life sciences by tackling a specific area of life sciences
development with the focused goal to build a competitive advantage that positions the region/state
as a global leader in an area of the life sciences with significant economic advancement
opportunities.
Advance transformative initiatives through strategic industry-university partnerships. By
focusing on a specific area of life sciences development that encompasses multiple projects and
multiple organizations, Indonesia can be positioned as a global leader. These transformative
initiatives in specific areas of life sciences development must address the focused goals of:
-Advancing world-class ―basic to translational‖ research and innovation capacity,
-Attracting and generating top talent,
-Focusing on commercialization,
-Fostering the growth of existing firms, creation of new firms, and attraction of firms to
Indonesia, and
-Generating a health care dividend for Indonesia.
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An excellent example of a systematic approach to industry-university partnerships that grows
from pre-competitive research to commercialization is the efforts of Israel‘s Office of Chief
Scientist (OCS). The OCS also operates several ―pre-competitive R&D programs16‖ that are
designed to encourage closer collaborations between industrial and academic researchers across
all scientific disciplines. For example, in the life sciences, the OCS funded the creation of the
National Institute for Biotechnology Research and Development17. Research institutes of this
type are expected to earn at least 30 percent of their revenue from industrial contracts. Under this
same umbrella, the OCS provides 66 percent subsidies, without any repayment requirements, for
university/industry consortia and for specific technology-transfer projects. The OCS then
administers several programs that provide ―pre-seed/seed‖ capital 18 . Relevant to the
biophar-maceutical sector is the $30 million ―technological incubators‖ program 19 .
Technological incubators provide a sheltered environment in which scientists can nurture
innovative ideas while receiving financial support, expert business advice, subsidized office and
lab space, and exposure to potential investors. Since 1990, the OCS has created 24 incubators,
owned by either academic institutions or private investors. At least two incubators are now
dedicated specifically to biotechnology. The OCS routinely funds as many as 10 specific
commercialization-research (pre-seed) projects within each incubator. Each project supports a
principal entrepreneur and several staff for up to 3 years, paying 80 to 85 percent of approved
costs. Projects are funded up to $1.8 million each in the biotechnology sector. Of all projects (all
sectors) funded since 2006, the OCS reports that 57 percent attracted follow-on investment, and
that 41 percent of those no longer receiving direct OCS support are still active in commercial
markets. OCS pre-seed awards are paid back via a 3.5 percent royalty on sales, and ownership in
the start-up is typically shared between the entrepreneur and the incubator. Once a start-up is able
to attract private investment, the OCS can match private investors up to $1 million through its
affiliated Heznek Seed Fund. The private co-investor is given an option to buy out the state
interest at a later date.
Another effort focused on transformative initiatives, with a proven track record, is Ohio‘s Third
Frontier. The Ohio Third Frontier (OTF) was created in 2002 to advance Ohio‘s economic
competitiveness and the generation of high quality jobs. The results to date have been significant.
Through the OTF program, Ohio has generated 79,464 jobs, $6.6 billion in leveraged funding,
and created, attracted, or capitalized 701 companies between 2002 and June 2011. In addition,
these investments have had significant impact on the business environment of the state for
16 See http://www.moital.gov.il/NR/exeres/D8C128E3-63D8-441B-86BE-844011126452.htm. Visited May 5, 2011. 17 See http://www.atp-israel.com/bgu/nibn.html. Visited May 5, 2011. 18 See http://www.moital.gov.il/NR/exeres/562B0C33-6809-4737-81EB-A40E9F0756FA.htm. Visited May 5, 2011. 19 List here: http://www.moital.gov.il/NR/exeres/14424C5D-A102-4C67-B3BE-F1A6C3B2227D.htm. Visited May 5, 2011.
67
technology companies, including the deepening of collaborations between and among Ohio‘s
industrial and research base.
A detailed independent assessment of the Ohio Third Frontier by SRI International found:
―Interviews with stakeholders clearly indicated that the Ohio Third Frontier is improving both the
research infrastructure and research collaboration in the state. University centers, such as the
Liquid Crystal Institute at Kent State University, that in the past licensed their technology to
overseas companies, are now collaborating with Ohio companies. Indicators of universities‘
connection to industry, such as industry funding of university research, university licensing
revenues, and the number of university-based startup companies, are all showing positive trends.
Although there remains work to be done to improve these linkages, Ohio Third Frontier has
significantly strengthened linkages among universities, industry, and research laboratories,
especially in the targeted technology areas.‖ 20
The signature initiative of the Ohio Third Frontier for promoting broad-based industry-university
consortiums is the Wright Centers of Innovation Program focused on targeted technology
platforms. From 2003 to 2008, OTF awarded $295 million to Wright Centers of Innovation,
including $147.3 million to life sciences related efforts. Prominent Wright Centers of Innovation
in the life sciences include:
-The Global Cardiovascular Innovation Center (GCIC), a $250 million product
commercialization consortium led by the Cleveland Clinic. Partners include Case Western
Reserve University, The Ohio State University, the University of Cincinnati, the
University of Toledo, University Hospitals, industry leaders, and economic development
organizations. The State of Ohio contributed $60 million to the Center. GCIC provides
commercialization assistance to its member companies, including creation of spin-off
companies and equity partnerships, assistance with licensing and IP issues, technology
validation, links to venture capital funding networks, and access to prototyping and
preclinical facilities. GCIC currently has 12 companies in its portfolio. GCIC has an
Entrepreneurs-in-Residence program and has organized a venture investment consortium
that includes professionals from several prominent venture capital firms who will jointly
evaluate investment opportunities. Talent recruitment services are available through Case
Western Reserve University.
-The Wright Center of Innovation in Biomedical Imaging serves as the focal point of
collaboration between companies and medical researchers in biomedical imaging
20 SRI International, Making an Impact: Assessing the Benefits of Ohio‘s Investment in Technology-based Economic Development
Programs, September 2009.
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throughout the state and has helped to bring and retain jobs in Ohio. In 2001, Philips
Medical Systems—a world leader in medical technology based in the
Netherlands—acquired Marconi Medical which Cleveland‘s Picker X-Ray had evolved to
become through a series of acquisitions. Due to currency exchange rates and external
factors, strong consideration was being given to relocating manufacturing operations to
Europe. As a result of the creation of the Wright Center, Philips decided to keep
development of new imaging devices and manufacturing in Ohio. Additional Ohio Third
Frontier grants have helped to advance the goals of the Wright Center and solidify Philips‘
corporate commitment to Ohio. Today, Philips Medical Systems is headquartered in
Cleveland, representing a major anchor company within Ohio‘s growing biomedical
imaging cluster. Ohio can also lay claim to the development and manufacture of the
world‘s most advanced commercially available MRI. A major goal of this Wright Center
of Innovation in Biomedical Imaging was the development of an Ultra High Field 7.0
Tesla MRI scanner that generates body scan images with extremely high resolution
relative to current technology.
Another far-reaching initiative that fosters broad-based industry-university consortiums is the
Kansas Bioscience Authority (KBA). It was created in 2004 to advance Kansas‘ leadership in the
biosciences, and encompasses an innovative financing structure based on the growth of state
income tax withholdings from employees of bioscience-related companies. State taxes that
exceed the base-year measurement of such taxes accrue to the authority for investment in
additional bioscience growth. This mechanism makes it unnecessary to raise taxes or reallocate
amounts from other state budgets. Revenues that accrue belong exclusively to the Kansas
Bioscience Authority and are not part of the state treasury.
The overall KBA initiative is designed to:
-Build world-class research capacity,
-Foster the formation and growth of bioscience startups,
-Support expansion of the state‘s bioscience clusters, and
-Facilitate industrial expansion and attraction.
According to KBA, the hub of its research capacity investment strategy is the Kansas Bioscience
Center of Innovation program (Centers of Innovation). Through this program, Kansas can address
its dual needs to build world-class bioscience research centers in its research institutions, and to
assist existing and emerging bioscience industries in capturing new knowledge and research
findings for their product and production functions. The Centers of Innovation focus on research
69
and development in core technology areas that establish national and international research
excellence and lead to high commercial payoff in new products and processes. The R&D agenda
of these centers focuses on areas of interest to Kansas companies and potential entrepreneurs.
They are designed not only for excellent research, but also for productive commercialization.
Centers operate as consortia of industry, higher education, and other private research
organizations driven by strong industry involvement.
Among the KBA funded Centers of Innovation are:
-The Center for Animal Health Innovation is linking technology developers with industry,
thereby helping to bring new products to market faster and more efficiently. The
geographical concentration of companies within the region‘s Animal Health Corridor, and
Kansas State University‘s leadership role in animal health and animal disease research
made the school‘s new Olathe campus the right location for the new center. The center
brings nine area animal health companies, plus regional universities and government
agencies together to accelerate job creation, research, development and commercialization
of the next generation of animal health and nutrition products.
-The Kansas Alliance for Bioenergy and Biorefining (KABB) is uniting key industry
players such as Archer Daniels Midland with the world-class research and development
efforts at the University of Kansas and Kansas State University. The center of innovation
uses commercial biorefining to develop alternative fuels and chemicals; commercializes
efficient biomass resources for cost-effective quality power; and improves carbon capture.
As with other KBA Centers of Innovation, the focus of this center is commercial viability,
which requires the confluence of economic viability with technical feasibility and
marketplace acceptance.
-Heartland Plant Innovations (HPI) is developing advanced technologies for gene discovery,
trait validation and crop improvement in order to deliver new products and production
platforms. The global research team associated with the center focuses on emerging
commercial opportunities for wheat and sorghum, crops in which Kansas has
world-renowned leadership and expertise. The center is a public and private collaboration
of Kansas Wheat, Kansas State University, the University of Kansas, and many private
investors.
-The Center of Innovation for Biomaterials in Orthopedic Research (CiBOR) is creating
medical instruments, medical devices, and composite implants that will improve the
practice of orthopedic medicine. The center focuses on commercial viability, conducting
research requested by industry to meet market needs, and capitalizing on the concentration
of composites expertise found in Wichita due to the state‘s longstanding aviation industry
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leadership. Together with the KBA, CiBOR is jointly sponsored by Via Christi, one of the
largest health systems in the Midwestern U.S., and Wichita State University, home of the
National Institute of Aviation Research.
1.6 Commercialization Models: Best Practices to Inform NARC Activities
Research by itself will not translate into technology being transferred, commercialized and
developed into a new product by the public or private sector without having a support
infrastructure in place to help move it through these various development stages.
Several important commercialization steps are needed for the industrialization activities to be
successful.
-Technology transfer is not sufficient to drive commercialization
-Incubation is a critical component
-Need for incentives
-Pro-active outreach marketing is critical
1.6.1 Importance of Going Beyond Technology Transfer with Complementary Technology
Commercialization Activities
Technology transfer is the passive management of a research organization‘s intellectual property.
Technology transfer involves disclosure of discoveries, the determination of the need for patent
protection, and the licensing of the intellectual property (to either a third-party organization or to
create a new business) to pursue the development of a product, process, or other intervention
based on the discovery, and its associated license.
Quality technology transfer approaches are critical, but not sufficient to advance
commercialization of technologies. Complementing, but distinct from technology transfer, are
more pro-active efforts to commercialize technologies, focused on enhancing technology
solutions to meet the need(s) of customers in the marketplace. Technology commercialization is
primarily concerned with building and growing new products and processes in existing or new
firms. It involves a number of activities, such as assessing the technology and its potential
markets against current products in the marketplace (e.g., technology and market assessments). It
involves developing the product itself, and optimizing its engineering and design to meet price
points of the marketplace, if sales and growth are to occur. It involves putting the business and
management team in place and securing the sources of equity and working capital that will carry
the product and/or firm through various stages of maturity until it becomes an established
71
company/product in larger domestic and global markets.
Often Technology Transfer Offices at research universities, have difficulty, in going beyond the
more passive efforts to protect and license technologies and engaging in the commercialization of
technologies.
Table 1.6.1 Technology Transfer vs. Technology Commercialization – Stages
Technology Transfer Technology Commercialization
Technology
Development
Stage
Discovery Translational
Research
Technology
Development
Product Development Production/Marketing
Outcome Invention
Disclosure
Publication
Proof of Concept
Patent/Trade
Secret
License
Engineering
Optimization
Product Prototype
Pre-seed business
Initial Product
Start-up business or
new program (for
established companies)
Mass Production
Established company
Source: Adapted from NIST, ―ATP and Venture Capital Funding Criteria Differ,‖
http://www.atp.nist.gov/factsheets/1-c-9.htm
The recently released 2012 survey of North American university research parks prepared by
Battelle for the Association of University Research Parks brings up-to-date the state of university
research park activities considering a wide range of key topics about how university research
parks operate and what matters in driving success. This is summarized in Table 7.5.2.
One key finding of this updated research park benchmarking study is that commercialization
services are critical. Across individual business and commercialization services, the most
common services offered include helping industry tenants access state and local programs for
business and commercialization and linking to or directly providing sources of capital.
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Table 1.6.2 Business and Commercialization Services Offered
Service Offerings Percentage of
Total Parks
Help access state and other public programs 81%
Link to or provide sources of capital 72%
Assist with business planning 64%
Advise on marketing and sales strategy 61%
Provide access to subsidized space 57%
Perform technology and market assessments 56%
Assist with human resource issues 44%
Provide proof-of-concept funding 36%
Source: The 2012 Survey of North American University Research Parks: Driving Regional
Innovation and Growth
1.6.2 Incubation Services are Critical
As a result of their targeted focus on building innovation ecosystems and on providing the
services that such systems require, university research parks have a demonstrated record of
economic development success that stem from their innovation activities, particularly through the
incubation of emerging technology companies. This success not only fuels the growth of research
parks, but has positive spill-over effects for the regions served as these emerging technology
companies graduate from the university research park and, frequently, set up shop in the
surrounding community.
Park directors from the 108 responding university research parks reported that 963 businesses
have graduated from their incubators or related startup space in the last five years. Of these
graduate startup companies 26 percent remained in the park (with 24 percent having moved to
multi-tenant space and 2 percent having moved into their own buildings). An additional 43
percent of graduate startup companies left the park but remained in the region (with 30 percent
locating in close proximity to the park). Just 12 percent of the graduate startup companies left the
region. Significantly, only 19 percent of the graduate startup companies were no longer in
business, considerably outperforming overall national statistics on startup companies, where over
50 percent fail within five years21. Apart from the extraordinarily high success rate of startups that
are incubated in a university research park, it is also important to note that of those startups that
succeed, a full 77 percent remain in the region surrounding the park where they were incubated,
21 Scott Shane, ―Start Up Survival Rates: The Definitive Numbers,‖ Small Business Trends, December 17, 2012, see
http://smallbiztrends.com/2012/12/start-up-failure-rates-the-definitive-numbers.html
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further contributing to the region‘s attractiveness as a center of innovation.
Table 1.6.3 Startup Companies Incubated Through University Research Parks
Status of Startup After Graduation from Incubator Percentage of Total
Moved to multi-tenant space within park 24%
Moved to own building in park 2%
Left the park but remained in the region 43%
Left the region 12%
No longer in business 19%
Other 1%
TOTAL 100%
Source: The 2012 Survey of North American University Research Parks: Driving Regional
Innovation and Growth
1.6.3 Incentives for Start-ups and SME Strategy
The ability to succeed in positioning NARC for success in commercialization depends upon
having the right mix of incentives to stimulate existing and emerging companies in conducting
product development as well as to attract critical venture funding for emerging companies.
One well-established incentive is to offset the cost of company research and development
activities.
1.6.4 Proactive Marketing and Outreach
Technology commercialization needs a proactive marketing and outreach effort to be successful.
All too often excellent programs are developed, but not marketed and so fail to find an audience.
This proactive marketing and outreach needs to target both domestic and international businesses,
as well as both well-established and emerging companies. This activity should be approached as
an integral part of the larger business and entrepreneurial outreach activities for BPPT, IPB and
ITB. By design and positioning, the NARC should serve as an accessible portal and point of entry
for members of the outside business community seeking to engage in commercialization and
related partnering activities.
Key elements for NARC‘s proactive marketing and outreach should include the following
interrelated activities:
Identity Branding and Awareness Building
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This effort involves creating logos, slogans, signage, collateral materials, periodic electronic
communications, and architectural and land use renderings to be used in all elements of the
outreach campaign for purposes of raising awareness and visibility of NARC for both external
and university audiences. Communication channels will include: website,
brochures/collaterals, social networking, conferences, newsletters, tradeshows, media relations,
international trade missions, all with consistent messaging and branding. Once established, there
should be an ongoing effort to continuously reinforce this identity branding, with regular updates.
Participation in Trade Shows and International Recruitment Missions
An annual calendar of domestic and international trade shows and missions will be scheduled and
attended.
Targeted Events Marketing
Sponsoring, hosting and promoting networking, association events and conferences with
university linkages will be key to developing relationships that lead to demand for NARC‘s
facilities. Experience has shown that well targeted events that bring together potential
collaborators can lead to projects and potential tenancies. Thus, while the NARC will not
organize all conferences and events that occur, it should be positioned to support, promote and
occasional sponsor events that lead to partnering that occur at its university and national labs sites.
Toward this end, a shared calendar of events should be developed and maintained for both
planning and promotion purposes. Examples of the types of networking events that could be
promoted include:
-Entrepreneur‘s Day, which should be scheduled as run as an annual event with sponsored
support.
-Periodic ―brown bag‖ lunches and briefings sponsored for targeted industry executives.
-Periodic events with affiliated Indonesian business associations.
-Various business plan and technology competitions and venture forums involving faculty,
graduate students and entrepreneurs.
Development of a Contact and Relationship Management System
Well prior to the completion of construction for NARC facilities, a system for managing targeted
outreach, tracking of contacts and prospects and appropriate follow-up should be established.
75
Chapter 2. Information Gathering and Analysis of Existing, Preceding
and Similar Clusters
When planning NARC in Indonesia, it is necessary to look down at the bio-cluster of the foreign
country, and in order to use as reference of the Indonesia NARC, information on planning,
construction, search for tenants, operation management, policy assistance of the government, etc.,
were collected.
2.1 Examples of Clusters in Japan, Asia, Europe, and USA
Although there are many bio-clusters in the world, especially in this report, the report focuses on
the biocluster of Asian countries which competes with NARC project, and the team conducts
collection and analysis of this information. Biotech industry is attracting attention as a new
growth field in recent years, and not only in developed countries but Asian countries show the
motion raised positively in 2000 and afterwards. The analysis for obtaining the hint which
contributes to establishment of Indonesia NARC, and to operation management, etc. from these
findings was conducted.
Looking at the bio-clusters in Asian countries, it is clear that the government of each country has
strongly performed legal and incentive provisions, strengthening of personnel training, etc. in
order to develop the bio industry of in the countries. Conclusively, if the development of bio
industry is aimed at also in Indonesia, leadership, powerful government policies and measures
such as laws and ordinances provisions are essential.
2.1.1 Examples of Clusters in Asia
(1) Overview of Asian Bioclusters
In considering bioclusters in Indonesia of an Asian, it is indispensable Indonesia Bioclusters must
compare with neighboring Asian countries clusters. In Asian countries, Japan has the biggest
number of bioclusters (25 districts) and this means regional development using Bio industry. In
Korea, the bio-related import (31.3%) is substituted to domestic products (68.7%), and it
contributes to stimulation of domestic demand by bio industry field. Taiwan interlocks the newest
and biggest hospital and clinical test laboratories, in Hsinchu bio-medicine park, and is expanding
bio research to the life science field. Singapore invited the globally prominent researcher, invited
the global drug industry, and it means that the country has imported the whole researcher with
investigational seeds from overseas. In other Asian countries, the results of bioclusters have not
been seen tangible yet.
76
The bio-clusters of Taiwan, South Korea, Singapore, and Malaysia in Asian countries are
individually described below and it is considered as reference of Indonesia bio-cluster.
The biocluster of Indonesia from the lesson and learnt by Asian countries is considered as
follows:
1) Inviting investigational seeds and researchers from overseas by collaborative research,
and making the many seeds of industrialization
2) Proceeding applications of biotechnology with little energy consumption and
less-pollution to the industrial field
3) Developing economical medical supplies applying biotechnology for a big population
The present conditions of the policy and biocluster of Singapore, South Korea, Taiwan, India and
Malaysia among Asian countries is described below.
(2) Singapore
1) Purpose and Background for Cluster Location
Science and Technology in Singapore have shown a top-down approach. The sector‘s
policies are formulated by the Ministry of Trade and Industry, with EDB, A*STAR and
SPRING being the statutory implementation bodies. This has ensured integration of the
sector‘s policies with the State‘s overall economic development strategy. Alongside,
flexibility to change is also incorporated.
Source: OECD, ―Innovations in Southeast Asia‖ 2013
Figure 2.1.1 Institutional Framework for R&D in Singapore
77
Source: UN ECLAC, ―The Singapore success story: public-private alliance for investment
attraction, innovation and export developments‖ 2010
Figure 2.1.2 Functional Network between Policy, Program and Real Estate in R&D Sector
a) History of Biotechnology in Singapore
In the 1980s, there was significant thrust in Singapore‘s industrial policy towards
value-addition and ―brain-intensive‖ sectors. (Tan, 1983) The Economic
Development Board (EDB) established the National Biotechnology Programme
(NBP) to promote the fast-growing industry as well as a National Biotechnology
Committee (NBC), among whose recommendations was the creation of a Training in
Biotechnology Scheme (TIBS) to promote and speed up the transfer of knowledge,
technology, and skills in biotechnology.
The focus in the 1990‘s was heavy on developing technologies critical for
Singapore‘s industrial clusters. In 1999 a new economic development program called
Technopreneurship21 was launched. In 2001 focus shifted to basic research, to create
long term robust innovative capacity. (OECD, 2013) Singapore‘s success in
biotechnology is most visible in Biopolis, launched in 2003 as an integrated cluster of
research facilities in an urban setting. With the allocation of SGD 1.55 billion in 2011,
future growth is being focused on three strategic sectors – Biomedical Sciences
(BMS), Environmental and Water Technologies (EWT), and Interactive and Digital
Media (IDM).
78
Table 2.1.1 Major Landmarks in the History of Biotechnology in Singapore
Year Main Issues
1983 Thrust in Industrial Policy towards value-addition and
―brain-intensive‖ sectors
1989 EDB established the National Biotechnology Program
1990‘s Focus only on industrial technology
2001 Focus shifted back to basic research
2003 Launch of Biopolis
2006 Research, Innovation and Enterprise Council (RIEC)
established
2011 Allocation of SGD 1.55billion to the National Research
Foundation
Source: JICA Study Team
Source: A*STAR, ―National Survey of R&D (2002 - 2011)‖
Figure 2.1.3 R&D Expenditure in Biomedical Industry
b) Governmental Commitment to Promote Biotechnology
(i) Investment
In response to government policy, the Singapore economy is becoming more
R&D intensive. Singapore ranks second globally in competitiveness (World
Economic Forum, 2013). Its public and private institutions are rated as the best in
the world for the fifth year in a row. With the Research, Innovation, and Enterprise
0
200
400
600
800
1000
1200
1400
1600
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
R&
Dexp
en
dit
ute
in
Bio
med
in
du
stry
(S$
Mil
lion
) Experimental
development
Applied
Basic
79
2015 plan, the government is committed to investing $16.1 billion between 2011
and 2016 to bolster Singapore‘s Research and Development (R&D) sector. In less
than 2 decades, Singapore‘s R&D expenditure has increased tenfold, from S$760
million in 1991 to S$7.4 billion in 2011. Of this, about two-thirds of R&D
expenditure was from the private sector. Expenditure in biomedical and related
sciences showed an increasing trend, in line with overall growth in R&D
expenditure up to 2008. During the global depression starting 2009, overall R&D
expenditure and biomedical expenditure took a down turn, while public
expenditure rose significantly. Flexible and well-timed State policy in support of
private sector expenditure has helped keep the R&D scene flourishing.
Source: A*STAR, ―National Survey of R&D(2002 - 2011)‖
Figure 2.1.4 Gross Expenditure on R&D and Biomedical Sciences, and Public Expenditure on
Biomedical Sciences
(ii) Education
Singapore also has world-class infrastructure (2nd) and a strong focus on
education, providing individuals with the skills needed for a rapidly changing
global economy. It ranks 11th in terms of Innovation and Sophistication Factors.
(World Economic Forum, 2013) The education system is designed to nurture the
inherent capability to innovate. Educational programs from kindergarten through
postgraduate levels reward scientific and engineering excellence.
The government plays a proactive role in streamlining policies towards market
80
trends. Its synchronized investment in supporting infrastructure and resources
ensures that Singapore gains an early-mover advantage in the global R&D.
c) Industry Response to Government Commitment
Private sector response to government policy for R&D has been very encouraging,
accounting for about two-third of total expenditure in R&D in Singapore.
Source: A*STAR, ―National Survey of R&D (2002 - 2011)‖
Figure 2.1.5 Total R&D Expenditure and Private Sector R&D Expenditure
(i) Enhanced firm performance
The knowledge intensive biomedical sector has grown to 19.6% of all
manufacturing output because of the inflow of top-ranked talent, strong base of
biomedical research capabilities and state-of-the-art infrastructure.
0
1000
2000
3000
4000
5000
6000
7000
8000
R&D Total
Private sector R&D
expenditure, 1998 - 2008
81
Source: Based on Economic Survey of Singapore, 2010, MTI, 2011
Figure 2.1.6 Share of Biomedical Manufacturing in Total Manufacturing in Singapore
(ii) Enhanced university performance
At a Wiley-Blackwell Research Seminar in March 2008, Blackwell‘s
bibliometrics director Iain Craig provided data illustrating that the research output
of Singapore was on track to reach and then exceed the world average in the next
few years, having increased by some 72 percent from 2000 to 2007. With an R&D
expenditure of US$3.1 billion in 2006, Singapore generated publications at a rate
of 0.3 publications per researcher, higher than that of either China or Japan.
2) Approximate Investment Size and Main Investors
a) Bioclusters in Singapore
Singapore has developed by the inviting foreign invested enterprises.
Electronic industries, such as television and a semi-conductor, have been invited to the
70s. Petrochemical industries, such as ethylene plants and its down streams, were
invited to the 80s. IT and information and telecommunications are remarkable as global
trends to the 90s. Singapore also began to put a strength into attraction of these
companies. When it was in the 21st century and the government raised a biomedical
industry. 15 bio-advanced companies were invited by 2010, and it determined to
become a local centre of pharmaceutical development and a medical investigational.
The overseas office of Singapore Economic Development Administration (EDB)
performed the attraction activities of foreign invested companies. The efforts of
82
attraction were achieved fruitfully and steadily. Six companies of top ten
pharmaceutical companies in the world came and started operation. Moreover,
relocation of the research and development division also progresses and the presently
bio-cluster has been formed.
Singapore aims at 21 century industry. Production amount in 2007 recorded by 4times,
S$24 billion and it became 4 times compared with 2000. It almost same as 2015 target,
S$25 billion and it is almost 4 times compare with year 2000. Number of Employee also
increased to13,000 in 2009.
(i) Historical Background of Biocluster Success in Singapore
Singapore aims at systematic biomedical research-and-development centre from
the basic study, the clinical test, the product and process development, the
production and manufacture in a full scale, and healthcare service. The historical
reason why the bio-cluster was formed for Singapore for a short period is
existence of the intention that EDB, that is, the government had strong policy. The
government had strong mind that the biomedical industry should be developed as
a leading industry in the 21st century. Although bio-industry did not exist in
Singapore further from the first, it was positively in charge of attraction of
foreign-invested firms. Last reason was that foreign experts in bio technology
were invited aggressively.
(ii) Advantage and Disadvantage in Singapore Biocluster
A. Advantage
I. Recognition and approval can be performed unitary.
II. Medical care data were approved by the U.S. FDA
III. Pursuit patient data for 10 years
IV. Clarify clinical test organization
V. Invitation worldwide medical maker and Exhibition
VI. Tax incentive
VII. Understanding Chinese medicine
VIII. Acceptance of a diagnoses and therapeutic of a foreigner
including medical tourism
B. Disadvantage
I. Weak for New medicine field
II. Personnel expenses are high and a manufacturing cost goes up compared
83
with the countries in Southeast Asia
III. Singapore market is small
IV. Since it is a production base of a foreign company, a loyalty is not
generated.
b) Main Bio Cluster and Other Facilities in Singapore
Source: JICA Study Team
Figure 2.1.7 Main Bio Cluster and Other Facilities in Singapore
c) Plans of Each Biotech Park in Singapore
(i) One-North
One-North is a 2 sq km development within Singapore‘s science and education
talent belt. It hosts research facilities and business park space for Biomedical
Sciences, Infocomm Technology (ICT), Media, Physical Sciences and
Engineering. It encompasses the National University of Singapore, the National
University Hospital, part of the Nanyang Technological University, Singapore
Science Park, and the Ministry of Education. Biopolis, the bio-cluster and the
Fusionopolis, a cluster for ICT, Media, physical sciences and engineering R&D,
are located within One-North.
84
Source: http://www.skyscrapercity.com/showthread.php?t=149241&page=39
http://www.pharmaceutical-technology.com/projects/biopolis/biopolis4.html
(Biopolis Biomedical Research Hub, 2013)
Figure 2.1.8 One-North Master Plan
(ii) Biopolis
Biopolis has been planned as ―the biomedical hub of Asia,‖ a city within a city
intended for scientists, researchers, and entrepreneurs. It is designed to attract
scientists from all over the world who will come for the quality of scientific
research and the cosmopolitan work environment. Biopolis offers office space,
from workstations to buildings; support facilities like common areas and an
auditorium; and retail units on rent. Many facilities have been designed to be
shared by scientists and engineers in related disciplines, including the Zebra fish
facility, bioreactor, electron microscopy, proteomics, MRI, histology, x-ray
crystallography, DNA sequencing, flow cytometry, lab supplies, media
preparation, and glassware washing.
85
Table 2.1.2 Fact Sheet for Biopolis
Phase 1 2 3 4 5
Year 2006 2011 2013
(ongoing)
Gross Floor Area 185,173 37,000 41,500 32,000 46,182
Cost S$500 mil S$70 mil $250 mil S$87mil
Developer JTC
(Public)
Private
( Crescendas
Bionix)
Private
(Procter &
Gamble)
Private
(Ascendas)
Source: Data from (Ho, 2007), (Biopolis Biomedical Research Hub, 2013),
(SG Property News, 2011)
Biopolis Phase 3 was awarded to Crescendas Group by JTC Corporation under a
design-build-own-operate basis with a 30+30 year lease. Crescendas Bionix, a
member of Crescendas Group, is the vehicle for the project. The consultants for
this phase of the project were Jurong Consultants. The facility will focus on
medical technology research and clinical & translational research. (Biopolis
Biomedical Research Hub, 2013)
Development for phases 4 and 5 of Biopolis is currently underway. Phase 4 has
been taken up by Procter & Gamble for its Singapore Innovation Centre, whilst
Phase 5, by Ascendas, will provide 46,182sqm of biomedical research facility for
additional laboratory space, including ready-fitted laboratories (i.e. Shell-plus
laboratory) which cater to biomedical SMEs and start-ups through saving the
companies time and resources during their initial setup phase. (Biopolis
Biomedical Research Hub, 2013)
Key Customers:
Major companies, such as the Novartis Institute for Tropical Diseases and the
GlaxoSmithKline Center for Research in Cognitive and Neurodegenerative
Disorders, have built a presence in the Biopolis.
86
Source: http://www.pharmaceutical-technology.com/projects/biopolis/biopolis4.html)
Figure 2.1.9 Biopolis Development Plan by Phase
4th Floor (GridAsia & OGF Meeting Floor)
3rd Floor (Breakout Rooms & Secretariat Room)
87
2nd Mezzanine Floor
2nd Floor
Source: http://www.pharmaceutical-technology.com/projects/biopolis/biopolis4.html
Figure 2.1.10 Floor Plan of Matrix Building
Source: http://www.ascendas.com/downloads/Brochure_Neuros.pdf
Figure 2.1.11 Neureos (Phase 2 Building ) Floor Plans and Schematic Section
88
Source: http://www.absa.org/abj/abj/071204behrmann.pdf
Figure 2.1.12 Novartis Institute for Tropical Diseases (NITD), BSL-3 Unit Set-up
89
(iii) Fusionopolis
Another park, Fusionopolis, located about half a mile from the Biopolis, focuses
on integration of physical sciences and engineering with biomedical sciences; and
of academic and industrial science, to speed research results toward commercial
application. Fusionopolis has public- and private-sector labs, homes, service
apartments, hotels, a shopping mall featuring smart-shopping technologies, food
and beverage outlets, and an experimental theatre for art performances.
It focuses on the physical sciences and engineering research, especially:
-Energy (fuel cells, organic photovoltaics)
-Home 2015 (assistive technologies for health monitoring and rehabilitation,
medical devices and technology
-Aerospace (computational fluid dynamics, manufacturing processes,
automation)
- Nanotechnology
- Sensors and sensor networks (wireless communication and robotics for remote
monitoring)
- Cognitive science, with future applications in social robotics
A*STAR plays a role in integrating the work of research institutes with MNCs,
SMEs, and start-ups, as well as with other agencies, such as the Economic
Development Board and SPRING Singapore.
Towers A & B of Fusionopolis Phase 2A house dry and wet laboratories and
business park space. Tower C consists of a cluster of high specification laboratory
spaces, including multi-storey stacked vibration-sensitive laboratories and clean
rooms, SERC Research Institutes of DSI, Institute of Microelectronics (IME),
Institute of Materials Research and Engineering (IMRE) and Singapore Institute
of Manufacturing Technology (SIMTech). (A*STAR, 2011)
90
Source: http://inhabitat.com/fusionopolis-singapore%e2%80%99s-new-green-skyscraper
/attachment/12787/
Source:http://www.jtc.gov.sg/RealEstateSolutions/PublishingImages/one-north/
Fusionopolis-SiteMap.jpg
Figure 2.1.13 Fusionopolis
91
Source: http://img.photobucket.com/albums/v133/RafflesCity/fusionopolis.jpg
Figure 2.1.14 Outline of Fusionopolis
92
Note: Showing office (R&D) spaces in green
Source: http://www.kilostudio.net/awards/2008/fusionopolis/
Figure 2.1.15 Schematic Floor Plans of Fusionopolis
93
Source: http://www.kilostudio.net/awards/2008/fusionopolis/
Figure 2.1.16 Single Floor Plan Schematic
94
Source: http://www.ice.ci.ritsumei.ac.jp/~ruck/PAP/wasa12CGT.pdf
Figure 2.1.17 Fusionopolis, Level 13 Connexis (North Tower)
95
Source: http://www.designbuild-network.com/projects/solaris-fusionopolis
/solaris-fusionopolis3.html
Figure 2.1.18 Plan of Solaris Fusionopolis (Phase 2)
96
(iv) Tuas Biomedical Park
Tuas Biomedical Park (TBP) is a world-class manufacturing hub, hosting process
development and manufacturing operations of major pharmaceutical,
biotechnology and medical technology companies; equipped with power lines,
telecommunication lines, water and gas supplies, established sewerage system
and road network. Third parties are providing utilities such as steam, natural gas,
chilled water and waste treatment services.
TBP presents a plug-and-play environment that reduces lead time to commence
commercial operations, and offers good access to logistics.
Table 2.1.3 Fact Sheet for Tuas Biomedical Park
Total Site Area (m2) 36,00,000
Developer JTC (Public)
Key Customers TBP is home to a host of global biomedical players,
including GlaxoSmithKline, Lonza, MSD GmbH,
Novartis, Pfizer and Roche.
Source: Tuas Biomedical Park, 2013
Source: Tuas Biomedical Park, 2013
Figure 2.1.19 Tuas Biomedical Park
97
(3) South Korea
1) Purpose and Background for Cluster Location
Bio industry has been recognized as one of the future engines for growth and required to
drive the world economy in the wake of the success of information and communication
technology. Through convergence with other cutting-edge technologies including
information technology and nano technology, it could lead innovation in the medicine,
chemical, energy, agricultural and food industries among others, as well as creating new
value-added industrial groups.
Although every country in the world is making effort for developing to produce big added
value, research and development are actively done by university, a research institute,
bio-venture, etc. even in Korea, and as results, the big outcomes are also produced.
In recent years, Korean biotechnology industry has achieved big success under
governmental support. The background is a) talented human resource development, b)
governmental strong supports and c) continuously prepared hardware. Life science
industry has become potential high developing power due to the expanding collaboration
between academic and industry.
a) Basic Framework and Direction of Technology Development in Korea
The institutional centers of Korean science and technology policy in the 1980s were the
Ministry of Science and Technology (MOST), which supported basic and applied
research through the Korean Institute of Science and Technology (KIST) and its
specialized research institutes, and the Ministry of Trade and Industry (MOTIE), which
promoted purely industrial research.
MOST is now called the Ministry of Education, Science and Technology (MEST), and
MOTIE became the Ministry of Knowledge Economy (MKE).
From the 1980s, the National R&D Program (NRDP) had been the focus of MOST‘s
activities. This was supplemented by a major new program: the 21st Century Frontier
R&D Program began in 1999 to develop science and technology competitiveness in
emerging fields, and over the subsequent decade the government poured $3.5 billion
into twenty-three projects in such fields as bioscience, nanotechnology, space
technology. Each grant has been for roughly $10 million.
The Creative Research Initiative (CRI) started in 1997, intended to support a shift
―from imitation to innovation‖ research. Fifty-seven research centers were selected,
each receiving $500,000 per year. The National Research Laboratory (NRL) chose
several research centers of excellence, aimed at improving competitiveness. Individual
projects receive up to $250,000 per year, and the majority of projects are at universities
98
and research institutes, with only about ten percent at corporate research labs. The
Nanotechnology Development Plan of 2001 was dedicated to this emerging technology,
spends about $170 million per year, and established two new national nanotechnology
labs. The Biotech 2000 Plan brought together several ministries with interests in
development of biotech, and the plan was intended to boost the biotech component of
the NRDP.
The Korean government prides itself on steadily increasing aggregate figures for R&D
expenditures and numbers of researchers. In 2008, Korea devoted 345 billion won
($286 million) to R&D, accounting for 3.37 percent of GDP, almost a full percent
increase over 1998 (it reached 3.48% in 2010). In PPP terms, it equaled about half of
the figure for the U.S. Also in 2008, the government employed over 4,000 researchers
in its R&D labs, nearly doubling the figure for 2000. Researchers employed in
corporate labs were 197,000, and private facilities accounted for two-thirds of both
total spending and researchers, while eighty percent of the rest toiled at universities.
Unsurprisingly, most corporate researchers work on applied technologies. As
impressive as these figures may be, Korea still lags in amount of expenditures per
researcher, behind Japan, the U.S., and several Western European nations. Also,
amounts of expenditures as a ratio of sales lag for many industries.
b) History of Biotechnology in Korea
The Korean government has begun promoting from the mid 1980‘s and after
establishing a basic plan for the promotion of biotechnology ―Biotech 2000‖ in 1994,
started to coordinate government policies and expand its investment in R&D greatly.
Main Issues of History of Biotechnology in Korea are summarized in Table 2.1.4.
Table 2.1.4 Main Issues of History of Biotechnology in Korea
Year Main Issues
1983 Genetic Engineering Promotion Law was established
1985 Korea Research Institute of Bioscience & Biotechnology (KRIBB) was
established
1994 Basic Plan for the Promotion of Biotechnology (―Biotech 2000: 1994-2007‖) was
established
1998 Brain Research Promotion Law was implemented and Basic Plan for the
Promotion of Brain Research (―Brain tech 21: 1998-2007‖) was established
2004 Novel Biomedicine and Organs industry was designated as one of the next
generation growth engines
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2006 The 2nd Framework Plan for the Promotion of Biotechnology (―Bio-Vision 2016:
2007-2016‖) was established
2007 The 2nd Framework Plan for the Promotion of Brain Research (2008-2017) was
announced and The Master Plan for National Life Resources was established
2008 Science and Technology Basic Plan ―577 Initiative‖ was established and ―BT
Committee‖ under the National Science and Technology Council was formed
Source: JICA Study Team
c) Vision for Biotechnology in Korea
Bio-Vision 2016 was established the direction of the development of Korean
biotechnology over a 10-year period up until 2016 and it was published to achieve a
goal of making Korea a biotechnology leader, according to a vision or realizing a sound
―Health Life‖ and ―Prosperous Bioeconomy‖, targeting to join the group of global top 7
biotechnology nations. Main goals for the vision are summarized in Table 2.1.5.
Table 2.1.5 Main Goals for the Bio-Vision 2016
Category 2006 2016
No. of science-technology papers published
(National ranking )
12th 7th
Competitiveness in patented technology
(National ranking )
15th 7th
No. of R&D manpower
(Postgraduate degrees )
9,500 17,300
Industrialized market value (Korean Won (KRW)) 2.7 trillion 60 trillion
Source: JICA Study Team
For the development of the industry, the following points should be strengthened:
- Strengthening an efficient comprehensive coordination system
Multi-ministerial coordination/Efficient budget allocation system
- Acquiring of creative original technology
Facilitating overall R&D activities/Core and fusion technologies needed
- Developing of advanced industrial infrastructure
Realignment of industrial systems/Securing the commercialization
infrastructure
- Promoting of bioethincs and a culture of research integrity
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Social consent for safety ethics/Promotion of ELSI research
d) Governmental Commitment to Promote Biotechnology
Biotechnology has a shorter history in Korea than IT industry which is the leading
industry of Korea. Over the past decade, however, it has grown substantially. In the
1990s, most R&D was pursued by universities and a few pharmaceutical firms, but
Korea now has a diversified R&D capacity in bio-science and product development.
Medical uses account for nearly sixty percent of the industry, by income, and food
products amount to nearly forty percent. The industry bounced back from a major
scandal involving human biotech experiments, and now boasts roughly 600 firms, most
of which are located in the Seoul area. The industry employs over 12,000, over half of
whom are researchers, and the rest in production. The industry produced $2.42 billion
in volume, along with $1.1 billion in exports, in 2004.
Investment of Korean government in Biotechnology 1994 through 2008 is shown in
Figure 2.1.20.
Source: Korea Ministry of Education, Science and Technology, 2009
Figure 2.1.20 Government Investment in Biotechnology (1994 ~2008)
Key investment fields related to biotechnology include four areas of green ocean, risk
science, mega trend science and national platform technology. Main project areas and
related critical technologies are summarized in Table 2.1.6.
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Table 2.1.6 Main Project Areas and Related Critical Technologies
1
Technology Areas Industrial Technologies [Green Ocean]
Projects Developing emerging technologies in the areas of drug, health and
medical care for which market sizes are expected to expand in the
future due to the aging society
Critical
Technologies
Next-generation system S/W, cancer diagnosis and treatment, brain
science, drug discovery and development technology, etc
2
Technology Areas National Issues-related Technologies [Risk Science]
Projects Technology development in the area of current issues related to
healthy life of people including new types of disease such as mad
cow disease and pathogeric avian influenza, and food safety
Critical
Technologies
Immune disease and infectious disease response, food safety
evaluation, IT nano-device technology, etc
3
Technology Areas Global Issue-related Technologies [Mega Trend Science]
Projects Technology development to cope with common issues of human
kind such as energy and resources, climate change, environment and
food, and to occupy vantage point in the future market
Critical
Technologies
New and renewable energy (solar energy, wind energy, bioenergy,
etc), Environment conservation and restoration technology, etc
4
Technology Areas Basic and Convergent Technologies [National Platform Technology]
Projects Developing platform and convergent/composite material
technologies with substantial socioeconomic effect, which become
the base of next-generation technology innovation
Critical
Technologies
Drug delivery technology, Biochip and biosensor, etc
Source: Swiss Business Hub Korea, ―Bio Technology Industry in Korea‖
e) Strengthening of Industrial Capacity
834 companies including more than 600 venture companies are involved in the
biotechnology sector, and more than 20,000 people are employed in the industry.
Market size of biotechnology in Korea from 2004 to 2009 is shown in Figure 2.1.21.
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Source: Korea Pharmaceutical Manufacturers Association
Figure 2.1.21 Market Size of Biotechnology in Korea (2004 - 2009)
Korean biotech industry has shown the growth rate of 16.8% of an annual average in
these five years (2005 - 2010). Moreover, the investment to the biotech industry by the
Korean government is increasing for about 3 times in 2009 compared 2003. The
research and development division has the largest budget, and it has been intensively
invested into infrastructure buildings and personnel development. The base of the
Korean biotech industry policy has based on laws of ―Life Science Development‖ by
the " of Educational Office of Science and Technology, and the "Healthcare technical
promoting" by the health-and-welfare household division which focusing development
of original technology and improving national healthcare. It is the stage which is
making the legal and institutional base which promotes the industrialization of
biotechnology. For raising Korean biotech industry up to the industrial level from now
on, it is necessary to invest R&D of bio-field with diversity investment in respect of
quantity and quality. It is also necessary to make it develop efficiently into
industrialization with appropriate selection and concentration. Presently the Korean
government revise the law of ―Life Science Development‖ to law of ―Life Science
Development and Industrialization Promotion‖ to proceed more industrialization. By
this revision, the government wants to strengthen bio industry fundamentals,
supporting R&D, governmental approval system, intellectual property management,
enterprise, aiming promoting bio technology industrialization.
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2) Approximate Investment Size and Main Investors
a) Present situation of regional biotechnology clusters in Korea
Korean government has built 20 regional bio-industry infrastructure on the basis of the
regional characteristics from 1998 until 2009 as shown in Figure 2.1.22
Source: Ministry of Knowledge Economy (MKE)
Figure 2.1.22 Present Situation of Regional Biotechnology Clusters
Korean government announced the "extensive industrial cluster building method" in
2009 and employed that the outcome of cluster enterprises reflected into local
development policy efficiently.
The whole country is divided into three districts, and it concentrates on life medicine,
healthcare, animals practical use technique, etc., in Dae Jeon/Chung Cheong Dong
district. Jeolla-do and Chung Cheong Dong area is concentrated into bio-agricultures
specializes in practical use of bioengineered foods and vegetation resources. Gang
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Won/Gyeongsang district is intensively raised with emphasis on practical use of life
environments, process and functional ingredients, and marine resources, etc.
b) Outline of Main Biotech Parks in Korea
(i) High-Tech Medical Complex, Daegu Innovation City
High-Tech Medical Complex is a high-tech medical industry cluster that supports the
commercialization of the domestic medical industry in a bid to strategically nurture
cutting-edge medical equipment and new drug industries.
A. Purpose
Provide a comprehensive support to the domestic medical industry in order to
strategically nurture cutting-edge medical equipment and new drug industries at
the national level
B. Vision and Strategy Purpose
I. Vision
To become a global medical R&D hub which has the best capability in the
high-tech medical industry
II. Goal
To provide a world-class research area to anyone with ideas
III. Practical strategies
Green and high-tech medical complex to develop cutting-edge new medicine,
and medical equipment
C. Overview
I. Location/Size
Within the Daegu Innovation City in Sinseo-dong
1,030,000 m2 (innovation city 4,220,000 m2)
-Government facilities including new drug development support center, and
cutting-edge medical equipment development support center: 76,000 m2
-Communication center, research institutes, and venture towns: 954,000 m2
II. Period
2009 - 2038(Construction : 2009 - 2012)
105
III. Total budget
KRW 5.6 trillion (KRW 2 trillion financed by the state government, KRW 0.3
trillion by the city and provincial government, KRW 3.3 trillion by the private
sector)
IV. Government budget
KRW 1,964 trillion (KRW 824.6 billion for facility operation, 1.1396 trillion for
R&D investment)
D. Expected benefits
Development of global high-tech products (16 new drugs, 18 high-tech medical
devices) will result in increase in production and employment of KRW 82 trillion
of production increase, 380,000 of job creation and KRW 40 trillion of
value-added (Annual net revenue from one drug development equals to exporting
3 million cars).
The construction of the complex creates a synergy effect across the local economy.
E. Blueprint for the high-tech medical complex
Research and application-oriented medical complex that puts research results into
action.
Establishing R&D infrastructure to support the selection and design of innovative
new drugs, manufacturing of prototypes, performance evaluation(cutting-edge
medical equipment), and clinical trial.
F. Bird's eye view
106
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Figure 2.1.23 Bird's Eye View of High-Tech Medical Complex
G. Location map of the complex
107
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Figure 2.1.24 Location Map of the Complex
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Figure 2.1.25 Medical Complex and Development of Surrounding Areas
108
H. Outline of facilities
Table 2.1.7 Outline of High-Tech Medical Complex
Facility Size
(m2)
Use
New Drug
Development Support
Center
70,100 evaluation of candidate
drugs, joint development
Ministry of
Education,
Science and
Technology
High-tech Medical
Equipment
Development Support
Center
design of medical equipment,
manufacturing, evaluation
support, etc.
Ministry of
Knowledge and
Economy
Lab Animal Center pre-clinical trial, etc. Ministry of
Health and
Welfare
Clinical Test and
Production Center
production and supply of
clinical trial sample
Ministry of
Health and
Welfare
Communication
Center
17,600
(8 floors above ground,
1 floor underground)
venture company, strategy
and planning headquarters,
amenities
Daegu city
Private sector zone 388,446 cutting-edge clinical trial
center, venture research
center
Private
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
I. Features of main facilities
I. New Drug Development Support Center
Main tasks
-Provide safety and toxicity evaluation on substance discovered and requested by
academics and industries
-Support the discovery of optimal candidate substance through repeated practice
of optimization
109
Size
Table 2.1.8 Size of New Drug Development Support Center
Area 4,062.81 m2
Total building
floor area 23,016.04 m
2
Floor 9 floors above ground,
1 floor underground
Construction
cost
KRW 57.4
billion
Ground-breaking September 2011 Completion of
construction July 2013
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Budget
Table 2.1.9 Budget for New Drug Development Support Center
Cost 2010 2011
Total KRW 16.5 billion KRW 15.5 billion
Facility cost KRW 15.9 billion KRW 13.4 billion
Equipment cost - KRW 1.3 billion
Construction cost KRW15.9 billion KRW 12.1 billion
Operating cost KRW 600 million KRW 2.1 billion
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
II. High-tech Medical Equipment Development Support Center
Main tasks
-Establish comprehensive infrastructure to support the development of
cutting-edge medical equipment
- Support the development of products with high growth potential such as
medical imaging devices, and medical robots
Size
Table 2.1.10 Size of High-Tech Medical Equipment Development Support Center
Area 4,406.49 m2
Total building
floor area 10,890.17 m
2
Floor 5 floors above ground,
1 floor underground
Construction
cost
KRW 34.4
billion
Ground-breaking September 2011 Completion of
construction July 2013
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
110
Budget
Table 2.1.11 Budget for High-Tech Medical Equipment Development Support Center
Cost 2010 2011
Total KRW 12.2 billion KRW 7.4 billion
Facility cost KRW 11.9 billion KRW 6.1 billion
Equipment cost - KRW 1.7 billion
Construction cost KRW11.9 billion KRW 4.4 billion
Operating cost KRW 300 million KRW 1.3 billion
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
III. Lab Animal Center
Main tasks
-Support animal test and the development of new drugs and medical equipment
within the complex
-Provide a stable supply of lab animals to research institutes within the complex
-Produce and provide various disease-model animals
-Support the training of specialists and animal test of local industry and academia
-Store human body resources as a bio resource center
Size
Table 2.1.12 Size of Lab Animal Center
Area 3,334.13 m2
Total building
floor area 8,716.87 m
2
Floor 3 floors above ground,
1 floor underground
Construction
cost
KRW 31.3
billion
Ground-breaking September 2011 Completion of
construction July 2013
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
111
Budget
Table 2.1.13 Budget for Lab Animal Center
Cost 2010 2011
Total KRW 9.7 billion KRW 10.7 billion
Facility cost KRW 9.5 billion KRW 10.1 billion
Equipment cost - KRW 4.1 billion
Construction cost KRW 9.5 billion KRW 6.0 billion
Operating cost KRW 200 million KRW 600 million
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
IV. Clinical Test and Production Center
Main tasks
-Support the complete production of new drug makers in Korea by classifying
drugs into two forms: anticancer drugs and tablets and capsule drugs
-Provide consulting on GMP specialist education programs, and GMP
equipment-related education, and global network service to upgrade GMP
operation
Size
Table 2.1.14 Size of Clinical Test and Production Center
Area 4,214.99 m2
Total building
floor area 6,513.84 m
2
Floor 1 floors above ground,
1 floor underground
Construction
cost
KRW 26.6
billion
Ground-breaking September 2011 Completion of
construction July 2013
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
112
Budget
Table 2.1.15 Budget for Clinical Test and Production Center
Cost 2010 2011
Total KRW 8.9 billion KRW 17.2 billion
Facility cost KRW 8.6 billion KRW 16.7 billion
Equipment cost - KRW 12.0 billion
Construction cost KRW 8.6 billion KRW 4.7 billion
Operating cost - KRW 600 million
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
V. Communication Center
Main tasks
-Support the commercialization, R&D of leading research institutes
-Execute the joint task of foundation (establishment of business plans,
promotion) and create synergy effects among centers
Size
Table 2.1.16 Size of Communication Center
Area 2,558.69 m2
Total building
floor area 17,702.01 m
2
Floor 8 floors above ground,
1 floor underground
Construction
cost
KRW 34.2
billion
Ground-breaking September 2011 Completion of
construction July 2013
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Budget
Table 2.1.17 Budget for Communication Center
Cost 2010 2011
Total KRW 2.0 billion KRW 6.0 billion
Fund,etc. - KRW 2.0 billion
Operating cost KRW 2.0 billion KRW 4.0 billion
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
113
J. Daegu-Gyungbuk High-tech Medical Industry Promotion Foundation
I. Foundation basis
Article 11 of the Special Act on designation and support of high-tech medical
complex
II. Corporation characteristics
Non-profit organization under Civil Code Article 32
III. Foundation direction
-Established as a single corporate entity considering the harmony between
administrative support function and efficiency
-Participation from the government, and the private sector (Daegu city and
Gyeongsang province also participate)
-Operating committees are set up at each center
IV. Main functions
-Secure competitiveness of the medical industry by establishing the
infrastructure for high-tech product development
-Support research on the medical industry
-Establish network where academia, industry and government agencies can
communicate together
-Attract investment to revitalize the local medical industry
-Provide efficient management in cooperation with support offices in the
complex
V. Organization
chairman, board of directors, 4 centers, 1 headquarters, 6 head offices, 11
departments and 49 teams
114
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Figure 2.1.26 Organization Chart of Daegu-Gyungbuk High-Tech Medical Industry Promotion
Foundation
(ii) Jeju Healthcare Town Project
Jeju International Free City's major project designed to provide a global medical
environment for attracting domestic and overseas companies and facilitating the
medical industry
A. Vision
Establishing a comprehensive medical complex providing combined services of
medicine and tourism, Jeju's representative industry, which will build the open
healthcare base at the international level by building infrastructures to develop the
region into a major hub of the medical tourism industry
B. Location
Donghong-dong and Topyeong-dong, Seogwipo City
115
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Figure 2.1.27 Location of Jeju Healthcare Town
C. Area
1,539,000 m2
D. Period
2008 - 2018
E. Expense
KRW 772.0 billion (KRW 172.0 billion financed by the public sector, 600.0 billion
by the private sector)
F. Facilities
I. Wellness Park
Establishing the medical and resort complex specializing in health care and
relaxation
-Membership resort & Water park, Thalasso Resotel, Wellness Mall
II. Medical Park
Establishing a comprehensive medical complex that provides cutting-edge
medical services
-Specialized hospital, medical examination center, long-term care town
III. R&D Park
116
Establishing a medical research complex that conducts the study on bio medicine
and specialized medical sectors
- Medical R&D Center, Anti-Aging Center, Rehabilitation Center
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Figure 2.1.28 Bird‘s Eye View of Jeju Healthcare Town
G. History
-Dec. 2006, Designation of a new major project titled "A Comprehensive Plan on
Jeju International Free City"
-Dec. 2009, Approval for the development project of Jeju Healthcare Town
-Oct. 2010, Transfer of the ownership of the industrial site
-Nov. 2010, Designation and announcement of Jeju Investment Promotion Zone
-Feb. 2011, Implementation of the project
-Dec. 2011, Selection of priority negotiation partner in Seowoo-Zhong Da Reaa
Estate Consortium
-Dec. 2011, Conclusion of MOU with China's Greenland Group
-Dec. 2011, Starting land preparation construction
-Jan. 2012, Kick-off Meeting organized by Greenland Group
-Jan. 2012, Kick-off Meeting organized by Seowoo-Zhong Da Reaa Estate
Consortium
-Jan. 2012, Kick-off Meeting organized by Seowoo-Zhong Da Reaa Estate
Consortium
117
-Jul. 2012, Conclusion of MOU with Shanghai-based Greenland Group for
investment
-Oct. 2012, Conclusion of contract with Shanghai-based Greenland Group &
Starting the first-phase construction of condominiums
(iii) Osong Biovalley
A. Vision & Goal
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Figure 2.1.29 Vision of Osong Bio-Valley
B. Osong High-tech Medical Complex
I. Location:
Inside Osong Bio-health Science Technopolis (1,131,000m2) located in
Gangwoe-myeon, Cheongwon-gun, North Chungcheong Province
II. Period: 2009-2038
III. Project cost: KRW 4.3 trillion
IV. Goal: Global research cluster
V. Main Facilities
-6 R&D supporting institutions (including the new drug development supporting
center)
-5 bioresearch town (including National Biobank of Korea)
- Biobiz town (including the center for venture research)
118
-20 private R&D institutions, UN cooperation center for biological science
VI. Blueprint for High-tech Medical Complex
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Figure 2.1.30 Blueprint for High-Tech Medical Complex
119
VII. Plot Plan for Facilities
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Figure 2.1.31 Plot Plan of Osong Bio-Health Science Technopolis and High-tech Medical
Complex within the Technopolis
120
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Figure 2.1.32 Plot Plan of High-Tech Medical Complex
C. Osong Bio Technopolis (Osong 1 Industrial Complex)
The only state-run technopolis for the bio-industry initiated by the Korean
government
A very attractive investment complex that is blessed with a favorable location, and
various benefits and information infrastructure, which help resident member
companies become among the most competitive internationally
I. Vision of Osong Bio Technopolis
Administration-centered integration city
-Site relocation: Ministries and offices to be relocated
-Total area: 296,91 k m2
-Project period: Ground breaking for construction in 2007 and completely
relocated by 2012
A new Osong city under construction
-To construct the future-oriented city infrastructure with comfortable dwelling
facilities, educational environment and ubiquitous system for the employees
of the Osong Bio-Health Science Technopolis Institute
-Total area: 24.20 k m2 (Planned population: one hundred thousand)
121
-Project period: From 2003 to 2020
II. Location
The whole area of Gangwoe-myeon, Cheongwon-gun, Chungcheongbuk-do
III. Area: 4,633,000 m2
IV. Period: 1997-2008
V. Project cost: KRW 520 billion
VI. Goal: Bio-complex
VII. Main Facilities
- Health, Technology Administration Complex (6 state agencies)
-36 pharmaceutical companies, 18 medical instrument companies
-4 healthy functional food companies
D. Osong 2 Industrial Complex
I. Location: Jeongjung-ri, Bongsan-ri, Yeonje-ri, Gongbuk-ri
II. Area: 3,332,000 m2
III. Period: 2007-2015
IV. Project cost: KRW 769.6 billion
V. Goal: Bio-complex
VI. Main Facilities
- Initiative university in the convergence area of industry and academia
- Graduate school for biotechnology convergence, independent private high
school
- Biocentral park
- Medicine, medical instruments and other biotechnology companies
E. Location and Floor Plan of Osong Biovalley
122
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Figure 2.1.33 Location of Osong Biovalley
123
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Figure 2.1.34 Plot Plan of Osong Biovalley
F. Reduction in Rent
-100% reduction for business of value in excess of one million dollar and
accompanying cutting-edge technologies
-75% reduction for general manufacturing business of value in excess of five
million dollars
124
(iv) Gyeongbuk Bio Industry Cluster
Gyeongbuk Bio Industry Cluster is northern bio cluster based on agricultural
and bio resources, and traditional medicine. It is aiming at development of a
new growth engine through the convergence of agricultural and livestock
industries, bio technology (BT), energy, and tourism industries.
Main institutes in the region are Gyeongbuk Institute for Bio Industry,
Gyeongbuk Institute for Marine Bio Industry, medicinal herb development
center and traditional medicine commercial complex is also located.
A. Creation of a Medicinal Cluster
Ginseng product development center, branch office of Korea Research Institute of
Bioscience and Biotechnology (continuous effort to push for the establishment of
Sangju traditional herb medicine industrial complex)
B. Korean Food Cluster
Bio venture plaza in Andong, branch office of Korea Food Research Institute
(association with Gyeongbuk bio industrial complex)
C. ―Agriculture Amenity‖ Complex
―Ginseng land‖ in Punggi, insect ecological academy in Yecheon,
environment-friendly agriculture theme park
D. Development and Deployment of Bio Energy
Bio energy development center, energy crop complex, bio diesel research and
production facilities
Source: Korea Trade-Investment Promotion Agency, Invest Korea Homepage
Figure 2.1.35 Bird‘s Eye View of Gyeongbuk Bio Industry Cluster
125
(4) Taiwan
1) Purpose and Background for Cluster Location
Taiwan has achieved remarkable economic success, having transformed itself in a few
short decades to the technology-driven economic powerhouse that it is today.
Over the past 20 years Taiwan has concentrated on developing its high-tech industries,
and is now a world leader in the development and production of electronic, information
technology (IT), computer and semiconductor products.
Taiwan's aim is to achieve the same kind of success and global standing in the industry of
the future - biotechnology.
a) Taiwan's Biotech Advantages
Taiwan has much strength that give it the edge over its competitors in the rest of Asia.
These strengths are due to a combination of existing conditions and to deliberate
planning on the part of the government. These include:
- Existing expertise in high technology, easily transferred to biotechnology
- Strategic location; close to China and straddling Northeast and Southeast Asia
- Strong legal framework
- Highly educated workforce, particularly in IT and biology
- World-class research facilities
- Abundant capital and Asia's most vibrant venture capital industry
- Herbal medicine knowledge and experience
Taiwan also has a highly educated workforce and world-class research facilities.
b) Taiwan Tops in Asian Biotech
Taiwan can already claim the title of Asian leader in biotechnology. In its November
2001 report entitled 'Asia Biotechnology — Asia's Biotechnology dawn,' the
Singapore office of the brokerage division of French-based Societe Generale Group
identified Taiwan as the top biotechnology nation in Asia, reporting that it had in
place many of the elements for a winning strategy. Second after Taiwan was
Singapore, followed by Hong Kong/China, Korea and India. The survey indicated
that Taiwan was particularly strong in IP protection, had a solid industrial
development organizational structure and abundant investment resources.
Taiwan is not resting on its laurels however, and continues to work towards
upgrading the competitiveness of its life science industries.
126
c) Biotechnology as Defined in Taiwan
As the term 'biotechnology' is relatively new, it is difficult to define what exactly a
'biotechnology' company is. As a combination of 'biology' and 'technology', such a
definition encompasses the vast range of life sciences and medical disciplines, and all
related technologies. As the dust has yet to settle on this question, the Biotechnology
and Pharmaceutical Industries Program Office, part of the Ministry of Economic
Affairs, has put forward the following definitions:
"Biotechnology is a set of powerful tools that employ living organisms or parts of
organisms to make or modify products, improve plants or animals, or develop
microorganisms for specific uses. Examples of this new 'biotechnology' include
industrial use of recombinant DNA, cell fusion, and novel bio processing."
It is generally understood in Taiwan as:
―The application of technological principles in life sciences‖
Using this latter definition, 'biotechnology' includes the pharmaceutical industry.
Furthermore, because of its ethnic Chinese heritage, Taiwan's pharmaceutical
industry has always included the Chinese medicine industry. In fact, many
manufacturers of Western pharmaceuticals in Taiwan are also producing Chinese
medicinal ingredients and formulations. Similarly, many new biotech start-ups are
conducting research on modern medical uses of traditional Chinese herbs and
medicines.
d) Government development strategy - The Promotion Plan for the Biotechnology
Industry
The strategy and direction of Taiwan's biotechnology industry development is clear
and focused. Industry, institutions and government bodies all follow developmental
guidelines as set forth in the Promotion Plan for the Biotechnology Industry.
This document, a road map defining national industry goals and clearly detailing the
corresponding action steps required to get there, was first written and released by the
Executive Yuan branch of the government in 1995, and has been revised biannually
ever since. The most recent revision of the Promotion Plan was released in March
2003.
127
e) Action Tasks
A major aspect of the Promotion Plan is that it has identified specific areas in need of
attention to upgrade not only the local biotech industry but also to enhance the
investment attraction of Taiwan to the overseas life science community. These five
areas of attention are as follows:
- Related laws and regulations
- R&D and application
- Technology transfer and commercialization
- Investment promotion and cooperation
- Marketing information and services
f) Goals
In compiling the Promotion Plan, Taiwan's strengths and capabilities were examined
and a number of industry objectives were decided on. These include the following
four major goals:
- To establish Taiwan as the center for genomic research and development in Asia
- To establish Taiwan as the leading location for human clinical trials in Asia
- To establish Taiwan as a worldwide subtropical floriculture center
- To establish in Taiwan the most vibrant biotech-focused venture capital industry in
Asia.
g) Growth Targets
In addition, the Promotion Plan set the following growth goals:
- US$4.5 billion in new biotech/pharmaceutical industry investment by 2010
- By 2010 at least 18 international-standard biotech companies are to be established
in Taiwan, being either fully locally owned, or mixed local-overseas ownership
joint ventures or collaborations.
h) Taiwan Bio Industries Ready for International Cooperation
Taiwan understands that for its life science industry goals to be met, it needs to more
fully integrate with the international biotech community. By encouraging investment,
joint ventures, biotech technology transfer and research collaboration between its
128
local companies and institutions and their overseas counterparts, benefits will come
not only to Taiwan but to all collaborating parties.
To help facilitate internationalization of Taiwan's biotech industry, the government,
planning and promotional organizations have all been working hard to develop the
ideal conditions for attracting international partners and for sustained future industry
growth.
The worldwide biotech community is welcome to examine the unique mix of
advantages and attractions Taiwan has to offer. With its large pool of bio scientists
and high-tech talent, an impressive medical research base including world-class
research institutions, its entrepreneurial 'can-do' business culture, and
last-but-not-least the commitment of the government to fully support the industry, all
add up in Taiwan's favor.
What's more, not only does Taiwan hold distinction as an investment and partnering
location in its own right, its proximity to mainland China and the language, ethnic
and business connections between the two make Taiwan the ideal location as a
stepping stone to China.
As they become more economically developed, it is anticipated that China's citizens
will increase their spending on health and medicine, creating a biomedical and
medical products industry boom. Be a part of this boom by investing in Taiwan.
Taiwan proudly welcomes all international partners to jointly share in the
development and future successes of the nation's newest industry.
i) R&D Investment
In the early 1980s, the Taiwan government listed the biotechnology industry as one of
its industrial development priorities. At that point it began to vigorously promote
research in related industries, as well as encouraging overseas Chinese scientists to
return to Taiwan to offer their experience and expertise to the nation.
Since that beginning, research budgets for life sciences have increased dramatically.
In 2002, the government allocated US$495 million to bioscience research and
development - 29 percent of the total national science budget -and an increase of 46
percent over the previous year's US$339 million.
For the total amount budgeted between 2000 and 2002, the funds were allocated as
follows: 30.4 percent to the R&D budget of the National Science Council, 20.4
percent to the Department of Health, 16.1 percent to the Ministry of Economic
Affairs - whose major task it to promote local industries - 21.6 percent to the Council
of Agriculture, and 11.5 percent to Academia Sinica.
129
j) National Research Programs
Life-science focused national development programs initiated by the government
now include the National Research Program for Genomic Medicine, the National
Science and Technology Program for Biotechnology and Pharmaceuticals.
Of these, the National Research Program for Genomic Medicine is the most recent,
and is a major part of Taiwan's goal to become the Asian center for genomic research.
The National Science and Technology Program for Agricultural Biotechnology is
devoted to research in seven major fields: floriculture and ornamental plants, plant
protection, aquaculture, livestock vaccines, plant genetic improvement and
modification, environmental protection, and medicinal plants.
The National Science and Technology Program for Biotechnology and
Pharmaceuticals puts focuses on the development of new drugs, herbal medicine, and
on biochip technologies and analysis methodologies.
k) Division of R&D Roles
Along with the above mentioned government bodies are vigorous R&D programs
being undertaken at the island's many outstanding universities and graduate institutes.
Together with such academic institutes and private industry, the government has
established a clear division of roles for those undertaking R&D within the life
sciences. Each institute involved, whether upstream undertaking basic research
through midstream to downstream at the product-commercialization level, has a
well-defined and coordinated research mission.
For example, the Development Center for Biotechnology (DCB) is a non-profit
research institute and service-provider, undertaking research at the pre-clinical stage.
The DCB has a clear and well-defined mission, serving as a bridge between the
academic and industrial communities. The center not only sources promising
biotechnologies overseas through its BioFronts program, but also has its own
research labs in Taiwan for the refining of such technologies.
The center has GLP-standard experimental animal lab facilities, fully accredited by
the Association for Assessment and Accreditation of Laboratory Animal Care
International (AAALAC), the only such accredited facility in Taiwan. It also has a
cGMP pilot plant for antibodies and proteins, with 300-liter and 500-liter bioreactors
on-site. The DCB bundles these facilities and services to help local companies set
programs and help build alliances between international biotech companies and local
firms.
130
Table 2.1.18 Division of R&D Roles Serving Taiwan's Biotechnology and Pharmaceutical Industry Development
Upstream Midstream Downstream
Promotional
units
Academia
Sinica
National
Science
Council
Ministry of
Education
Department
of Health
Ministry of
Economic
Affairs
Council of
Agriculture
Atomic Energy
Council
Ministry of
National
Defense
Industry
Implementing
Institutes
Academia
Sinica
Universities
National
Health
Research
Institutes
Center for
Disease
Control
Center for
Drug
Evaluation
Development
Center for
Biotechnology
Industrial
Technology
Research
Institute
Pharmaceutical
Industrial
Technology &
Development
Center
Food Industry
Research &
Development
Institute
Council of
Agriculture
and its
related
divisions
Taiwan
Agricultural
Research
Institute
Nuclear
Research
Institute
Chungshan
Institute of
Science and
Technology
National
Defense
Medical
Center
Private
Companies
R&D scope Basic
research
Stipulate and
execute
policies and
regulations
Clinical
trials
Public health
New drug
evaluation,
regulation
and
development
Technology
application and
development
Procedures for
scaling up
production
Application
and
development
for animal,
agriculture,
marine and
livestock use
Development of
radioactive
pharmaceuticals
Application
and
development
of national
defense
research for
civilian use
Product
manufacturing
Marketing
Customer
services
Non-profit R&D Organizations
R&D
Institutes
National
Health
Research
Institutes
Industrial
Technology
Research Institute
Pharmaceutical
Industrial
Technology &
Development
Center
Development
Center for
Biotechnology
Food
Industry
Research &
Development
Institute
Animal
Technology
Institute Taiwan
R&D scope Public health
New dosage
development
Clinical
Genomics
Nanobiotechnology
Pharmaceuticals
Tissue engineering
Pharmaceutical
dosage form
development
Preclinical trials
Biotechnology
and
pharmaceutical
production
Bacterial
collection,
examination,
and
Transgenic
animal-derived
pharmaceuticals
131
trails and medical
engineering
for Chinese
herbal medicine
Production
processes for
Chinese herbal
medicine
processes
Pre-clinical
services
preservation
for the
improvement
of food
technology
Animal testing
Biochemistry
safety tests
Structural
engineering
Source: Biotech East, Biotechnology in Taiwan http://www.biotecheast.com/index.php
2) Approximate Investment Size and Main Investors
a) Present Situation of Biotechnology Clusters in Taiwan
Taiwan's science parks are part of a network of industrial parks set up over the years
to provide a supportive environment for the manufacturing industry, catering
particularly to export-based companies. These districts, some commissioned by the
central government, others by local city and county councils, some even by large
private industrial conglomerates, are situated away from existing residential areas but
close enough to supply needed labor and associated infrastructure, full set of
supportive industries, utilities, schools, etc.
Some parks were planned as (or have developed into) special purpose areas, such as
Hsinchu Science Park, while others are general purpose industrial zones.
The government has encouraged life science companies to locate in the island's
science parks, which have been designed especially for high-technology industries.
There are currently two in operation; the Hsinchu Science Park and Southern Taiwan
Science Park, with the Taichung Science Park still under development. Associated
with these science parks are zones catering specifically for life science companies
and Institutes, such as the Hsinchu Biomedical Science Park.
Taiwan's science parks are set up and administered by a special division of the
National Science Council (NSC).
Taiwan biotech industry is classified into three regions, "new biotechnology
(biological materials and agricultural biotechnology, etc.)", "pharmaceutical", and
"medical equipments." There are five agricultural bio-parks as industrial cluster of
agricultural biotechnology. "Changhua National Ornamental-Flower Park ", "Chiayi
Herb Medical-Herb Park", "Tainan Taiwan Orchid Floral Park", "Yilan Marine
Organism Park", "Pingtung Agricultural Park (Taiwan Green Bio-Park)", and there
bio-related companies and bio-venture are carrying out development and production
of the bio products.
It can be said that these bio-clusters are still more nearly developing because they
were built 2000s, considering from the number of companies and number of
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employee . The Taiwan government aims at development, making another cluster
based on the successful cluster, or taking in the management resources of the bio
cluster. As factor of these cluster growth, there are two; (i) collaboration of
supporting organizations and establishment of knowledge network, (ii) the financial
support system and incentive policy led by the government. In the bio-cluster, the
incubation center is considered the core of business creation. Many venture
businesses were created based on this, and the network of industrial, government and
academic sectors was organized. Although 70% was occupied with a pharmaceutical
in 2007, new medicines development, medical equipments, etc., in biotech industry
investment of Taiwan, growth rate of agricultural biotechnology is greatly expected
in the growth target of biotech industry. This development changes the state of
traditional agricultural ways and is expected to contribute also to a growth of
surrounding industries.
b) Outline of Main Biotechnology Clusters in Taiwan
(i) Hsinchu Science Park
Taiwan's first (established in 1980) and most well-developed science park, the
1100-hectare Hsinchu Science Park (HSP) is home to many of the island's largest
and most famous IT and semiconductor companies, including Taiwan
Semiconductor, the world's largest made-to-order IC manufacturer. To the north
and south of the park are two special biomedical zones.
To the north, the Hsinchu Biomedical Science Park, still being developed, will be
centered around the 600-bed National Taiwan University Medical Center. The
hospital will house a cancer research and proton therapy center. The park will also
house an incubation center, joint research centers, an information network center,
and a biotechnology center.
To the south, the Chunan Base, currently occupied by the National Health
Research Institutes (NHRI) and the Animal Technology Institute of Taiwan, is
also attracting biotech startups.
It is expected these two bases will develop into true biotech clusters, reinforcing
Hsinchu's position as a premier biotech hub.
Hsinchu Biomedical Science Park
A. Brief Introduction and Features
According to the successful examples of the overseas developmental process of
biomedical industry and biotechnology park, the developmental model for the
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establishment of biomedical science park cluster in Taiwan was integrated with
the concept of one-stop shop for biotechnology integrated incubation
mechanism, in order to develop the R&D potential of biomedical business.
Biomedical industry can also develop product with market value through the
verification of clinical trial platforms. Furthermore, the advantages over ICT
design and manufacturing of HSP can be integrated with biomedical industry at
the Park to trigger new development of biomedical technology in Taiwan, to put
into practice the development of knowledge economy by the government and to
enhance national competitiveness.
B. Management and Mission
I. Goals
-To make Taiwan become an important member of international biomedical
social groups and to introduce the one-stop shop concept of supra incubation
center (SIC) of biotechnology into Taiwan to make Taiwan become an
important link in Asia seeking for technological value adding and industrial
development
-To make the Park become an ideal base of innovative R&D/industrial
incubation for foreign and domestic biomedical field-related high-tech
talents
-To develop the Park into the pioneer leading the development of biomedical
industry in Taiwan
II. Strategies
-To aggressively construct infrastructure engineering and standardized
biotechnology plant to facilitate the businesses
-To aggressively create business opportunities and to attract investment
-To give priority to the promotion of establishment of Biomedical
Technology and Product R&D Center and Incubation Center to develop
medical devices and pharmaceuticals-related industries
-To establish relevant biomedical verification and testing platforms and to
develop a complete risk management system
III. Park Planning
The Park will introduce the mechanism of biotechnology SIC to plan the
construction of three major centers (―HBSP Hospital,‖ ―Biomedical
134
Technology and Product Research Center‖ and ―Industrial and Incubation
Center‖). The interconnection and R&D resource sharing will be the
developmental focuses of the Park. Every requirement for the development
of biotechnology industry, such as R&D, trial preparation, clinical trial,
patent transfer and company incubation, will be integrated in the Park to
provide companies with one-stop shop support and legal verification
service to speed up the industrialization of R&D achievements. Moreover,
the Park will be integrated with HSP and the industrial advantage over ICT
to form a cluster effect, and becomes the pioneer leading the development
of biotechnology industry in Taiwan.
IV. Operation and Management
-Park Administration is responsible for the business recruitment
and operation of the Park
-The planning and construction of Incubation Center is led by
Ministry of Economic Affairs
-HBSP Hospital is planned by Department of Health
-Biomedical Technology and Product Research Center is planned and
operated by National Science Council
C. Park Public Facilities
Hsinchu Biomedical Science Park covers an area of approximately 38.1
hectares, and is located in the HSR Hsinchu Station Special District
(HSR Hsinchu Station Special District industrial area). The completed
construction of public infrastructures in the Park includes two major
parts, public facilities and overall landscape engineering:
I. Public Facilities Engineering Project
The public facilities engineering project includes the construction of required
service facilities, such as primary and secondary roads, underground parking
of the Central Park, reservoir, underground joint trench, sewage trench,
electronic monitoring system, etc.
II. Overall Landscape Engineering Project
The Overall Landscape Engineering Project includes site preparation, road
paving, vegetation planting and installation and construction of facilities
135
such as landscape pond, various garden bridges, landscape restaurant, green
veranda, pavilion, and water stage. Moreover, the Park is equipped with
50KWp solar photovoltaic system. As for vegetation, arbors and shrubs are
planted in the Park. The project also includes the construction of sprinkler
system, indicator system, water and electricity engineering, and other
miscellaneous engineering.
III. Biotechnology Building
The construction of the standard biotechnology building of the Park has been
completed in February 2011 and is currently recruiting business and
investment.
D. Business Opportunities and Investment
Hsinchu Science Park is a high-tech cluster which enhances industrial
competitiveness and promotes economic development.
HBSP plays the role of integrating various resources, connecting the power of
industries with that of government, academia, research and medical field to fill
the gap of biomedical industrial chain. Moreover, the Park integrates the global
leading advantages of ICT industry at the HSP to encourage electronic
industries to invest capital and technology in cross-industry alliance and to
develop niche-based industries with innovation potential, such as industries
concerning ―R&D of new drugs‖ and ―advanced medical devices.‖ With the
advantages of the Park and the strong R&D foundation, the Park integrates
various relevant research resources to establish complete supporting measures
and mechanisms for industrial incubation to effectively reduce the cost of R&D
and industrialization cost and to increase the success rate of entrepreneurship of
biomedical corporations. Furthermore, the Park attracts the companies
conforming to its developmental objective and possessing international
competitiveness to start entrepreneurship at the Plant, in order to construct a
complete biomedical industrial cluster.
The government offers companies in the Park various ―incentives and
privileges‖ and a One-stop Service to provide the finest investment
environment in an aim to improve technological advancement of the
biomedical technology industry and make the Park one of the Asia's pioneer
developers of biomedical research in the 21st century.
136
E. Innovative Services
Introducing the Innovative Services of the Hsinchu Biomedical Science Park,
to serve biomedical businesses in the Park, the Administration plans to
establish several information platforms, including the "International Standard
Technical Document Management System and Plan for Mechanism of
Cooperation in Clinical Trials of Medical Apparatus", "Planning and Initiation
of the Information System Integration Platform for Biomedical Research and
Development", "Planning and Establishment of the Medical Information
System" and "Planning and Establishment of the Biomedical Science Park
Portal". In addition to the above plans, the Administration also has several
plans for the future, including "Establishment of the Virtual Testing Laboratory
and Information Platform for Linking Models in Clinical Trials" and
"Establishment of Information System on Issuance of Patents and R&D
Consultation", which are intended to provide excellent information platforms
and services and help biomedical businesses shorten time to market from R&D
to production and in turn boost competitiveness.
F. Biomedical Industry Patent Inquiry Platform
In recent years, the management and flexible application of intellectual
property rights has become the most popular research issue. All of the foreign
and domestic high-tech corporations have attached importance to the strategies
for management of intellectual property rights and suggested that the
importance of intellectual property rights is closely related to corporate
development. According to the survey by World Intellectual Property
Organization, if the information on intellectual property rights of patents and
trademarks is used properly, the R&D time and R&D cost can be effectively
reduced by 60% and 40%, respectively.
In view of this trend, ―Biomedical Industry Patent Inquiry Platform‖ was
established as the window for information exchange of biomedical
industry-related patents. Moreover, it is hoped that the webpage of complete
guidance information on intellectual property rights can compensate the lack of
multidisciplinary talents in the fields of technique, patent, legal affairs and
management in corporations, and assist biomedical industry in Taiwan in
establishing intellectual property right management system to enhance R&D
capacity.
All of the services currently provided on the website are for free. The website
137
contents include the introduction to patent system and cases, information on
patent activities, patent consulting service yellow page, patent news,
patent-related website links, patent Q&A, discussion board, etc. The domestic
biomedical companies and their employees may access to patent consulting
service via phone and may also consult with patent professionals in detail and
face-to-face by making an appointment.
G. Service Contents of Inquiry Database of Organizations
HBSP Office has established ―Inquiry Database of Examination Organizations,
Laboratories and CROs‖ to provide inquiry service of ―examination/laboratory
organizations‖ and ―CROs‖ for biomedical products, in order to speed up the
function testing and clinical trial of biomedical products and to reduce the time
for product marketing.
In terms of ―examination/laboratory organizations,‖ their objective is to
provide the information on safety and efficacy as required by pre-marketing
biomedical products. Moreover, the capacity of various examination/laboratory
organizations in Taiwan will be compared in order to establish the validation
environment of biomedical product-related laboratories in Taiwan. The
establishment of such validation environment can assist HBSP in integrating
the knowledge supply chain of validation testing for various bridging studies at
laboratories to speed up the marketing of new medical and biomedical
devices/products.
As for ―CROs,‖ their objective is to summarize the information on clinical
trials conducted at hospitals, to complete the connecting and cooperative
development model of clinical trials and to attract sponsors to conduct clinical
trials in Taiwan.
H. Investment Information
I. Water, Electricity and Environmentally-Friendly Facilities
The total power supply is 29,330 KW and the total water supply is 6,385
CMD. The total sewage capacity is 4,990 CMD. Laboratories under P3 level
are allowed to be set up in the Park.
II. Management Fee
A management fee of 0.19% of the turnover shall be charged. A minimum
management fee of NTD (New Taiwan Dollar) 10,000 shall be charged.
138
III. Biotechnology Building
Biotechnology Building is open for rent. It offers a total of 36 units as the
actual operating area, including 6 units of 55 ping (16.6375 m2) operating
area, 10 units of 100 ping (30.25 m2) operating area and 20 units of 200 ping
(60.5 m2) operating area.
IV. Monthly Rent
Land rent at approx. NTD 59/m2 per month
Biotechnology Building rent at approx. NTD 109/m2 per month
V. Investment Margin
0.3% of the total investment capital shall be charged as the investment
margin and shall be refunded without interest upon completion of the
investment project.
VI. Electricity Fee
Approx. NTD 1.22-4.26 per unit (subject to electricity consumption, voltage
in use and time of electricity used).
VII. Water Fee
Approx. NTD 7-11 per unit (subject to water consumption); NTD 11.5 per
unit shall be charged for users whose total water consumption reaches 50
units (tons) and above.
VIII. Sewer User Fee
It shall be charged according to sewage quality and amount of sewage.
Note: The rent rates of the Park are temporary estimates. The actual rent rates
will be announced upon completion of the sharing of public facilities.
Moreover, the rent rates may be adjusted year by year according to the
announced land values, construction fee of public facilities and applicable
laws and decrees.
I. Appearance and Floor Plan of Biotechnology Building
139
Source: Hsinchu Biomedical Science Park HP
Figure 2.1.36 Appearance of Biotechnology Building
Source: Hsinchu Biomedical Science Park HP
Figure 2.1.37 Exterior and the Surrounding Environment of Biotechnology Building
140
Source: Hsinchu Biomedical Science Park HP
Figure 2.1.38 Interior of Biotechnology Building
Source: Hsinchu Biomedical Science Park HP
Figure 2.1.39 Floor Plan of 2F-5F of Biotechnology Building
141
Source: Hsinchu Biomedical Science Park HP
Figure 2.1.40 Plant Space (the actual operating area of 200 ping [60.5 m2] for example)
142
(ii) Southern Taiwan Science Park (STSP)
With the success of the Hsinchu Park, plans were made to extend Taiwan's
high-tech development to the south of the island. The Southern Taiwan Science
Park is the result of this planning, and is located between the southern cities of
Tainan and Kaohsiung.
The first-stage Tainan Science Park started operations in 1996. Originally planned
as an agricultural biotech center, its 1038-hectare location was chosen because of
its proximity to agricultural research Institutes, including National Cheng Kung
University, National Sun Yat-Sen University, the World Vegetable Center, Taiwan
Livestock Research Institute, and the Tung Kang Marine Laboratory.
While such an agricultural emphasis is still hoped for, today the major industries
in the park are the same as those in the Hsinchu park, namely IT and electronics
companies. The most significant life science company with facilities in STSP is
ScinoPharm Taiwan Co., Ltd. However, with vast land resources available,
government incentives and location advantages on offer, the park will certainly
play a major role in Taiwan's future biotechnology development.
As of late 2003, 116 companies had set up operations at the park, with 24 of them
being biotech companies.
The second stage of the park, the Luchu Science Park, opened in 2001 on land
provided by state-owned Taiwan Sugar. The 571-hectare park consists not only of
industrial sites but also residential areas, public facilities and wildlife reserves.
(iii) Biotechnology Plaza, Nankang Software Park
Opened in 2003, the Biotechnology Plaza is part of the newly-developed Nankang
Software Park, located east of Taipei. This park is home to many software
development companies and other high-tech enterprises. Biotechnology Plaza is a
20-floor building with a total area of 72,600 square meters, and the first
R&D-focused biotech center in Taiwan. This state-of-the-art facility is ideally
situated near R&D resources and institutes such as Academia Sinica, the
Development Center for Biotechnology (DCB) Hsichih facilities, and the many
major medical centers in nearby Taipei City. In addition, leading research
institutes such as Academia Sinica, the DCB and the National Health Research
Institutes (NHRI) will have a presence in the park. Government institutes
including the National Science Council and the Biotechnology & Pharmaceutical
Industries Program (BPIPO) of the MOEA will also have administrative offices at
this location.
143
(iv) Other Biotech-Focused Biocluster and Industrial Areas
Table 2.1.19 Bioclusters in Taiwan
Region Main Field Location
Area
Major Universities
and Institutes
Major Enterprise and
Venture
History of
Development
Taiwan Green
Bio Park
High Level
Agro-bio
Pingtung
Pref.
233ha
Fishery Institute,
Improvement of
Seeds, Forestry
Institute,
Pingtung University
Bio Agriculture,
Medicines, Bio
Fertilizer, Vaccine,
Functional Foods. 150
companies involved
Agricultural
Biotechnology
Park started in
2003
Medical-Herb
Bioscience
Technical Park
Herbal Bio
Food
Production
Chiayi
Pref.
6.14ha
Taiwan Orchid
Flower
Science Park
Development
Orchid
Marketing
Research
Tainan
25.8ha
29companies
Source: ―International Trade and Investment‖ No.56, 2004
The Neihu District of east Taipei is the site of a newly-developed industrial area
and home to many biotech companies.
Taiwan's pharmaceutical manufacturing industry, although spread across the
island, is concentrated primarily in Tainan County's many industrial parks and to a
lesser degree in the following areas: Taipei County, Taoyuan County, Hsinchu
County, Taichung County, Nantou County, Chunghwa County and Kaohsiung
County.
144
(5) India
1) Purpose and Background for Cluster Location
a) Overview and Short History of Biotechnology in India
The Indian Biotechnology industry has been evolving over three decades. The
milestones of the evolution of biotech industry in India began in 1978, in Bangalore,
when the country‘s first biotech company Biocon was established for producing
industrial enzymes. The Government provided a major thrust to the sector with the
establishment of the National Biotechnology Board (NBTB) under the aegis of the
Department of Science and Technology (DST) in 1982. The NBTB acted as an apex
body, which was given the task of identifying priority areas and evolving a long-term
plan for the development of biotechnology. Four years later in 1986, the NBTB was
upgraded to a full-fledged Department of Biotechnology (DBT). This paved the way
for furthering the growth of biotechnology in the country.
The progress for biotechnology industry in India has been possible due to the
inherent advantages that the country has, including diverse flora and fauna, large
gene pool, temperate climate, quality manpower and low-operational costs. Further,
the proactive policies and measures taken by the Government of India and its
agencies, have allowed the industry to capitalize upon such advantages. Today,
biotechnology is being promoted in the country keeping in view its enormous
potential to improve agriculture, food, health, environment and energy requirements
of the population.
b) Outline of Biotech Sector in India
In terms of market dynamics, the Indian biotech sector had a healthy growth in
2012-13 with its revenues reaching Rs. 235.24 billion. Within this, BioPharma
contributed Rs. (India Rupee) 149.23 billion, followed by BioServices (Rs. 43.29
billion), BioAgriculture (Rs. 32.10 billion), BioIndustrial segment (Rs. 7.72 billion),
and BioInformatics (Rs. 2.90 billion). Recent trends in turnover of the industry
indicate that the Indian biotechnology industry recorded a CAGR (Compound
Annual Growth Rate) of 14.15% during the last five years, increasing from Rs.102.72
billion to Rs. 235.24 billion during the period.
The domestic biotechnology market clocked revenues of Rs 115.12 billion in
2012-13, registering a 8.6% growth as compared to the previous year, and accounting
for around 48.9% of revenues generated in the industry.
As regards segment-wise data, for the year 2012-13, BioPharmaceutical sector
accounted for the largest chunk of the biotech industry, garnering a share of 63.4% in
145
total revenues, with vaccines being the largest contributor within the
BioPharmaceutical segment.
BioServices (18.4%) and BioAgri (13.6%) are other major sub segments of Indian
biotech industry.
Segments like BioIndustrial and BioInformatics garnered a share of 3.3% and 1.2%,
respectively of the total revenue in 2012-13.
The Indian biotech industry is largely export-driven accounting for 51.1% of the total
revenues in 2012-13. In rupee terms, the exports business went up by almost 22.5%
to Rs. 120.12 billion.
c) National Biotechnology Development Strategy
Government of India on its part has initiated certain far-reaching legislations to
promote the growth of the biotechnology industry in the country. In India, there is
involvement of several organizations regulating the development of biotechnology,
which has often resulted in overlap of functions. In order to streamline the regulatory
process, the Government has proposed the establishment of the National
Biotechnology Regulatory Authority (NBRA), to provide a consistent mechanism for
regulatory approval. The National Biotechnology Regulatory Authority would be set
up as an independent, autonomous and professionally led body to provide a single
window mechanism for biosafety clearance of genetically modified products and
processes. In July 2008, The Department of Biotechnology (DBT) introduced the
National Biotechnology Regulatory Act, which empowered the NBRA as an body to
approve genetically modified crops, food, recombinant biologics like DNA, vaccines,
recombinant gene therapy products, and recombinant and transgenic plasma-derived
products such as clotting factors, veterinary biologics and industrial products.
The key elements of the Indian National Biotechnology Development Strategy are as
follows:
•High-powered Inter-ministerial Committee is to be set up under the chairmanship of
secretary, DBT, to effectively coordinate the development of the sector by
addressing cross cutting issues.
•30 percent of DBT's Budget to be spent on public-private partnership programs.
•Biotechnology Industry Partnership Program (BIPP) for Advanced Technology
would be launched
•The existing Small Business Innovation Research Industry (SBIRI) scheme to
promote innovation in SMEs has been a success. Approval has been accorded for
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the expansion of SBIRI during the 11th Plan.
•Biotechnology Industry Research Assistance Council (BIRAC) is to be launched to
act as an interface between academic and private sector, particularly SMEs and
startups; nurture and catalyze R&D and innovation in biotechnology in the private
sector and promote public-private partnerships.
•A new role visualized for autonomous institutions of DBT to promote excellence in
R&D. Selected institutions will be financially empowered for promoting excellence
in and translational R&D by supporting 'Research Resource Units' in universities
and sister institutions through extramural funding.
•UNESO Regional Centre for Science, Education and Innovation in Biotechnology
being established at Faridabad, Haryana, by DBT as part of a Health Science and
Technology Cluster.
•Innovative re-entry packages in terms of fellowships and R&D support will be
offered to young and senior scientists of Indian origin to return to Indian
laboratories and pursue research on national priorities.
•In order to create and strengthen world class institutional research capacity in
biotechnology, 50 Centers of Excellence (CoEs) to be established during the 11th
plan
•Keeping in view the requirements for translating scientific leads into useful
products and processes, a new national initiative will be taken up to build capacity
in technology transfer and intellectual property rights.
•Cluster development is a key strategy to promote innovation and accelerated
technology and product development. This new approach has been given the green
signal by the government. Four technology clusters are at an advanced stage of
planning.
•Grand challenges of national relevance in the area of agriculture, health, energy and
environment will be identified through national and international consultations.
Programs will then be launched through multidisciplinary teams, involving
public-private partnerships.
•DBT's proposal to establish new institutional structures, especially in areas very
vital to India's progress but in which current strengths are suboptimal has been
approved in principle by the government. The institutions, representing a new
breed, will be designed with a strong bias for integrating science and translation,
and for producing skilled personnel driven towards entrepreneurship.
In its vision to build world class human capital, the strategy has focused on:
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•Improved and expanded PhD and post-doctoral programs in order to reach the best
levels in the Asian region
•Enhanced quality of masters level and undergraduate level education
•Promotion of life sciences and biotechnology at undergraduate and masters levels
•Creation of a translational workforce of high quality to meet short- and mid-term
requirements of the country
•Promoting support to institutions for undergraduate education to achieve 'Star
College' status.
The enactment of New Patents Act, 2005, brought a paradigm shift in research and
development in the sector. Previously, India had a patent protection for process rather
than the product, which brought about complacency without initiating much effort
upon the development of new products. The New Patents Act of 2005 enforces
product patents thereby inspiring firms and research institutions to undertake the
innovation at their behest. Apart from this, there are two bills, namely, DNA Profiling
Bill, and The Protection and Utilization of Public Funded Intellectual Property Bill,
which are on the anvil and are expected to be passed by the Parliament shortly.
d) Government Funding
In addition to creating enabling policies, the Government has also been supporting
the sector through provision of funds. While Government funding to the Science &
Technology sector increased nearly three times from the Tenth Five-Year Plan to the
Eleventh Five-Year Plan, support to the biotech industry increased by as much as four
times during the same period with the budgetary allocation shooting up from Rs.
253.0 billion in the Tenth Plan to Rs. 753.0 billion in the Eleventh Plan. In fact, the
Department of Biotechnology received almost 8.5% (Rs. 63.9 billion) of the total
budgetary outlay of the Ministry of Science & Technology in the Eleventh Plan.
Though the DBT remains the main funding organization for the Biotech sector in
India, there are other scientific departments, which have also started contributing in
this field.
e) Research & Development Facilitation
The DBT and other organizations have also proactively taken up a number of
initiatives in creating institutional infrastructure and a strong research base in the
country in areas relating to agriculture and forestry, human health, animal
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productivity, environmental safety and industrial production.
DBT has also been at the forefront of maintaining many international collaborations
and introducing joint proposals with countries like Australia, Canada, Finland,
Germany, Sweden, USA, Japan and the EU. Under the National Bioresource
Development Board, a major initiative has been taken for the establishment of a
Microbial Culture Collection–Biological Research Centre in Pune.
The Centre has provision to hold more than 200,000 bacteria and fungi following
international standards, with the gradual upgradation of the facility as an
International Depository Authority on microbial collections. Under the program on
prospecting of drugs from microbial sources, about 100 thousand bacterial isolates
have been collected and screened. More than 200 thousand extracts have been
prepared, and about 7,000 promising hits obtained.
f) Centers of Excellence in Biotechnology Sector in India
The Department of Biotechnology (DBT) has set up numerous topnotch Centres of
Excellence (COE) in the country. These centers are responsible for generating skilled
manpower as well as supporting R&D efforts of corporates. These institutions have
also been enhancing interactions between the academia and the industry. Eleven such
COEs are under implementation in the areas of genome sciences and predictive
medicine; system biology and tuberculosis; genome-mapping and molecular
breeding of Brassicas, Stem Cell research, Anti-virals etc. It is envisaged to fund 50
COEs mostly in Universities during Eleventh Plan.
Representative centers of excellence in biotechnology sector in India are shown in
Table 2.1.20.
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Table 2.1.20 Representative Centers of Excellence in Biotechnology Sector in India
Advanced Basic Research
-Tuberculosis Drug Resistance
(Indian Institute of Science, Bangalore; The Foundation of Medical Research, Mumbai; Birla
Institute of Technology & Science, Pilani)
-Designing inhibitors against infectious agents
(National Institute of Immunology, New Delhi)
-Basic Molecular biology of a model microorganism, E.coli
(Centre for DNA Fingerprinting and Diagnostics, Hyderabad)
Advanced Science with Translational Research
-Systems Biology of Tuberculosis and Drug Development
(International Centre for Genetic Engineering and Biotechnology, New Delhi; University of
Delhi, South Campus, New Delhi; Central Research Institute of Jute & Allied Fibres,
Barrackpore, W.B)
-Genetics and Genomics of Silkmoths
(Centre for DNA Fingerprinting and Diagnostics, Hyderabad)
-Antivirals Against Hepatitis C
(Indian Institute of Science, Bangalore & others)
-Mesenchymal and Adult Stem Cell Therapies
(Christian Medical College, Vellore)
-Platform Technologies for Designer Crops
(International Crop Research Institute for the Semiarid Tropics, Hyderabad)
-Stem Cell Research: Basic and Translational
(All India Institute of Medical Sciences, New Delhi)
Partnership with Industry
-Heterosis Breeding in Rice
(University of Delhi-South Campus, New Delhi & Mahyco Ltd., Jalna)
-DBT-University Institute of Chemical Technology
(Energy Biosciences Centre), Mumbai
Source: Department of Biotechnology, Government of India, Annual Report
g) Public-Private Partnerships
Public-private partnership needs to be encouraged and supported in areas that are
vital to national development, from a scientific, economic or social perspective. The
focus needs to be on technology and product development. India has a wide network
of universities, departments and specialized institutes that have been promoted by
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various authorities providing numerous specialized science degrees at the Masters‘
level.
These institutions also provide an effective network of research laboratories. Efforts
should be made to bring in a seamless transfer of knowledge and people among these
universities, institutes, and corporates for better coordination, and to share their
research-based information on an ongoing basis. Corporates could have preferential
access to the intellectual property generated in such jointly funded projects.
Another alternative could be encouraging public-funded successful R&D institutions
to establish ‗not for profit‘ companies to facilitate collaborative work with industry.
There should be an industry-academia alliance wherein the industry could have an
active participation when it comes to planning curriculum and methods of evaluation.
Private firms may also share the responsibility to promote academic excellence by
creating Chairs in Universities and further strengthen the industry – academia
relationship.
h) Fostering Growth Through Bio Clusters
The Indian biotechnology industry is spread across many states in the country. These
states have unveiled state-specific biotech policies and have established biotech
parks to attract investment in this industry. These parks have emerged as a focal point
of some of the leading biotech clusters such as Genome Valley in Hyderabad and
Hinjewadi in Pune. The respective government policies in these states and scientific
ambiences have also been responsible for the growth of bioclusters.
The state governments are contributing their bit towards developing the
biotechnology industry in cities having strength and potential but there are a few
missing elements. Once everything is in place, with the coordinated efforts of all
industry stakeholders, India will have many bioclusters.
The United Nations Industrial Development Organization (UNIDO) has identified
about 388 clusters in India in various sectors from textile to chemicals and
pharmaceuticals to food processing. Of these 11 clusters are situated at Cuttack in
Orissa, Hyderabad in Andhra Pradesh, Indore in Madhya Pradesh, Thane, Pune,
Aurangabad and Mumbai in Maharashtra, Margao in Goa, Valsad/Bharuch, Baroda
and Ahmedabad in Gujarat, all dedicated to pharmaceuticals. These clusters are into
bulk/ basic drugs manufacturing.
The Minnesota Biomedical and Bioscience Network has prepared a list of the life
sciences and biotechnology clusters of the world in which it has included Bangalore,
Hyderabad and New Delhi as clusters along with New York/New Jersey, Philadelphia,
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Baltimore/Washington, DC, Research Triangle NC of the US.
Clusters are particularly important in knowledge-based sectors like biotechnology,
medical biosciences, life sciences, and information technology, despite the trend
towards globalization arising from rapid advances in transport and communication
and accessible global markets. This is because the type of knowledge that creates
competitive advantage often requires proximity or regular face-to-face interactions
and trust in order to be effectively communicated.
Earlier studies and analysis demonstrate that clusters can raise innovation and
productivity in a number of ways. Companies benefit from sharing knowledge about
best practice and reduce costs by jointly sourcing services and suppliers. Frequent
interactions facilitate formal and informal knowledge transfer and encourage the
formation and efficiency of collaboration between institutions with complementary
assets and skills. The critical mass effect attracts further companies, investors,
services, and suppliers into the cluster, as well as creating a pool of skilled labor.
Local training institutions and infrastructure can provide further benefits for
companies. Rivalry between firms can stimulate competitiveness and encourage
constant upgrading. Many of these benefits are likely to be more important for SMEs
than for larger companies that are more able to capture them internally.
The concept of clustering definitely has relevance for the Indian biotechnology
industry, which has just started moving up the growth ladder.
Rajesh Jain, joint managing director, Panacea Biotec said, "Bioclusters would work
in India. Such bioclusters will be successful, provided a close interdisciplinary
strategy is adopted by cohesive interactions between excellent innovative science and
entrepreneur spirit of business leaders and industry friendly policy of the government.
The success of bioclusters will not only result in improving the economic
development of the country or marking India a global "hub" of biotechnology, it will
also generate excellent job opportunities."
Sharing similar views, Vibhav Garg, principal-business development, Mascon Life
Sciences said, "Bioclustering is a good way of looking at the scattered expertise and
experience, which could be complementary to each other, under one roof. This
approach is already bearing fruits for rest of the world. I do not see any reason why it
will not work in India. The approach is certainly going to benefit the industry and the
country as complementary nature of the organizations in a given biocluster will bear
fruits for all and hence it will be a win-win for one and all."
Rajesh Jain further said, "Bioclusters in terms of development of biotechnology
industry have already grown unintentionally as clusters. These clusters are mainly
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located in the states of Andhra Pradesh, Maharashtra, Karnataka and Delhi. The
respective government policies and scientific ambiences have been responsible for
the growth of such clusters. A recent example is a cluster of biotechnology and
pharmaceutical ventures at Baddi in Himachal Pradesh."
Main life biotechnology and life science clusters in India are shown in Figure 2.1.41.
Note: Green areas represent life biotechnology and life science clusters
Source: BioSpectrum India
Figure 2.1.41 Indian Bioclusters
2) Approximate Investment Size and Main Investors
There have been a lot of activities in public/private partnerships for biotech parks in India.
Overall, India is still strong in generics, but some innovative companies are coming out of
Genome Valley, about 20 miles from Hyderabad, and also from Bangalore. Within the
next two to three years, India expects to have about 27 biotech parks, according to Ernst
& Young.
a) Key Biotech Clusters in India
Bangalore, in Karnataka is the Biotech capital for India. India houses 380 biotech
companies of which a majority of 198 are in Karnataka and 191 in Bangalore alone.
Bangalore and Karnataka jointly contribute 27% to the revenue of the sector.
The other key clusters include Mumbai and Ahmedabad in the West (Maharashtra
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and Gujarat respectively), Hyderabad (Andhra Pradesh) in the South and the area in
and around New Delhi in the North.
The Western belt houses companies that are large pharmaceuticals with a prominent
manufacturing and R&D base, who have active interest in pursuing the manufacture
of biogenerics.
Hyderabad has several vaccine manufacturers and other large biotech companies
involved in research. The regions in and around New Delhi house several key
research centers and universities that are involved in research.
(i) Karnataka - Bangalore
Biotechnology, post the ICT success, has emerged as a recent rapidly expanding
sector in Bangalore. The city accounts for over 50% of the 380 biotech companies
in India. The city has revenue of over $550 for 2008-2009 which is over 20% of
the total biotech revenue for the country.
Bangalore is the country‘s largest cluster, the city boasts of 198 biotech firms.
Biocon, the nation‘s leading biotech company is headquartered in Bangalore.
Some of the key life science companies to look out for in Bangalore include:
Advinus Therapeutics, Astra Zeneca, Aurigene Discovery services, Biocon India,
Jubilant Biosys, Metahelix Life Sciences, Strand Life Sciences, Strides Arcolab
and Xcyton Diagnostics
Government of Karnataka is investing Rs. 5,500 crore in Bangalore Helix Biotech
park which is spread over 106 acres at the Electronics City, off Hosur Road in
Bangalore.
Bangalore can boast of good Universities like the Indian Institute of Science,
JNCASR, NCBS, University of Agricultural Sciences. ABLE the Trade
association for Biotech Industry is headquartered at Bangalore.
Bangalore has opportunities in Contract Research Space and lot of potential in the
Stem Cell area.
(ii) Andhra Pradesh - Hyderabad
Biotechnology is an important industry in Andhra Pradesh. There is a high
concentration of biotech companies producing recombinant therapeutics for
human consumption. It also has the second largest recombinant DNA therapeutic
production facility in the world, which is also being used by multi-national
companies to produce their own recombinant products. Andhra Pradesh is called
―Bulk drug Capital of India‖. Andhra Pradesh has a dominant position in the bulk
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drugs and pharmaceutical sector with Hyderabad accounting for nearly one third
of India's total bulk drug production. Hyderabad has witnessed infrastructural
development in the biotech domain wherein the Knowledge Park, the Biotech
Park, Genome Valley and other projects have come up giving the city an
advantage over others. Hyderabad is also a house for research and development
centers like Centre for Cellular and Molecular Biology (CCMB), Indian Institute
of Chemical Technology (IICT), International Crop Research Institute for
Semi-arid Tropics (ICRISAT),Central Food Technology Research Institute
(CFTRI) and Institute for Life sciences centre is based out of Hyderabad and have
32 laboratories and 12 research centres.
The Government of Andhra Pradesh offers opportunities in Therapeutics,
Diagnostics, Industrial Biotechnology, Inputs to the industry (hardware suppliers
- Instrumentation and Chemicals), Agricultural Biotechnology in the biotech
space.
(iii) Tamil Nadu - Chennai
Tamil Nadu is the first state to have introduced a separate Bio Tech policy. Tamil
Nadu presents an attractive market for medical biotechnology products as it
accounts for about 11% of the pharmaceutical market in the country. The
Government of Tamil Nadu has also announced the establishment of
Biotechnology Enterprise Zones (Bio-Valleys) along the lines of Silicon Valley to
exploit the bioresources of the State. Chennai has some of the top pharma
companies like Orchid Pharma, Shasun Pharma and Bafna Pharmaceuticals and
few Biotech companies like ABL Biotech and Proalgen Biotech. Tamil Nadu also
has reasearch centres like Centre for Biotechnology, Anna University Centre for
Plant Molecular Biology, Tamil Nadu Agricultural University, Coimbatore,
Centre for Research in Medical Entomology, Madurai, Department of
Biotechnology, School of Bioengineering, SRM University, Rajiv Gandhi Centre
for Biotechnology, School of Biotechnology, Madurai Kamaraj University,
School of Chemical and Biotechnology – Sastra University. Tamil Nadu has
opportunities in the area of Stemcell Research and Nanotechnology.
(iv) Maharashtra - Western Region
The state accounts for 40 per cent of the country' pharmaceuticals output. It has
strong research capabilities and accounts for over 30 per cent of country‗s patents.
It has a presence of reputed companies focusing on the biotech sector including
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Wockhardt, Nicholas Piramal, Cipla and Lupin, among others and state is setting
up biotech parks at Hinjewadi, near Pune. Major opportunities have emerged in
the pharmaceutical sector, primarily in the areas of contract research, contract
manufacturing and clinical trials. State boasts of Low costs, strong manufacturing
base, well developed laboratory and R&D infrastructure, a strong resource pool.
The backward linkages with the well-developed chemicals and petrochemicals
sector is an added advantage.
(v) Gujarat
Gujarat accounts for around 30 per cent of national pharmaceutical production.
First state to manufacture APIs and finished dosage forms. It is a home to 902
allopathic manufacturing units and 2,122 contract manufacturing units. Gujarat
accounts for exports worth more than US$ 1.5 billion. It has number of clinical
research organisations in India and over 100 companies with WHO-compliant
manufacturing units, academic and research institutions providing over 4,600
technically-skilled manpower per annum. India‘s largest biotech park of 700 acres
is being developed in Savli, Vadodara. Key players are Zydus Cadila, Torrent
Pharma, Sun Pharma, Intas Pharma, Alembic, Dishman Pharma. Mumbai is home
to the two major pharmaceutical associations including Indian Drug
Manufacturers Association (IDMA) and organisation of Pharmaceutical
Producers of India (OPPI).
b) Outline of Main Biotech Parks in India
ICICI Knowledge Park was founded in 2000 on 200 acres of land. It currently is
100% occupied, with 80,000 square feet of wet labs and about 1,400 employees
onsite, according to the just released Ernst & Young study, ―Biotechnology Clusters
in India‖. Genome Valley also includes the Shapoorji Pallonji Biotech Park with
modular wet labs, pilot plants, a business incubation center, and business support
facilities. Its 140acre phase I site is operational, and the phase II site is expected to be
completed by 2015.
Hyderabad is dominated by the generics industry but has some biotech companies
that are working on innovative drugs. CROs, including GVK Biosciences, are
growing, spanning the gap between discovery and development. Strengths include
the University of Hyderabad, which has a strong private partnership culture.
Table 2.1.21 shows outline of main biotech parks in India.
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Table 2.1.21 Main Biotech Parks in India
Name of the Park Area
(Acres)
No. of Companies Specialization
Shapoorji Pallonji Biotech
Park, Hyderabad
300 16 companies in Phase 1
and 10 companies in
Phase 2
Life Science, healthcare
and pharmaceutical
ICICI Knowledge Park,
Hyderabad
200 35 R&D companies Life Science
Agri Science Park,
Hyderabad
25 108 ventures have already
been incubated
Agribiotech and
agribusiness R&D
Bangalore Helix, Bangalore 14 8 biotech incubators Sector specific SEZ
Biotech Park
Biotech Park, Lucknow 8 15 enterprises Healthcare, agriculture,
environment, industrial
application and energy
Kinfra Biotech Park, Cochin 50 Expected to house 15-20
biotech units with shared
facilities like biotech
incubation center
Bioinformatics and
biotechnology with focus
on marine, herbal and
agricultural biotechnology
Kinfra Biotech Park,
Thiruvanthapuram
25 Developing Stage Agriculture, healthcare,
diagnostic and industrial
enzymes
Golden Jubilee Biotech Park
for Women Society,
Kanchipuram
20 10 enterprises Agro, food and nutrition,
medical, and healthcare
and environment & energy
Inspira Infrastructure
Biotech Park, Aurangabad
25 Developing Stage This biotech park is
designed for bipharma and
agri-biotech companies
who are into
manufacturing and R&D
International Biotech Park,
Pune
100 12 enterprises Medical and Pharma
Biotechnology
Savli Biotech Park,
Vadodara
724 11 companies have been
recommended for land
allotment in Phase 1
All major sectors of
Biotechnology
TICEL Bio Park, Chennai 5 12 enterprises Medical Biotechnology,
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nutraceuticals, agricultural
biotechnology and
bioinformatics
Agri Biotechnology Park,
Jalna
124 n.a. n.a.
Source: Department of Biotechnology, Government of India, Annual Report
c) Plans of Each Biotech Park in India
(i) TICEL Bio Park
A. Outline of TICEL Bio Park
TICEL Bio Park, located in Chennai, India, provides world class laboratory
infrastructure and services for Biotech R&D. TICEL Bio Park Ltd. is a unit of
Tamil Nadu Industrial Development Corporation Ltd. (TIDCO), which is
undertaken by the State Government.
The Bio Park provides such facilities as (i) Bio Resource Centre (Under
Consideration), (ii) Tenancy Area and (iii) Training Center.
The Bio Park has proposed to undertake (i) Testing, analytical and mentoring
services at the Bio Resource Center, (ii) Training and (iii) Contract Research
Program.
The Government of Tamil Nadu has conferred the status of Research and
Development institution to TICEL. TNEB has extended to TICEL the Power
tariff applicable to R&D institution to promote growth of Biotechnology R&D
in Tamil Nadu.
B. Park Features
TICEL Bio Park, a world class infrastructure for biotech R&D, implemented in
5 acres of land in Chennai at a capital outlay of Rs.625 million (US$ 12.5
million) has now achieved 100% occupancy with National and International
clients.
Support and financial assistance (equity/term loan) was provided by TIDCO,
TIDEL, Indian Bank, Karur Vysya Bank and Indian Overseas Bank.
The Bio Park has proposed to offer the following facilities:
I. Bio Resource Center
Wet labs for Fermentation & Microbiology, Downstream Processing,
Molecular Biology, Plant Tissue Culture, Animal Tissue Culture and
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Analysis
II. Tenancy Area
The tenancy area has 74 modules of 1,525 sq.ft. each, available for clients to
develop their own customized R&D labs of BSL2 standards, upgradeable to
BSL3, in accordance with GLP standards. Clients can install their facilities
appropriate to perform their independent research and development
activities.
Source: TICEL Bio Park HP
Figure 2.1.42 Facilities in the Park
C. Park Infrastructure
Main park infrastructure of the park is explained as follows:
- World class design for Bio Park
- World class laboratory standards with BSL2 upgradeable to BSL3
Source: TICEL Bio Park HP
Figure 2.1.43 Appearance of the Main Building
- Common infrastructure and facilities
- Electrical power supply and distribution through two feeders
- 100% power backup
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- Air-conditioning with 100% fresh filtered air
- Water treatment and supply
- Waste water treatment & disposal - approved by Tamil Nadu Pollution
Control Board
- Consent from TNPCB under AIR (P & CP) & WATER (P &CP) Acts.
- Potable water, Compressed air and Vacuum
- Smart card access and security system
Source: TICEL Bio Park HP
Figure 2.1.44 Interior in the Park
D. Park Amenities
I. Business Center
-Four Cubicles with Computer available to facilitate tenants to set up their
offices at TICEL during prefitment period, at a rental of Rs.5,000/- plus
applicable service tax
-Two rooms attached with space for receiving visitors and for conducting
meeting can be availed on lease basis for three months
II. Training Center
-TICEL is equipped with modular training centre with two halls with seating
capacity of 60 persons each or single hall of maximum seating capacity of
120
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Table 2.1.22 Fees for Use of the Hall
(Rs.)
No. Module Duration Revised Rates
(TICEL Clients)
Other than
TICEL Clients
01 Full Hall Full Day (10 hrs.) 10,000 20,000
02 Full Hall Half Day (5 hrs.) 6,000 12,000
03 Half Hall Full Day (10 hrs.) 6,000 12,000
04 Half Hall Half Day (5 hrs.) 3,000 6,000
05 Full Hall 3 hours 4,000 8,000
06 Half Hall 3 hours 2,000 4,000
Note: Service Tax will be charged extra at 12.36% on the above rates;
Full Hall = 120 Seats ; Half Hall = 60 Seats
Source: TICEL Bio Park, Homepage
III. Other Amenities
-International standard communication facilities: Through Bharath Sanchar
Nigam Ltd (BSNL)/ Reliance Infocom Ltd (RIL)
-Food Court / Ample Parking area
-Access to Recreation facilities at TIDEL include swimming, Tennis and
Gymnasium
-ATM facility
E. Location and Surroundings
The Bio Park is located in the knowledge corridor where leading IT firms and
institutions of High tech research are situated and in the neighborhood of
residential areas.
Located just about 14 km from International Airport and 16 km from Chennai
Sea Port.
The Park is located in proximity to:
-Indian Institute of Technology (IIT)
-Anna University
-Madras University Institute for Basic Medical Sciences
-CSIR Labs of Government of India
-IT corridor with TIDEL Park and global IT firms
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F. Floor Plans
TICEL provides Laboratory space of BSL2/BSL3 standards for Biotech R&D
in modules of 915 sq. ft. with super builtup area of 1525 sq. ft.
TICEL provides the furnished lab space at the ground floor for long term lease
of 10 years with upfront collection of rent for the lease period.
Table 2.1.23 shows the floor plans for each floor.
Table 2.1.23 Floor Plans for Each Floor
Floor Lobs for rent/sale Number of Modules
G Furnished Wet Labs 13
1 Wet Labs 10
2 Wet Labs 16
3 Wet Labs 16
4 Wet/Dry labs 16
5 Wet/Dry labs 16
Source: TICEL Bio Park, Homepage
Source: TICEL Bio Park HP
Figure 2.1.45 Floor Plan (Ground Floor)
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Source: TICEL Bio Park HP
Figure 2.1.46 Floor Plan (First and Second Floor)
163
Source: TICEL Bio Park HP
Figure 2.1.47 Floor Plan (Third and Fourth Floor)
164
Source: TICEL Bio Park HP
Figure 2.1.48 Floor Plan (Fifth Floor)
G. Tenancy Rates
Government of Tamil Nadu has recognized TICEL as a Research &
Development (R&D) institution and hence TNEB provides electric power at
concessional tariff.
TICEL reduced the Tenancy/Rental advance for lab space to six month rental
charges and provides 3 month rent free-fit out period to furnish the labs by
clients.
Laboratory space at TICEL Bio Park is provided on Rent / Lease basis.
Tenancy rates of the park are shown in Table 2.1.24.
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Table 2.1.24 Tenancy Rates of the Park
(Rs./Sq. ft./month)
Labs No. of Modules Rent / Lease
(*) A/C (12 hours
operation)
Operation & Maintenance Charges (*)
Unfurnished wet
labs (BSL – 2) 42 30 15.0 12.00
Un furnished Dry
Labs 32 30 7.50 11.50
Total 74 - - -
Note: Service Tax extra as applicable
Source: TICEL Bio Park, Homepage
(6) Malaysia
1) Purpose and Background for Cluster Location
a) Bio Technology Industry in Malaysia
In line with global competition, Malaysia is actively building up its biotechnology
sector to spur the industry utilizing its rich resources and pool of skilled workers. In
its transition to a knowledge-based economy, the Malaysian biotechnology industry
will be given special focus during the period 2005 – 2020 guided by the
Biotechnology Master Plan created in the context of the National Biotechnology
Policy (NBP).
The NBP was enacted in 2005 and over the past 7 years, the industry has developed a
strong base and today Malaysia‘s biotechnology cluster has the potential to lead the
Asia Pacific region. The industry is projected to generate annual revenue of Euro
42.5 billion (RM (Malaysia Ringgit) 170 billion) by 2020.
Having completed the first phase of the policy from 2005 – 2010 focusing on
capacity building for the industry, the biotechnology industry led by Malaysian
Biotechnology Corporation Sdn Bhd (Biotech Corp, agency of the Ministry of
Science, Technology and Innovation) has entered the second phase of
implementation from 2011-2015 which involves commercialization activities and
realizing the value of the industry through various initiatives. In short, it is the stage
to bring the results from science to business.
Hence, in order to achieve that, efforts are being taken to lay a solid foundation
including developing human resource to create skilled workers, emphasizing
research and development in priority sectors as well as building technological
infrastructure and foster innovation and industry development.
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Table 2.1.25 Key Indicators for the Biotechology Industry as of 31st December 2011
Indicators Targets Achievements
In 2005-2011 period
Phase1 (2005-2010)
Phase2 (2011-2015)
Phase3 (2016-2020)
Total (2005-2020)
Investment by private sector and government
RM6 bil RM9 bil RM15 bil RM30 bil RM10.7 bil
Number of BioNexus companies
25 25 50 100 210
Employment (at end of period)
40,000 80,000 160,000 280,000 55,904
Annual revenue (at end of period)*
RM20 bil RM80 bil RM170 bil RM270 bil RM14.2 bil
Contribution to GDP
2.5% 4.0% 5.0% 5.0% 2.2%**
Note : * This is the total number/value at the end of each Phase. The Target for
2020 is the same as that at the end of Phase III.
** This is the total of GDP contribution reported as at the end of Phase I.
Source: Biotech Corp, BiotechCorp Annual Report 2011
Biotech Corp, Score Card Report (October 2011)
b) National Biotechnology Policy
The Malaysian Government being the main driver for the industry‘s growth has
developed a sound set of policy that ensures the development and strategic direction
of the biotechnology industry.
The key development areas under the National Biotechnology Policy (NBP) are as
follows:
Table 2.1.26 Key Development Areas under the National Biotechnology Policy
Thrust 1 : Agriculture Biotechnology Development
Transformation and enhancement of the value creation of the agricultural sector through
biotechnology
Thrust 2 : Healthcare Biotechnology Development
Capitalization on the strengths of biodiversity to commercialize discoveries in natural products as
well as position Malaysia in the bio-generics market
Thrust 3 : Industrial Biotechnology Development
Ensuring growth opportunities in the application of advanced bio-processing and
bio-manufacturing technologies
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Thrust 4 : R&D and Technology Acquisition
Establishment of Centers of Excellence, in existing or new institutions, to bring together
multidisciplinary research teams in coordinated research and commercialization initiatives.
Accelerate technology development via strategic acquisitions
Thrust 5 : Human Capital Development
Building the nation‘s biotech human resource capability in line with market needs through special
schemes, programs and training
Thrust 6 : Financial Infrastructure Development
Application of competitive ―lab to market‖ funding and incentives to promote committed
participation by academia, the private sector as well as government-linked companies, implement
sufficient exit mechanisms for investments in biotech
Thrust 7 : Legislative and Regulatory Framework Development
Creation of an enabling environment through continuous reviews of the country‘s regulatory
framework and procedures in line with global standards and best practices. Develop a strong
intellectual property protection regime to support R&D and commercialization efforts
Thrust 8 : Strategic Positioning
Establishment of a global marketing strategy to build brand recognition for Malaysian biotech
and benchmark progress. Establish Malaysia as a center for Contract Research Organizations and
Contract Manufacturing Organizations
Thrust 9 : Government Commitment
Establishment of a dedicated and professional implementation agency overseeing the
development of Malaysia‘s biotech industry, under the support of the Prime Minister and relevant
government ministries
Source: Ministry of Science, Technology and Innovation
c) Focus Areas and the Target Sectors
(i) Agriculture Biotechnology (Green Biotechnology)
The main objective is to enhance the country‘s agriculture products, particularly
the food and commodity crops, subsequently ensuring sufficient and sustainable
food supply. However, the government is giving importance to all these areas:
crop-related biotechnology, livestock technology, marine/aquaculture
biotechnology and natural products.
In 2011, the Ministry of Agriculture Malaysia has launched the National Agro
Food Policy which will cover a period from 2011 – 2020 and focusing on ensuring
the agriculture sector continues to drive the economy and provide adequate supply
of food as well as boost the valued added of food products. (Source: Bernama
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News, October 18, 2011)
Targeted Sectors
Bio-agriculture mainly includes the production of high yield crops, genetically
modified plant, livestock and poultry, transgenic animal, forestry products,
fisheries, aquaculture, value added products, biofertilizer and biocontrol,
biopesticides, cell culture technology, feed and additives, hybrid seeds, tissue
culture, nutraceutical and food technology.
(ii) Healthcare Biotechnology (Red Biotechnology)
Malaysia aims to thrive on the traditional and complementary medicine sector to
develop leads for the pharmaceutical and nutraceutical industries given the
country‘s rich resources, biodiversity and local knowledge. Also, due to
emergence of new and chronic diseases, the government is trying to reinforce a
better healthcare system for the population at large.
Targeted Sectors
Bio-healthcare covers tropical diseases, preclinical contract research, clinical
trial, diagnostics and biomedical instruments/devices, personalized and
preventive medicine, therapeutics, drug discovery, antibodies, recombinant
proteins, vaccines and bioactive compounds for healthcare, herbal products and
cosmeceuticals.
Among the above mentioned categories, the medical devices/IVD shows higher
involvement mainly due to the shorter time to market the products as compared
to others. Furthermore, it is easier to obtain funding from the financial
institutions as there is better understanding of the devices sector and is also
subjected to less regulatory control.
(iii) Industrial Biotechnology (White Biotechnology)
Industrial biotechnology in Malaysia tends to focus on the petrochemical and oleo
chemical segments as the country is rich in petroleum and oil palm resources.
Coupled with its strong background in manufacturing and outsourcing capabilities,
Malaysia is capable in fulfilling the local and foreign requirements.
The identified areas of growth include the development of biocatalysts such as
enzymes for food and feed preparations, cleaning products, textile processing and
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other industrial processes. Bioprocessing is another growth area which can be
applied in the production of biomaterials such as bioplastics, biofuel, specialty
chemicals such as cosmetics ingredients and electronic chemicals.
Targeted Sectors
Bio-manufacturing applies to the development of bio materials, enzymes
(biocatalysis), bio fuel, microbes technologies, biomass, bio-degradable plastics,
oleochemicals, bio-process engineering, fermentation, green chemistry and
contract manufacturing.
To develop the industry and spur commercialization activities, the National
Biotechnology Acquisition Program has acquired the following platform
technologies for the three biotechnology areas:
Table 2.1.27 Platform Technology Necessary for the Three Biotechnology Areas
No. Platform Technology Industry
1. French based Nanotechnology platform in non-oncology
applications. Help to further develop the segment of
biopharmaceuticals/pharmaceuticals and medical devices /
in vitro diagnostics
Healthcare
2. Australian based DotScan Antibody Microarray technology:
Development of immunoassay reagents and therapeutic
monoclonal antibodies
Healthcare
3. Canadian based Marker Assisted Selection (MAS) in plant
and animal breeding technology
Agricultural
4. Dutch based Supercritical Fluid Extraction (SFE) platform
technology. Extraction of high valued flavor/fragrances,
food ingredients, nutraceuticals, active pharmaceutical,
cosmeceutical ingredients and specialty industrial chemicals
Industrial
Source: Biotech Corp, Malaysia Biotechnology Guide
These platform technologies were chosen based on the country needs and they
can be applied across the sector for various applications. The objective is to
encourage more research applications to commercialize the technologies that
have been acquired.
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d) Achieving Bionexus Status
(i) Privileges under BioNexus Status
Through BiotechCorp, the Malaysian Government grants the ―BioNexus Status‖
to eligible companies where they can enjoy the following privileges under the Bill
of Guarantees as stated below:
Bill of Guarantees :
1. Freedom of ownership
2. Freedom to source funds globally
3. Freedom to bring in knowledge workers
4. Eligibility for competitive incentives and other assistance
5. Eligibility to receive assistance for international accreditations and standards
6. Strong intellectual property (IP) regime
7.Access to supportive information network linking research centres of
excellence
8. Access to shared laboratories and other related facilities
9. BiotechCorp as the one-stop agency
(ii) Pre-Requisites for BioNexus Status
-Establish a separate legal entity for the BioNexus qualifying business and
activities
-The company should already have projects ready for production and
commercialization. In the case of pre-commercialization stage with projects still
at the pilot plant development, beyond proof of concept and ready prototypes,
they will be considered on case by case basis. Early start-up companies with
conceptual or research stage projects will not be eligible.
-The company must use life sciences processes or biotechnology elements in
production or agriculture activities. Companies that provide and trade on
products and services and involved in mere blending, repacking, mixing,
distributing or trading activity will not be able to qualify.
-Possesses research capability and conducts research in focus areas : that is
agricultural, healthcare and industrial biotechnology.
-Employs a significant percentage of knowledge workers in its total workforce
-Complies with environmental and ethical laws and guidelines
e) Bio-XCell in Iskandar, Johor: Malaysia‘s Premier Biotechnology Park and
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Ecosystem
Spanning over 160 acres, Bio-XCell is a dedicated biotechnology park and
ecosystem for healthcare and industrial biotechnology sectors. Located in the
township of Nusajaya in the Iskandar region, it is only minutes away from Singapore
and is well placed between the East and West trade routes. Companies can take
advantage of the strategic location to have direct access to booming Asian markets. It
also has other advantages such as proximity to abundant biomass for use as feedstock
and renewable energy generation as well as business friendly incentives.
In Bio-XCell, investors will have efficient and reliable utilities for biomanufacturing.
In terms of infrastructure, as an alternative to purchasing vacant land and build the
facility, companies located in Bio-XCell can rent a shell facility, renovate and fit-out
the facility according to their operational needs. It also allows tenants to design and
customize facilities according to their own unique operational requirements with the
construction and set-up costs distributed across the lease period. This enables tenants
to move in and begin operations with minimal initial capital expenditure.
2) Approximate Investment Size and Main Investors
a) Regional Economic Corridors in Malaysia
Currently, there are five Regional Economic Corridors in Malaysia. Rather than
clustered, each corridor covers a huge area or a few states and is basically
geographically based. The five corridors are spread throughout the Peninsula
Malaysia as well as East Malaysia. Looking at the abundant natural resources,
infrastructure availability, technology and skilled workers as well as Government
support and business incentives the Economic Growth Corridors present great
opportunities to foreign investors not only in the area of biotechnology but others too.
Below is a brief introduction of the Corridors.
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Table 2.1.28 Main Biotechnology Corridors in Malaysia
Northern Corridor Economic Region
(NECR)
Iskandar Malaysia East Coast Economic Region
(ECER) Development period
2007 - 2025 2006 – 2025 2007 – 2020
Area 17,816 sq km 2,217 sq km 66,736 sq km Biotechnology Areas
GM crops, agricultural
biotechnology, industrial
biotechnology, manufacturing – medical, APIs
agricultural biotechnology, human capital, infrastructure, manufacturing
biomass/biofuels, GM crops,
nutraceutical, bioremediation, bioprocessing
Strengths Biodiversity & bioresources,
manufacturing and logistics
infrastructure
Location, logistic infrastructure, oil
palm
agriculture & acquaculture base, bioresources (oil palm, tobacco)
Expected employment
3.1 million 1.4 million 1.9 million
Sarawak Corridor of Renewable Energy
(SCORE)
Sabah Development Corridor (SDC)
Development period
2008-2030 2008-2025
Area 70,708 sq km 73,997 sq km
Biotechnology Areas
biomass/biofuels, livestock, bioremediation
biomass/biofuels, livestock& aquaculture,
bioremediation
Strengths focus on livestock
industry, biodiversity, oil palm
acquaculture base, biodiversity, oil palm
Expected employment
3.0 million 2.1 million
Source: Malaysian Biotechnology Corporation
b) Outline of Biotech Parks in Malaysia
In Malaysia, in order to accelerate biotechnology development, Ministry of Science,
Technology and Innovation installed the national biotechnology executive board
(BIOTEK) in 1995. In order to attain rationalization of biotechnology research,
BIOTEK prepared the seven biotechnology common centers (BCC). BCC adjusts the
biotech research which various research institutions do, aims at cooperation, and
avoids duplication. As for BCC, many are installed in institutions of higher education
(i) Technology Park Malaysia
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A. Outline of Technology Park Malaysia Corporation
Since its establishment in 1996, Technology Park Malaysia Corporation Sdn
Bhd (TPM) has continued to manifest in its underlying motto "Your Success
Begins Here" that has reached the length, depth and breadth of the
technopreneurial community.
More than 3,000 technology driven companies have benefited from TPM - both
local and multi-national within various clusters of industry. ICT cluster has
recorded the highest tenancy within TPM followed by Engineering and Biotech,
Telecommunication and Content, and Support Services.
Focused on the objective of creating this conducive environment for innovation,
TPM will transform itself with a five prong strategy which involves the
maximizing of its land assets, enhancing its commercialization and support
services, increasing the efficacy of its advanced infrastructure and networking
capabilities, elevating its 4th generation technology incubation programs and
developing start-up friendly policies to generate a proliferation of technology
based quality start-up companies with global potential.
TPM provides a unique comprehensive balance of technology, support and
R&D capabilities.
Main activities and supports by the corporation for incubation are as follows:
I. Rental of Incubator Premises
Suitable for scientists, researchers, technopreneurs and SMEs and lease of
land parcels for technology knowledge-based companies
II. Technology and Business Incubation Programs
Offerings include business mentoring and coaching services, business,
marketing & financial consultancy services, technology & business forums,
workshops and business matching to researchers, scientists, technopreneurs
and SMEs
III. Technology Commercialization Assistance and Support
Assistance and support in technology commercialization which include
advisory and consultancy services in technology transfer facilitation, project
management, strategic management advice, market research and opportunity
analysis and professional development programs
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B. Management of the Park
I. Community
Malaysia's pioneer technology park, TPM is a 700- acre development that is
home to more than 150 technology companies employing 10,000 knowledge
–workers. Strategically located in Kuala Lumpur, the campus is the premier
choice of location for technopreneurs, scientists or researchers and
knowledge- based companies.
II. Strategic Location
Conveniently located between Kuala Lumpur and Federal Government
Administrative Centre, Putrajaya, TPM is within proximity to major
universities and research institutes and government agencies. Amenities
available within the campus are sport amenities, shopping centers, banks,
clinics, schools, housing and commercial developments.
III. Flexible Office Solutions
TPM offers flexible incubator space and office premises to fulfill the
operational needs of companies at different level of growth stage. Attractive
government incentives and government funding for technopreneurs, MSC
and Bio-nexus status companies and technology based companies are
available.
IV. Integrated Facilities and Service Programs
TPM offers incubation support facilities such as life science laboratories,
engineering and ICT facilities. Incubation programs & services are offered to
incubatees and technopreneurs to ease their businesses and technology
development. The incubatees will work hand-in hand with the technical and
business experts to gain competitiveness.
C. Integrated Infrastructure of the Park
- Uninterruptible and fully backup electric power supply
- Centralized air-conditioning system (8am-6pm)
- Local Area Network (LAN) and wide bandwidth connectivity
- 24-hour security with surveillance system
- Open basement and multi-level car park
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D. Land
Various sizes of land plots are available for technology companies to sublease
and erect their own buildings. All land plots come with infrastructure and
facilities that fulfill the needs of technology companies.
E. Office Space
I. Rental information
TPM offers flexible office space and office premises to fulfill the operational
needs of companies at different level of growth stage. Attractive government
incentives and government funding for technopreneurs, MSC and Bio-nexus
status companies and technology based companies are available.
II. Lease Period
2 years and renewable every two years
III. Lease Commencement
As stated in the Letter of Offer and Tenancy Agreement
IV. Tenancy Agreement
Duration of agreement is 2 years from the commencement date of the
tenancy agreement. Any cost associated with preparation and enforcement of
the Tenancy Agreement including stamp duty and legal fees, directly or
indirectly, shall be borne by the tenant.
V. Handover Date
The premise will only be handed over after initial payment (deposits),
signing of Tenancy Agreement and preparation of standing instruction (for
payment of monthly rent).
VI. Office Renovation
Related technical and layout drawing for office renovation must be certified
by respective technical expert and to be submitted to the Facilities
Management Department (FMD). Approval must be granted by FMD prior
to office renovation.
VII. Service Charge
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A service charge of RM1.50 is included in the rental rate which is made up of
the following:
- Quit rent
-Air conditioning (Monday to Friday, 8.00 a.m. to 6.00 p.m.)
-Electricity and water supply to common area
-Building insurance
-Building security charges
-Building and landscape maintenance
F. Facilities and Services
The Park Management ensures for the following facilities and amenities are
made available to all tenant companies and their employees:
-Technoflex
-Amenities
-Information Resource Centre (Library)
Technoflex Amenities
Information Resource Center (Library)
Source: TPM HP
Figure 2.1.49 Examples of Facilities and Common Space
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TPM also offers the use of its facilities to tenants and third parties at very
reasonable rates. The following support facilities and amenities are made
available to address the business and general needs of tenant companies:
-Conference and meeting rooms
-Function/exhibition area
-Court game facilities
G. Centre for Technology Commercialization
The Centre for Technology Commercialization (CTC) is dedicated to stimulate
the needs of the country's key stakeholders in harnessing technology for wealth
creation. Universities, research institutes, venture financiers, technopreneurs,
intellectual property specialists, governmental regulators, researchers, business
entities and industry players will come together at CTC to make technology
commercialization a reality.
The CTC offers advisory and consultancy services in facilitating technology
transfer, R&D commercialization, project management, strategic IP
management advice, market research and opportunity analysis as well as
professional development programs to increase commercial potential of
projects.
CTC is working with the Innovation and Commercialization Division of the
Ministry of Science, Technology and Innovation (MOSTI) towards the
commercialization of products developed through R&D activities sponsored by
the Ministry, by way of MOSTI/TPM Products Commercialization Prospecting
Sessions. CTC's Project Monitoring Team (PMT) has also been appointed by
MOSTI to manage and monitor grants given out under the Technofund,
Sciencefund and Innofund grants. These grants are for the Biotechnology,
Agriculture and Industry Clusters, to encourage development of new products
for commercialization.
Main activities of CTC are characterized as follows:
-Equipped with experienced managers, CTC's service offerings include the
facilitation of business matching for start-ups and early stage enterprises for
the following:
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•Conducting market survey for companies intending to embark on new
product development recognizing the importance of knowing which
features are needed or often used by customers and what kind of support
they require.
•Organizing roundtable discussions with relevant technical and business
experts to develop the best possible strategies and bringing new
intellectual insight for specific business enhancements.
-Sourcing of experts and advisory personnel to be part of organizations that
require such services on specific needs or retainer basis.
-Developing links between institutes of higher learning, Government R&D
institutions, funding organizations and Government implementing agencies
- parties that form the research and innovation value chain.
H. Innovation Incubation Centre
The Innovation Incubation Centre (IIC) aspires to accelerate the growth of
technopreneurs in the renewable energy, ICT, biotech and engineering
industries to grow from ideation to commercialization via provision of
intervention programs in critical areas.
I. Objectives
-To incubate and nurture knowledge-based enterprises by providing expertise
and support in technical & business skills
-To provide handholding services which include comprehensive coaching,
mentoring, consultancy & training to enhance technopreneurship
-To facilitate technopreneurs for better access to funding
-To facilitate Research and Development, Innovation and Commercialization
activities by providing advanced infrastructure, equipment and facilities
-To facilitate government and private sector smart partnerships in technology
development and commercialization of research results
-To provide a platform for the establishment of strategic business, and market
linkages for the incubates/technopreneurs with MNC's, GLC's, research
institutes, academia, financial community and industry, locally and globally
II. TPM Biotech Sdn Bhd
TPM Biotech Sdn Bhd (TPMB) was established in 2004 as a fully owned
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subsidiary of Technology Park Malaysia (TPM) Corporation Sdn. Bhd., a
Malaysian government–linked company. There are two divisions in TPMB:
Biotechnology Development Centre and Herbal Biotech Center.
Biotechnology Development Centre is located at Bukit Jalil, Kuala Lumpur.
This division is the focal point for all biotechnology services. In addition to
this, it is also the centre of all sales and marketing activities.
The Herbal Biotech Centre (HBC) is located at Kg. Ulu Sungai, Batu Talam,
in the district of Raub, Pahang, approximately 190 km from Kuala Lumpur.
HBC is a processing centre where all semi-finished and finished herbal
based products are produced.
Malaysia is well known for her rich biodiversity, and TPM's recognises the
potential and opportunity to exploit this abundance in natural resources.
Taking cognizance of the growing global interest and demand in natural
products, TPM Biotech Sdn Bhd was established.
(ii) Bio-XCell
A. Outline of Bio-XCell
Malaysian Bio-XCell Sdn. Bhd. - comprehensive, state-of-the-art
biotechnology ecosystem in Malaysia with the objective of Biotechnology park,
Bio-XCell aims to build a conducive Biotechnology ecosystem to support
manufacturing and R&D for the industrial and healthcare Biotechnology
sectors. It is a platform where Malaysia pools the soft infrastructure financial
incentives, human capital development, business and operational set-up,
advisory and services and attractive leasing models, along with the hard or
physical infrastructure that will enable companies to springboard their
Biotechnology business and commercialisation activities.
Bio-XCell is a joint venture between BiotechCorp and UEM-XCell project
entails the development of a 72.53-acre biotechnology park in Iskandar
Malaysia, Johor. The biotechnology park will be developed in three phases over
a span of six years, to provide an estimated 1.125 million square feet of
dedicated, purpose-built space and facilities for biotechnology companies.
To date, Bio-XCell has clinched some RM1.146 billion million investments
from deals with three companies, namely India's Biocon Ltd, French group
Metabolic Explorer (METEX) and Houston, Texas group Glycos
Biotechnologies (GlycosBio). Biocon would focus on R&D and production of
high-end biosimilars and other biopharmaceutical products in Bio-XCell. The
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investment is the largest for the Malaysian biotechnology sector thus far. In the
first phase, Biocon proposes to invest around RM1.0 billion in this facility
which is targeted to be operational by 2014.
B. Land Scheme
Customise your operations to maximize efficiency with our Standard Shell
Scheme. Readily available plants with standardized layout provides the
flexibility to move-in and renovate or fit-out according to operational needs.
- Land size of 1 acre with built-up area of approximately 20,000 sq ft
- Allocation to build and additional floor for extra space (At tenant‘s own
expense)
- Minimum tenancy period of 3 years
Source: Bio-XCell HP
Figure 2.1.50 Plot Plan of Bio-XCell
C. Lab Services
Innovation is part of our culture at Bio-Xcell. Realising the necessity of
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well-equipped facilities to help propel research and manufacturing to the next
level, we have laboratories, incubation centres, pilot plants and a customized /
centralized utility facilities.
I. Shared Laboratories
At Bio-Xcell, we understand that collaboration can act as a catalyst for
invention. That is why our shared laboratories facilities aim to bring
academia, institutes of higher learning and entrepreneurs passionate about
biotech together to accelerate research and innovation.
-Pay per use
-Piped-in gases
-Fume hoods
-Risers and chimney stacks
-Waste management services
-Business centre for administrative support
II. Incubation
Attention to detail matters and at Bio-Xcell, we don‘t believe in compromise.
Our facility provides the perfect incubation space complete with technical
infrastructure necessary for research and innovation.
-Pay per use
-Piped-in-gases
-De-ionised water
-Laboratory furniture
III. Pilot Plant for Testing and Demos
Setting up an entire fully operational facility is not just a hassle but a big risk
too. At Bio-Xcell, we provide you the chance to minimize that risk by setting
up a pilot plant facility that will provide for continuous enjoyed benefits of
our facilities and biotech ecosystem as a whole.
The plant intends to:
-Enable biotechnology companies to test and validate formulations for their
products prior to scaling-up of operations
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-Serve as demonstration plants which may be used to produce samples
which may then be given to potential clients prior to the completion of the
commercial-scale plants
-Facilitate product testing and procurement of regulatory approvals (i.e.
National Pharmaceutical Control Bureau (NPCB) prior to scale-up
D. Business Services
I. Customizable Office Spaces
A comfortable working environment is essential for optimal productivity.
With customizable office spaces and layouts, personalising your office space
to accommodate everyone‘s needs is now possible. Service providers to
companies within Bio-Xcell such as law and accounting firms are most
welcome to be a part of our ecosystem.
Space is flexible from 300 to 2000 sq ft and tenancy will be for a minimum
period of 3 years.
II. Convenient Retail Outlets
With a variety of retail outlets, food and beverage outlets, banks and other
related services within the area, your errands won‘t get in the way of your
work again.
E. Training and Conference Amenities
As a premier biotechnology ecosystem, we provide world-class training and
conference facilities complete with audio-visual and related training
equipment.
I. Auditorium
Large theatre-styled hall suitable for lectures and corporate events
II. Conference / Seminar Rooms
Multi-purpose rooms suitable for small or large conferences, seminars,
meetings or any other corporate use
F. Leasing Opportunities
I. Incubator and Lab Spaces
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Table 2.1.29 Example of Incubator Lab Space
Item Description
Price Range Early Bird Rate: RM 11.00 per sq.ft. /month
Features and Offerings
Incubator space with airlock entry
Adjacent Lab office space
Centralized Air Conditioner 8:30-5:30pm (Mon-Fri)
Facilities Management included
Complimentary Wi-Fi
Note
Signed Letter of Intent
Deposit of 1 month rental
Provision of company profile and intended business/brand
36 months lease period
Source: Bio-XCell, Homepage
II. Bare Lab Spaces
Table 2.1.30 Example of Bare Lab Space
Item Description
Price Range Early Bird Rate: RM8.00 per sq.ft. /month
Features and Offerings
Bare space to be fitted out, 10,000 sq.ft
Suitable for CRO, Central Lab & Regional HQ
Centralized Air Conditioner 8:30-5:30pm (Mon-Fri)
Facilities Management included
Complimentary Wi-Fi
Note
Signed Letter of Intent
Deposit of 1 month rental
Provision of company profile and intended business/brand
36 months lease period
Source: Bio-XCell, Homepage
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2.1.2 Example of Biocluster in Japan
(1) Outline of Biocluster in Japan
Japan has various industrial clusters. The clusters with theme of Bio including life science are
shown below. METI (Ministry of Economy, Trade and Industry) designated 8 bioclusters in
2013through current cluster policy.
Table 2.1.31 Bioclusters in Japan
Name of Bioclusters Designated
by METI
Incubation center with
wet laboratory
Japan Hokkaido Forum of Bio-industry Cluster ● 1 incubation center
Tokachi Region Agricultural Bio Cluster None
Hakadate Marine Bio Cluster None
Promoting Formation of Bio Cluster in
Yamagata Prefecture None
Shimotsuke Bio Cluster None
Metropolitan Bio Network ● 12 incubation centers
Project of Tokai Bio Manufacturing ● 2 incubation centers
Life Science City in Yokohama 3 incubation centers
Farm-valley in Foot of Mt.Fuji None
Nigata Bio Research Park 1 incubation center
Project of Hokuriku Manufacturing Creation ● 1 incubation center
Toyama Bio Valley None
Nagahama Bio Cluster 1 incubation center
Bio Cluster Project in Kansai ● 2 incubation centers
Development Organization of Kinki Bio
Industry None
Mie Medical Valley None
Kyoto Bio City ７incubation centers
North Osaka Bio Cluster 3 incubation centers
Kobe Biomedical Innovation Cluster Kansai International strategic zone
(2013-), 7 incubation centers
Hiroshima Bio Cluster None
Forming Project of Core Industry for Next
Generation ● 1 incubation center
Shikoku Techno Bridge Planning ● None
Bio Cluster Planning in Kyusyu Region ● 2 incubation centers
Kurume Biomedical Innovation Cluster 1 incubation center
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Note: Incubation centers have no relevance with clusters in some cases. Operator of biocluster is
normally different from the operator of Incubation center.
Source: JICA Study Team
These eight clusters are designated to locate in each part of Japan by government policy, but the
clusters are usually configured with a range of prefecture level because of administrative reason.
The clusters are information networks aiming at building relationship among
industry-academia-public. The operators of the networks are various, and those are not
necessarily accompanied by incubation facilities. Three typical types of bioclusters are 1) large
scale of participants in wide area, that is, the type of ―open networking‖, 2) information
originating from the core facilities, that is, the type of ―networking from core facility‖, and 3)
Industry-Academia-Public being operated by public sector, that is, the type of ―finding and
exchanging local seeds for innovation.‖ Examples of the these types are as follows:
1) Metropolitan Bio Network (Designated by METI, Bio Industry Association)22
At first, it was established as Metropolitan Bio Genome Venture Network in 2002, and
its main roles were development of network, coordination of business and supports for
bio ventures.
Thereafter completion of reading the human genome, the network has been operated
continuously by Bio Industry Association. The Metropolitan Network has more than
450 members currently, and they transmit and share information mutually. The
association arranges bases and opportunities for collaboration, provides appropriate bio
ventures with information and develops advising business by coordinators. Open
innovation system to obtain resources widely from outside is becoming essential,
because of developing medicine efficiently. In this stream, the association is focusing on
strengthening network not only of domestic bioclusters, academia and bio ventures but
also with overseas clusters and supporting associations.
2) Life Science City in Yokohama (Led by Yokohama City) 23
Yokohama Bio Industry Center is located in Yokohama Science Frontier District where
Yokohama City develops in Tsurumi Ward. There are Institute of Physical and Chemical
Research (RIKEN) and IDEC (Incubation Center) in the district. Yokohama Bio
Industry Center has many tenants in the rental R&D rooms. Yokohama Bio Medical
22 http://www.jba.or.jp/syutokenbio/about/ 23 http://wuctedww.sanken.osaka-u.ac.jp/labs/bse/homepage/kihara.htm
186
R&D (YBIRD) was developed with subsidy of METI in 2009. And the organization
opens technical training and human resource development by lectures. The main body
of the operation is Kihara Foundation, and it also operates Yokohama, Kanagawa Bio
Business Network. This is an example that the facilities were constructed by local
government utilizing subsidy of national government. After completion of construction,
affiliated organization will operate the beneficial business such as operating facilities
and contracted researches.
3) Kyoto Bio City Conception (Led by Kyoto Municipal Government) 24
In the field of life science, Kyoto Bio City Conception works together with
industry-university public cooperation in order to promote forming new industry that
leads the next generation, utilizing advanced group of companies, universities with a
wide range of research results. It promotes joint research projects with a focus on
universities and companies, and plans and manages the symposium and research
meetings for the purpose of the consortium on the theme of food, measurement, life
sciences, etc. Three major fields of R&D projects in particular are as follows:
a) Fusion Fields of Medical and Engineering
R&D and commercialization of state-of-the-art technology that contributes for
high-altitude medical and biological phenomenon through the integration of
medicine and engineering
b) Field of Environment
Construction of utilizing biological circulation systems such as biodegradable plastic
c) Field of Utilizing Local Resources
Material production plant of using industrial rearing system of silkworm, and R&D
on industrial utilization
4) Kansai Bio Cluster
The Kobe Medical Industry Town and North Osaka Bio-cluster are forming a medical
cluster in Kansai.
In the Kobe Medical Industry City, the measure led by Kobe Municipal Government
started around 1998 as one of the prime projects of the earthquake disaster revival from
the Great Hanshin-Awaji Earthquake. Accumulation of R&D centers (a hospital, a
24 http://www.astem.or.jp/biocity/
187
medical-supplies company, a medical equipment company, etc.) of advanced medical
technology was prepared in Port Island of the man-made island. It aimed at activation of
the medical industry and improvement in medical service. The cooperation reinforces
accumulation base with hospitals, incubation facilities, the facilities for research, etc.
Table 2.1.32 Core Facilities in Kobe Medical Industry City
Field Name Funded by Open Area(m2)
Medical
Facilities
Generation& and Regeneration
Institute
Riken 2002 19,700
Advanced Medical Center Kobe city 2003 10,000
Kobe Biotechnology Research
and Human Resources
Development Center
Kobe University 2004 2,000
Kobe Medical Equipment
Development Center
SME Organization 2006 3,250
International Medical
Development Center
Kobe International
Friendship Fund
2011 4,300
Kobe International Business
Center
Kobe City Fund 2001 20,000
Kobe Hybrid Business Center Advanced Medical
Fund
2011 2,000
University
Hyogo Pref. University Hyogo Pref.
University
2011
Kobe University Overall Center Kobe University 2011 2,500
Other Super Computer Riken 2012 20,000
Source: Development Bank of Japan (DBJ) Report
The North Osaka Bio-cluster started from the formation of the Senri Science Promotion
Foundation for the purpose of the life advance in North Osaka. In addition to the
industrial, administrative and academic sectors cooperation, reinforcements of Osaka
University, the National Circulatory Disease Research Center, and research institutes of
private enterprises which established earlier, attraction of drug design base and the
establishment of incubation facilities in Saito Life-science Park have been performed.
The public research institute was founded under the Kobe Medical Industry City
Foundation in cooperation with independent companies. Construction subsidies and
188
operation costs are subsidized from the administration.
Table 2.1.33 Core Facilities in Kita Osaka Biocluster
Field Name Funded by Open Area(m2)
Medical National Circulatory
Organ Institute
National Circulatory Organ
Institute
1977 n.a.
Medical Fundamental
Institute
Medical Fundamental Institute 2005 n.a.
Osaka Bio Science
Institute
Medical Fundamental Institute 1987 n.a.
University Osaka University Osaka University 1931 n.a.
Incubation
facility
Saito Incubator Regional Promotion
Organization
2004 4,900
Saito Bio Center Yashima Farma 2006 3,575
Saito Bio Innovation
Center
SME Promotion Organization 2008 2,737
Source: DBJ Report
(2) Example of Incubation Centers in Japan
There are many incubation offices including those for IT ventures. The number of the
incubation officessupported by Ministry of Economy, Trade and Industry (METI) in Japan is
176.
Among them, ―Wet laboratories‖ for bio experiments are few, and most of the laboratories are
prepared by Organization for Small and Medium Enterprises and Regional Innovation.
189
Table 2.1.34 Incubation Facilities Supported by METI
Implementation Body Number of Facilities
Organization for Small and Medium
Enterprises and Regional Innovation 24
Local Governments 119
Third Sector Funded by Public and Private 33
Total 176
Note: Some of the above facilities do not include wet laboratories for bio experiments. Source: Study Group, Secretariat of Regional Innovation, 1998 http://www.meti.go.jp/committee/materials/downloadfiles/g80303b03j.pdf
Table 2.1.35 Examples of Wet Laboratories for Bio Experiments
(Selected 45 examples)
Owner Size Remarks
Organization
(Note 1)
Public-
Private
Rental
Area
(m2)
Total
Floor
Area(m2)
Rentable
Ratio
Common
Labo
Hokkaido Univ. Business
Spring ● 1,136
Tohoku Univ. Business
Incubator ● 1,621 2,483 0.65
Tokyo Univ. Kashiwa
Venture Plaza ● 1,687
Tokatsu Techno Plaza ● 11,881
Tokyo Institute of
Technology Yokohama
Venture Plaza
● 1,829
Creation Core Kazusa ● 882 1,449 0.61
Kazusa Bio Incubator ● 496
Hamamatsu Innovation
Cube ● 2,139 3,021 0.71
Venture Plaza Funabashi ● 1,463 2,366 0.62
Chiba Univ. Inohana
Innobation Plaza ● 1,848
Wako-Riken Innovation
Plaza ● 1,773
Noukou Univ. Tama
Koganei Venture Port ● 1,059
Nagoya Medical Industry
Incubator ● 2,142
Ishikawa Univ. Incubator ● 1.563
Ritsumeikan Univ. BKC
Incubator ● 1,362
Kyoto Univ. Katsura
Venture Plaza ● 3,693
190
Owner Size Remarks
Organization
(Note 1)
Public-
Private
Rental
Area
(m2)
Total
Floor
Area(m2)
Rentable
Ratio
Common
Labo
Creation Core Kyoto
Mikuruma ● 1,480
Doushisha Univ.
Entrepreneur Training
Facility
● 1,503
Kyoto Sangyou Kagaku
Technology Integration
Inovation Center
Private (Note 3)
Uji Vennture Enterprize
Development Factory (Bio
Wing)
● 1,250.72
Kyoto-Fu Keihanna Venture
Center ● 1,102
National Institute of
Advanced Industrial Sciece
(AIST) and Tech, Kansai
Industry-Univ. Coorperation
AIST 1,720 5,750 0.30
Kobe Medical Instruments
R&D Center ● 1,435 2,100 0.68
Kobe Medical Device
Development Center ● 1,387 3,600 0.39
Saito Bio Incubator ● 3,700 4,900 0.76
Saito Bio Incubation Center ● 1,730 2,500 0.69
Saito Bio Hills Center Private 830
Osaka University Sanken
Reseasrch Park Osaka University 1,471
Creation Core East Osaka ● 1,019
Okayama Univ. Incubator ● 1,086
Kumamoto Univ. Incubator ● 982
Nagasaki Dejima Incubator ● 971
Kobe Advanced Medical
Center ● Hospital
ancillary
facilities
Kobe Baio Medical Creative
Center ● (6,391)
(Note 2)
11,620 (0.55)
(Note 2) (Note 3)
Kobe International Business
Center ● (10,962)
19,930 (0.55)
(Note 2)
Kobe Incubation Office ● (4,125)
(Note 2)
7,500 (0.55)
(Note 2)
Kobe Highbrid Business
Center ● 718
Tsuruoka Metabolome
Cluster ● 5,140 8,171 0.63 (Note 3)
191
Owner Size Remarks
Organization
(Note 1)
Public-
Private
Rental
Area
(m2)
Total
Floor
Area(m2)
Rentable
Ratio
Common
Labo
Nagahama Bio Incubation
Center ● 1,124 1,625 0.69
Yokohama City
Industry-Academia Joint
Research Center (Research
Wing)
● 1,225 2,869 0.43
Leading Venture Plaza
(Wing 1) ● 3,100 5,390 0.57
Leading Venture Plaza
(Wing 2) ● 1,665 3,180 0.52
Fukuoka Bio Incubation
Center ● 759 (Note 3)
Fukuoka Bio Factory ● 1,500
Tottori Bio Frontier ● 490 1260.84 0.388
Total Floor Area (Excluding Note 1)
Total Floor Area (Including Note 1)
63,306
(84,784)
m2
m2
Note 1: Organization for Small and Medium Enterprize and Regional Innovation, Japan
Note 2: Rentl room is calcurated assuming the rentable ratio as 0.55.
Note 3: Facilities including common laboratories with analizing equipments to be able to
utilize with former appointment.
Source: JICA Study Team
1) Wet Laboratories
Though the facilities shown in the above table are including wet laboratories, the actual
area for the laboratories is 70 to 80 % of the total, because the floor area includes not
only laboratories but also research rooms and offices. Most of the incubation centers
were supplied by Organization for Small and Medium Enterprize and Regional
Innovation. It is rare case that universities or private companies construct the facility
themselves without public fund.
In many cases, incubation centers were constructed by receiving subsidies which were
used for part of the initial costs. Such subsidies are usually used for operation costs
for personnel, such as an incubation manager. Purpose of establishing an incubation
center is promotion of small and medium enterprises, so the rental rates are being set at
lower levels than those of nearby offices. In addition, local governments intend to
support tenants of younger ventures with subsidies. As such subsidies come from tax
revenue, ventures supported with subsidies must move out after staying at incubation
192
centers for a few years. If the expensive experimental equipments are provided by
tenants, there is a problem that they cannot recover the costs within such short period of
time. In some cases in Japan, to solve such a problem, tenants can stay at wet
laboratories up to 15 years.
2) Rentable Ratio
When zoning inside of the building, corridors, stairs and elevators will first be
determined, meeting rooms, exchanging lounge, consultation rooms and offices will be
located on the ground floor, and then the whole facility will be designed.
If ―rentable ratio‖ is smaller against the total floor area, rentable floor area per
construction area will be smaller (getting worse). On the other hand, if rentable ratio is
larger, the common spaces would be smaller, and without enough space, the facility
would lose added value. So, well-considered planning with balanced rentable ratio is
required.
Especially, the rentable ratio affect the feasibility of the center operation, it must be
determined by studying the situation of the similar cases. Normally, rentable ratio is
used as a measure for efficiency of rental management.
The rentable ratio is around 80% for small offices and around 60 to 70% for large scale
offices. In the case of Hamamatsu Innovation Cube for reference, it is 78.95% on the
third floor. In this case, there is a common area such as corridors, an elevator, elevator
halls, staircases, toilets, a shower room and office kitchenettes. In this case, laboratories
are located on both sides of the center corridor with one set of staircases, so that the
plan is the most efficient as the standard floor for incubation centers. However, if
replacing the blocks of laboratories with meeting rooms and exchanging space, the
rentable ratio would go down to around 50 to 60%.
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Rentable ratio for standard case＝a/(a+b)
Rentable ratio for Incubation Center＝a/(a+b+c)
Source: JICA Study Team
Figure 2.1.51 Rentable Ratio
Examples of incubation centers and rentable ratios are shown at Table 2.1.35. In general,
the rentable ratio will be most effective if laboratories are set to be located along both
sides of the center corridor on the standard floors.
In case of arranging offices, meeting rooms, as minimum requirement, the rentable ratio
might be 60 to 70%. The rentable ratio of NARC incubation center will be assumed to
be 60 to 70% on the standard floor.
3) Floor Area per Room for Wet Laboratories
We took samples of average floor area of Japanese incubation centers which are
operated by Organization for Small and Medium Enterprises and Regional Innovation.
Table 2.1.36 Area per Room for Wet Laboratories
(m2)
Wet Laboratories
Average Max. Min.
Tsuruoka Metabolome Cluster - 155.53 73.4
Yokohama City Industry-Academia
Joint Research Center - 150 50
Leading Venture Plaza(Wing1) - 100 50
Leading Venture Plaza(Wing2) - 90 45
Tokyo University Venture plaza 45.5 63 32
Yokohama Institute of Technology
Venture Plaza 70.4 156 43
Rental laboratory（Exclusive Use）
Corridor
Entrance hall
Toilet
Hot water room
Mechanical room
Total floor area
Common Laboratory
Office
Meeting room
Storage
Cargo EV
Backyard
Special mechanical RM
Standard common spaces for
office building
Specific common spaces
for Incubation Center
Area-a
a
Area-b
a
Area-c
a
194
Kazusa Bio Incubator 99 100 99
Hamamatsu Innovation Cube 62.8 63 24.5
Venture Plaza Funabashi 45.8 63 26.25
Kobe Medical Device Development
Center 59.8 80.5 31.5
Kobe Healthcare Industry
Development Center 57.8 80.5 40
Source: Organization for Small and Medium Enterprises and Regional Innovation HP
The average area for one room in incubation centers is around 45 to 99 m2, though it is
very hard to find out typical size of the room. However, it is clearer to find the average
sizes for minimum and maximum rooms. Most of the largest type is 63 m2. This number
is assumed to come from standard structural column span of the building with 7 by 9
meters. In addition, half of the standard structural span is assumed to be size of a
minimum rentable room.
RC structure is main construction method in Indonesia, so that 1 span will be shorter
than the span made of steel structure. If we set the RC span to be 8m by 6.5m
(measurement by the center of the wall), the standard room will be 52 m2.
Also in the case of NARC, standard laboratory type will be 52 m2 (8m×6.5m ×1 span)
and larger laboratory type will be 104 m2 (8m×6.5m×2 spans).
4) Rentable Area per Researcher
Standard researcher (experimental) room‘s floor area is 54 m2 (span of 9 m by 6 m) for
5 persons. So the rentable floor area per researcher is around 10.8 m2. It should be noted
that public space such as corridors and meeting rooms are not regarded as rentable.
195
Source: Yamato Scientific Corporation Co., LTD, ―Design of Laboratory‖
Figure 2.1.52 Plan of Standard Research Room
(Approximately for 5 Persons)
2.1.3 Example of Biocluster in Europe and the US
(1) Representative Biocluster in Europe and the US
Table 2.1.37 shows famous bioclusters in the world and they are located mainly near universities.
196
Table 2.1.37 Representative Bioclusters in Europe and the US
Country Location Field Number of Bio-related
Enterprises
US Boston Medical Equipment,
Bio
250 (US 18%)
North Carolina Medicines, Bio Venture 140,
Bio Research 65
UK Cambridge Bio 150
German Munich Medicines, Bio 100 with 31 Ventures
Finland Owl Biomedical High Tech Company more
than 500
Source: Mitsubishi Research Institute
Table 2.1.38 Bioclusters Ranking by European Commission
Ranking Country Name Region Evaluation
1 UK Cambridge Worldwide Cluster
2 US Sandiego
3 France Genpole Matured Stage Cluster
4 Danish/Sweden Medicon Valley
5 Norway Technopol
6 Japan Hokkaido Bio Cluster/Forum
7 Canada Saint-Hyacinthe
8 German Munich
9 Sweden Biotech Umea Developing Stage
Cluster 10 France/German/Swiss Biovalley
11 Austria UAFC
12 Belgium Gent
13 France IAR
14 Netherland Food Valley
15 Spain Biocat Initial Stage Cluster
16 Bioval
Source: METI Hokkaido Bureau of Economy HP
(2) Biocluster Ranking by European Commission
Table 2.1.38 shows biocluster ranking by the European Commission. It is thought that there is
197
useful information which serves as reference of the bioclusters in newly emerging countries. The
evaluation criterion of the Europe commission is shown in below. In addition, this evaluation
criterion has put emphasis not on economic impact but diversity of the bio-field of non medical
treatment. There are two clusters called Basel and Bio-Alps in Switzerland. Especially, Basel is
the international center of pharmaceutical industry, though it is not described by the ranking by
European Commission. Moreover, the notable clusters are not chosen in the case of Japan. Also
from these, the ranking is set accoding to the characteristic bioclusters in the world.
1) Cluster of Worldwide Scale: 20 to 30 years have passed since formation, and there are 2
to 3 important fields.
-The cluster is bearing the important innovation of companies. Funds can be raised even
when it is difficult for companies.
-A Nobel prize winning researcher and several persons with world class technique have
formed the cluster.
2) Developing Stage of Cluster
a) Matured Biocluster
-10 to 20 years have passed since formation. The scale of cluster, growth and activity
are taken attention.
-The research institution of the cluster has received the high evaluation in their countries.
The cluster leads key industries.
-A cluster has a powerful platform and provides the participating organizations with the
incentive.
b) Developing Biocluster
-Five to ten years have passed since formation. Strong points are accepted, with
synergistic effects with other fields.
- As a cluster grows, formation of new companies can be caused.
Infrastructure for a cluster, such as an incubator is accumulated. A cluster plays a role
of attracting talented people.
c) Initial Stage Biocluster
-There is an important field newly coming from the cluster and formation of an
inauguration stage. The strategic master plan was formulated and tackled.
-Organization is formulated for a cluster and makes it possible to attract funds for new
business.
198
-New employment is created and information can be delivered to the talented people
outside the district.
2.2 Investment Trend of Bioindustry Capitals
2.2.1 Investment and R&D Activities Trend of the World in Biopharmaceutical
While the U.S. is still the world leader with a growing biopharmaceutical base, a closer look at the
trends suggests that U.S. dominance in the biopharmaceutical sector is facing broad international
competition, with U.S. market share of worldwide activity declining. One good way to consider
this shifting global competition is to examine key performance measures across economic activity
and innovation in biopharmaceutical development.
In economic activity, two measures are considered. One is net output of pharmaceutical
manufacturing, and the other is export of pharmaceutical goods. Table 1 shows both the levels
and changes over the past decade in these two measures of economic activity for the world, the
U.S., the E.U., and the 18 comparison nations for this study. While the size of the U.S.
pharmaceutical economic activity remains substantial and is growing, it is not keeping pace with
overall world growth. Of particular note is that other nations, while at a substantially lower base,
are making major gains well above world growth rates.
In pharmaceutical net output, while the world grew by 109 percent from 2000 to 2010, the U.S.
grew a sizable, though lagging, by 72 percent. The fastest-growing nations in pharmaceutical net
output from 2000 to 2010 are China at 719 percent, Russia at 359 percent, Israel at 278 percent,
and Singapore at 274 percent25
.
Similarly, in exports of pharmaceutical goods, the U.S. is a significant player, though not
dominant given the size of its internal market. The U.S. grew at a substantial 240 percent from
2000 to 2010, but still behind the hefty world growth rate of 325 percent. The fastest-growing
nations in the export of pharmaceutical goods from 2000 to 2010 include Israel at 1,410 percent,
Ireland at 548 percent, Singapore at 503 percent, China at 498 percent, and Brazil at 412
percent26
.
It is interesting to note that the position of the U.S. is similar to that of the overall E.U. in terms of
pharmaceutical net output level and growth-both accounting for slightly more than a quarter of
world pharmaceutical net output but lagging world net output growth rates. However, the overall
E.U. connection to global markets appears substantially stronger than the U.S. as shown in total
export levels-even when accounting for intra-E.U. trade. Germany is an exception among the
25 See National Science Foundation 2012 Science and Engineering Indicators. 26 See World Trade Organization.
199
leading developed nations as it continues to outpace world growth rates in pharmaceutical net
output and exports.
It is also important to note that the faster growth of economic activity in pharmaceuticals,
particularly by emerging nations, is similar to the overall growth expected in the demand for
pharmaceuticals across the world. Datamonitor reports that the global pharmaceuticals market is
expected to grow from $733 billion in 2010 to $981 billion by 2015, an increase by 33.8 percent.
This healthy growth of the pharmaceuticals market is largely driven by emerging nations, with
demand for pharmaceuticals expected to grow from 2010 to 2015 in China by 109 percent, and
Brazil by 67 percent. By contrast, the U.S. is expected to increase its demand for pharmaceuticals
from 2010 to 2015 by 31 percent, slightly below the world growth rate. This demonstrates a major
market opportunity going forward in the demand for pharmaceuticals among many emerging
nations with rising populations and incomes27
.
Table 2.2.1 Biopharmaceutical Economic Activity Measures by Country
Pharmaceuticals, Net Output Exports of Pharmaceutical Products
Country 2010 Level (US$ Million)
% Change 2000-2010
2010 Level (US$ Million)
% Change 2000-2010
World 345,994 108.6% 461,267.8 324.5% United States 91,903 72.3% 44,582.9 239.8%
EU* 90,418 95.6% 295,144.4 326.1% Australia 2,597 191.1% 3,584.0 207.4% Brazil 11,683 191.6% 1,360.4 412.1% Canada 4,215 138.8% 5,703.6 364.6% Chile 370 70.5% 128.3 258.5% China 63,316 718.5% 10,688.8 497.6%
France 11,324 49.7% 34,479.8 229.6% Germany 19,546 129.7% 66,937.7 386.7% Ireland 5,035 151.1% 32,178.1 547.5% Israel 949 278.1% 6,475.1 1,409.9% Italy 9,379 52.2% 17,675.8 177.0% Japan 30,015 ‐3.4% 4,324.0 58.3%
Russia 1,784 358.6% 583.0 289.2% Saudi Arabia 73 82.5% 47.7 113.8% Singapore 6,510 274.4% 6,097.4 503.1% South Africa 1,439 196.7% 167.6 55.4% South Korea 6,813 113.9% 1,215.0 260.6% Sweden 5,687 86.9% 9,191.6 134.6%
UK 14,744 84.6% 34,340.0 218.9%
Note: The European Union includes Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain,
Sweden, and the UK.
27 Datamonitor. Global Pharmaceuticals, December 2011, with separate country reports issued from December 2011 and January
2012.
200
Note: Intra - exports for the E.U. nations and China are included in the levels of exports
Source: Pharmaceutical Net Output from the National Science Foundation, 2012 for
Science and Engineering Indicators; World Trade Organization for Export Data
In innovation activity, as measured by medical science publications, medical science patents, and
biopharmaceutical-related venture capital funding, the U.S. currently has an especially strong
share of worldwide activity. In particular, the U.S. accounted for 66 percent of the world‘s
biopharmaceutical related venture capital funding in 2010, suggesting that the U.S. has a
substantial advantage in its more established capital and entrepreneurial development
infrastructure. The U.S. innovation strength also remains strong in medical science, where the
U.S. represented 47 percent of worldwide activity in 2010. The rest of the world seems to be
challenging the U.S. in one notable area—medical science publications — suggesting that other
nations are laying the foundation of knowledge and discovery needed to advance
biopharmaceutical innovation.
In terms of growth rates for innovation, similar to economic activity, the U.S. has grown in
scientific publications, patents, and venture capital funding since 2000, but it is not keeping pace
with world growth rates in these areas, demonstrating that other nations are moving forward
aggressively. A closer examination of medical science publications suggests that China and
Brazil have been emphasizing growth of their academic health research activities over the past
decade, with each more than doubling its output of medical science publications. Meanwhile, in
patents, South Korea and Israel crossed the 1,000 patent level in medical sciences in 2010 and
realized strong growth over 2000 to 2010. In biopharmaceutical8 related venture capital funding,
emerging nations, such as Brazil and China are laying the groundwork of a venture capital
industry, making enormous gains from 2000 to 2010 to put their nations on the map of
venture-backed new company formation in biopharmaceuticals. By contrast, more developed
nations across the E.U. and Japan recorded a significant decline in biopharmaceutical-related
venture capital from 2000 to 2010.
201
Table 2.2.2 Biopharmaceutical Innovation Activity Measures by Country
Medical Science
Publications
Medical Science
WIPO Patents
Biopharmaceutical-related
Venture Capital
Investment (US$ Million)
Country 2010
Level
Percentage
Change
2000–2010
2010
Level
Percentage
Change
2000–2010
2010
Level
Percentage
Change
2000–2010
World 179,021 15.6% 34,151 64.4% $12,478 15%
United
States
58,664 10.6% 15,932 54.1% $8,229 5%
European
Union*
61,774 4.0% 10,518 47.7% $1,710 -9%
Australia 4,960 29.9% 493 44.6% $98 -31%
Brazil 3,131 167.4% 186 353.7% $189 57,103%
Canada 7,356 25.0% 843 1.8% $862 87%
Chile 403 29.2% 26 44.4% – -100%
China 7,429 373.0% 856 48.9% $491 6,649%
France 6,100 -12.5% 1,939 73.9% $370 108%
Germany 11,779 -0.2% 3,014 31.7% $399 -50%
Ireland 614 41.5% 199 41.1% $54 889%
Israel 1,602 -7.8% 1,037 141.2% $197 8%
Italy 7,698 22.1% 881 75.8% – -100%
Japan 10,666 -20.1% 2,729 106.3% $7 -50%
Russia 153 -25.1% 157 -10.8% – –
Saudi
Arabia
503 51.5% 16 1,500% $12 -65%
Singapore 521 14.1% 162 800% $8 –
South
Africa
4,227 226.5% 76 46.2% $89 21%
South
Korea
546 7.4% 1,232 592.1% $48 -53%
Sweden 2,959 -10.4% 534 8.3% $2 –
United
Kingdom
12,518 -10.6% 1,897 -2.0% $370 108%
Sources: National Science Foundation, 2012 Science and Engineering Indicators for
Medical Science Publications.
Thomson One for Venture Capital Funding in Biopharmaceutical-Related
Technologies.
WIPO Medical Science Patents, World Intellectual Property Organization.
The recently released ―2014 Global R&D Funding Forecast‖ issued by Battelle in collaboration
with R&D Magazine reported that life sciences research and development remains under pressure
202
from expiring patents and the lower productivity of research activities in light of the rising
complexity of innovation in drug development. From 2012 to 2013, world R&D in life sciences
declined, and Battelle forecasts only a modest growth of 3.1% in 2014. While there is even more
uncertainty in the U.S. due to the recent enactment of health care reform and its focus on cost
effectiveness, the U.S. remains the world leader with 46% of the world‘s life science R&D. A
survey of U.S. industry research executives, meanwhile, points to the challenge of growing
relationships with U.S. companies. Nearly 60% of the life science industry representatives
reported their companies have no plans for specific foreign engagement, while only 20% are
planning new R&D facilities outside of the U.S. and a mere 7% expect to expand existing foreign
operations over the next year.
$184.2 $197.7 $195.3 $201.3
$84.5 $91.1 $90.6 $92.6
$0
$50
$100
$150
$200
$250
2011 2012 2013 2014
Ind
ust
rial
R&
D S
pen
din
g, B
illio
ns
U.S
. $
Global U.S.
Source: Battelle and R&D Magazine, ―2014 Global R&D Funding Forecast‖
Figure 2.2.1 Industrial R&D Spending Globally and by the U.S.
2.2.2 Investment Trend of Japanese Bioindustry Companies and Institutions
Japanese bio industries have invested and made establishments in countries such as U.S., Canada,
EU, and Singapore. Some also do business in India, where they have access to seasoned
researchers and scientist that have had a high level of education and experience in laboratories and
companies in developed countries. However, as a general trend, the appetite to invest overseas is
not too high, partly due to the huge time and cost to expand their businesses overseas, but also
from the need to put priority on maintaining and recovering the faltering operation rates in
existing manufacturing facilities.
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Examples of Japanese Bio Industries:
- Daiichi Sankyo Company, Limited has research facilities for antibodies for cancer in
Germany, research and development facilities for new low-molecular pharmaceutical
medicines in U.S., and transitional research for low molecular pharmaceutical products for
infectious diseases and auto-immune diseases in India. Daiichi Sankyo Company also
produces bulk pharmaceuticals in Ranbaxy Laboratories Limited, their fully consolidated
subsidiary in India
- Eisai Co., Ltd. has invested 5 billion Yen (approx. US$ 50 million) to establish research and
manufacturing facilities for bulk and intermediate pharmaceuticals in India.
- Kyowa Hakko Kirin Co., Ltd. owns research centers in U.S. and Singapore and
development centers in U.S., U.K., China, Korea and Hong Kong.
- Mitsubishi Tanabe Pharma Corporation acquired a Canadian pharmaceutical company that
is researching innovative production of vaccines using Virus Like Particles. Mitsubishi
Tanabe Pharma Corporation has also established manufacturing bases in China, Korea and
Taiwan.
- Takeda Pharmaceutical Company Limited has research and development centers in
Singapore and China. It also has several manufacturing facilities in China.
In Indonesia, some Japanese bio industries have established manufacturing facilities, due
to low wages and a large domestic market. Some examples can be found as follows:
- Mitsubishi Tanabe Pharma Corporation established PT. Tanabe Mitsubishi, a consolidated
subsidiary, in Indonesia in 1970. PT Tanabe Mitsubishi manufactures hypertension
medication for both Indonesia and its neighboring countries.
- Takeda Pharmaceutical Company Limited manufactures pharmaceuticals in Bekasi,
Indonesia for the domestic market.
- Mitsubishi Corporation Life Science Limited has factories in Indonesia to produce nucleic
acid, carrageenan and sorbitol.
- Bridgestone has established a research facility near some rubber-tree foundations, and are
studying medicines to cure or prevent diseases in rubber trees.
On the other hand, there are not so many Japanese bio industries that have established research
and development facilities in Indonesia. Interviews conducted revealed that bio industries will
seek locations where high-quality researchers, infrastructure and research grants are available.
The interviewees were of the view that neighboring countries such as Singapore and Thailand are
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more attractive relative to Indonesia on such issues. A few companies pointed out that the results
of Bio-science researches could easily be replicated if samples were removed from the site, and
therefore, high information security would be a critical requirement. Such companies found it
difficult to justify conducting sensitive R&D outside of Japan.
2.3 Best Practice of Successful Cluster Development Overview
Biosciences and associated industries are among the most actively pursued economic clusters by
governments and economic developers globally. The reasons are many, but chief among them
are:
-Biosciences represent a highly active area of scientific inquiry with a high volume of
innovations and novel technological advancements occurring that provide significant
opportunities for commercialization and business development.
-Bioscience products, especially medicines, but also other specialty products, are high-value
and are in high demand in global markets. Products produced by life-science clusters will
typically be export earners for their locations.
-Bioscience industry activity can add significant value to local bioresources generated via
natural ecosystems, agriculture, forestry and fisheries.
-Bioscience-oriented sectors in drugs and pharmaceuticals, agbioscience product development,
bio-chemical refining and other areas tend to be high-wage sectors – providing robust
family-sustaining wages to workers.
-Bioscience markets are extremely large and expanding. Rising global population in
combination with a global increase in middle-income consumers provide the basis for assured
and expanding demand for medicines, health products, food products, fuels and other
biobased products.
Bioscience is such a broad and deep field of science and technological advancement that there
exist a large-range of niches within bioscience which regions can specialize in and exploit.
Because of this breadth of opportunity, distinctive bioscience clusters can be identified across the
globe and much can be learned from the experiences of specific locales. Opportunities exist in
food and agriculture, in industrial bioproducts, in drugs and biologics, in environmental products,
biosecurity products and many more arenas.
Indonesia with its large-population (generating demand), its stock of natural- and bio-resources
(providing a highly flexible biomass production environment), and its base of research
institutions (in universities and national labs) provides a location rich in opportunity for
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bio-cluster development. Research reported herein notes that there are opportunities in three
major meta-theme areas for Indonesia:
-Agriculture and Value-Added Food
-Biofuels and Biorefinery Products
-Biopharmaceuticals, Natural Products and Functional Nutrition Products.
In this section of the report Battelle profiles some lessons-learned from global clusters active in
the three platforms of relevance to Indonesia. First, Battelle presents an overview of the general
characteristics of clusters active in these platforms, and then further detail is provided via some
specific case-study examples using a table-based summary format.
2.3.1 Agriculture and Food Oriented Clusters
(1) General Characteristics of Agbiosciences Oriented Clusters
Food and agriculture (agbioscience) clusters are typically focused in one or more of three primary
focus areas: 1) development of inputs and technologies to improve primary agriculture (especially
crop and livestock yield); 2) development and dissemination of optimized agronomic practices
to improve domestic agriculture, and 3) development of value-added food, feed, fiber and
industrial products from agricultural resources. Within these general areas, clusters of
innovation around the world will then tend to focus on enhancements to their system focused on
their local or regional agronomic characteristics.
A key characteristic shared by major agbioscience cluster locations globally is the presence of one
or more major research universities with a focus on food and agricultural sciences, or a
government or major non-profit research institution. Typically this will involve an institution (or
institutions) having the full spectrum of infrastructure required to advance modern plant or animal
bioscience, including (but not limited to):
-Life science laboratory facilities, equipped to facilitate basic through translational science
inquiries. Increasingly this requires high quality resources for molecular biology, advanced
genomics and proteomics – in addition to traditional wet-lab resources.
-Specialized resources focused on the growth and development of plants and livestock.
Including climate-controlled plant growth chambers, soil and sample preparation facilities,
secure greenhouse facilities, livestock housing units (for both large and small animals) and
biosecurity infrastructure (if dealing with pathogens or invasive species).
-Facilities for value-added product development and pilot-scale production of value added food,
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feed or industrial biomass-based products. Including food industry pilot plant equipment to
facilitate work such as basic milling, advanced food ingredient processing, value-added food
product formulation, sensory labs and other specialized infrastructure.
-External experiment station or university-farm facilities for field-trials. Such facilities may
also be used for foundation seed production and for income-generating production agriculture
activities
-And, increasingly, locations suited to industry-university partnerships and the
commercialization of institutional and industry agbioscience innovations. These range from
co-labs and incubation facilities, through to full-scale research parks.
(2) Case-Study Examples of Agbiosciences Oriented Clusters
Table 2.3.1 Case-Study Examples of Agbiosciences Oriented Clusters
Saskatoon, Canada Melbourne, Australia Kannapolis, North Carolina, USA
Description A defined cluster of university (University of Saskatchewan) and Canadian government labs. Oilseed and grains focus, plus livestock focus in infectious diseases and vaccines.
AgriBio is a world-class shared agbioscience facility developed by LaTrobe University and the State of Victoria Department of Primary Industries
A joint corporate and multi-university research campus (350 acres) specifically focused on food and agriculture
Focus Well-known in plant molecular biology. A focused agenda on semi-arid regions, and taking a ―prairie systems‖ approach to soil and water conservation, climate adaptation, pest control, crop and livestock development, and crop management.
Plant (primary crop and forage) improvement and livestock improvement.
Nutritional enhancement and value-added foods for health.
Corporate Relationships
Key relationships with multiple corporations, including significant relationships with Bayer CropScience and Dow AgroSciences.
Large scale sponsored R&D engagement by Dow AgroSciences and other domestic and multinational agbioscience companies. Additional relationships with Bayer Crop Science, DuPont-Pioneer, Hexima and others.
Multiple food and agribusiness company research labs (including Dole, Monsanto, and General Mills) located on a purpose built campus. Access to university/industry collaborations on-site.
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Saskatoon, Canada Melbourne, Australia Kannapolis, North Carolina, USA
Relationships with producer commodity groups also, such as Dairy Futures.
Government Engagement and Incentives
Provincial government responsible for development of co-located research park.
State of Victoria a primary investor in the development of the AgriBio complex.
Generous IP terms, granting international IP ownership, provided for international companies sponsoring research.
Primarily funded by commercial investment and philanthropy – especially through the direction of David H. Murdock, owner of Dole Foods. State universities have developed branches and research labs on site. State funded North Carolina Biotechnology Center helps promote and provide access to various state incentives and workforce development programs.
Commercialization Infrastructure and Shared Facilities
Provincial government operates co-located ―Innovation Place‖ a 78 acre research park chartered as a separate corporation. Provides flexible lease terms, wet-lab equipped multitenant buildings, greenhouse space and growth chambers. Facilitates university-industry partnerships. Very successful with 177 tenants/clients, 23 buildings and employment of 3,700 personnel. 75% are local Saskatchewan companies.
State-of-the-art genomics and associated resources for plant and animal improvement research. Co-located greenhouse facilities and biosecurity facilities. Dedicated space set-aside for industry co-location in AgriBio building and adjacent research park.
Purpose designed to foster collaborations across industry and academic labs.
Structured to provide: research collaborations and partnerships; space to host conferences, seminars, and workshops; shared-use facilities with advanced equipment and instrumentation; plus wet lab and Class A office space to lease or build-to-suit.
Workforce Assets
Co-located on university campus with access to undergraduate and graduate-students
Co-located on the Bundoora campus of La Trobe University with direct access to undergraduate and graduate students. Plus relationships with other Victorian universities.
On-site community college satellite facility. Active research labs of multiple universities with engaged graduate students.
On-site North Carolina Biotechnology Center facilitates access to state
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Saskatoon, Canada Melbourne, Australia Kannapolis, North Carolina, USA
programs in customized job training for companies.
Source: JICA Study Team
It should be noted that agbioscience-focused clusters have been developed not-only around
universities, but also via development of freestanding research institutes (such as the Danforth
Plant Sciences Center in Missouri USA and the Noble Foundation in Oklahoma, USA). The
BioResearch and Development Growth Park at the Donald Danforth Plant Science Center in St.
Louis, Missouri, U.S. allows tenant companies to access core facilities at the Danforth Center,
including greenhouses, growth chambers and advanced microscopy facilities at a discounted rate.
Plans are for three buildings reaching a total of 450,000 sq. feet. (there is currently one building of
110,000 sq. ft.). Several other U.S. universities are operating major food product development
and pilot plant facilities focused on joint industry/university research and applied product
development. Examples can be found at The Ohio State University, the Center for Crops
Utilization Research at Iowa State University, Kansas State University and the University of
Minnesota (to name a few).
2.3.2 Biorefining and Biofuels Oriented
(1) General Characteristics of Biorefining and Biofuels Oriented Clusters
This is a still developing space, and there are relatively few distinctive clusters of biofuels and
biorefining excellence that have emerged globally. That said, there are several locations that are
generally viewed as leaders in this emerging industry. In almost every case the biorefining
clusters that have emerged are focused on the conversion of local biomass resources into
value-added industrial and fuel products. In this regard they are quite similar to the agriculture
and food clusters in structure and focus – seeking to add-value to a domestic or regional/localized
bioresource. Examples include:
-The Midwestern/prairie states in the United States - such as Iowa, Minnesota, South Dakota
and Nebraska - which have had an initial focus on the conversion of starches (primarily from
corn) into ethanol via fermentation pathways. These locations are also active in the
development of next generation biofuels processes for the conversion of lingo-cellulosic
materials (including crop residues and dedicated energy crops) into biofuels.
-Nations and regions with a concentration of sugar-cane operations (most notably Brazil),
focused on conversion of sugar cane into ethanol and other biorefinery products via
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fermentation (biotechnology) processes.
-Locations with significant production of oil-bearing crops (such as the U.S., Canada and
Europe) for development of biodiesel, downstream refined-oil products and oleochemical
products.
There are also some locations, albeit a limited number, that are more focused on next generation
biofuel and biorefining production technologies that the specific conversion of local biomass into
fuels or biobased products. These locations are interesting in that they are leveraging previous
biotechnology R&D expertise to new applications in biofuels or are existing hubs of companies
that are pivoting to biofuel opportunities. An example here is Denmark, which as home to
leading enzyme companies Novazymes and Genencor, is on the leading edge of work in
enzymatic processing of lingo-cellulosic biomass. Similarly, San Diego (a global medic al
biotechnology hub) has also developed significant university and industry R&D expertise in
biofuels.
In general, cluster initiatives in biofuels and biorefining tend to focus around certain aspects of the
biomass to converted product supply chain –covering areas such as:
-The development and enhancement of enhanced plant (or algae) biomass with desired
characteristics in terms of yield, phytochemical/oil content, downstream processability,
adoption top local growing conditions and stresses, etc. This requires expertise in plant
biology, molecular biology, plant breeding and genomics. This focus requires lab-to-field
trial infrastructure similar to that identified under food and agriculture above.
-The development of techniques and technologies for biomass harvesting, biomass
densification and transportation (e.g. early processing steps to reduce the bulk-density of the
biomass for shipment purposes – such as via pyrolysis to bio-oil, crushing of oil-seeds, or
pelletization of lignocellulosic biomass). Thins requires expertise in mechanical and
agricultural engineering, chemical engineering and, increasingly, biotechnology.
-Development of downstream bioprocesses and chemical engineering for conversion of
biomass in to value-added fuels, chemicals and materials (typically via one of three major
platforms: thermochemical, biochemical/fermentation, and catalytic chemical reactions).
This requires institutions and industry with expertise in chemistry, chemical engineering,
process and industrial engineering, and biorefinery operations. It also requires access to
pilot-plant and scale-up facilities able to process lab-developed chemicals and products at a
scale sufficient for downstream customers to test the potential product.
(2) Case-Study Examples of Biorefining and Biofuels Clusters
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Table 2.3.2 Case-Study Examples of Biorefining and Biofuels Clusters
Iowa, USA Brazil Colorado, USA
Description State Government, private industry and state university collaborations focused on building a world-class location for bioenergy and biobased product development and production.
A national industry cluster in bio-based ethanol production.
A cluster of national lab, university and industry resources coming together to build a biofuels and biorefining cluster in Colorado.
Focus Initial focus on building a significant base of first generation biofuels production facilities (ethanol from corn and biodiesel from soy). Complementary research focus on next generation biofuels, integrated biorefinery operations and value-added biobased chemical products.
Production of ethanol from sugar cane and advanced biotechnology and chemical engineering techniques to fully utilize sugar cane biomass.
Focus on maximizing production efficiencies.
Next generation biofuel technologies using plant biomass and algae.
Corporate
Relationships
Production sector in Iowa is corporate or farmer cooperative owned and operated.
There are 35 dry mill and 7 wet-mill ethanol processing plants in the state, plus multiple biodiesel operations and integrated biorefineries are developing.
The Brazilian experience has been government and corporate led, rather than university directed. Industry has been the primary investor, responding to demand signals stimulated by government policies (see below). Ability to implement actions greatly facilitated by size of semi-public PetroBras multinational corporation.
Multiple engaged companies. Formal engagements through the Colorado Renewable Energy Collaboratory, with key engagement by: Chevron; Cool Planet Energy Systems, Gevo, Rentech, Shell Global Solutions and Sundrop Fuels.
Government
Engagement
and Incentives
Significant State of Iowa support programs, including matching grants program for industry-university collaborations.
State of Iowa operates multiple incentive and industry support programs, usually in the
High mandatory national blend requirements (20-25%) for biofuels stimulates domestic demand.
Government fleet vehicles early adopters, including 100% ethanol vehicles. Plus promoted Brazilian
Presence of the U.S. Federal government‘s national lab focused on renewable energy (NREL) with large-scale specialized infrastructure, pilot plants and a new Integrated Biorefinery Research Facility. Also operates the
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Iowa, USA Brazil Colorado, USA
form of loans and/or forgivable loans, based in part on job creation, capital investment, the ability to meet certain wage standards, quality of employment, and economic benefits for the state and local community. Also operates a tax credit program for ethanol/biofuels production.
State biofuels infrastructure grants are available to help install alternative fueling infrastructure. Also provide alternative fuel vehicle demonstration grants.
manufacturing of flexible fuel vehicles.
Thermochemical User Facility.
Focused research programs at three public state universities (University of Colorado, Colorado State University and the Colorado School of Mines). These institutions, together with NREL and industry have formed the Colorado Renewable Energy Collaboratory.
State cleantech seed fund. Clean Technology Discovery Evaluation Grant Program. State operated Biofuels Research Grants. Plus state legislation to encourage biofuels/alternative fuels usage. State agencies required to purchase renewable/flex-fuel vehicles.
Commercializa
tion
Infrastructure
and Shared
Facilities
BEACON scale-up facility for biobased products development. Center for Crops Utilization Research pilot plants. Co-lab space in ISU Plant Sciences Institute and adjacent to campus Research Park with incubator facilities.
Significant innovation occurring within private industry labs without the need of extensive public infrastructure investment.
Several private and government/university R&D institutes provide support.
User facilities at NREL (including major pilot plant facilities) and access to university facilities under user agreements.
University research parks and incubator facilities.
Workforce
Assets
Co-located on university campus with access to undergraduate and graduate students.
Custom commercial biorefinery workforce education programs
The Brazilian government claims that the development of the ethanol industry has generated 1 million new jobs in the country.
The growth of the
Multiple engaged universities.
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Iowa, USA Brazil Colorado, USA
developed by Iowa Community College system.
industry has outstripped the ability of Brazil to supply domestic labor. Currently migrant labor used in the industry is over 200,000 persons.
Increasing use of mechanized planting and harvesting equipment led to programs to retain harvesters for downstream processing jobs.
Source: JICA Study Team
A notable emerging trend in North America is the repurposing of existing industrial chemicals
research facilities and assets to serve the needs of biofuels and biorefining R&D, piloting and
scale up. Three recent examples of this trend can be found in the Province of Ontario in Canada;
the State of West Virginia in the U.S., and the State of Michigan in the U.S.:
-In Ontario a former Dow Chemical research facility has been taken over by the City of Sarnia
and the County of Lambton and renovated to create the Bioindustrial Innovation Center. The
Center is on the Sarnia Lambton Campus of the University of Western Ontario and is managed,
under contract, by the University. The facility houses labs and pilot plant facilities and
industry is able to locate in the building to conduct research and pilot scale projects. A large
regional chemicals industry cluster helps link researchers and new start-up enterprises to
existing companies and scale-up infrastructure.
-In West Virginia, the State has taken ownership of the former Union-Carbide Research
Campus in South Charleston. This sprawling R&D complex includes offices, lab space,
multiple pilot-plant and scale-up facilities suited to a range of chemical and fuel development
projects. A non-profit chemicals R&D company, staffed by ex Union Carbine/Dow
technicians and engineers, is operating on the site and managing projects for clients using the
pilot plant facilities. The local community college and Marshall University are also operating
education programs on the site and providing customized job training.
-In Michigan, a 138,000 square foot building was donated to Michigan State University by
Pfizer Corporation. MSU has installed its Bioeconomy Institute into the building, complete
with offices, laboratory space and pilot plant facilities suited to a range of chemical
development work. The plant contains approximately 30 reactors ranging from 40 to 4,000
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liters together with centrifuges, driers, filters, condensers and other shared-user resources.
The building contains dedicated business incubator space, and the Institute is focused on three
themes in specialty chemicals, biomaterials and biofuels.
2.3.3 Biopharmaceutical Products Oriented Clusters
(1) General Characteristics of Biopharmaceutical Products Oriented Clusters
Work for Indonesia is focused on development of biopharmaceutical and functional nutrient
biomedical platforms (as opposed to, say, medical devices or health care technologies). As such,
the examples discussed below are focused on locations that are providing successful in
developing and attracting significant biopharma R&D and production investments.
In general, locations that are successful in biopharma operations share the following
characteristics:
-For those engaged in biopharma R&D and associated innovation they will typically be home
to one or more major biopharmaceutical corporation research locations and associated
spin-out enterprises, and/or home to major academic institutions (especially academic medical
centers with a co-located medical school) with a track-record in biomedical research. With
university-driven clusters they will often be focused on particular classes of drug products
(such as biologics, small molecule drugs, vaccines, diagnostics, etc.) or on products focused
towards particular applications or diseases (e.g. cancer therapeutics, animal vaccines,
infectious disease treatments, psycho-pharmaceuticals, etc.).
-Strong focus on commercialization of university research discoveries and providing access to
risk financing for new product development and new enterprise formation. Often tax
incentives will be used to advance R&D, commercialization and risk capital.
-They have developed a sophisticated system of assuring research labs and industry production
operations have access to a skilled workforce, trained in specialized GLP and GMP processes.
-They provide access to specialty service providers in provision of clinical trial services,
regulatory affairs, intellectual property protection and legal affairs.
-They provide an operating environment that is stable (reducing risks) and conducive to
protecting the intellectual property rights of innovative biopharmaceutical companies.
-It is common for there to be associated research park developments affiliated with universities
and research institutions given the need for access to specialized wet lab space that is typically
not provided by the commercial real estate market.
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Beyond the innovative biopharma sector clusters, there are also international clusters focus on the
far-less innovative production of generic drugs, vaccine, and an emerging bio-similars space.
Also there is the production of excipients – materials that are not the primary therapeutic
compound contained within a biopharma product.
(2) Case-Study Examples of Biopharmaceutical Products Oriented Clusters
Table 2.3.3 Case-Study Examples of Biopharmaceutical Products Oriented Clusters
Singapore Jordan Indiana, USA
Description Government-led focused strategy on growing biopharmaceutical industry in Singapore.
An emerging biomedical cluster supported by combined public and private efforts across pharmaceutical, contract research, hospitals and universities.
A statewide biosciences industry cluster development strategy.
Focus Singapore has also sought to attract the R&D operations of biopharmaceutical firms and support new firm formation through a comprehensive strategy of investing invested heavily in research and development (R&D) in concert with industry, undertaking significant workforce development initiatives, and providing commercialization support.
Jordan has enjoyed a growing biomedical cluster fueled by government policies to embrace economic reforms to integrate into the world economy, including enhancement of world IP standards. This focus on integration into the world economy has included international accreditation of hospitals.
In 2002, Indiana launched a focused, statewide life sciences cluster development strategy to realize its potential in the biosciences. A strategic plan developed by Battelle set out a comprehensive and integrated action agenda focused on: • Creating stronger
public-private partnerships
• Focusing investments in key research areas
• Supporting start-up companies
• Ensuring venture capital is available
• Addressing the lack of specialized facilities
• Building a skilled, life sciences workforce
• Raising the national reputation of Indiana
Corporate More than 30 companies, many
Long-standing, home-grown generic
Established industry base in
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Singapore Jordan Indiana, USA
Relationships well‐known multinational biopharmaceutical companies, have located R&D operations in Singapore.
This has enabled Singapore to enjoy strong industry growth, with pharmaceutical output increasing by 274 percent from 2000 to 2010.
pharmaceutical manufacturing industry of more than a dozen firms that were able to adapt to higher IP standards and are now very export oriented.
In last decade, a base of contract research organizations (CROs) for bioequivalence testing of generics has developed, which is now supporting a growing base of clinical testing of new drug candidates.
Also, Jordan has benefited from continued growth in medical tourism, led by its private hospitals, major academic hospitals, and the Royal Medical Services, which have obtained international accreditation.
biopharmaceuticals, led by presence of Eli Lilly and Roche, along with the largest orthopedic medical device cluster in the U.S. with companies such as Zimmer, DePuy and Biomet.
Since implementation of strategy, Indiana has experienced strong job growth well outpacing the nation.
Plus, robust new firm creation with 220 life science startups since 2004
Government
Engagement
and
Incentives
As of 2010, Singapore‘s annual expenditures in
biomedical sciences R&D exceeded S$1 billion
(US$1.25 billion). Singapore has achieved its goal of R&D expenditures of 2.5 percent of GDP and has now advanced the goal to 3.5 percent by 2015.
Extensive use of tax incentives, with many targeted towards innovation and R&D activities.
Establishment of selected research centers at Jordan Universities.
Development Areas Law of 2008 set out aggressive approach to attracting foreign investment for biomedical industries through development of mixed use educational and high tech zones in Jordan with significant incentives.
New tax credits – R&D credit and sales tax exemption, VC Investment, Patent Income Exemption
Focused growth of life sciences research capabilities with $600 million+ in major philanthropic grants to life sciences research universities and institutes
Commercial-
ization Infra-
structure and
Created a series of research institutes and industrial consortia organized outside the university sector and
First Middle Eastern nation to implement Trade-Related Aspects of Intellectual Property (IP) Rights (TRIPS) as it
Substantial levels of venture capital investment with $277 million invested in life sciences firms since
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Singapore Jordan Indiana, USA
Shared
Facilities
focused on industry-driven applied research.
Created the Biopolis Research Park, as signature place in which to co‐locate the research institutes with international industry.
A comprehensive commercialization effort successfully implemented with: 1) a dedicated technology transfer and commercialization arm to serve the research institutes; 2) initial proof-of-concept funding to validate technology as well as follow-on prototype funding; and 3) new enterprise counseling.
joined the World Trade Organization in 2000
Nascent infrastructure being put in place to support business formation and growth, such as for incubation and entrepreneurial support, largely in partnership between Jordanian government and foreign donors. Plus, upgrading technology transfer activities at universities, with support from the EU, to develop common IP policies and training for university staff in managing technology transfer.
2004, particularly at the seed stage.
Creation of IU Health bringing together IU Medical School and Clarian Healthcare System, has advanced a stronger capacity in translational research.
Workforce
Assets
Singapore works on parallel tracks of recruiting talent at all levels and developing indigenous talent. Makes extensive use of
scholarships and fellowships to foreign universities to grow its local base of researchers.
A strong theme of Singapore‘s talent programs is the development of physician‐scientists. Best known is Singapore‘s
flagship partnership with Duke University established in 2005.
Strong pipeline of talent through significant growth in university graduates in biomedical and clinical medicine fields over the last decade.
Creation of specific industry focused organizations for orthopedics, drug development, sports medicine, health IT and personalized medicine able to advocate for specialized education and training programs by colleges and universities.
Source: JICA Study Team
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2.4 Batam Polytechnic
2.4.1 Outline of Batam Polytechnic
Batam Polytechnic (Politeknik Negeri Batam: Polibatam) is the only State College in the area of
vocational education on trade and free ports of Batam, Bintan and Karimun in Riau Islands
Province. Besides located at one of the central areas of national economic growth, Polibatam is
also located in the leading edge region and the outer region of the Republic of Indonesia . The
rapid growth of the industry in Batam creates high demand for professionals and skilled workers,
so it is reasonable for the Batam Authority initiated the establishment of Polytechnic education
institution whose mission is scored for the needs of industrial workers in Batam.
At first, Polibatam is a private higher education under the Education Foundation established by
Batam Authority, Bandung Institute of Technology (ITB), Government of Batam City and
University of Riau. Along with the performance development and its achievements over a decade,
on October 18, 2010, the Indonesian Government through the Minister of National Education
Regulation No. 26 of 2010 stipulated that Polibatam officially became state college namely
Batam Polytechnic .
Application of Teaching Factory in Polibatam, which is a real problem-based learning in the
industry, is also expected to enrich the students' skills, confidence and real working habits. There
are four majors, Business Management, Electrical Engineering, Mechanical Engineering and
Informatics Techniques. Each department has a laboratory to improve the competence of
students28
.
2.4.2 Batam Techno Park
Development idea of Batam Techno Park begins of discussions between Batam Polytechnic and
business groups regarding the application technologies in the industrial city of Batam. Following
up the idea, Directorate of Goods Traffic of BP Batam (Badan Pengusahaan Batam: BIFZA
(Batam Indonesia Free Zone Authority)) in cooperation with the central government such as
Ministry of Research and Technology, Coordinating Ministry of Economic Affairs, Riau Islands
Province, ITB and Batam Polytechnic plans to construct facilities and technology innovation
center called Batam Techno Park. The concept is also in the framework of supporting engineering
and accountancy programs of the polytechnic, so that teaching factory activities could be a benefit
for the students, lecturers and SMEs by applying the technology being developed.
This plan has been discussed in both, central and local level, even BP Batam has also held
28 http://www.polibatam.ac.id/ ; www.bpbatam.go.id and other related articles
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discussions with UNESCO - Sector STP (Science Technology Park) to get input in terms of the
formation of the techno park. Batam Techno Park is a vehicle that is prepared to bring innovation
through synergy of academia, business, and government. This vehicle is also intended to enhance
the human resource capacity, as well as to foster new technology-based businesses. The Techno
Park will be doing a lot of research for the development of the animation industry and the
electronics industry in Batam. It is expected in the future to boost the growth of small industries
there.
On September 13, 2013, the Minister of Research and Technology launched Batam Techno Park
in Batam Polytechnic Auditorium. In the near future, Government of Riau Province, Government
of Batam City and BP Batam will sign the MoU related to the construction of facilities. For
development of technology, strong commitment of related ministries, governments and
organization will be expected.
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Chapter 3. Legal Framework
3.1 Legal Background
3.1.1 Legal Basis of the Project
JICA New Academic Research Cluster (NARC) Study Team has been conducting the survey on
the legal basis of NARC project. Since many of Research and Development (R&D) activities are
not profitable enough to be conducted as pure private business, the government
supports/incentives are inevitable to promote R&D activities. The main role of this project is to
promote R&D activities by providing decent R&D facilities for co-work between public and
private research institutions/companies; therefore, it is important to select the legal basis which
makes it possible for government to provide supports/incentives for the
development/construction of R&D facilities. In order to acquire government supports/incentives,
JICA Study Team proposed two project scheme alternatives in Chapter 8. One is the PPP Scheme
with government subsidy and another is Hybrid Scheme which is the combination of public
investment and private investment. The legal basis for the above-mentioned two project schemes
alternatives are as follows:
(1) PPP scheme, based on the Presidential Regulation (―PR‖) No.67 of 2005 (which has been
amended by PR No.13 of 2010 and PR No.56 of 2011) (herein after ―PR67/2005PPP
Regulation‖),
(2) Hybrid scheme, Presidential Regulation No.54 year 2010 on Government Procurement of
Goods/Services (Hereinafter ―PR54/2010‖) and Government Regulation No.6 year 2006 on
State/Regional Assets Management (hereinafter ―GR6/2006‖).
The legal issues regarding to PPP Scheme with subsidy and Hybrid Scheme shall be discussed in
3.2 and 3.3. It is also important to provide the incentives to R&D activities by itself in order to be
more attractive for the potential tenants of NARC facility and to be more competitive among the
neighbor countries. The incentives for R&D activities shall be discussed in detail in Chapter 4.
3.1.2 Legal Capacity of BPPT and State Universities as NARC Project Implementation
Agencies
(1) Applicability of BPPT as Contracting Agency
BPPT is Non-Ministrial Government Agency (Lembaga Pemerintah Non-Kementerian or
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―LPNK‖) (PD103/2001) under coordination of Ministry of Research and Technology
(MEN-RISTEK). Based on Article 60 of PD 103/2001, BPPT has authority, as follows:
1) Preparation of national plan at the macro level related to its sector
2) Preparation of policy in its sector to support development at the macro level
3) Stipulation of information system in its sector
4) Other authority in accordance with laws and regulations, such as preparation and
implementation of certain policy in assessment and application of technology
5) Submit recommendation of application of technology and conduct audit of technology
The main mandate of BPPT is stipulated under PD 103/2001. Pursuant to mandate of BPPT as
described in section D, the statute of BPPT does not expressly specify that BPPT is mandated to
carry out R&D infrastructure. However, it seems to be that this mandate is implied, because BPPT
is generally authorized to carry out assessment and application of technology29
.
(2) Applicability of Sate Universities as Contracting Agencies
1) Transition of Legal Status of State Universities
Since 1989, the Status of State Higher Educational Institutions including state universities in
Indonesia has been transited into 4 forms as follows:
a) PTUPT (Unit PelayananTeknis/ Technical Implementation Unit);
b) PTBHMN (BadanHukumMilik Negara/ The State-Owned legal Entity);
c) PTBHP (BadanHukumPendidikan/ Education Legal Entity);
d) PTBLU (BadanLayananUmum/ Public Service Entity); or
e) PTBH (BadanHukum/ legal Entity) (Optional based on evaluation)
In 1999, considering the increasing operation costs and needs for implementation of main
functions, the status of State Higher Educational Institutions transited from PTUPT to
PTBHMN by GR 61/1999. PTBHMN is an independent legal entity which can conduct
business activity that would support the main function of the State Higher Education.
In 2003, the autonomy of State Higher Educational Institutions was reinforced by replacing
PTBHMN to PTBHP through Law 20/2003 (later by Law 9/2009). The status of PTBHP
allowed State Higher Education Institutions to manage their income and expenditure
independently. This status raised pros and cons in the society. The societies who think that
the PTBHP status will make liberalization and capitalization of State Higher Educational
29 See APPENDIX 3-2 for legal comments.
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Institutions and will increase the cost of education raised the issue to the constitutional court
to convey their objection on PTBHP status of higher education.
After the process of review, this objection was accepted by the Constitutional Court.
Therefore, the law lost validity by the decision of Constitutional Court of Indonesia Number
11-14-21-126-136/PUU-VII/2009 dated March 31, 2010. This court decision makes the
government issue GR 17/2010 (amended by GR 66/2010 and GR 17/2010) to convert the
status of State Higher Educational Institutions to PTBLU whose autonomy is limited.
The law which provides the autonomy to the State Higher Educational Institutions was
again enacted on 10th August 2012 (Law 12/2012) which would convert the PTBLU to
PTBH30.
2) Current Legal Status of State Universities
After the issuance of Law 12/2012 on 10 August 2012, then on 28 August 2012 the national
government has issued Government Regulation No.74 of 2012 on Amendment of
Government Regulation No.23 of 2005 on Financial Management of Public Service Agency
(BLU) (herein after "GR 74/2012")31. GR 74/2012 has stipulated that financial management
in IPB and ITB are implementing financial management of BLU with status full BLU.
Article 37B of GR 74/2012 provides that all assets (including state assets that stipulated as
preliminary assets of IPB and Airlangga University) of IPB and ITB are transferred to
Ministry of Education and Culture (herein after "MEC"), in which the transfer of assets will
be further regulated under MOF Regulation.
Based on GR 74/2012, currently, status of IPB and ITB are full BLU. In Article 65
paragraph (2) of Law 12/2012 provides that national universities which implement financial
management of BLU have governance and authority of management in accordance with
laws and regulations on BLU.
Implementation of autonomy in universities may be given selectively from MEC based on
performance evaluation of BLU or by establishment of PTN-BH to produce high-quality
higher education.
Under Law 12/2012, universities have their own autonomy to manage its agencies by
themselves as implementation center of Tridharma. Autonomy of universities shall conduct
based on the following principles:
a) Accountability
30 See the APPENDIX 3-3 for the comparison between the transition statuses of State Higher Education. 31 The description of Applicability of State University as Contracting Agency was cited or summarized from the
Legal Review by HJ. See APPENDIX 3-2.
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b) Transparency
c) Nonprofit
d) Quality assurance
e) Effectiveness and efficiency
Elucidation of Article 63 of Law 12/2012 confirms the meaning of nonprofit principle that
universities conduct activity which have purpose not pursue profit, so then all result of net
income from such activity must be reinvested for universities to improve capacity and/or
quality of education service.
The main mandate of IPB and ITB as universities is stipulated under Law 12/2012. The
main mandate of IPB and ITB includes:
a) Development of capability and creation of character and civilization of nation in order to
educate dignified life of the people
b) Development of academic activity with innovative, responsive, creative, qualified,
competitive, and cooperative through implementation of Tridharma
c) Development of science and technology with regard and implement of humanities value
Law 12/2012 does not provide specific mandate for IPB and ITB to conduct R&D
infrastructure. The implementation regulation of Law 12/2012, which is currently under
preparation by MEC may prescribe the mandate of state universities.
JICA Study Team assumes the IPB and ITB as PTBH (Perguruan Tinggi Berbadan
Hukum/University with Legal Entity) would be given mandate including the development
of R&D facility as IPB is currently involved with the shopping mall business.
3) Consistency with RP 67/2005
The Government Contracting Agency (herein after ―GCA‖) is the contracting body to make
a PPP contract with private business entity. Also, the GCA has a responsibility to provide
necessary government support such as provision of land and VGF.
In this NARC project, both BPPT and the state universities are expected to be GCA.
However, the current PR67/2005 does not prescribe state universitiy as a GCA for PPP
project (Article 2 (1) and (2) of PR67/2005). If the state university cannot be a GCA, BPPT
shall be the only one GCA. In this case, the right and obligation of the project would be
shared only between BPPT and SPC under PPP contract. Separately from PPP contract,
BPPT would share the right and obligation with state universities based on the cooperation
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agreement32.
JICA Study Team believes that the most simple and reliable contractual structure should be
the structure that BPPT together with state universities shall would be GCA. Study Team
recommends the state universities to submit the proposal to amend PR67/2005 to include
state university as GCA for PPP project.
3.1.3 Legal Issues on Project Sites
(1) Utilization of Land of State for NARC BPPT Site
The land of NARC BPPT site is owned by the State. Regarding to the interview to BPPT, the right
to use the land is hold by RISTEK and shall be transferred to BPPT and/or a private company.
RISTEK need prior approval from MOF for the contribution of the land to a private company.
(2) Utilization of Land of State for NARC IPB Site
NARC IPB site is owned by the State and IPB is given the right to use the land. As mentioned in
3.1.2, IPB shall be given the autonomy in the form of legal entity (PTBH) based on Law 12/2012.
PTBH is regulated under Law 12/2012. Based on Article 65 paragraph (3) of Law 12/2012, PTBH
has governance and authority as follows:
1) Preliminary assets in the form of separated state assets except for land
2) Governance and independent decision making
3) Unit that implement accountability function and transparency
4) Rights to manage fund independently, with transparency and accountablity
5) Independent authority to appoint and dismiss of lecturers/education manpower
6) Authority to establish business entities and develop endowment fund
7) Authority to open, implement, and close study program
As shown in 1) above, the law indicates that no land will be regarded as owned by PTBH. IPB
also need prior approval from MOF for the contribution of the land to a private company.
(3) Utilization of Land of Bekasi Regency for NARC ITB Site
Based on the interview to ITB, the ownership of the land where NARC project is proposed to be
conducted is currently under Bekasi Regency. However, Bekasi Regency and ITB had the
agreement, ―Cooperation Agreement between Government of Bekasi District and Bandung
Institute of Technology about ITB Campus Development and Education Development Activities,
32
See 8.2 for the alternative project scheme and APPENDIX 3-2 for the legal review on each alternative structure.
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Training Research and Community Social Responsibility in Bekasi District (herein after
―Bekasi-ITB Agreement‖)‖ and ITB shall be given the right to use the land of Bekasi Regency
based on the Bekasi-ITB Agreement33
.
Article 13 of Bekasi-ITB Agreement prescribes that Bekasi Regency shall hand over the
management of land and building to ITB for the purpose of educational development activities,
training research and community service in Bekasi. However, it does not prescribe about
sub-leasing the land to the third parties. In order for a private company to use the land,
Bekasi-ITB Agreements should be amended before the procurement process would start.
Also, Bekasi-ITB Agreement prescribes that the ownership of the building on the land which
Bekasi lend to ITB shall be transferred to Bekasi Regency (Article 12 of Bekasi-ITB Agreement).
Therefore, when the private business entity builds the NARC facility on the site of ITB, the
ownership of NARC facility might be transferred to Bekasi Regency. Since the NARC project
assumes project finance from financial institution, it would be required to set the collateral on the
NARC facility. If the NARC facility were owned by Bekasi Regency, it would be difficult to set
the collateral on the NARC facility, which makes difficult for the private business entity to get
finance. ITB need to amend Bekasi-ITB Agreements in this issue as well to keep the ownership of
NARC for the private business entity during the project period.
3.1.4 Other Legal Issues
(1) Restriction of Foreign Investment
Foreign investment is prohibited or restricted for a certain sector in Indonesia. The list of sectors
which are prohibited or restricted is prescribed in PR 36/2010, which is called ―Negative List.‖
JICA Study Team visited BKPM on September16 2013 and sent the confirmation letter for the
relevance of NARC to the Negative List on Sep.24 2013. We received a tentative answer from
BKPM saying the NARC might be categorized as a ―Industrial Park‖ and there will be no
restriction for foreign investors. In another word, foreign investor can hold 100% of share of the
SPC which shall be established in NARC Project.
If the NARC project shall be conducted under SEZ law, the Negative List shall not be applied
except for the business fields that are reserved for small and medium companies and cooperatives
(Article 39 of Law 39/2009).
(2) Restriction of Foreign Borrowing
When the private company registered in Indonesia make a loan from overseas, the private investor
are required initial registration and monthly report to the Bank of Indonesia (12/24/PBI/2010,
33
See APPENDIX 3-4 for the concerned articles of Bekasi-ITB Agreement.
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12/19/Dint, 13/1/Dint).
(3) Overseas Remittance
Private company can send the cash to overseas without restriction, however, reporting to Bank of
Indonesia is required when sending over US$ 10,000.
(4) Restriction of Land Utilization by Foreign Company
There are three types of basic right regarding land.
1) Ownership (Hak Milik)
2) Right to construct (Hak Guna Bangunan: HGB)
3) Right to use (Hak Pakai)
It is prohibited for foreign companies to own the land in Indonesia, therefore, the project which
involves construction usually acquires HGB.
(5) Establishment of Special Purpose Company
PPP contract would possibly be made between public sector and Special Purpose Company (SPC)
which is most likely in the form of Perseroan Terbatas (PT: Limited Company). PT is the form of
the company which the shareholders have limited liability. The shareholders shall not have an
obligation for the debtor of the company (Corporate Law Article 3 (1)). Since NARC project
assume project finance, PT would be the most applicable as SPC.
There are two types of PT. One is open company (PT Terbuka) and another is closed company (PT
Tertutup). In case of closed company, the minimum shareholders are required as two (Corporate
Law Article 7 (1)) and minimum capitalization value is Rp.50,000,000. Shareholders can be
national or international companies.
(6) Dividend and Reserve
Dividend policy shall be decided in the shareholders meeting. Amount of dividend shall be based
on the number of shares; however, the company also can issue the preferred stock, which dividend
shall be given more preferably than common stocks.
The company is required to reserve the legal retained earnings until the total amount reach to the
20% of paid in capital (Corporate Law Article 70 (1)3). This is mandatory as long as the company
has cumulative surplus (Corporate Law Article 70 (2)).
3.1.5 Issues of Current Legal Status
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Since this kind of academic research based R&D Project is the first case in Indonesia, many legal
burriers need to be tackled, such as the implementation organization structure and land status
mentioned above. Moreover, R&D business mainly aims to create new technologies as well as
products, and not create direct benefit to the R&D business investor in the short term. Therefore,
commonly required strong government support both for financial and non-financial issues to
attract and accelerate R&D investment to value-adding national economic value and international
competitiveness.
3.2 Legal Issues on PPP Scheme with Subsidy
3.2.1 Applicability of PPP Regulation
PR 67/2005 is the basic regulation regarding to PPP in Indonesia and prescribes about the targeted
infrastructures, contracting agencies, possible government supports such as VGF and so on. The
NARC Project requires the government fiscal supports in order to attract more tenants from
industry by setting low tenant fee. Therefore, it is inevitable for the NARC project to receive
government supports such as VGF. VGF is the facility which would be available for the PPP
project under PR 67/2005.
PR 67/2005 does not prescribe ―Infrastructure for Innovation and R&D activity‖ as its targeted
infrastructure (Article 4(1) of RP 67/2005). Based on the legal review by Hermawan Juriarto
(herein after ―HJ‖), the list of infrastructures prescribed in PPP regulation is not conclusive.
However, HJ commented that Ministry of Finance most likely would not provide VGF unless
―Infrastructure for Innovation and R&D activity‖ would be listed in PR 67/200534
.
BPPT and JICA Study Team had a discussion with the officers from Directorate of Public Private
Partnership (PPP) Development, BAPPENAS (herein after ―PPP-BAPPENAS‖) on July 26 2013
regarding to the applicability of PPP regulation for the NARC project. BPPT and JICA Study
Team were recommended from PPP-BAPPENAS that BPPT should submit the proposal to
include ―Infrastructure for Innovation and R&D activity‖ as a targeted infrastructure in PR
67/2005 (herein after ―Amendment Proposal‖) to Committee on Policy for the Acceleration of
Infrastructure Development (KKPPI).
BPPT supported by JICA Study Team prepared the Amendment Proposal to KKPPI and
submitted it to KKPPI at the beginning of September, 2013. BPPT and Study Team were informed
that the concerned government ministries are currently collecting information for the amendment
of PR67/2005. The actual amendment of PR 67/2005 is scheduled in 2014.
34
See APPENDIX 3-1 for the Legal Review by HJ.
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3.2.2 Legal Issues on PPP Procurement
(1) Contents of Pre-Feasibility Study Required by PPP Regulation
PPP procurement procedure is prescribed in BAPPENAS Regulation No.3 of 2012 on The
Operational Guidelines Manual for The Implementation of Public Private Partnership in
Infrastructure Provision (herein after ―OGM‖) and its attachment (herein after ―OGM
Attachment‖).
Regarding to Article 4 of OGM, the PPP Project Development Cycle (the PPP Project Cycle) shall
be carried out in the following phases:
Planning of PPP Project
1) Preparation of PPP Project
2) Transaction of PPP Project
3) Implementation Management of PPP Contract
Article F. of OGM Attachment prescribes that the Pre-Feasibility study shall be conducted in 1)
Preparation of PPP Project, and the document generated during Project Preparation Phase
comprises of:
1) Report of the Preliminary Appraisal of Pre-Feasibility Study (the Outline Business Case)
2) Report of the Project Readiness
Report of Preliminary Appraisal of pre-Feasibility Study shall at least include:
1) Executive Summary
2) Introduction, covering
-Project‘s Background
-Objectives/Targets
3) Legal and Institutional Study, covering
-Analysis of Law and Regulations
-Institutional Analysis
-Conclusion
4) Technical Study, covering
-Technical Analysis
-Site Enablement
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-Basic Engineering Design
-Scope of PPP Project
-Output Specifications
-Conclusion
5) Project Feasibility Study, covering
-Analysis of Social Benefit Costs
-Market Analysis
-Financial Analysis
-Risk Analysis
-Tariff Structure Analysis
-Conclusions
6) Environmental and Social Study, covering
-Environmental Analysis
-Social Analysis
-Plan of Land Acquisition and Resettlement
-Conclusions
7) Cooperation Form (Choice of Modality Review in Infrastructure Provision
8) Appraisal of the Needs for Government Support and / or Government Guarantee, covering
-Appraisal on Government Support
-Appraisal on Government Guarantee
-Conclusions
9) Conclusions and Recommendations
10) Attachments
(2) Possibility of Unsolicited Measure
Unsolicited measure as direct appointment is not allowed under PR 67/2005, however, PR
67/2005 prescribes the cooperation project based on initiative of business entities which shall be
applicable under the following criteria:
1) Not included in the sector related master plan
2) Technically integrated with the sector related master plan
3) Financially and economically feasible
4) Does not need any Government Support in the form of Financial Fiscal Contribution
(Article 10 of PR 67/2005)
If the initiative of business entities is accepted by the government, the project shall be
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compensated by the following measures:
1) Added value;
2) Provision of right to make an offer by Business Entity or Foreign Legal Entity initiator to
the best tender participant (right to match), in accordance with the appraisal result in the
tender process; or
3) Purchase of the Cooperation Project initiative including the intellectual property rights
thereof by the Minister/Chairman of the Institution/Head of the Region or by the tender
winner
Based on the interview to BAPPENASS on July 26, the NARC project would not be the
cooperation project based on initiative of business entities since the NARC project is listed in
MPA master plan which is considered as one of the sector related master plan. Also the NARC
project requires the government financial fiscal contribution. Therefore, it is clear that the NARC
is not entitled to receive above mentioned compensation from the government as a cooperation
project based on initiative of business entities under PR 67/2005. Also, under the SEZ law, the
selection of business entity as a partner of PPP project shall be under the public procurement
regulation.
3.3 Legal Issues on Hybrid Scheme
3.3.1 Applicability of PR54/2010 and GR6/2006
In order to implement Hybrid scheme in the project, mainly two types of contracts need to be
made; one is EPC contract for the construction of Incubation and Support Center and another is
BOT contract for DBFO of Research Center (including design of Incubation and Support Center).
The legal base of the EPC contract is Presidential Regulation No.54 year 2010 on Government
Procurement of Goods/ Services (Hereinafter ―PR54/2010‖). It seems to be no legal obstacle for
this EPC procurement.
On the other hand, the legal basis of BOT contract would be Government Regulation No.6 year
2006 on State/Regional Assets Management (hereinafter ―GR6/2006‖). GR6/2006 allows the
utilization of state or regional government property for private as BOT scheme with the following
condition (Article 27).
- The facility which private develop shall provide the public services
- Not funds are provided from State and Regional government‘s budget.
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Since the BOT contract of Research Center would provide public services and would not require
public budget, it would clear the above-mentioned conditions. Also no other major legal obstacles
are found.
3.3.2 Legal Issues on Hybrid Procurement
(1) Budgeting for Construction of Incubation Center and Support Center
In case of PPP Scheme with government subsidy, BPPT can be the only one GCA because
PR67/2005 does not prescribe national university as GCA. However, for the hybrid Scheme, not
only BPPT but also IPB and ITB can be GCA. If the all parties above have a role of GCA, each
party needs to apply for the budgeting of construction of Incubation Center and Research Center.
If only BPPT would have the role of GCA, only BPPT would apply for the budget for the
construction of above-mentioned facilities. In this case, the assets funded by APBN (using
BPPT‘s budget) will become the State assets (barang milik negara) registered under BPPT‘s name
as the asset user (pengguna barang).
(2) Budgeting for Non-academic Facility for Universities
IPB and ITB (with its status as PTBH) are allowed to propose for funding from APBN for the
implementation of higher education (Art 51(1) of GR 65/2013 and Art 91(1) of GR 66/2013).
However, there is no express provision for funding for non-academic purposes (although
generally IPB and ITB are allowed to conduct investment with commercial motive). It is assumed
that IPB and ITB are allowed to propose for APBN support for its investment as long as the
program is approved in the APBN discussion. If the investment by IPB and ITB is using the
funding from APBN, then the procurement of the goods and services must follow PR 54/2010 (as
amended).
(3) Joint Procurement
Based on Presidential Regulation No.54 of 2010 concerning Government Procurement of
Goods/Services as severally amended and most recently by Presidential Regulation No.70 of
2012 ("PR 54/2010"), ministry, government agency (BPPT), regional government, government
institution (IPB and ITB) may conduct joint procurement through joint procurement contract
(kontrak pengadaan bersama) (Article 50 paragraph and Article 53).
In elucidation of Article 53 paragraph (2) PR 54/2010, the joint procurement contract is
conducted in order to implement goods/service procurement, which fund originated from several
ministries, government agencies (BPPT), regional government, government institution (IPB and
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ITB), with different source of funds.
Article 53 paragraph (4) PR 54/2010 states that the responsibilities for budget in joint
procurement contract, is to be regulated in a certain joint funding agreement between the parties.
(4) Possibility of B to B Contract between GCA and the Private
There is a question if BPPT and Universities can have Business to Business contract for the
Research Center since there is no subsidy injection.
On the assumption that the land constitutes "State assets" or "region‘s assets" (i.e. land owned by
the state or by regional government), then BPPT/IPB/ITB cannot establish business to business
contract for BOT of the research center as well as O&M.
As a government agency, BPPT must follow GR 6/2006 in relation to optimization of state assets
under its control. GR 6/2006 sets out the minimum provisions in BOT agreement between
government and the private (Article 29 paragraph (5)). GR 6/2006 also sets out the minimum
obligation for private partners to pay fixed contribution to state/region account in every year
during operation period, which the number of amount based on calculation by the team
established by the Minister of Finance (in case of State assets) and Governor/ Regent/ Mayor (in
case of region‘s assets).
The Universities (IPB and ITB), as PTBH, have preliminary assets from separated state assets.
The separated state assets become the Universities assets and registered under its name. The
separated state assets do not include the land which given by state. Such land is still under the
name of government (state assets), but the revenues from utilization of such land become those of
the Universities (elucidation of Article 65 paragraph (3)a, Law 12/2012). It is considered that the
rights for universities to make decision independently and for authority to manage fund
independently are only applied to all assets under Universities‘ name, not to state or region assets.
Therefore, the Universities can have B to B contract with third parties, to the extent the contract is
not related with the use of state assets or region assets. As long as the assets are classified as state
assets, then the use of state assets shall follow the provisions on utilization of state/region assets
(GR 6/2006).
3.4 Alternative Legal Basis
3.4.1 Joint Venture between Government and Private Entities
The national government could potentially enter into a joint venture with private entities in order
to develop the Project. The capital participation of the national government in the joint venture
can be made by making cash injection or in kind contribution (land or otherwise). In return to such
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participation, the national government (through the Ministry of State Owned Enterprises) will
own certain shares in the project company.
In order to make the participation, the national government will need to obtain approval from the
parliament (Dewan Perwakilan Rakyat or "DPR") and a promulgation of a government regulation
(peraturan pemerintah).
JICA Study Team believes that the hurdle to obtain approval from the parliament is high.
3.4.2 Special Economic Zone (SEZ) Framework
(1) Applicability of SEZ Law
SEZ is regulated under Law No.39 of 2009 on Special Economic Zone (herein after "Law
39/2009") and Government Regulation (herein after ―PP‖; peraturan pemerintah) No.2 of 2011 on
Implementation of Special Economic Zone (herein after "PP 2/2011")35
in which was amended
by PP No.100 of 2012. SEZ is the defined area with certain border in the jurisdiction of Republic
of Indonesia which is designated to implement certain economic function and obtain certain
facility. Under PP 2/2011, a SEZ may, among others, be designated for the purposes of technology
development (including activities for research and technology, design and engineering, applied
technology, development of software and technology information related services) (Article 3 of
Law 39/2009).
Development, including land acquisition and physical construction, of SEZ may be financed by:
1) Business entity (private (PT), BUMN, BUMD, cooperative, or joint venture establish to
manage SEZ);
2) Cooperation of national government, regional government, and business entity (public
private partnership);
3) State budget and/or regional budget; and/or
4) Other legitimate sources in accordance with laws and regulations.
As noted above, a business entity (private entity) is allowed to propose for an establishment of
SEZ, and in which case such private entity may be immediately appointed as the SEZ developer
without the need for public tender. However, if the SEZ is proposed by private entity, then the land
acquisition and all financing of the SEZ will become the full responsibility of the appointed
business entity (SEZ developer).
A location to be designated as a SEZ must satisfy the following criteria:
35 The description of SEZ framework was cited or summarized from the Legal Review by HJ (See APPENDIX 3-1)
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1) Compliant with spatial plan and do not potentially harm to protection area (kawasan
lindung)
2) There is a support from the related provincial/regency/municipal government to determine
the project as SEZ
3) Location is close to international trading hub or near to international shipping lanes in
Indonesia, or located in an area with prime resources potentials
4) Having clear boundaries
The SEZ will be determined by President and stipulated by issuance of government regulation
(PP).
(2) Procedure for SEZ Application
Since SEZ application is necessary to be proposed by the executing organization with local
government agreement, the procedure shall be taken by each NARC project will be as listed
below.
1) Establishment of an Executing Organization
It is necessary to establish an executing organization for each NARC project site, which
shall involve the BPPT for the PUSPITEK site, IPB for the Leuwikopo site, and ITB for the
Deltamas site.
Based on the Article 5 of Law 39/2009, the executing organization may form as:
a) Business entity private enterprise (PT), state owned enterprise (BUMN: badan usaha
milik Negara), regional owned enterprise (BUMD: badan usaha milik daerah),
cooperative, or joint venture (JV) established to manage SEZ;
b) Regency/municipal government; or
c) Provincial government.
Therefore, BPPT, IPB and ITB shall establish the executing organization as a PT,
cooperative or JV.
2) Acquisition of Local Government Support as an SEZ Development Agreement
Document listed below are necessary to be attached to the SEZ application as an agreement
from the Local Government for the SEZ development.
a) Land use permit;
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b) Approval and recommendation letter; and
c) Incentive from the Local Government, if any.
3) Proposal/Application to the SEZ National Committee (SEZNC)
To fulfill the condition to be selected as for SEZ, it is necessary to have an initial meeting
between the executing organization and SEZNC. The contents of the initial meeting will be:
a) possibility and timing to be selected as SEZ, b) advice on preparation of the proposal, and
c) confirmation of necessary support from the central government authorities to accelerate
the selection procedure.
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Chapter 4. Incentive Policy
4.1 Overall Incentive Policy for Research and Industrialization
(1) Current Incentive Laws and Regulations for R&D
The incentive provided by the government of Indonesia for research and development activities
conducted by the business entities is mentioned in the Government Regulation (GR) No. 35 of
2007. The forms of incentives are; taxation, customs, and/ or technical assistance for research and
development. Also, Law No.36 of 2008 prescribes tax incentive for R&D.
The further regulation on the incentive, especially for the incentive in the form of technical
assistance for R&D is regulated in the Minister of Research and Technology of Republic
(RISTEK) Regulation No. 1 of 2012 on Technical Assistance for Research and Development to
Business Entities. RISTEK Regulation 1/2012 prescribes that the incentives provided by the
government for the business entities that conduct R&D activities in the form of technical
assistance by placing the experts and utilizing laboratory facilities in R&D institution.
Besides incentive to the business entities, the R&D institutions which provide technical assistance
for R&D can be granted financial support from government and regional government budget
( Article 17 & 18 of RISTEK Regulation 1/2012).
Table 4.1.1 List of Laws and Regulations regarding to Incentives for R&D in Indonesia
Laws/Regulations Numbers Covered Area Outline of Incentives
Law of Government of Indonesia No 18 of 2002
National System of Research, Development and Application of Science and Technology
Tax relief, risk mitigation, rewards and recognition, or other incentives that can encourage funding for R&D activities
Government Regulation (GR) No. 35 year 2007
Allocating Some Portion of Revenue of Business Entities to Improve the Capability of Engineering, Innovation and Technology Diffusion
Tax incentive, customs, and/ or technical assistance for R&D
Law of Government of Indonesia No. 36 of 2008
Income Tax Gross Income deduction for R&D activities costs
Government Regulation (GR) No. 93 of 2010
Donation for National Disaster, Donation for Research and Development, Donation for Education Facility, Donation for Sport Coaching, and Social Infrastructure Development Cost which are Deductible from Gross Income
Gross Income deduction for donation for R&D activities
Government Regulation No. 52 of 2011
Income Tax Incentive for Capital Investment in Certain Areas and/ or Certain Regions
To domestic entities taxpayers in certain business areas : reduction in net income by
236
Laws/Regulations Numbers Covered Area Outline of Incentives
which is a second amendment of Government Regulation No. 1 of 2007 (the first amendment was Government Regulation No. 62 of 2008)
30% (thirty percent) of the Capital Investment, charged for 6 (six) years respectively by 5% (five percent) per years; Acceleration of depreciation and amortization imposition of Income Tax on dividends paid to foreign tax subject by 10% (ten percent), or a lower rate under the applicable Agreement of Double Taxation Avoidance losses compensation for longer than 5 (five) years but not more than 10 (ten) years .
Minister of Research and Technology of Republic of Indonesia Regulation No. 1 of 2012
Technical Assistance for Research and Development to Business Entities
placement of experts, and / or utilization of laboratory facilities in R & D institutions
Source: JICA Study Team
(2) SEZ
There are several facilities in the SEZ that can be enjoyed by investor or business entity which
conduct business activities. Every taxpayer which conducts business activities in the SEZ will get
facility of income tax and also can be added in accordance with zone characteristics (Article 30 of
Law 39/2009). Tax facility also may give to the investor in certain period in the form of reduction
of building tax (Article 31 of Law 39/2009). Import of goods to SEZ may get facilities in the form
of:
1) Suspension of import duties;
2) Exemption of tax, to the extent such goods are raw materials and production supporting
materials;
3) Exemption of value added tax or sales tax on luxury goods for taxable goods; and
4) No admission for import income tax.
In addition, every taxpayer which conducts business activities in SEZ may be given incentives in
the forms of exemption or reduction of regional tax and tax retribution in accordance with laws
and regulations in tax (Article 35 of Law 39/2009). However, it necessary to have discussion and
negotiation with the relevant government authorities, such as Ministry of Finance for the fiscal
incentives and Local Government for the simplify procedures, by each SEZ executing
organization separately.
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Since no platform for the figures on listed possible incentives above, the actual incentives in
surrounding countries below can be utilized as a reference for the negotiation.
Table 4.1.2 Fiscal Incentives Provided by Neighboring Asian Countries
Country
Basic
Corporate
Income
Tax Rate
Incentives on
Corporate Income
Tax
Incentives on
Import Duties/Customs
Tariff
Other Incentives
China 25% For investors:
Exemption for the first
2 years and tax at the
rate of 12.5% (50%
reduction) for the next
3 years for high
technology industries
in SEZ. For certain
projects in basic
infrastructure,
environment
protection and energy
there is ―3+3‖ years
tax holiday. Under
certain terms
enterprises investing
in integrated circuits
production can get a
―5+5‖ years tax
holiday.
As for high
technology industries,
a reduced rate of 15%
is eligible and an
additional 50%
deduction for R&D
expenses is applicable
regardless of location.
Exempted from
import duties on
imported capital
equipment in SEZ and
Economic and
Technological
Development Zone
(ETDZ) and High
Technological
Development Zone
(HTDZ).
Business tax is
exempted under some
conditions.
238
Country
Basic
Corporate
Income
Tax Rate
Incentives on
Corporate Income
Tax
Incentives on
Import Duties/Customs
Tariff
Other Incentives
Korea 22% For investors:
Exemption for 5 years
and follow with 50%
reduction for 2 years
for specific sector
under the Restriction
of Special Taxation
Act. As for Free
Economic Zone
(FEZ), exemption for
5 years and then 50%
reduction for 2 years
are offered.
For developers of
FEZ: Exemption for 5
years and follow with
50% reduction for 2
years.
For investors and
developers: Exempted
for 3 years from
imported capital
goods.
For investors and
developers: Local tax
(acquisition/
registration/ property
tax) is exempted or
reduced based on
conditions. Cash grant
is provided under
several requirements.
India 40% For investors:
Exemption for first 5
years, 50% reduction
for next 5 years in
SEZ. Exemption for
Central Sales Tax.
Exemption from
Service Tax.
For developers:
Exemption on income
derived from the
business of
development of the
SEZ for 10 years.
Exemption for Central
Sales Tax. Exemption
from Service Tax.
Exemption from
dividend distribution
tax.
For investors and
developers: Duty free
import/domestic
procurement of goods
for development,
operation and
maintenance of SEZ
units.
For investors and
developers: Service
tax and commodity
tax are exempted
based on the
conditions in SEZ.
Also, VAT is
exempted in several
provinces.
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Country
Basic
Corporate
Income
Tax Rate
Incentives on
Corporate Income
Tax
Incentives on
Import Duties/Customs
Tariff
Other Incentives
Thailand 30% For investors: 100%
exempted for 3 years
in Bangkok
Metropolitan Area, 7
years in the suburban
provinces and 8 years
in other provinces.
For developers: 100%
exempted for 8 years
if the zone is
designated for
software development,
high tech industries or
agro-processing.
100% exempted for 3
years in Bangkok
Metropolitan Area, 7
years in the suburban
provinces and 8 years
in other provinces for
other types of zones.
For investors and
developers: Exempted
or reduced from
import duties on
imported machinery,
equipment, etc. that is
designated by BOI.
For investors and
developers: VAT for
imported capital
goods is virtually
exempted. Deduction
of transport cost and
utility cost from
taxable income under
some conditions.
Malaysia 27% For investors:
Exemption of 70% of
income for 5 years if
Pioneer Status is
applicable, Exemption
of 100% for 10 years
if Multimedia Super
Corridor Status,
Exemption of 100%
for 8-10 years in SEZ
in East Coast
Economic Region
(ECER-SEZ).
For developers:
Exemption of 100%
for 5-10 years if
developing
infrastructure of
industrial park and
SEZ or undertaking
the project in ECER.
For investors and
developers: Exempted
from import duties on
components,
machinery and
equipment that are not
produced locally in
ECER-SEZ.
If no income tax
holiday, alternatively
Investment Tax
Allowance (ITA) shall
be offered; (a) For
enterprises that hold
Pioneer Status, deduct
60% of capital
investment against
70% of income for 5
years, and (b) For
enterprises that hold
Multimedia Super
Corridor Status and
enterprises in
ECER-SEZ, deduct
100% of capital
investment against
100% of income for 5
years.
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Country
Basic
Corporate
Income
Tax Rate
Incentives on
Corporate Income
Tax
Incentives on
Import Duties/Customs
Tariff
Other Incentives
Vietnam 25% For investors: 100%
exempted for 2 years
in the promotion area,
4 years in the special
promotion area and
special promotion
sectors, followed by
50% reduction period
in 4-9 years.
For developers: The
same incentives will
be offered to
developers.
For investors and
developers: Exempted
from import duties on
machinery, capital
equipment and certain
types of equipment.
VAT is exempted for
investors under the
conditions.
Philip- pines
30% For investors:
Incentives by BOI:
100% exempted for 4
years for non-Pioneer
project and for 6 years
for Pioneer project). Incentives by PEZA: 100% exempted for 3-6 years depending on Pioneer / Non-pioneer project status. For Economic Zone Developers &Operators; Special 5% tax on gross income and exemption from all national and local taxes shall be offered.
Exempted from duties on import machinery, equipment, spare parts and accessories for investors (export-oriented enterprises).
Tax credit on raw materials, supplies and semi-manufactured Products, etc. Additional deduction from taxable income for labor expense, necessary and major infrastructure works, etc.
Source: JICA Study Team based on the data of JETRO and the websites of investment promotion agencies in the selected countries, www.worldwide-tax.com, and Ministry of Commerce &Industry of India, Department of Commerce
241
Table 4.1.3 Summay on Non-Fiscal Incentives Provided by Neighboring Asian Countries
One-Stop Window /Simple
Procedures
Special Permit for Foreigners
Competitive Utility Tariff
Land Premium
Training for
Employees
Financial Assistance
(Grant/ Loan)
Others
Malaysia exists exists exists exists exists exists Flexibility in foreign exchange administration
Thailand exists exists none exists none none - Philippines exists exists none none none none Unrestricted
use of consigned equipment
Vietnam exists exists none exists exists exists (develop-
ment of
infra-
structure)
-
South Korea
exists exists none exists none exists Flexible approach to labor regulation. Establishment of educational institutions and hospitals for foreigners.
India exists exists none none none exists - Source: JICA StudySurvey Team based on the websites of investment promotion agencies in the selected countries.
4.2 Examples of Incentives in Other Countries
4.2.1 Singapore
(1) General Incentives
1) Pioneer status
Full corporate tax exemption up to 15 years for strategic high value-added manufacturing
or service projects
2) Development and expansion incentive (DEI)
5% corporate tax rate reduction. For up to 10 or 20 years. For local expansion, upgrade
equipment or business activities
3) Investment allowance (IA)
50% deduction of equipment investment. To encourage investment, technology
Allowance for purchase of equipment, to improve efficiency or to introduce new
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technology to the industry
4) Double Tax Deduction (DTD) for Internationalization
400% tax deduction on first $400,000 expenditure, 100% tax deductions on balance
qualifying expenditure. To support local businesses‘ activities overseas
(2) Tax Incentives for R&D
1) R&D Tax Allowance (RDA) Scheme
Supporting Research and Development Activities
Tax allowance of up to S$150,000 to be deducted from a company‘s assessable income
when profitable companies engage in qualifying R&D activities in Singapore
2) Liberalized Research & Development (R&D) Tax Deductions
Supporting Research and Development Activities
Tax deduction on 150% of qualifying expenditure incurred on qualifying R&D activities
performed in Singapore, both in-house and outsourced
3) Productivity and Innovation Credit (PIC)
Tax deduction / cash incentive for investment in innovation and productivity. (Activities
include R&D; Investment in design, automation, equipment, training; Acquisition or
registration of IP)
4) Research &Development and Intellectual Property Management Scheme
Tax exemption for 5 years on royalties and interest received from abroad
5) Section 14DA Enhanced Deduction for Overseas R&D
400% enhanced tax deduction on overseas R&D
6) Deduction of Patent Registration Fees
To encourage the patent registration in Singapore
(3) Grant for R&D
1) Research Incentive Scheme for Companies (RISC)
Reimbursable R&D grant for improved industrial competitiveness
2) Technology for Enterprise Capability Upgrading Initiative (T-UP)
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Covers up to 70% of costs of scientist or engineer from A*STAR attached to a technology
company to implement qualifying R&D projects. Relevant to medtech companies
3) R&D Incentive for Start-up Enterprises (RISE) Scheme
Cash grant of up to S$20,250 for at least S$150,000 worth of qualifying R&D expenses
during the first 3 years of start-up activities
(4) Tax Incentives for Supporting New Venture Formation
1) Angel Investors Tax Deduction Scheme
Supporting New Venture Formation
50% tax deduction for angel investors who invest at least S$100,000 in start-up
companies and hold investment for a minimum period of 2 years
2) Tax Exemption for Start-ups
Supporting New Venture Formation
Full tax exemption on the first S$100,000 and 50% exemption on the next S$200,000 of
chargeable income for any first 3 consecutive years of tax assessment for start-up
companies
(5) Grant/Fund for Supporting New Venture Formation
1) ACE Startups Grant
Up to S$50,000 matching grant to start first business
2) Business Angel Funds
Up to S$1.5 million matching investment by SPRING Singapore for angel funds
investing in seed or early stage start-up companies
3) Early-Stage Venture Funding Scheme (ESVF)
Up to S$10 million co-funding from the NRF (National Research Foundation) for
early-stage technology start-ups
4) Incubator Development Program (IDP)
Up to 70% grant support to incubators and venture accelerators to nurture start-ups and
hiring of mentors and to offset operating expenses
5) Startup Enterprise Development Scheme (SPRING SEEDS)
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Up to S$1 million matching investment by SPRING for private investment in start-up
companies
6) Initiatives in New Technology (INTECH)
Grants for capacity-building in technology-application, industrial R&D
7) Technology Enterprise Commercialization Scheme (TECS)
Proof of Concept or Proof of Value demonstration competitive grant
(6) Incentives for Supporting Human Resources
1) Precision Engineering (PE) Manpower Initiative
Training allowance for 5-year in-employment PE training programme. Relevant to
medtech companies
2) Singapore Translational Research (STaR) Investigator Award
To recruit world-class clinician scientists for translational and clinical research
3) Clinician Scientist Award (CSA)
Research funding and salary support to medical researchers
4) Translational & Clinical Research (TCR) Flagship Program
Up to S$25 million for 5-year collaboration in translating research into healthcare
solutions (bench-to-bed solutions)
5) Competitive Research Program (CRP)
Up to S$10 million for 3 to 5 years. Broad based program for potential strategic research
areas of the future
6) Health Services Research Competitive Research Grants (HSR-CRGs)
Up to S$ 1 million for 2 years for Principal Investigators (PIs) from local public
healthcare or academic institutions. For conducting and translating of HSR findings into
policy and practice
4.2.2 South Korea
(1) Incentives in Taxation
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The scope of corporate tax breaks has been expanded to more R&D projects for drug
development (Technologies for new growth engines, currently four biologics including stem cell
therapy products with vaccines recently added).
New financing to fund R&D related to exports (Export-Import Bank)36
, and financing for policy
loans related to drug development and equipment investment37
.
(2) Financial Support - Biofund to Nurture Bio Industry -
1) Seoul Biotech Fund
In 2009, Seoul City and the Ministry of Knowledge Economy created a 100 billion won
fund through a public-private joint investment. It invests more than 60 percent of the
entire fund in mid-sized companies with sales revenue of more than KRW 30 billion or
unlisted small or medium ventures in the biologics or medical equipment industries (GP:
Oxford BioScience Partners & Hanwha VC).The scope of corporate tax breaks has been
expanded to more R&D projects for drug development.
2) Korea Drug Development Fund (KDDF)
Total expenditure from September 2010 to September 2011 amounts to over 1 trillion
won (530 billion won from the government, 530 billion won from the private sector). The
fund is aimed at advancing investment strategies for drug development and R&D to
dominate the global market.
4.2.3 Taiwan
Taiwan is located at the heart of the Asia-Pacific region. In addition to superior geographic
location, well-established infrastructure, matured industry development and abundant
high-quality human resources, the government also offers incentives to make Taiwan more
investor-friendly, and try to help enterprises grow with high competitive advantages.
The incentives that Taiwan government is offering include "tax related incentives" and "non-tax
related incentives." Most of the tax related incentives are provided under the Statute for
Upgrading Industries (SUI), which was introduced in 1991. The SUI is meant to supplement other
tax regulations which also provide tax concessions.
The SUI has recently become expired on December 31, 2009. In its place, the government has
promulgated the Statute for Industrial Innovation (SII) to replace the SUI. Taiwan's corporate
income tax rate has recently been reduced. In the interest of creating a fair and competitive tax
36 Support for overseas phase-3 clinical trials up to KRW 0.1 trillion, 8-year maturity, prime rate 0.5 percent 37 Korea Finance Corporation, Export-Import Bank – up to 8-year maturities, prime rate of up to 0.5 percent
246
environment, the areas where tax incentives are offered would need to be revisited. Consequently,
under the SII the only area of where tax incentive is still being offered is R&D credit.
For non-tax related incentives, considering developing companies' needs, our government has
provided "Industrial Technology Development Program," "Land Lease Incentives in Industrial
Parks," "Government Participation in Investment" and "Low-Interest Loans," etc. to reduce
businesses' operating costs.
(1) Tax Incentives for Biotechnology and New Pharmaceutical Industry
1) Background
Taiwan‘s economy has focused primarily on the development of manufacturing since the
1950s and the country has gained a global leading position in the semiconductor and
digital image industries. However, Taiwan has only a 0.5% share of total global
production value of the biopharmaceutical industry which is one of the new
knowledge-economy industries. To ensure a smooth transition to a knowledge-intensive
economic model, the Biotech and New Pharmaceutical Development Act was introduced
on July 6, 2007 to promote the development of knowledge-intensive industries such as
new drugs and high-risk medical devices, and to drive the transformation of Taiwan‘s
economy.
2) Incentive Items
The Biotech and New Pharmaceutical Development Act provides for a number of tax
incentives:
a) Incentives for R&D and Personnel Training
Biotech and new pharmaceutical companies are entitled to a deduction from their
profit-seeking-enterprise income tax liability when undertaking R&D on new drugs
and high-risk medical devices, as well as the training of personnel. The deduction is
limited to 35% of the total amount invested in R&D and personnel training and may
be credited against the profit-seeking-enterprise income tax within five years from
the year the tax liability is incurred.
b) Investment Tax Credit for Corporate Shareholders
Investors who invest in Biotechnology and new Pharmaceutical companies and hold
the shares for more than three years are entitled to a deduction from the
profit-seeking-enterprise income tax payable for a period of five years starting from
the year the tax liability is incurred, up to 20% of the acquisition cost of the shares.
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If the shareholder is a venture capital business, the corporate shareholders of the
venture capital business may claim a deduction when calculating their
profit-seeking-enterprise income tax liability for a five-year period starting from the
fourth year after the venture capital business becomes a registered shareholder of the
biotech and new pharmaceutical company. The deductible amount is calculated by
taking the shareholding ratio of the venture capital investment to the biotechnology
new drug company and the total paid-in capital, and applying the ratio to the
acquisition cost of the shares, up to 20% of the acquisition cost.
c) Tax Deferral for the Acquisition of Shares
To encourage technology investors and high-ranking professionals to hold shares in a
biotechnology and new drug company on a long-term basis and to participate in the
company‘s operations, such investors are permitted to pay tax based on the actual
trading price when the ownership of the shares is transferred, rather than paying tax at
the time the shares are acquired.
d) Rights to Issue Stock Warrants
To help biotechnology and new drug companies attract outstanding talent and acquire
technology, such companies may issue stock warrants to high-ranking professionals
and technology investors allowing them to subscribe to the shares at a price lower
than their face value. In such cases, the acquired shares are taxable only at the time of
actual transfer of ownership.
(2) Incentives for Science Park Investment/Location
1) Tax Incentives
-No taxes are levied on park enterprises with respect to imported machinery for self use,
raw materials, fuel, materiel and semi-finished goods. No paperwork required for no-tax
treatment, guarantees, bookkeeping or tax withholding.
-Park enterprises that export products or labor services are subject to zero enterprise tax.
-Corporate income tax: 17%
2) Protection of Investor Rights
-Foreign investors enjoy the same privileges and rights as domestic investors.
-Foreign investors can hold 100% equity in park enterprises, and can seek the
government of the Republic of China and local enterprises as joint investors.
-Profits, capital gains and interest from investments by foreigners or overseas Chinese are
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eligible for transfer overseas upon application.
-Where the equity stake of foreign investors, overseas Chinese investors or a combination
thereof shall exceed 45% in a particular enterprise, the government provides its
assurance that, within 20 years beginning on the day of operation, the government will
not purchase such equity stake.
-The foreign investor may apply for a one-time overseas transfer of the investment
amount upon the approval of the authority.
-Intellectual property rights and ownership rights are protected under law.
-Upon approval by the Park Administration, a science industry enterprise may engage in
import and export businesses related to its business.
3) Government Participation in Investment
-Investors can apply for government participation in investments, with the maximum
investment amount capped at 49% of principal.
-Agencies representing the government include Science and Technology Development
Fund and other development funds.
4) Capitalization of Technology Know-How‘s
-Upon certification by authentic organizations in form of technology capitalization
evaluation documents, together with approvals of shareholders‘ broad, a Park tenant
company may apply to the Division of Business Services of the Science Park
Administration to issue new stocks or to register modifications of new stocks regarding
innovative technology know-how‘s.
5) Capital Raising
-In case of capital raising demand, local or foreign investors may raise capital via
assistances of the Taiwan Venture Capital Association. The Association includes more
than 180 venture companies in Taiwan and holds regular seminars and meetings,
offering useful information for mutual interaction. Contact information of the
Association is as follows.
6) Incentives for Research and Development
-The Science Park Administration provides Park tenants innovative technology
industry-academia cooperation project grants, with a maximum grant of ten million
NTD. The grant, however, could not exceed 50% of project budget.
-R&D expenses can be deducted from corporate income tax up to 15% but the total
249
deducted expenses cannot exceed 30% of the total corporate income tax.
-R&D equipments can be exempted from import duties.
4.2.4 India
(1) Incentives Related to Biotechnology
1) General Incentives for Investment in Biotechnology Industry
General incentives for investments in Indian biotechnology industry are as follows:
-100% foreign equity investment is possible in manufacturing of all drugs except
recombinant DNA products and cell targeted therapies.
-Department of Bio Technology (DBT) provides a ―single window processing
mechanism‖ for all mega biotech projects involving FDI (Foreign Direct Investment)
of US$22 million or more under the Foreign Investment Implementation Authority
(FIIA) with its Fast Track Committee (FTC) existing in DBT.
-Depreciation allowance on plant & machinery.
-Customs duty exemption on goods imported in certain cases.
-Customs & excise duty exemption to recognized Scientific & Industrial Research
Organizations (SIRO).
-150% weighted tax deduction on R&D expenditure.
-3 years excise duty waiver on patented products.
-100% rebate on own R&D expenditure.
-125% rebate if research is contracted in public funded R&D institutions.
-Joint R&D projects are provided with special fiscal benefits.
2) Industry Development Financing
For a potential entrepreneur, the Technology Development Board (TDB) in the
Department of Science and Technology (DST) and the New Millennium Indian
Technology Leadership Initiative (NMITLI) of the Council of Scientific and Industrial
Research (CSIR) have been the major sources of funds. Since its inception in 1992, the
TDB has promoted several new startup companies, by providing soft loans, especially for
the commercial up scaling of indigenously developed technologies.
The CSIR-led NMITLI has emerged as the biggest funding route for biotech sector. The
funding is typically for ventures with short project cycle, high-risk and low investment. It
funded the bioinformatics educational software development project of TCS, gene
marker identification project of the Institute of Genomics and Integrative Biology.
250
3) Fiscal Incentives (Union Budget)
In order to further stimulate the market development of the biotech sector, the
Government has introduced a number of tariff and non-tariff measures:
-All drugs and materials imported or produced domestically for clinical trials are exempt
from customs and excise duties.
-Customs duty on import of reference standards has been reduced from 25% to 5%.
-To facilitate R&D in the biotechnology sector, the Government is planning to remove
the existing restriction of minimum export obligation of approximately US$4 million
to be able to avail exemption from customs duty on certain equipment.
-R&D units with manufacturing facilities can avail of full customs duty exemption for
certain equipment up to 25% of the previous year‘s export receipts.
4) Research and Development Funding Schemes of Department of Biotechnology
a) Objectives of Funding
Objectives of Research and Development Funding Schemes by Department of
Biotechnology are as follows:
-Realization of biotechnology as one of the greatest intellectual enterprises of
humankind, to provide the impetus that fulfills this potential of understanding life
processes and utilizing them to the advantage of humanity
-Launch of a major well directed effort with significant investment, for harnessing
biotechnological tools for generation of products, processes and technologies to
enhance the efficiency and productivity and cost effectiveness of agriculture,
nutritional security, molecular medicine, environmentally safe technologies for
pollution abatement, biodiversity conservation and bioindustrial development
-Scientific and technological empowerment of India‘s incomparable human resource
-Creation of a strong infrastructure both for research and commercialization,
ensuring a steady flow of bioproducts, bioprocesses and new biotechnologies
b) Targeted Research Areas
Targeted Research Areas of Research and Development Funding Schemes by
Department of Biotechnology are as follows:
-Animal Biotechnology
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-Aquaculture and Marine biotechnology
-Basic Research in Biotechnology
-Biofuels
-Bioinformatics
-Biological Control of Plants pests, diseases and weeds
-Bioprospecting and Molecular Taxonomy
-Biotech process engineering and industrial biotechnology
-Biotechnology of Medicinal and Aromatics plants
-Biotechnology of Silkworms and host-plants
-Crop Biotechnology
-Environment & Conservation Biotechnology
-Food Biotechnology
-Medical Biotechnology (Vaccines, Diagnostics, Drug Development, Human
Genetics & Genome Analysis, Seri Biotechnology, Stem Cell Biotechnology)
-Microbial Biotechnology
-Plant tissue Culture
-Human Resource Development
-Nano Biotechnology
-Women Biotechnology & Programme for Rural Areas and SC/ST population
-Jai Vigyan National S&T Missions
-Patent Facilitation
c) Components of Grants
Grants are for recurring and non-recurring requirements as well as for R&D staff
supports; recurring expenditure includes cost for chemicals, consumables, glassware,
domestic travel, contingency etc. Non-recurring expenditure includes support for
capital equipment, instruments, facilities and so on.
4.3 Examples of Necessary Incentives (Incentives for Start-ups and SME Strategy)
The ability to succeed in positioning NARC for success in commercialization depends upon
having the right mix of incentives to stimulate existing and emerging companies in conducting
product development as well as to attract critical venture funding for emerging companies.
In recent years, Battelle has conducted many surveys of U.S. life science executives on what
drives their investment in different locations. One such study released for the Council on
American Medical Innovation noted the concern that United States is falling behind in its R&D
252
tax credit as well as other tax incentives and policies that incentivize medical innovation and
related manufacturing38
. A forthcoming study by Battelle for the Pharmaceutical Research and
Manufacturing Association suggests that along with IP protection policies, health care coverage
and payment and a well-functioning regulatory system, a key factor shaping investment decisions
is the tax system and incentives. A recent discussion that Battelle had with a leading industrial
biotechnology company executive familiar with Indonesia revealed that the most attractive or
important incentives that would positively influence their decision to locate an R&D or
manufacturing facility in a particular country or region were:
-General research tax credit
-Availability of a one-time credit associated with moving to a new facility or significantly
expanding an existing location.
One well-established incentive is to offset the cost of company research and development
activities.
As of 2011, 26 out of 34 OECD countries offer R&D tax incentives. Other emerging countries
such as Brazil, China, Russia, Singapore, and South Africa also offer R&D tax incentives. The
R&D tax incentives of the various nations differ significantly in terms of their size, design, and
whether they explicitly target certain types of firms or specific locations. Some credits are
provided based on the total volume of R&D conducted, whereas others, as in the U.S., are based
on increases in R&D spending above a particular base year.
Many countries offer larger credits for small and medium-sized companies. In some instances,
credits are provided for capital investments to support R&D. To make the credits more useful to
small, early-stage companies that may not yet be profitable, a number of countries – including
Australia, Canada, France, Ireland, and Singapore -- offer tax credits that are refundable,‖ i.e., the
firm, if it has no tax liability, may receive a cash grant for all or a portion of the credit39
. In the
U.S., 38 states reported offering R&D tax credits in 2010, a small number of which are refundable,
but the federal credit is not refundable40
.
Singapore provides a 400 percent deduction for R&D as well as for IP acquisition or protection,
training and approved design or automation project41
. As illustrated in Table 8, a number of
38 Gone Tomorrow: A Call to Promote Medical Innovation to Create Jobs and Find Cures in America, Prepared by Battelle for
Council on American Medical Innovation, June 2010. 39 Deloitte, ―Global Survey of R&D Tax Incentives‖, July 2011
http://www.deloitte.com/assets/Dcom-Canada/Local%20Assets/Documents/Tax/EN/2011/ca_en_tax_RD_Global_RD_Survey_TaxI
ncentives_111011.pdf. 40 Battelle, ‖BIO State Bioscience Initiatives,‖ 2010 41
See http://iras.gov.sg/irashome/PIcredit.aspx#About_Productivity_and_Innovation_Credit. Visited March 31,
2012.
253
countries offer R&D tax incentives with the objective of inducing multinational companies to
locate or to expand R&D operations in their country.
Table 4.3.1 Examples of Key R&D Tax Credits of Different Nations, as of July 2011
Country R&D Credit Refundable
Australia 125% immediate super deduction for expenses incurred
175% enhanced super deduction is offered for expenditures
exceeding a 3-year rolling average.
Yes
Brazil 160% super deduction of the total R&D expenditures
The super deduction increases to 170% of the qualified
expenses if the entity increases the amount of researchers by up
to 5% in a given year
The super deduction increases to 180% of the qualified
expenses if the entity increases the amount of researchers by
more than 5% in a given year
Enhanced R&D tax super deduction for patents is an extra 20%
deduction when a patent is registered
Other excise and withholding tax exemptions available
No
Canada 20% federal tax credit for all qualifying R&D costs. Enhanced
refundable credits (35%) are available for Qualified Canadian
controlled private corporations. Tax credits are also available
from provincial authorities
Yes
Chile 35% credit against corporate income tax if applicable to
activities carried out in conjunction with pre-approved
universities and research institutes; remaining 65% may be
deducted from taxable income
150% super deduction of the qualifying R&D expenses
Business Tax Exemption for the transfer of qualified technology
Corporate tax rate for companies granted High and New
Technology Enterprise (HNTE) status is reduced from 25% to
15%
Newly established Technology and Software companies receive
a tax holiday (and new established HNTEs in certain provinces
may receive tax holidays)
Enterprise Income Tax exemptions for certain qualified
technology transfers.
No
254
Country R&D Credit Refundable
France 30% tax credit for the first €100M of qualified R&D
expenditures incurred during the tax year; plus an additional 5%
of any amount in excess of the €100M threshold
Increased credits are available for new credit applicants - 50%
for the first year of application (subject to limitation), 40% for
the second year (subject to limitation), and 30% thereafter
Cash grants for R&D and acceleration of depreciation
deductions for fixed assets used in qualified research.
Yes
Ireland 25% incremental credit for all expenditures exceeding the ―base
amount‖
25% credit for expenditures incurred for buildings or structures
used in the conduct of qualified R&D activities
R&D grants are also offered
Yes
Israel Tax rate reductions though the Alternative Tax Program and
Strategic Program
Several grant programs are available.
NA
Italy 10% on expenditures for in-house research
40% for expenditures on research connected by contract with
European universities or other public research entities
Yes
Japan The credit equals 8% to 10% of qualifying expenditures for
large companies
The credit equals 12% of qualifying expenditures for SMEs
Both SMEs and Large Companies are eligible for an Additional
Incremental Credit
No
Russia Value added tax (VAT) —Full VAT exemption for new products
and technologies development or conceptual improvements of
existing products and technologies
150% super deduction for certain R&D expenses
No
Singapore 100% base deduction for qualifying R&D expenses incurred
Additional 50% deduction for certain R&D expenses incurred
in Singapore
Additional 250% or 300% enhanced deduction on the first
S$400K of certain R&D expenses
200% super deduction for certain expenses approved by
government
Yes
255
Country R&D Credit Refundable
South
Africa
150% volume-based super deduction
Accelerated depreciation for R&D related capital expenditures
No
South
Korea
Tax credits for SMEs and large companies
Investment tax credits
3% deduction of revenue from taxable income
No
United
Kingdom
130% volume-based super deduction for large companies
175% volume-based super deduction for SMEs
Cash credits for loss position SMEs
Yes
United
States
Incremental tax credit of 20%
Accelerated Simplified Credit of 14%
No
Source: Deloitte Global Survey of R&D Tax Incentives, July 2011,
http://www.deloitte.com/assets/Dcom-Canada/Local%20Assets/Documents/Tax/EN/2011/ca_en
_tax_RD_Global_RD_Survey_TaxIncentives_111011.pdf
(1) Patent Box
A growing practice to encourage R&D and its commercialization is to allow corporate income
from the sale of patented products to be taxed at a lower rate than other income. This is sometimes
referred to as a patent box (so called because income derived from domestic patents is isolated
and taxed at a lower rate than the taxpayer‘s net income). A patent box is intended to encourage
commercialization domestically by lowering the effective corporate tax rate for knowledge-based
companies. Eight nations (Belgium, China, France, Ireland, Luxembourg, the Netherlands, Spain,
and Switzerland) offer this incentive (Table 7.5.5). The UK government recently completed a
―consultation‖ on the detailed regulations for a ten percent patent box (versus the corporate rate of
26 percent) due to come into effect in April 2013.
Table 4.3.2 Overview of Corporate Tax Rates and Impact of Patent Box Tax Policies on Tax Rates,
by Selected Country
Country Regular Corporate
Tax Rate
Patent Box
Rate
Qualifying Income
Belgium 20% 6.8% Patents and supplementary
protection certificates
China 16% 0–12.5% Registered patents and know-how
France 34% 15% Patents and supplementary
protection certificates, industrial
fabrication processes, and
256
patentable inventions
Ireland 10% <10% Most IP
Luxembourg 17% 5.9% Software, copyrights, patents,
trademarks, design, or models, and
domain names
The
Netherlands
17% 5% Patents or IP from qualifying and
approved R&D
Spain 25% 15% Most IP
Switzerland 21% 0–12% Most IP
Source: Information Technology and Innovation Foundation,
http://www.itif.org/files/2011-pb-atkinson.pdf.
Just as important as having incentives for R&D to advance commercialization is the ability of
emerging bioresources firms to access venture and other sources of private capital. A great deal of
research suggests that venture capital plays an absolutely critical role in stimulating innovation.
Indeed, outside the United States, where venture capital is less well developed, governments see
the formation of a vibrant venture capital sector as one of the keys to stimulating innovation.‖ 42
Governments can seek to ensure that firms have access to the capital needed for sustainability and
growth by creating incentives to encourage private investment in companies or venture capital
funds and/or by directly investing in companies. A number of countries offer tax incentives to
help start-up companies and to encourage investment in start-ups. Examples include:
-Singapore offers an extremely broad array of tax incentives including ones targeted for
start-up companies. Under the R&D Incentive for Start-Up Enterprises, start-ups with few
shareholders engaged in at least S$115,000 ($91,441) in R&D annually can convert their
losses into tax grants up to S$15,000 ($11,926) for each of their first three years of
operations. Singapore also exempts the first S$77,000 ($61,225) of taxable income and
half the next S$200,000 ($159,056) from corporate income tax for qualifying start-ups and
offers an angel investor tax credit.
-The UK allows individual purchasers of shares in qualifying companies to deduct 20
percent of the value of their investment of up to £500,000 ($794,887) in relief against
income-tax liability. Gains on subsequent sale of shares are free of capital-gains tax. If
shares are disposed at a loss, the loss is deductible. The government has proposed
increasing the deduction from 20 percent to 30 percent.
42
G. Pisano ―Science Business: The Promise, The Reality and the Future of Biotech.‖ Harvard Business School
Press, 2006:115.
257
-Italy exempts gains from investment in start-ups less than seven years old from taxation,
provided ownership was held for at least three years, and the gains are reinvested within
two years on start-ups in the same sector.
-To attract R&D investment in Canada, the Scientific Research and Experimental
Development Tax Credit offers corporations a 35 percent credit on the first C$3 million
($3 million) in qualified expenditures and 20 percent on excess, and the credit is
refundable for smaller Canadian-controlled private corporations. Additional credits are
available at the provincial levels.
-Under France‘s Young Innovative Companies program, companies less than eight years
old with R&D at least 15 percent of revenue can be exempted from social insurance
contributions and profit tax for the first three years of profitability and then at a scale that
declines over 12 years. In addition, for such companies, the R&D credit is refundable, and
investors can be exempted from capital gains tax on shares or options held at least three
years.
Still, the use of public dollars to directly invest in companies is an important means of leveraging
larger amounts of private investment. The E.U.‘s European Investment Fund (EIF) is an example
of a fund that leverages public sector funding to raise private funds. EIF makes equity funding
available by purchasing interest in privately managed venture capital partnerships specializing in
a region of the E.U. Each investee partnership secures other limited partner investors, thus using
public investment to attract and leverage private capital. The EIF manages member-nation
interests in 28 venture funds of which 11 include a life science focus.
The UK‘s Capital for Enterprise is a state-affiliated investment fund that also invests public
money in privately managed venture capital partnerships. In 2009, the government announced the
creation of a new UK Innovation Investment Fund comprising two 10-year funds that will pool
public and private investment to create a fund targeted at more than $500 million.
In Australia, the AusIndustry development agency offers flow-through tax benefits (including
eligibility of foreign investors for complete exemption from capital gains taxes) to eligible
venture capital firms. Also, the Innovation Investment Fund has directly invested more than
$A500 million ($516.4 million) in federal funds (alongside private co-investors) in the creation of
at least 16 new venture capital funds that target early-stage investing across several sectors.
China‘s Innovation Fund for Small Technology-Based Firms offers more than $600 million in
start-up capital in the form of grants, subsidized loans, and equity investments up to 20 percent of
a company‘s capital base to companies engaged in technology commercialization and innovation.
258
4.4 Present Situation of Bioresource Use and Intellectual Property in Indonesia
4.4.1 Present Situation of Bioresource Use in Indonesia
In Indonesia, as a country with tremendous biodiversity, there is substantial priority placed on
ensuring that the natural resources are appropriately managed and preserved. As put forth in the
Indonesia‘s Biodiversity and Action Plan (2003-2020), the government seeks balance between
the dual goals of biodiversity preservation and bioresource use for economic development.
These regulations are influential factors in assessing the viability of a commercial bioscience
based industry. Some regulations are based on laws and others are based on institutional practices.
For international companies in particular, these regulations are a critical factor in defining the
attractiveness of the business environment in bioresource fields.
Described below are bioresource regulations that can affect research and innovation in the
proposed biocluster initiatives
(1) Biodiversity Treaty
Indonesia is a signatory to the Convention on Biological Diversity (ratified by the government in
1996, Act 4-1996) as well as the Nagoya Protocol on Access to Genetic Resources and the Fair
and Equitable Sharing of Benefits Arising from the Utilization, the Nagoya Protocol (Ratified by
the government in May 2013, Act 11-2013). As a consequence, policies regarding the
management and transfer of biological resources reflect these guidelines. The goals and
obligations under the Nagoya Protocol are summarized in the Table below.
259
Table 4.4.1 Key Provisions and Obligations under the Nagoya Protocol
The Nagoya Protocol sets out core obligations for its contracting Parties to take measures in
relation to access to genetic resources, benefit-sharing and compliance as follows:
1. Access Obligations
Domestic-level access measures are to create a clear and transparent set of rules and procedures
to issue permits, promote research contributing to biodiversity and sustainable use, and reflect
the importance of genetic resources for food and agriculture.
2. Benefit-sharing Obligations
Domestic-level benefit-sharing measures are to provide for the fair and equitable sharing of
benefits arising from the utilization of genetic resources with the contracting party providing
genetic resources. Utilization includes research and development on the genetic or biochemical
composition of genetic resources, as well as subsequent applications and commercialization.
3. Compliance Obligations
Specific obligations to support compliance with the domestic legislative or regulatory
requirements of the contracting party providing genetic resources, and contractual obligations
reflected in mutually agreed terms, including access to justice. This is considered a significant
innovation of the Nagoya Protocol. In addition, the protocol calls for taking measures to monitor
the utilization of genetic resources after they leave a country including by designating effective
checkpoints at any stage of the value-chain: research, development, innovation,
pre-commercialization or commercialization.
Source: Convention on Biodiversity
Regarding follow up to the Nagoya Protocol, the technical regulations are currently being
developed by an interagency group led by The Ministry of the Environment and LIPI. These
conditions may have a significant impact on research and innovation regarding bioresources so
should be followed closely.
(2) Transfer of Biological Materials
1) Export
The export of biological materials is subject to approvals of various government agencies
and commissions. Key aspects of gaining approval are:
- Approval of a plan for the use of the microbe abroad
260
- Agreement regarding an Memorandum of Understanding and
- Acceptance of a Materials Transfer Agreement (MTA).
The MTA is developed by the host Indonesian research institution and is not defined by the
regulations. This is therefore more a matter of institutional policy than government
regulation. The purpose is to protect the interests of Indonesia regarding potential uses of
the materials.
Ultimately approval for the export of biological materials requires consent by the State
Secretary and by the Ministry of Foreign Affairs' International Cooperation Office.
2) Import
To import non-native biological materials permission is typically needed from the relevant
agency or regulatory body. For example, to import microbes for agricultural purposes, the
permission of the Ministry of Agriculture is required. If the product is a biopesticide, then
the approval is via the Commission on Biocontrol Agents under the ministry. A second step
is the Plant Quarantine office where samples are held and inspected to ensure the accuracy
and safety of the actual sample being transferred. Finally, the microbe must be registered
with the Ministry of Agriculture.
If the species are clearly identified and known the process is relatively straightforward.
Also, if the purpose is primarily for research to be conducted at a research institution such
as a university or a national laboratory, then the permission can be facilitated by the
research host institution and can be attained in a timely manner.
3) Conservation Area Permits for Sample Collecting
In order to collect samples from "conservation areas" such as national parks, conservation
area permits are required. These permits are issued by the Directorate General of Forest
Protection and Nature Conservation. In addition, if samples are to be moved across
province borders, then a transport certificate is also needed. Transport Certificates are also
issued by the Directorate General of Forest Protection and Nature Conservation.
In order to receive permission to take samples from Conservation Areas, the researcher
must list all of the microbes or other biological samples that are expected to be taken. If, for
example, 1,000 microbes are anticipated then the identities of all 1,000 microbes should be
listed in advance. This can present a challenge if not all such identities are known or if the
purpose of the research is to identify certain types of microbes.
261
In order to accommodate the discovery of new microbes, such discoveries are permitted as
long as they are anticipated in the list. This process can likely best be managed by the host
Indonesian organization.
For areas outside of Conservation Areas, such use permits are not required.
4) Restrictions on Domestic Natural Resource Transport
The large diversity of islands and provinces is also accompanied by restrictions on the
inter-island or inter-provincial movement of resources. For example, in logging, in order to
stop illegal logging which is aggravated by the inter-island transport of logs, there is now a
regulation in place that requires logs to be processed on the islands on which they are
harvested.
This then leads to an incentive to find higher value added products as well as ways to use all
of the biomass. One example in which ITB is engaged is the addition of composite
materials to lumber to create higher value laminate products.
(3) Research Registration for Foreign Researchers
For foreign researchers planning to conduct research or biological sampling in Indonesia, there
are a number of procedures that must be followed.
1) Research Permit
If a researcher is planning to conduct any field research, a research permit is required from
the Ministry of Science and Technology. This would require a research plan that describes
the purpose of the research as well as any travel that is anticipated. If the researcher is
planning to visit other provinces, a letter of introduction is required from the Ministry of
Science and Technology.
At IPB, in order to assure the smooth conduct of the research permitting, IPB assists
researchers in attaining research permits through IPB.
2) Researcher ID Card
If a researcher is planning to travel outside the host institution, then permission is needed
from the Police Agency in the form of a Researcher ID Card as well as a traveling permit.
This researcher card gives the researcher to conduct research indifferent provinces of
Indonesia.
3) Provincial Approval
262
Travel to different provinces for research purposes also requires approval of the provincial
government. Provincial government‘s management this approval process via a national
network that is managed by the national Policy Agency.
(4) Transgenic Material Policy (Genetically Modified Organisms)
Policies regarding the research and commercialization of transgenic plants have been evolving
over the past fourteen years. In general policies are supportive of research and the Ministry of
Agriculture has certified a number of transgenic plants as safe for use as a food. However, the
Ministry of Environment has been cautious about the potential environmental impacts, adhering
to a strict precautionary principle that has not yet allowed such plants into the market in
Indonesia.
In 1999, the Government of Indonesia‘s Ministry of Agriculture gave its approval to the use of
certain transgenic crops, BT corn and Monsanto‘s Roundup Ready products for cotton, corn, and
soybean as safe for food. However, the move was opposed by the Ministry of Environment
which argued that Indonesia should follow the ―precautionary principle‖ and that further
environmental studies should be required. This difference in position has marked the evolution
of transgenic plants in Indonesia since that time43
.
Current policies of the Indonesian government do not allow for the commercial use of genetically
modified organisms. However, the Government of Indonesia (GOI) and local universities are
researching a number of transgenic varieties including virus resistance for tomatoes and potatoes,
delayed ripening for papaya, sweet potato pest resistance, and drought tolerant rice. In addition,
some Indonesian researchers have begun to focus on transgenic research applied to animals for
genotyping or genetic markers of Indonesian local livestock, such as poultry, cattle and sheep.
Thus transgenic research is pursued by numerous institutions in Indonesia and certification of the
safety of such plants as foods has precedents of over a decade. The bigger question for
commercialization appears to be the government‘s stance regarding environmental impacts.
Some of the key regulations are noted below.
- In 2005, Government Regulation No. 21 concerning Biosafety of Transgenic Products was
released.
- In 2008, the National Agency of Drug and Food Control (BPOM) published the Guidelines
for Food Safety Assessment on Transgenic Products which were simplified in 2012.
- In 2010, Presidential Regulation No. 39 was issued, which established the Biosafety
Committee for Transgenic Products, a necessary mechanism to complete outstanding and
new biotechnology regulations.
43 Richel Dursin, The Asia Times, ―Indonesian ministries at odds over transgenic crops,‖ March 7, 2001.)
263
- In 2011, transgenic feed enzymes have been approved as a feed additive.
- In March 2012, labeling regulations for packaged and/or retail food products containing
transgenic ingredients were released. According to this regulation, the packaged food that
contains at least 5 percent of transgenic product must be labeled and stated ―Food Containing
Genetically Modified Material‖ on the label.
In 2011, two transgenic soybean varieties have received approval for food safety in Indonesia, as
well as six transgenic corn varieties. Three transgenic sugarcane varieties were recommended
for environmental safety by the Ministry of Environment. However the Ministry of Agriculture
has not provided a variety-release approval.
It is reported that the Ministry of Environment is expected to publish the guideline for the
environmental risk analysis of transgenic product in the near future.
Other than environmental safety and food safety assessment, transgenic crops for feed
consumption also need to be formally assessed for their feed safety. However, at the present
there is no guideline for a viable feed safety assessment.
Table 4.4.2 Regulatory Jurisdiction of Ministries Regarding Transgenic Plants and Organisms
No. Ministry Office Area of Responsibility
1 Ministry of
Environment
Deputy for Biodiversity Conservation
Enhancement and Environmental
Destruction Control
Bio-safety
2. Ministry of
Agriculture
Feed safety
3. Ministry of
Agriculture
Center for Investment and License Seed imports permit
4. Ministry of
Agriculture
National Seed Agency Crop variety release
5. Ministry of
Agriculture
Indonesian Agency for Agriculture
Research and Development
Research Permit
6. Ministry of
Agriculture
Indonesian Agency for Agriculture
Quarantine
Plant and animal
imports
7. National Agency of
Drug and Food
Control (BPOM)
Food safety
8. Ministry of Marine
Affairs
Research Center for Marine and
Fisheries Product Processing and
Fisheries products and
fish feed
264
Biotechnology
9. Ministry of Forestry Forestry plants
Source: USDA Foreign Agricultural Service, ―GAIN Report – Agricultural Biotechnology
Annual 2012‖
Although the commercialization of transgenic products has not advanced in Indonesia, the policy
discussion seems to continue to contemplate possible revision. A National Biosafety Commission
for Transgenic Products under the Ministry of Environment, but comprising many ministries,
continues to hold discussions regarding the revision of transgenic biology policies.
In addition, domestic business interest seems to be rising, and this may affect the speed of change.
The Indonesia Coalition for Agricultural Biotechnology (ICAB), modeled on the success of the
Biotechnology Coalition of the Philippines, a pro-biotech advocacy association, was formed in
Lombok, West Nusa Tenggara on July 4, 2012 during the 5th Indonesia Biotechnology
Conference for supporting the Indonesia agriculture biotechnology.
Research and testing continues but field testing seems to be on a slow track at this time. Recently,
the Government of Indonesia conducted confined field tests of several transgenic crops, to
include rice (resistant to biotic stress), sugarcane (tolerant to biotic stress and modification of high
glucose content), cassava (modification of amylase), potato (resistant to biotic stress), and tomato
(resistant to biotic stress). Additional Government of Indonesia sponsored research projects on
transgenic plants such as virus resistance for tomatoes and potatoes, delayed ripening for papaya,
sweet potato pest resistance, drought tolerant rice, and pest resistant soybeans, remain ongoing,
although at a relatively modest pace.
The Biosafety Commission for Transgenic Products seems to be continuing a cautious posture at
this time, asking for additional data and not yet recommending approval for commercial use.
265
Table 4.4.3 Status of Various Transgenic Crop Tests in 2012
No. Transgenic Crops Bio-safety Committee
Recommendation
Government Approval Status
1 Herbicide Tolerant Corn
(NK 603)
Safe for food consumption
(2010)
Food Safety Certificate issued by the
National Agency of Drug and Food
Control - BPOM (2011)
Safe for feed use (2012)
Feed Safety Certificate issued by the
Ministry of Agriculture - MOA
(2012)
2 Insect Resistant Corn
(MON89034)
Safe for food consumption
(2010)
Food Safety Certificate,
BPOM (2011)
3 Herbicide Tolerant Corn
(GA21)
Safe for food consumption
(2011)
Food Safety Certificate,
BPOM (2011)
4 Insect Resistant Corn
(BT11)
Safe for food consumption
(2011)
Food Safety Certificate,
BPOM (2011)
5 Insect Resistant Corn
(MIR162)
Safe for food consumption
(2011)
Food Safety Certificate,
BPOM (2011)
6 Insect Resistant Corn
(MIR604)
Safe for food consumption
(2011)
Food Safety Certificate,
BPOM (2011)
7 Herbicide Tolerant
Soybean (GTS40-3-2)
Safe for food consumption
(2011)
Food Safety Certificate,
BPOM (2011)
8 Herbicide Tolerant
Soybean (MON89788)
Safe for food consumption
(2011)
Food Safety Certificate,
BPOM (2011)
9 Ronozime AX (CT) Safe for feed consumption Feed Safety Certificate, MOA (2010)
10 Sugarcane (NXI-1T) Safe for food consumption Food Safety Certificate,
BPOM (2012)
11 Corn (Event 3272) Safe for food consumption Food Safety Certificate,
BPOM (2012)
12 Ice Structuring Protein Safe for food consumption Food Safety Certificate,
BPOM (2012)
Source: USDA Foreign Agricultural Service, ―GAIN Report – Agricultural Biotechnology
Annual 2012‖
Precautionary Principle
266
The GOI‘s overarching policy on agricultural biotechnology is to ―accept with a
precautionary approach‖ with respect to environmental safety, food safety, and/or feed
safety based on scientific approaches as well as taking into considerations of religion,
ethical, socio-cultural, and esthetical norms. Therefore, several regulations and guidelines
have been issued to protect the public from the possibility of negative consequences of
biotechnology utilization.
As of to date, seven transgenic corn varieties, two transgenic soybean varieties, and three
transgenic sugarcane varieties have received approval for food safety in Indonesia. In
addition, two transgenic corn varieties have received feed safety approval. Transgenic
sugarcane varieties that have been approved for environmental safety are anticipated to
receive variety-release approval from the Ministry of Agriculture in the near future.
Two more transgenic soybean varieties and one transgenic corn variety are in pipeline for
food safety approval. Thus with positive momentum on the research and testing front, some
anticipate that first transgenic plant to be officially commercialized in 2015: locally
produced drought tolerant sugarcane.
On the other hand, however, the new environmental requirements for event approval may
delay the importation or development local commercial of genetically engineered seeds. In
addition, other considerations, such as religion, ethical, socio-cultural, and esthetical norms
could affect the acceptance of agricultural biotechnology.
(5) Summary
The management of the nation‘s biodiversity is a high priority in Indonesia as reflected in the 17
year time frame of the National Biodiversity and Action Plan, 2003 -2020. The plan calls upon
the country to seek an effective balance between biodiversity preservation and sustainable
economic development. To manage this balance, an array of regulations is in place or in
development. Understanding and managing landscape will be an essential task for promoters of
biobased industries and bioclusters.
The existing regulations can be complex for international partners. Thus one important role of
the Indonesian innovation institutions is partner with foreign companies and institutes to ensure
effective and efficient compliance that at the same time productively advance research and
development.
267
4.4.2 Present Situation of Intellectual Property in Indonesia
The Indonesia intellectual property regime follows international practice under the World Trade
Organization and the Trade Related Aspects of Intellectual Property Rights (TRIPPS).
Indonesia signed the Patent Cooperation Treaty in 1997. The fundamental law governing patents,
Law No. 14, was established in August 2001. Just prior to this, in 2000, the government enacted
Act 29 which addressed Plant Variety Protection.
In 2002, the government passed Act 19 establishing copyrights.
There are three types of patents that can be files in Indonesia: (1) a PCT application which follows
the international practices under the WTO and TRIPPS, (2) a non-PCT patent application and (3)
and simple patent application. Non-PCT patents and those following the PCT procedures are
valid for 20 years from the filing date. Simple patents are only valid for 10 years.
Simple patents only cover products or mechanical devices and although these must be new and
industrially applicable, they do not have to be ―inventive.‖ Processes, uses compositions and
products characterized solely by their process cannot be applied for under this category.
Non-PCT patent applications and PCT applications have similar evidence requirements.
Non-PCT patents are typically aimed at only the Indonesian market. Due to the international basis
and scope of PCT applications, and implication that patent applications will be files in other
countries, there is the additional requirement of an International Preliminary Examination Report.
Thus among residents of Indonesia there is some trend to filing only Non-PCT patents in
anticipation of domestic market use and due to the lower filing costs.
The Figure below shows the number of PCT and non-PCT applications submitted by residents of
Indonesia. Overall the numbers of patents submitted by residents of Indonesia have been small
over the past decade, reaching 541 non-PCT applications in 2010 and only 258 PCT applications
in 2011.
268
Source: WIPO, ―Statistical Country Profiles – Indonesia‖
Figure 4.4.1 PCT and non-PCT Patent Application filings by Indonesian Residents (Ref. WIPO,
Statistical Country Profiles - Indonesia)
Source: WIPO, ―Statistical Country Profiles – Indonesia‖
Figure 4.4.2 PCT and non-PCT Patent Application filings by Foreigners and Indonesian
Residents
0
100
200
300
400
500
600
Non PCT Filings By
Residents
PCT Applications
Filed by Residents
0
1,000
2,000
3,000
4,000
5,000
6,000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Foreigner PCT
Applications
Foreign Non PCT
Applications
PCT Applications
Filed by Residents
Non PCT Filings By
Residents
269
Table 4.4.4 Patent Applications by Residents and Foreigners in Indonesia
Foreigner PCT Applications
Foreign Non PCT Applications
PCT Applications Filed by Residents
Non PCT Filings By Residents
2001 2,901 813 197 212
2002 1,976 633 157 234
2003 2,620 479 163 201
2004 2,989 452 177 227
2005 3,536 533 163 235
2006 3,805 519 242 288
2007 4,357 493 209 279
2008 4,278 469 214 375
2009 3,761 342 247 437
2010 4,140 390 253 516
2011 4,839 458 - 541
Source: WIPO, ―Statistical Country Profiles – Indonesia‖
Source: WIPO, ―Statistical Country Profiles – Indonesia‖
Figure 4.4.3 Application of Simple Patents by Residents and Foreigners in Indonesia
0
50
100
150
200
250
300
Simple Patents by
Residents
Simple Patents by
Foreigners
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Table 4.4.5 Application of Simple Patents by Residents and Foreigners in Indonesia
Simple Patents by
Residents
Simple Patents by
Foreigners
2001 197 24
2002 157 48
2003 163 29
2004 177 32
2005 163 32
2006 242 26
2007 209 34
2008 214 34
2009 247 38
2010 253 36
2011 236 56
Source: WIPO, ―Statistical Country Profiles – Indonesia‖
The composition of patent applications divided by the major patent application categories is
shown in the Figure below.
Source: WIPO, ―Statistical Country Profiles – Indonesia‖
Figure 4.4.4 Patent Applications by Fields of Technology
Other
consumer
goods
10% Civil
engineering
8%
Furniture,
games
6% Other
special
machines
6% Engines,
pumps,
turbines
6% Basic
materials
chemistry
6% Chemical
engineering
5%
Textile and
paper
machines
5%
Pharmaceut
icals
4%
Environmen
tal
technology
4%
Others
40%
Share
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Plant variety protection is included under patent variety protection (PVP). There are some special
provisions. The scope of plant variety protection regulations covers the issuance of rights to
plant breeders of plant varieties that are produced and have new, distinct, stable, uniform and may
be named. PVP rights is issued to the applicant for a period of 20 (twenty years) for perennial
crops or 25 (twenty-five) years for annual crops after being given a PVP rights certificate.
(1) The Process
The process for patent filing and review is shown in the schematic below. The process generally
follows common steps in international practice. The time to approval shown to be typically 36
months is somewhat long and will need attention as the number of patents increase in the future.
Source: Patent Lens, Diagram from Access International Patent web site
http://www.access-ip.com/prosedur_paten.html
Figure 4.4.5 Patent Approval Process in Indonesia
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(2) Evolving Patent Situation of Public Institutions
With the strengthening of the patent system in 2001, the leading research institutions including
IPB, BPPT, and ITB strengthened programs to support patent development and filing. All
institutions continue to maintain technology transfer or commercialization offices. However,
since 2008 government policy changes have altered patenting incentives. It is anticipated that by
2014 the patent incentives should be properly realigned.
In 2008 the government decided to change the legal status of these institutions from private
entities (or semi-public) to fully governmental entities. Prior to this time, between 2001 and 2008,
these institutions had the legal status of semi-public institutions. As a result of the 2008 change,
currently, all three institutions are governmental entities and therefore all intellectual property
rights created from the work of the institution belong 100 percent to the government. There is no
division of benefits from royalties back to the researcher or to the institution. As a result there is
little IP being filed through the institutions. However the institutions are allowed to hold onto
their old IP.
The government is said to be attempting to revise this situation. There are discussions underway
at the Ministry of Education to revert the legal status of these institutions so that they can again
own and manage their IP. This may happen in 2014.
Instead of simply giving up patents, professors are choosing to file patent applications directly,
even though this will entail out of pocket costs. For industrial partners, it is thus important to
work with professors in the areas of interest and to consider working with the professors to help
support patent applications and patent costs.
As noted above, prior to the 2008 change, in the 2001-2008 periods these institutions managed
their IP institutionally as universities do in Japan or the United States. To provide incentives to
their researchers to produce IP, the institutions returned a percent of royalties back to the
inventing researcher(s) and to their research units. The distribution of benefits was as
summarized below.
Table 4.4.6 Distribution of Patent Royalties at Institutions When IP is Owned by the Institution
Institution Percent of Royalty
to Inventor(s)
Percent of Royalty
to Department
Percent of Royalty
to Institution
IPB 40 40 20
ITB 40 30 30
BPPT n.a. n.a. n.a.
Source: JICA Study Team
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This is approximately the same magnitude as provided in the US and in Japan.
Table 4.4.7 Number of Patent Applications and Granted
Institution Patent Applications Patents Granted
IPB 261 56
ITB 78 Approx. 10
BPPT n.a. n.a.
Source: JICA Study Team
Since patenting and patent management is a relatively recent activity, licensing is not yet
significant. Also, this has not been possible for these institutions on IP generated after 2008.
However, this is expected to change. As in all advancing countries, companies in Indonesia will
attach growing value to investing in innovation for their business growth.
Despite the government policy shifts, each institution continues to maintain an office dedicated to
managing intellectual property and business partnerships and to supporting researchers who do
wish to file patents. In return for ownership by the government, the government through the
university provides support in filing the patent and in addition covers the cost of the patent
application and maintenance. If the government decides not to support the costs of filing a patent,
then the researcher is free to file independently from the government and university. IPB uses a
panel of approximately 10 researchers to advise on the decision of whether to support or not
support the payment of patent costs. Also, at IPB the technology transfer office provides an online
service to facilitate the entry of patent information and advises researchers on the ultimate
application.
Patent management thus has a short and interrupted history at Indonesia‘s research institutions.
Nonetheless, these institutions continue to seek industrial partnerships in a variety of ways to
bring their innovations to society.
(3) Cooperative Research and Development
One important point to consider in understanding the role of an institution in innovation is that IP
licensing is only one element of successful commercialization. Innovations can be protected
through trade secrets, exclusive use agreements, and other arrangements as well. Although the
number of licensed patents may be modest to date, there are numerous spin-out businesses. IPB,
for example, notes 179 innovations that have received national recognition among a total of 510
awards given over the history of the nation‘s Inovasi Indonesia program that are attractive
commercialization candidates. For international partners, a key step in this environment is
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therefore establishing relationships with key partners through such vehicles as cooperative
research and development.
Cooperative research and development partnerships provide one straightforward path for
universities to secure benefit from their innovations under the current IP policies of the
government. If a university established a project with a company in which the company will pay
for a researcher's services, then the funds can be used directly by the researcher. One example is
IPB's recently developed partnership with Kao.
IPB and Kao have a cooperative agreement to extract, identify and screen certain tropical plants
for active compounds that may be of medicinal value. Kao provides a cooperative research grant
to IPB and the work is conducted jointly with Kao researchers visiting ITB and ITB researchers
spending time in Kao labs. The intellectual property is jointly owned and if Kao commercializes
any of the compounds found then there is a royalty payment back to IPB. IPB maintains
Indonesian rights.
Another example is from ITB which is the case of a cosmetic cream made from virgin coconut oil.
Researchers at ITB teamed up with UK cosmetics company Dermazone. Dermazone produces
and markets natural product based cosmetics with one of their lead products being an olive oil
based hand and body lotion. Olive oil is believed to have replenishing abilities in reducing
dryness in skin. The company learned of research at ITB regarding the use of virgin coconut oil as
a skin moisturizer. They entered into a cooperative R&D arrangement, with ITB researchers
developing both the virgin olive oil production process as well as the skin lotion formulation
process. The product is now available on the market in the UK and ITB receives royalties on
product sales.
In the commercialization phase the UK company‘s location in a foreign market proved to be quite
advantageous. Approval in the UK to market the lotion was achieved in a few months and the
product was transitioned to a commercial product in a timely manner. However, in Indonesia the
regulations and testing around skin lotions are far stricter and the product is in on a wait list that
could take two years to pass. International market diversification from international partners
could thus help to accelerate product to market times due to different market and regulatory
structures.
(4) Summary
Over the past decade, intellectual property laws comparable to the international standard have
been in place in Indonesia. In response to this framework, research institutions put in place
infrastructure and incentives to support the creation of intellectual property such as patents by its
researchers. Although a change in institutional legal status in 2008 changed this environment by
shifting all patent ownership from these research institutions – IPB, ITB and BPPT – to the
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government, this is expected to change in the near future to allow IP ownership again by these
institutions.
Innovation partnerships with international organizations for cooperative research and
development continue to provide an effective means of advancing innovations and are expanding
at these institutions despite changes in IP management processes. International partners bring the
added and important advantage of access to other markets which may be easier to penetrate for the
initial sales of new products.
4.5 Direction of Incentives from the Viewpoint of Target Market
A closer examination of best practices found across the target markets identified for the NARC
involving the three broad areas of Health Products, Industrial Products and AgriFood Products
suggest the types of investments needed by the government to advance the quality and
attractiveness of the NARC facilities.
In order to clarify the appeal and advantage of working with each institution, it is recommended
that each of the three sites develop a Signature Investment Platform. This would allow each
institution to show the offering of facilities, equipment and expertise being made available to
their partners to promote bio-science commercialization. Such Signature Investments should
complement the key platform assets of each institution, some of which are noted in the Table
below.
Table 4.5.1 Key Platform Assets at the Three NARC Institutions
BPPT IPB ITB
Industrial
Bioproducts
Center for
Bioindustrial
Technology
Oil palm genetic
engineering
Industrial enzymology
Starches
Surfactant and
Bioenergy Research
Center
Palm oil processing
research
Breeding and
cultivation of
energy/bioresource
crops
SEAFAST fats and
oils pilot plant
Micro and
macro0algae research
Biorefining Research
and Innovation Center
Life Sciences Center
Chemical engineering
Microbial
biotechnology and
industrial enzymology
Micro and
macro-algae
Lignocellulosic
biofuels from crop
residues
Bioethanol
Catalyst development
Agriculture
and Food
Center for
Agricultural
Cultivation
Technology
Livestock and
Center for Tropical
Horticulture Studies
SEAFAST Center
Plant improvement,
including marker
Biofertilizers
Oil crop development
(specialty oils)
Plant adaptation to
environmental stress
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aquaculture feed
development
Biopesticide
development
Soil improvement and
inoculants
Food product
development
Nutrition and
nutrigenomics
assisted breeding
New crop
introductions and
agricultural
diversification
Research farm and
greenhouses
Germplasm
repository
Extension operations
Value-added food
product development
Packaging center
Food safety and
evaluation
Business incubator
Health
Products
Center for Technology
for Pharmacy and
Medical.
Biotechnology
fermentation scale-up
facilities.
Analytical chemistry
Animal research
facilities
Pharmaceutical raw
materials development
Biopharmaca
Research Center
Ethnobotany and
bioprospecting
Analytical chemistry
Extraction and
process
standardization
Herbal medicine
efficacy, animal
testing and toxicology
Primate center
Small-scale GMP fill
and finish
Medical plant garden
and herbarium
Life Sciences Center
and School of
Pharmacy
Analytical chemistry
and chemical
extraction
Medicinal chemistry
Natural products for
treatment of specific
conditions (e.g.
neuro-degenerative,
diabetes, etc.)
Vaccine development
Pharmaceutical raw
materials development
Animal testing
facilities
Source: JICA Study Team
Reflecting these assets the following three Signature Investment Platforms are recommended for
consideration to address health products, biofuels and biochemicals, and agriculture and food.
4.5.1 Health Products Platform
(1) Signature Investment: Development of pilot-plant and scale-up infrastructure at BPPT
for the production of biologic products in volumes required for conducting Phase I and
Phase II clinical trials.
While BPPT currently has some bioreactor capacity, the current infrastructure is old and there is a
need to upgrade facilities and capabilities at BPPT to achieve GLP and GMP
standards. Companies participating in group meetings noted that they would be interested in
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contracting with such a facility within BPPT for production of new products, while similarly the
facility would facilitate the scale-up and production of products originating within the three
research institutions.
In addition, it was noted that the lack of a Clinical Research Organization (CRO) infrastructure in
Indonesia is a considerable barrier to the development of a domestic biopharmaceutical and
natural products industry. As such, the development at BPPT would benefit from development of
a basic CRO operation comprising capabilities in study design, regulatory affairs and trials
management. This will require establishing collaborations with Indonesian hospitals and
medical systems to gain patient access. Interest was also expressed in the development of BSL III
facilities at BPPT.
(2) Examples of University-affiliated Research Parks that have Successfully Employed This
Strategy
- University of Wisconsin, Madison, a leading biomedical university research center with one
of the most successful university-affiliated research parks in North America. Today the
University of Wisconsin research park encompasses 37 buildings totaling 1.8 million gross
square feet, housing 125+ companies with nearly 4,000 employees. A cornerstone of its
success has been its ability to offer a high quality environment for existing and start-up
companies, leveraging the broader specialized shared use laboratory facilities located at the
university. This includes an FDA-approved Good Manufacturing Practices facility for
biomanufacturing, housed in the Waisman Center, with capabilities in the production of
bio-therapeutics and vaccines for human clinical trials as well as full support for
Investigational new drug applications. Waisman currently operates and maintains seven
cGMP compliant cleanroom areas to accommodate clinical production of mammalian and
microbial therapies and aseptic filling of final products. The facility was designed to support
and segregate different manufacturing processes. Among its biomanufacturing capabilities
are gene therapies, cell therapeutics, vaccines, and recombinant proteins. The Waisman
Center has supported the development and clinical production of a number of novel types of
biotherapeutics from process development through to aseptic fill and finish.
In addition, the Waisman Center at the University of Wisconsin works to connect its industry
partners with other university resources to advance medical products into clinical trials. This
includes the University of Wisconsin, Office of Clinical Trials, established in 1988, which
largely supports industry-sponsored clinical trials on a fee-for-service basis for a range of
activities from regulatory services to patient accrual to bioinformatics and laboratory services.
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- The University of Iowa is an emerging 500 acre research park that currently is home to ten
well-established companies and has an active incubator with over 20 new business venture
tenants, many of whom are commercializing university technologies. It also houses several
university-related activities, including the University of Iowa Pharmaceuticals (UIP), an
FDA-registered contract pharmaceutical manufacturing and analytical testing facility that
produces a wide range of pharmaceuticals, including sterile injectable solutions and
lyophilized powders; topical semisolids and oral liquids; and tablets and capsules. UIP
services include clinical supply manufacturing, small scale commercial manufacturing,
analytical method development and validation, routine quality control analysis, and stability
studies. UIP capabilities include handling controlled substances and potent and cytotoxic
compounds. UIP employs 5 full time staff and its facilities are found both at University of
Iowa Research Park as well as at the main campus.
- The University of Maryland Baltimore‘s Biopark is a 12 acre park located adjacent to the a top
tier academic medical center, which now has nearly 500,000 sq. ft. of built out space and
supports over 650 company and university-affiliated jobs. Among Biopark‘s tenants are four
that offer commercial contract research services providing both cGMP manufacturing,
validation, regulatory services and early phase clinical trial services.
(3) Key Facilities and Equipment to Create This Capability
For Good Manufacturing Practices biomanufacturing facilities the standard tenant improvements
include:
- Clean rooms with direct digital control of room pressures, air flow, temperature, and humidity
with separate Air Handling Units (AHUs) for manufacturing areas
- Equipment Monitoring System monitors critical parameters and alarms for all cGMP
equipment
- Keycard access control to facility: cleanroom manufacturing areas, cell bank storage, and raw
material quarantine/release rooms
- Multiple pass-through compartments for flexible production of cell therapeutics or complex
biologics
- Dedicated showers and gowning areas for entering Microbial and Mammalian/Cell Therapies
Suites
- Pure steam generator for steam-in-place (SIP) bioreactors
- Dedicated cGMP sterilization and decontamination autoclaves with steam supply from pure
steam generator
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- Separate and locked ―Quarantined‖ and ―Released‖ raw materials and manufactured product
storage areas
- Dedicated cell bank and viral bank gas phase liquid nitrogen storage freezers
- Separate ready supply and decontamination areas
Common biomanufacturing equipment includes:
- Bioreactors of various sizes with digital control monitors for pH, dissolved oxygen, gas and
media flow rates
- Reach-In CO2 incubator
- Roller bottle apparatus
- Single use glass stirred tanks (36 liter capacity) for suspension cell banking, protein
production, or virus expansion.
- CYTO3 Bioreactor with digital control monitor for pH, dissolved oxygen, gas and media flow
rates
- Preparative Liquid Chromatography (LC) systems for downstream purification
- Scalable single-use Tangential Flow Filtration (TFF) systems
- Centrifuges
- Parallel plate single-use cell culture vessels (multi-tray cell factories) for adherent cell lines
For traditional pharmaceutical production, the typical facilities would include analytical testing
equipment, sterility equipment and general manufacturing equipment, including:
- Analytical laboratory equipment, such as titrators, coulometers; high performance liquid
chromography systems, spectrometers and spectroscopy systems, hardness testers,
osmometers, radiometers, turbidimeters, viscometers, and associated software.
- Solid dosage form equipment including capsule filling machines, capsule polishers, punch
tablet presses, rotary tablet presses, blending and mixers, drying ovens, mills and granulators,
pan coaters, tablet/capsule counters and sorters
- General manufacturing equipment including steel mixing tanks, tube fillers and sealers,
powder fillers, stirrers
- Sterile products equipment including stills, pure steam generators, lyophilizers, washers,
autoclaves
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4.5.2 Biofuels and Bio-based Chemicals Platform
(1) Signature Investment: Development of pilot-plant and scale-up facilities, including
integrated bio refinery operations, to be operated by ITB at the Deltamas satellite campus.
As envisioned, facilities will be developed to support work in both biochemical and
thermochemical conversion technologies from lignocellulose, starch/sugar, and plant oil
feedstocks. The ITB operation should ideally be designed to facility upstream or downstream
extraction of valuable phytochemicals, and the downstream processing of residual biomass into
value-added fuels and industrial chemicals. Given institutional interests in algae-based biofuels,
the facility should also contain scale-up facilities to facilitate algae propagation and processing
research. The Deltamas site, with large-scale land availability, and infrastructure specifically
designed to support industrial development, should be highly conducive to attracting international
and domestic energy and chemicals/materials companies to work with ITB and its partner
institutions. In addition to the development of a piloting and scale-up facility at Deltamas, the
JICA Study Team noted that life sciences labs at ITB‘s main campus have a substantial need for
upgrading of equipment and facilities. Supporting the development of more modern lab
resources at ITB for biological sciences and associated chemical engineering will be important for
assuring an enhanced pipeline of innovation from the institution.
(2) Examples of University-affiliated Research Parks that have Successfully Employed This
Strategy
- The Iowa State University BioCentury Research Farm is a 1,000+ acre site offering a unique
integrated research and demonstration facility dedicated to biomass production and
processing. Its unique facilities combine biomass feedstock production, harvesting, storing,
transporting and biorefinery processing into a complete system to develop the next generation
of biofuels and biobased products. The BioCentury Research Farm engages industry directly
on-site through collaborative projects and fee for services to tap the BioCentury Research
Farm‘s unique shared use facilities, including an incubator program where emerging
companies rent space and pilot-plant scale equipment. Many of the leading industrial
biotechnology companies are engaged at the BioCentury Research Farm including DuPont
Cellulosic Ethanol, Centocor, Pioneer Hi-Bred and Vermeer.
- The National Renewable Energy Laboratory, a U.S. Department of Energy facility, offers a
world-class Integrated Biorefinery Research Facility for industry use in developing, testing,
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evaluating and demonstrating processes for the production of bio-based products and fuels.
The Integrated Biorefinery Research Facility offers a 27,000 square foot biochemical
conversion pilot plant for converting cellulosic biomass into fuels and chemicals, as well as
supporting pretreatment processes. The facility also includes a compositional analysis
laboratory. While not a traditional research park, this shared use facility is a signature lab for
the Colorado Renewable Energy Collaboratory that advances university-industry partnerships
and taps the university research park found at the University of Colorado, Boulder.
(3) Key Facilities and Equipment to Create This Capability
There are a range of facilities that offer high value in advancing biofuels and bio-based chemicals,
including:
- Field capabilities involving a range of farming equipment, including tractors, forklifts, loaders,
trailers, forage wagons, etc.
- Drying, grinding and pretreatment involving bale processors, belt dryers, chilsonator, drying
mills, horizontal grinder, hammermills, sieve shakers, impregnator reactor systems
- Biochemical processing equipment involving multi-size fermenters, mixing vessels,
distillation towers, evaporators, process tanks, membrane filtration systems, decanting
centrifuges and autoclaves
- Thermochemical processing equipment involving fast pyrolysis processors, gasification
reactors, and syngas cleaning system.
4.5.3 Agriculture and Food Platform
(1) Signature Investment
IPB, as the premier institution in Indonesia for work in agbiosciences already has significant
resources and facilities to encourage product development, university-industry collaborations and
the commercialization of new products and technologies. That said, Battelle noted that certain
infrastructure at IPB, critical to the successful development of this platform, is in need of
upgrading and augmentation. In particular, IPB needs to have a new center built for advanced
plant sciences and for crop improvement research and development. This means developing
a facility with the modern analytical lab resources (genomics, NMR spectroscopy, mass-spec,
chromatography and wet lab resources) to facilitate basic plant sciences and applied plant
transformation/improvement research. The developed facility will need to have modern
environmentally controlled growth chamber facilities and, ideally, be co-located with controlled
greenhouse operations and land for field-trials and scale-up of varieties for release. While the
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SEAFAST Center contains business incubation and some food pilot-plant facilities, investments
are likely also required to improve equipment and facilities for the development of value-added
food products at ITB.
(2) Examples of University-affiliated Research Parks that have Successfully Employed This
Strategy
- The University of Saskatchewan and Innovation Place is Canada‘s undisputed center of
agbioscience research. Innovation Place has 177 tenant/clients distributed over 23 buildings,
employing nearly 4,000. About 27% of the tenants are considered to be in the agricultural
sectors (typically crop development or veterinary medicine), and another 8% in
pharmaceuticals (including now in the new vaccine focus). Among its industry tenants are
significant operations of Bayer CropScience and Dow AgroSciences. Innovation Place is
home to a contract bioprocessing center offering wet milling for the nutraceutical, cosmetic
and agri-food industries, offering technical staff experienced in Good Manufacturing
Practices and quality assurance.
The University of Saskatchewan, meanwhile, offers several specialized research centers,
including its highly regarded Crop Development Centre focused on crop improvement, new
crop development and the creation of new uses for crops. It also has a Feeds Innovation
Institute addressing value-added activities and a Centre for Northern Agroforestry and
Afforestation working at the intersection of forestry and agriculture. Among its shared use
facilities are research fields, seed facility, a pilot bioprocessing plant for isolating and
extracting compounds from crops and a controlled environmental growth facility.
- The Bio-Research & Development Growth (BRDG)Park in St. Louis, Missouri is located next
to Monsanto‘s main headquarters and major research and development facility. BRDG is
expected to comprise three buildings totaling 450,000 square feet. Building One has 17
tenants and houses Nidus Partner, a venture accelerator. Another building is home to the
Danforth Plant Science Center (formed in partnership with Monsanto), with leading research
strengths in disease resistance, biomass, and biosafety, as well as offering strong capabilities
in genomics/proteomics/computational biology and having an active industry engagement
program.
(3) Key Facilities and Equipment to Create This Capability
- Field farms
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- Controlled environmental facility programmed to produce various environmental conditions,
such as qualities and intensities of light, ranges of temperature and humidity
- Wet bioprocessing involving centrifuges, dryers, evaporators, process tanks, sieve tray
distillation system, and wet milling equipment
- Analytical labs involving chromatography, microscopy, phenotyping using 3d imaging, and
mass spectroscopy, along with bioinformatics platform for analysis
4.5.4 Responses towards this Platform
Proposing this platform and explaining how it will be effective, the institutions have
basically shown their understanding of the value of this approach, although it was
expressed by each institution that each has an interest in all of research focus areas
drawn on the Signature Platforms. Therefore they would like to have internal
discussions to decide which Signature Platform to pursue at their own institutions. The
Signature Platform concept is not to exclude any research area from any institutions but
to highlight the key areas which each institutions have the strengths in order to clarify
the appeal and advantage of working with each institutions. In order to make this
platform effective, it is essential that each institute develop or upgrade their current
assets, therefore the Signature Platforms also present a means of focusing key research
investments.
4.6 Considerations of the Incentive Scheme in Indonesia
In order to attract industries to conduct R&D in Indonesia, it is important to have incentives such
as tax deduction. It is more important to know the current incentive setups for R&D activity of
neighboring countries than other area of the world since neighboring counties would be major
competitors for Indonesian R&D business.
JICA Study Team selected Singapore, Malaysia, and Taiwan for comparative analysis to know if
there is comparative advantage in terms of incentives for R&D activities in Indonesia (See the
table below). JICA Study Team found there is various types of incentives for R&D in neighboring
counties not only tax incentives but also grant/subsidy type of gov‘t support, fund for R&D and so
on. Especially it is critical that grant/subsidy type incentive for R&D activity is missing in
Indonesia while neighboring countries provide various types of grant/subsidy for R&D.
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Table 4.6.1 Comparison of Incentive Policies for R&D among Neighbor Counties
Singapore Malaysia Taiwan Indonesia
Tax Incentive e.g. 150% of R&D expenditure can be deducted
e.g. 100% of capital expenditure for R&D can be deducted within 10 years. In-house R&D can claim 200% super deductions for non-capital expenditures
e.g.35% of taxable income within 5 years
e.g.100% of R&D expenditure can be deducted
Grant/Subsidy e.g. Cash grant of up to S$20,250 for at least S$150,000 worth of qualifying R&D expenses during the first 3 years of start-up activities
e.g. Exploratory Research Grant Scheme for Explore new ideas & concepts catalyst for new discoveries & inventions -Prototype Research Grant Scheme for research for product development prior to commercial launch
e.g. Subsidies 50% of research budget for Small Business Innovation Research -Subsidies to the set-up of R&D centers by multinational corporations up to NT$5 million each year, and 50% of the research budget
e.g. Research of National Innovation System (more than Rp 500 million per year per proposal)
Patent , Fund, Human Resources
e.g Deduction of patent registration fees. -Training allowance for 5-year in-employment PE training program. Relevant to med-tech companies
e.g Techno Fund to develop products & technologies for pre-commercialization stage Max: $1.6Million Pilot scale production
e.g. A Science Park tenant company can apply to the Division of Business Services of the Science Park Administration to issue new stocks regarding innovative technology know-how‘s.
e.g. Technical assistance by placing the experts and utilizing laboratory facilities in R&D institution
Source: JICA Study Team
To bring the R&D activities of the world class technology and science industries in Indonesia
would give enormous impact for the development of Indonesian economy. However, the current
incentive system does not have enough comparative advantage among neighboring countries.
JICA Study Team recommends establishing the following incentive policies.
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(1) Proposal based on the Comparison of Incentive Policies among Neighboring Countries
1) Creation of Grant/Subsidy type incentives for R&D activity
The neighboring counties have various types of grant/subsidy incentive policy for R&D
activities. In order to compete with those neighboring counties, JICA Study Team
recommends the Government of Indonesia (GOI) to consider establishing more
grant/subsidy type incentives for domestic and international companies especially for
NARC user whoes R&D is approved by GOI as strategically impoartant for industrial
development of Indonesia. This role might be initiated by RISTEK.
2) Stronger Tax Incentives at least to the level of Singapore and Malaysia
The current tax incentive policy of Indonesia is still less competitive comparing Singapore
and Malaysia. JICA Study Team recommends GOI to increase the level of tax incentive at
least to the level of Singapore and Malaysia which allow deducting 150-200% of R&D
expenditure. It is also provide strong incentives to R&D industries if tax is exempted for the
initial several years of operation for NARC users. This role might be initiated by Ministry
of Finance.
(2) Proposals for Incentivizing by Using Comparative Advantage of Indonesia
1) Privilege for Utilization of Biodiversity Natural Resources in Indonesia
Current Indonesian policy for bio resource is biased for protection and giving impression of
closed for the utilization of bio resources, which make international firms hesitate for
initiating R&D activity utilizing biodiversity in Indonesia. Therefore, it is important to shift
the policy direction to utilize bio resources more actively. By permitting the domestic and
international firms using NARC facility to utilize bio resources not only for research
purpose but also for subsequence commercial purpose, it would provide tremendous
incentives for high technology and science oriented firm to utilize NARC facilities for their
R&D activities. This role might be initiated by RISTEK.
2) Incentive for Commercializing Research Output originated from NARC
Having co-research with Indonesian public research institutions (BPPT, IPB and ITB) and
private firm and sharing intellectual property right among those parties in NARC, the
incentives should be also provided even it moves from research stage to commercial stage
as long as the project still sustain the conditions for receiving incentives during R&D. In
other words, if the privilege such as tax reduction would be given even after the commercial
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stage by utilizing the result of NRAC‘s co-research output, the private firm who is currently
considering only the construction of production line in Indonesia may seek the opportunity
for R&D activity as well. This role might be initiated by MOF.