As a group, the “Rest of the World” (ROW) countries—those other than the U.S., those in Europe and China—are expected to see moderate growth in their R&D investments in 2014, with leadership from countries like South Korea, Russia and Taiwan. Most Asian countries are projected to experience significant economic growth in 2014. When GDP momentum is paired with national commitments to increase research intensity, robust R&D funding growth typically results (as is the case in China). However, some countries elect to deploy resources against other priorities, and in other cases, the lack of well-developed research infrastructure inhibits the impact of R&D spending that does take place.
Highlights of R&D funding prospects in ROW countries include:
- Russia’s economy is expected to grow 3%, with R&D growth exceeding that rate. Russia’s strong infrastructure for scientific research positions it better than other CIS affiliates, which should also see positive GDP growth, but will likely not advance R&D funding to the same degree.
- Most Middle East countries will experience strong GDP growth in 2014, but they are constrained by weak R&D infrastructure. The exceptions include Israel and Qatar, which invest in R&D at globally competitive levels.
- Africa is expected to see strong GDP growth, but is also limited by under-developed R&D capabilities—the exception is South Africa.
- Strong GDP growth is expected in South America, but this region also lags in R&D capacity—even Brazil appears to be under-performing expectations.
The U.S., China, Japan and Europe (34 countries) account for about 78% of the $1.62 trillion which we forecast to be invested in R&D around the world in 2014. ROW countries (74 of which are included in this forecast) account for the remaining 22%, or $350 billion. Among this group are innovation-driven economies like South Korea (where $63 billion will be invested in R&D in 2014), to significant nations with relatively low emphasis on R&D (e.g., India), to entire continents where R&D funding is traditionally weak and can be forecast in the aggregate (e.g., Africa).
China, South Korea, Japan and Taiwan, in addition to their regional proximity, all have strong R&D programs that support development of science and technology (S&T) in the public and private sectors. Like China, Korea has established aggressive five-year plans for S&T. The objectives involve national competitiveness in innovation-intensive industries in which each country also has a strong manufacturing stake. Contribution to scientific discovery is also valued, with publications being among the measures of success. As the global R&D funding rankings indicate, each of these countries is expected to see substantial R&D growth in 2014.
Countries like Mexico offer a stark contrast. Despite sharing a border with the U.S. and an economy that is expected to experience reasonable growth in 2014, Mexican research intensity (R&D as a share of GDP) has languished below 1% range for some time. The country’s S&T and academic infrastructures are not well suited to support a higher level of growth. As a result, based on its current resources, priorities and national aspirations, Mexico’s prospects for long-term growth based on innovation are limited. It ranks in the top 40 R&D-sponsoring nations only because its large GDP, which is driven by agricultural, materials and lower-technology consumer products. Mexico is typical of the R&D infrastructure and policy context in a number of emerging countries, and contrasts with countries like Finland and Denmark, which spend about the same absolute amount as Mexico on R&D while having economies about one tenth the size.
In ROW, Means & Policy Disproportionately Affect R&D
The sustained high rates of R&D growth in China are unusual. Apart from the historic R&D leaders like the U.S., Japan and Europe, no countries are positioned to match China’s level of commitment. Even South Korea, with its exceptional level of research intensity, cannot achieve the same scale or rate of growth.
Emerging countries with similar aspirations for innovation-based growth require a diversity of talent, capabilities and markets—and the will to invest. With the world’s fourth-largest GDP, India is a good example. It has significant academic infrastructure, large population and global connectivity, but social and political priorities draw investment away from R&D. India’s projected rate of R&D funding growth in 2014 is only one-fifth that of its anticipated economic growth.
Although difficult to quantify, a lack of willingness or capacity to invest in R&D could restrain such economies from reaching larger potential in the long term. And it may become more difficult. According to McKinsey Global Institute analysis, as global economic growth slows in the future (as it is projected to do), the supply of capital will fall short of demand by 2030. This is especially important for those among the 74 ROW economies with limited R&D infrastructures: They could become even more restricted in building a foundation for R&D in the future than they are now.