SCG aims high on R&D benefits

"If we want to leap frog the growth, theoretically the R&D budget growth rate should be 3 times of sale growth rate," said Roongrote Rangsiyopash, vice president and chief financial officer.

SCG this year expects its sale revenue to rise 10 per cent, and the R&D budget, if increased 3 times, would be Bt1.3 billion from Bt1 billion this year. The budget has been rising every year. From Bt40 million five years ago, the budget in 2008 rose to Bt730 million and Bt780 million in 2009. The company announced recently that in 2013, the budget would be raised to Bt1.5 billion, from just Bt40 million five years ago.

According to SCG President Kan Trakulhoon, SCG is now on the shopping spree and global researchers are on the shopping list to strengthen the research team. The newcomers included Dr. Chachanat Thebtaranonth, deputy director of National Science and Technology Development Agency (NSTDA) and a Japanese chemical researcher who wants to settle down in Thailand. Targets are mainly those in Japan thanks to their proficiency in industries, proximity of Japan and Thailand and similar work culture.

Kan himself interviewed the candidates. Now that the research department is established, job interviews are now passed to chief researchers. 

As a result of extensive search, at SCG, the number of staff with doctoral degrees has risen sharply from 14 before 2007 to over 40 in 2010.

"The investment is proved fruitful. The share of HAV (high value added) products and services to total sales rose from 4 per cent in 2004 to 25 per cent in 2009, as the value rose from Bt8 billion in the year to over Bt43 billion in 2009," Kan said.

Kan attributed the impressive profitability in 2009, when companies globally suffered from the global crisis, to the HAV which thanks to innovative elements are enjoying higher demand and prices. In the year, when the company's sale dropped 17.28 per cent from Bt302.4 billion in 2008 to Bt250 billion, the net profit rose 45 per cent from Bt16.77 billion to Bt24.35 billion.

"This convinces us that competitive advantages can be shifted to HAV. We need to further support R&D and IP (intellectual property) management," he said.

Kan He is ready to transfer the successful experiences to other businesses, taking a leading role in the upcoming workshop of Thailand Management Association.

He noted that the country's competitiveness could be strengthened largely if local universities can take a supporting role in this area. He recalled the overseas university visits since 2003, where those universities are ready to present their innovations to interested companies. Against criticisms that few private companies support the universities' R&D activities, he said in the US, universities' research fund enjoys 80 per cent supports from the government. In Japan, companies are working on their own research, but there is a channel to bridge knowledge with university labs.

The executive was impressed with the universities' presentation of their innovation to interested parties. During his last visit to Japan, where he visited 3 institutions including Tokyo University of Technology and Waseda University, he learnt that each university has business coordinators. Some can speak Thai.

Thai universities are underfunded, though, he noted. Chulalongkorn University is allocated Bt3 million for hardware procurement this year, while at SCG alone Bt200 million is spared this year and Bt300 million last year. A small university in Pittsburgh like Carnegie Mellon controls the R&D fund of US$100 million, he said.

Total R&D spending in the public and private sectors in 2008 was Bt20 billion, or 0.2 per cent of the Bt9 trillion economic size. South Korea witnessed a leap frog growth after raising the R&D spending from 0.2 per cent in 1960s to 1 per cent a few years after that.

"If we want to establish this as a Thai culture, Thai leaders first need the right mindset. We must invest for the long term growth," he concluded.