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Kota Kinabalu, February 19, 2013

Conference Plenary Session 1 Bio Borneo 2013

Malaysia's transformation journey towards being a bio-based economy

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An increasingly shared global view is that "living off the land" is the only way to secure long term human survival

Source: Roland Berger

24 23 22 21 20 19 18 17 16 6 5 4 3 2 1

2

1

0

30 29 28 27 26 25

10

9

8

7

6

5

4

3

15 14 13 12 11 10 9 8 7

"Living off the land"

"Living off the land"

Population 9 - 10 billion

Population < 1 billion

"Age of hydrocarbons"

World population - from year 0 to year 3000 [in billions]

We are here

CO2

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A global bio-based economy is the way forward and addresses key sustainable development challenges affecting the world

Economy

Society Environment

Viable Equitable

Livable

Sustainable

Economy • Economic growth • Job creation

Environment • Climate change • Reduce dependence on fossil

fuels for energy and raw materials • Preservation of biodiversity Society • Population growth • Consumption needs • Public health • Food security • Energy security

Sustainable development challenges

Source: Roland Berger

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The global evolution towards a bio-based economy is on the way, facilitated by an increased commercialization of biotech research

Pacific Ethanol

(Cellulose ethanol)

BioGasol

(Cellulose ethanol & gas) Force

(Cellulosic fibers & chemicals)

NExBTL Biorefinery

(Veg oil & animal fat biodiesel)

Ghent Bio-

energy Valley

(Biofuels, gas and

power)

Lignocellulosic Biorefiniery

(Cellulose ethanol and chemicals)

Green Biorefinery

(Chemicals, biofuels,

gas and power)

Green Biorefinery

(Chemicals, food, feed,

biofuels, gas and power)

Green Biorefinery

(Cellulose ethanol)

Mackay biorefinery

(Cellulose ethanol)

Waste Biorefinery

(Cellulose ethanol)

CHRISGAS

Large scale

ethanol

production

Forestry Biorefinery

(Chemicals)

Green Biorefinery

(Chemicals, biofuels,

gas and power)

Microalgea Biorefiniery

(Chemicals, feed, food)

Iogen

(Cellulose ethanol)

Lignol

(Cellulose ethanol)

Blue Fire

(Cellulose ethanol)

Abengoa

(Cellulose ethanol)

ICM

(Cellulose ethanol)

Poet

(Cellulose ethanol) NewPage

(Cellulose

ethanol)

Alico

(Cellulose ethanol)

Range fuels

(Cellulose

ethanol)

NExBTL Biorefinery

(world’s largest biorefinery)

(veg oil & animal fat biodiesel)

DSM-Roquette

(Chemicals)

Source: Wageningen University Research Center; International Energy Agency ;Department of Energy, Company websites

Global bio-based initiatives (selection, non-exhaustive)

Borregaard

(Cellulose

ethanol &

specialties)

BioHub

(Chemicals)

Braskem

(biopolymers)

VTT/Kemira

(Biomass R&D center)

Dedini/Novozymes

(Cellulose ethanol)

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In a bio-based economy, a substantial amount of economic output is derived from developing & using biological based materials

Biotechnology could contribute up to approximately 2.7% of GDP in the OECD by 2030.

Biotechnology could account for an even higher share of GDP in non-OECD countries, due to the greater significance of primary & industrial production to GDP.

The use of these biotechnologies in 2030 is estimated to contribute to 35% of chemicals output, 80% of pharmaceuticals and diagnostic production and approximately 50% of agricultural output.

Forecasts on bio-based economic contribution by the OECD review of the Bioeconomy to 2030

Source: The Bioeconomy to 2030 (OECD International Futures)

The 2.7% of GDP forecast is based on an evolutionary path of biotechnology development.

A more revolutionary approach towards policies, regulation, funding, economic competitiveness etc. has

the potential to deliver greater upside

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The many applications within a bio-based economy will impact our daily lives in a wide range of areas

Source: Innovation agenda for the BBE, Roland Berger

PRODUCE BIOMASS CONVERT PRODUCE END PRODUCTS

Algae

Crops and

plants

(Thermo)chemical

conversion

Biological

conversion

Tertiary residuals

(manure, solid

waste-municipal)

Secondary

residuals (food

processing)

Primary

residuals (palm

oil waste, wood

chips etc.)

Resi-

duals

Pre-

treat-

ment

Specialty

chemicals

Base

chemicals

Fuel

Power,

gas & heat

Food-feed

Packaging, fertilizer

Pharma-

ceuticals

Waste

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2005 2006 2010 2011

Launch of National Biotechnology Policy

Formation of BiotechCorp

Formation of Agensi Innovasi Malaysia (AIM)

Launch of National Biomass Strategy (NBS)

Launch of 1Malaysia Biomass Alternative Strategy (1MBAS)

2012

Conclusion of BTP lab sessions

Formation of the Sustainable Energy Development Authority Malaysia (SEDA)

PM Datuk Seri Najib Tun Abdul Razak announces plans to cut Malaysia's carbon emissions by 40% by 2020

2009

Launch of National Green Tech Policy

Renewable Energy Act

10th Malaysia Plan (10MP)

Economic Transformation plan - PEMANDU NKEA Labs

Key developments/ national plans surrounding bioeconomy sector

Source: Desktop research, Roland Berger analysis

BTP EPPs and trigger projects announced by the Prime Minister Oct '12

Malaysia has laid the foundations for a bio-based economy by launching the Biotechnology Transformation Programme (BTP)

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8 BBE_BioBorneo_v5.pptx Source: BIM Workshop

Vision:

To become a global high income bioeconomy through a sustainable ecosystem of R&D

and commercialization in the areas of agriculture, healthcare and industrial biotechnology

by 2020, leveraging upon:-

In line with national aspirations to become a global high income bio-based economy, the BTP directs its efforts at three focus areas

Tropical agro-biotechnology,

Renewable bio-resources; and

Innovative healthcare products and services.

1

2

3

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Industrial bio Inputs

Bio-based farm

inputs

Trigger projects

Establishment of an energy crop plantation 1

Production of syngas for steam generation from solid bimass 2

Production and utilization of compressed biomethane gas (CBG) for transportation and industrial sectors 3

Production of isobutanol from cellulosic feedstocks 4

Bioethanol and biomethanol production from solid biomass 5

Production of cellulosic sugars from woody biomass produced by energy crop plantations 6

Establishment of commercial production of PHBH from palm oil and its by-products & derivatives 7

Production of bioplastics resin 8

Production of Biopolyols for Biopolyurethanes from Palm Oil derived Oleic Acid 9

Scale up production and promote usage of biodegradable & compostable packaging products from sustainable agro-waste 10

Converting agriwaste to bio fertilizers through implementation of integrated waste treatments plants 11

Scale up of production and commercialization of bio-feed for livestock industry 12

Scale up plantation, extraction & commercialization of Stevia as an alternative sweetener for food & beverage products 13

Develop, produce and commercialise indigenous hybrid paddy seed 15

Scale up production of high value mushroom products 16

Develop plantation, extraction and commercialization of mangosteen 14

Accelerate development, production and commercialization of Malaysian-made biotech drugs (biosimilars/biologics) 17

Develop drug discovery services and IP development around natural products 18

Scale up innovative molecular screening and diagnostics (MSD) products and services 19

To promote, encourage and ensure progress of stem cell therapeutics and regenerative medicine in Malaysia 20

The BTP encompasses 20 trigger projects across 3 industries: (1) Industrial, (2) Agriculture and (3) Healthcare

Ind

us

tria

l

Biochemicals

Biomaterials

High value

bioingredients

High value food

varieties

Biosimilars

Drug discovery

Molecular screening

Stem cells

Ag

ric

ult

ure

H

ea

lth

ca

re

EPPs

Source: Roland Berger

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A significant number of these EPPs have a direct impact on Sabah and Sarawak

Feedstock Plantations

Syngas for Steam

Compressed Biogas

Isobutanol

Bioethanol/Biomethanol

Cellulosic Sugars

PHBH

Bioplastic Resin

Biopolyols for BioPU

Biodegradable Packaging

Biofertilizers

Biofeed

Stevia

Mangosteen

Hybrid paddy

Mushroom

Malaysian-made biosimilars

Drug discovery

Molecular screening

Stem cells and regenerative medicine

Ind

us

tria

l b

iote

ch

no

log

y

Ag

ric

ult

ure

b

iote

ch

no

log

y

He

alt

hc

are

b

iote

ch

no

log

y

Trigger project Peninsular Malaysia Sabah Sarawak

✓ ✓

✓ ✓

✓ ✓ ✓

✓ ✓

✓ ✓

✓ ✓

✓ ✓

✓ ✓ ✓ ✓

✓ ✓ ✓ ✓

✓ ✓ ✓ ✓

✓ ✓ ✓ ✓

✓ ✓ ✓

✓ ✓

✓ ✓ ✓

✓ ✓ ✓

✓ ✓

✓ ✓ ✓ ✓

✓ ✓

✓ ✓ ✓ ✓

✓ ✓

PRIMARY FOCUS

✓ ✓ Primary focus ✓ Secondary focus

Source: Roland Berger

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Sabah and Sarawak hold tremendous untapped potential for further bio-based activities, albeit with a set of challenges

Key resources

Source: Roland Berger

Opportunities Challenges

• Hydro • Biomass (oil palm & timber

waste) • Carbon sink expansion

potential (replanting + forest plantation)

• Aquaculture potential • Diverse biodiversity • Land available for

agriculture

• Hydro power • Biomass for energy • Downstream applications

(e.g. bioplastics, biochemicals, bioplastics, biofertilizers, bio-based pharmaceuticals)

• Carbon sink expansion potential (replanting + forest plantation)

• World-scale aquaculture: - Caviar production from

sturgeon meat - Lobster production

• Pan-Borneo collaboration (e.g. strategy, research, projects)

• Labor supply shortage due to low population and population density

• Infrastructure – e.g. road system connectivity

• Logistics • Institutional capability (e.g.

budget, policy) • Strategic framework at the

state level

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Going forward, some key focus priorities remain to fully realize Malaysia's transformation into a bio-based economy (1/2)

Develop a clear roadmap for implementation

Defining what needs to be done and how we set out doing it will set us up for success. Alignment, execution,

performance monitoring and regular strategic reviews are all necessary for success.

Engrain sustainability in people's mindset

Malaysia has inherent advantages to 'win' in the bio-economy. But the mindset of sustainability and living off

the land must first be a way of life – not easy; given that we always have 'enough' resources, there is hardly

any incentive to be efficient.

Further invest downstream

Extract maximum value from our natural resources by making sustainable investments further downstream

the value chain in new application areas (e.g. biochemicals, bioplastics, bio-based pharmaceuticals etc)

Engage the people

Public education and communication is necessary to seek buy in and also to overcome skepticism and

negative feelings over novel bio-based products & technologies

Learn from successful international models

Many bio-based economy models are beginning to emerge globally e.g. the Dutch model. We need to learn

from these models quickly and to adapt what works best for us.

Key priorities (1/2)

Source: Roland Berger

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Attract and develop talents

Quality supply of engineers, scientists, biotechnologists from the local talent pool required; attracting global

experts and leading biotech firms; providing a conducive environment for innovative research

Foster cross-industry integration

Bio-based value chains cut across different sectors and require multi-industry collaboration to develop new

applications closer to the needs of consumers

Fully realize export potential

Malaysia should position itself as a key exporter of bio-based applications and technology with thriving

collaboration amongst the government, business entities and research initiatives.

Anticipate future trends

The biotechnology sector is today probably where the IT sector was in the 1980s. Trends may still be volatile

and the end game is still unclear. Need to keep up with the latest industry trends and developments.

Recalculate plans when the facts change.

Key priorities (2/2)

Source: Roland Berger

Going forward, some key focus priorities remain to fully realize Malaysia's transformation into a bio-based economy (1/2)

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It's character

impact! that creates