Research for public good

This article first appeared in The Edge Malaysia Weekly, on June 27, 2022 - July 03, 2022.
Research for public good
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What is the real function of a university — to train people for society, or to do research for knowledge? Knowledge is of course a social good: individuals and societies increase knowledge to improve themselves. Universities as institutes of higher learning are important for the production and transmission of new knowledge or know-how to deal with complex situations. 

Throughout modern history, research and development (R&D) has always been an important part of a dynamic, innovative society-cum-economy. R&D cannot be done in isolation. It is an investment for the future and critical for individuals, companies, government or academia. The most successful example of a good R&D innovation ecosystem is Silicon Valley in the US. 

Silicon Valley got its name from the R&D on semiconductor silicon chips conducted in the world-class engineering universities of California — Stanford, Caltech, University of California, Berkeley, and the like. University professors or their top students eventually went on to create entrepreneurial start-up companies like Intel, Google, Facebook or Apple.

In other words, academia, business and civil service (ABC) can come together to form an ecosystem that generates positive economic, social and policy outcomes. With top policymakers rotating their knowledge and experience between universities, business and policy­makers, the US was able to transform the country flexibly using the latest scientific and social research tools and thinking.

Academics who have deep business and policy experience can thus help transfer their knowledge to the next generation of students, better than pure theories that bear little connection to reality.  American universities funnel their best and brightest to business and government, like Harvard professor Larry Summers as treasury secretary, or Henry Kissinger as secretary of state, each returning to business or consulting thereafter.

Meanwhile, the Securities and Exchange Commission, Federal Reserve Board and Commodities Futures Trading Commission of the US regularly draw on top academics to advise on policy and regulatory formulation. More recently, this practice has been increasingly emulated in many countries globally.

Reigniting R&D in Malaysia’s capital markets

Last year, the Institute for Capital Market Research Malaysia (ICMR), an initiative by the Securities Commission Malaysia to conduct research projects and thematic studies on capital market development, appointed me as Distinguished Fellow to advise on how to improve R&D in capital market development.

Two themes feature prominently in capital markets today: the promotion of financial inclusion and sustainable development.

One tends to forget that Malaysia’s stock market was the darling of the emerging stock markets in the 1980s and early 1990s. At its highest point, the Malaysian stock market had a larger market capitalisation as a percentage of gross domestic product than the banking system. I still remember how the October 1987 stock market crash in the US shocked the Kuala Lumpur Stock Exchange (KLSE), but our economy rebounded quickly. 

Nonetheless, it was the 1997 Asian financial crisis that hurt the Malaysian stock market owing to large capital outflows and debt defaults. Since then, even though our economy and stock market have recovered, our growth has been relatively smaller compared with other emerging markets such as Turkey, South Africa, India and China, which have grown much larger in absolute size. 

After the Covid-19 pandemic, it is timely that our capital markets renew themselves through more R&D. Emerging markets need new thinking in ideas, products, services and strategies that could help companies and the nation as a whole to overcome the aftershocks of the pandemic. Thus, there is considerable scope for developing research symbiotically that may prove critical to national economic development, as in the case of advanced economies like the US. Even if R&D might not bring immediate returns, the long-term benefits could be substantial.

Ever since the introduction of quantitative easing in advanced country monetary policy, the decline of real interest rates has caused a ballooning of debt in almost all countries. In Malaysia, the rise of Islamic finance, particularly in sukuk bonds, has been pioneering to provide new stimulus to our capital markets. However, as companies become more leveraged, it has become imperative at the policy level to encourage the development of equity markets. This was emphasised in the Securities Commission’s Capital Market Master Plan III, published last year, to ensure that our capital markets remain resilient, efficient and diversified.

Creating successful ecosystem innovation needs a culture of entrepreneurship and risk-taking that leverages academic research. One successful example of this is the Centre of Marine and Coastal Studies at Universiti Sains Malaysia, supported by the Ministry of Science and Technology. Under the ministry’s TechnoFund, the centre piloted production of oyster seeds in partnership with a local small- and medium-size enterprise (SME), SeaHarvest Aquamarine Sdn Bhd. This venture became the first commercial oyster hatchery in Malaysia and the region.

Harnessing research collaboration for sustainable recovery

ICMR has created a Research Collaboration Network in an effort to get Malaysian researchers in academia, think tanks and businesses to “fully leverage the power of innovation to build a cohesive, dynamic and sustainable recovery”. This collaborative platform aims to network policymakers, the financial sector and real businesses to work with the universities and research institutes to foster more applied research on capital markets.

ICMR is now running a “Call for Paper” series, which seeks to identify capital market opportunities in Malaysia and the broader region, specifically to study emerging topics such as environmental, social and governance (ESG) trends and sustainable finance. In particular, we hope to stimulate more studies on addressing market-based financing challenges faced by SMEs as well as the exciting opportunities of digital finance in the Islamic finance space. ICMR is willing to partially fund such studies, and all individuals with relevant research ideas and topics are encouraged to submit their papers, with selected papers published within Scopus indexed journals.

The post-pandemic era has created new opportunities to build capital markets that can directly change the livelihood and vibrancy of our economies, including helping to address climate warming and social inequities. We hope that more academics and researchers will come forward to take advantage of this initiative to study matters of deep interest and relevance to Malaysia. 

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