Southeast Asia drives for biotech supremacy.

The biotechnology industry is being targeted as an area for future growth by Southeast Asian countries--just as they face increasing competition from basic manufacturing industries in China, India and other lower-cost producers.

The Organisation for Economic Co-operation and Development

(OECD) reports that the global biotechnology industry achieved sales of around $90 billion in 2004, with the U.S. accounting for about two-thirds. However, a World Bank study shows that demand for biotechnology products in the Asia-Pacific region is likely to grow twice as fast as that in North America over the next decade. New patent laws in Asian countries, including China and India, and more liberal regulations around stem-cell research in South Korea and Singapore, should spur growth outside the United States. Rapid economic growth in the Asia-Pacific region will also boost demand for biotechnology products.

Global biotechnoiogy companies are attempting to reduce R&D costs by outsourcing operations to Asia. Many are seeking to establish Asian regional headquarters. Singapore and Malaysia are competing to attract these investors. Although China and India have also established fast-growing biotechnology industries, countries like Singapore have a key advantage both in infrastructure and the enforcement of intellectual property rights.

According to Yeoh Keat Chuan, deputy director of biomedical sciences for the Singapore Economic Development Board (EDB), "Singapore aims to capture a share of the fast growing global biotech pie. Our biomedical sciences industry output grew by 33 percent over the past year alone to reach S$15.8 billion (US$9.4 billion). Singapore's vision is to be 'the Biopolis of Asia,' an international biomedical sciences cluster advancing human health."

Singapore: A Global Player

The city-state of Singapore launched a drive into the bio-medical sector in 2000 and has since emerged as the leading regional biotechnology center and a global player in the industry. Strong IP protection and enforcement is an important reason why Singapore is a preferred investment location for many companies. In fact, Singapore has been ranked as the location with the lowest risk in Asia in terms of IP protection for three consecutive years (2002 to 2004) by the Hong Kong-based Political and Economic Risk Consultancy.

The DSB's Chuan argues that Asia's size and growth curves mean that within this region alone "the potential demand for biotech products is enormous." Over the past five years, Singapore has attracted over 50 multinational pharmaceutical and biotechnology companies. Their activities range from R&D and clinical trials to manufacturing and logistics.

Companies that have based their regional headquarters in Singapore include GlaxoSmithKline and AstraZeneca. In August 2005, Germany's Schering AG became the latest company to establish such a presence in Singapore. According to the EDB, its regional base is intended to:

* Serve as a headquarters for sales, marketing and logistics;

* Manage regional clinical and medical activities in the region;

* Coordinate clinical trials for Schering products, a development that could shorten by as much as two years product approval for markets such as China and South Korea.

By locating its key decision-making and management activities in Singapore, this regional headquarters will support Schering's operations in Southeast Asia, Australasia and China. It will manage regional sales revenues in excess of US$300 million. Schering's Asia-Pacific office will also coordinate its clinical and medical activities in the region.

Building Biopolis

Singapore's commitment to the biomedical sciences is symbolized by a physical Biopolis: an integrated R&D complex that houses five public research institutes as well as biopharmaceutical industry R&D laboratories.

At the Biopolis, researchers can leverage the shared facilities and infrastructure including state-of-the-art scientific equipment. In addition, there are conference facilities and meeting rooms as well as centralized laboratory support services. This allows companies to reduce R&D costs significantly and accelerate their product development timeline.

The demand for research space at the Biopolis has exceeded initial expectations. Biopolis Phase I, which, opened in September 2003 with 18.6 hectares of space, is already over 90 percent occupied by more than 100 companies.

Development work on Phase II is well underway. When completed at the end of 2006, it will provide an additional 3.4 hectares of space. The two buildings in Phase II will be dedicated to private-sector R&D operations.

Some of the companies that have operations at the Biopolis include the Novartis Institute for Tropical Diseases, Johns Hopkins, Vanda Pharmaceuticals, Paradigm Therapeutics, GlaxoSmithKline, Waseda-Olympus Bioscience Research Institute, ES Cell International, and Proligo Singapore.

The five publicly funded research institutes at the Biopolis are the Bioinformatics Institute, Bioprocessing Technology Institute, Genome Institute of Singapore, Institute of Molecular & Cell Biology, and the Institute of Bioengineering & Nanotechnology.

Singapore Manufacturing

While the Biopolis is dedicated to biopharmaceutical R&D, Tuas Biomedical Park (TBP) plays an instrumental role in attracting global pharmaceutical and medical technology companies to set up their manufacturing bases in Singapore. Within the past five years, the 183-hectare park has attracted such global giants as Ciba Vision, Lonza, Merck Sharpe & Dohme, Novartis, Pfizer, Wyeth Pharmaceuticals, and Wyeth Nutritionals. Tuas Biomedical Park II, which will create an additional 188 hectares to cater to the strong industry demand, is already under development.

TBP provides ready-prepared industrial land with essential infrastructure including roads, sewer and power lines, drainage systems, water, telecommunication lines, and industrial gas supply.

Other biomedical multinationals with manufacturing operations in Singapore include GlaxoSmithKline, Sanofi-Aventis, Schering-Plough, Baxter, Becton Dickinson, and Kaneka.

Malaysia: Focus on Agriculture

Malaysia is seeking to exploit a large agricultural base by focusing its biotechnology efforts on the agricultural sector. In May 2005, the government unveiled a National Biotechnology Policy (NBP) and established the Malaysian Biotech Corporation to spur the development of agricultural biotechnology. The NBP will be implemented over three phases, spanning a 15-year period ending in 2020. Malaysia's biotechnology ambitions, outlined in the NBP, are:

* To focus on the three areas of agricultural, healthcare and industrial biotechnology;

* To become the preferred out-sourcing destination for Western biotechnology industries;

* To collaborate rather than compete with Singapore in providing biotechnology services and products to the international market.

The Malaysian government's commitment should ensure that the industry has the required financial resources to develop into a regionally competitive player. As well as public capital, the government plans to offer incentives to lure significant foreign investment into the sector.

However, a shortage of suitably skilled scientists (especially those capable of conducting R&D projects) may hamper the growth of the industry in the short term. The government hopes to boost the long-term supply of biotechnologists by launching research centers of excellence at nine universities in the country. Launch is set for late 2006.

GM Crops in Thailand

With its own large agricultural sector, Thailand is also well placed to attract agriculturally focused biotech companies. Monsanto, a leading developer of genetically modified (GM) crops, announced in November 2003 its intention to make Thailand a regional base by 2006 for its GM seed production. However, local opposition to GM crops has hindered the company's plans. In 1999, the government imposed a ban on open field trials because of concerns about the spread of Monsanto's GM cotton crops to nearby farms growing non-GM crops. Monsanto has repeatedly, yet unsuccessfully, lobbied Thailand's government to revoke the ban. Its efforts have failed due to strong opposition from farmers, environmentalists and consumer groups. The anti-GM coalition says GM crops pose a serious threat to native plants, increase investment costs and pose a health threat to the human population.

In terms of basic infrastructure and the skills of its farmers, Monsanto says, in a report to shareholders, that Thailand has more potential than India and the Philippines as a GM "seed hub." The country could earn large revenues from exporting transgenic seeds, but also faces a significant competitive threat from other agricultural producers in the region, such as China, which are adopting GM crops.

Moving to the Philippines

In August 2005, Monsanto threatened to scrap its plans to invest in GM corn production in Thailand unless the government lifted its ban on open field trials and the commercialization of transgenic crops. The company has already begun shifting its operations to India and the Philippines, where the commercial planting of GM corn and cotton has been approved. In late 2005, the Philippines government announced an agricultural biotechnology policy that gives the green light to the development of GM crops in the country.

The World Bank reports that the Philippines is already the leading producer of GM crops in the region and the fourteenth largest producer of GM crops in the world. In 2002, the country became the first in Asia to endorse the commercial production of a GM food crop. President Gloria Macapagal-Arroyo has encouraged the development of biotechnology industries and use of GM crops.

The Philippines started its biotechnology programs in 1980. The government has since funded conventional biotechnology research programs focusing on various crops including bananas, mangos and papaya, as well as corn. Manila has also focused on infrastructure building and project funding, mainly in the research and academic sectors. These activities have been geared to producing a pool of technically competent individuals from which a critical mass of scientific experts can arise.

Biotechnology development is hindered by funding difficulties, with marked cutbacks in government expenditure for science and technology having taken place under former President Joseph Estrada. In the private sector, the biotechnology industry is still in its infancy, with most products derived from traditional biotechnology such as fermentation using unmodified organisms.

Thus, while the Philippines was one of the first countries in the region to identify molecular biology and biotechnology as areas of great potential, its biotechnology industry still suffers from a shortfall in people, infrastructure, technical capabilities, and funding. The country also lacks the necessary guidelines to thoroughly regulate its biotechnology industry.

The success of the biotechnology industry in Southeast Asia depends on government commitments to developing infrastructure and protecting intellectual property rights. Malaysia's efforts to match Singapore in these areas are likely to attract greater investment from foreign-based multinationals, while Thailand and the Philippines will need to strengthen government commitments in order to capitalize on biotechnology investment.

Gordon Feller, from San Rafael, California

gordonf20@comcast.net