Rest of the World

Mon, 12/17/2012 - 6:19pm
Martin Grueber, Research Leader, Battelle and Tim Studt, Editorial Director, Advantage Business Media

GFF GlobeThe U.S., BRIC, and European countries account for about 70% of the R&D performed in the world. Countries in the rest-of-the-world (ROW) account for the remaining $500 billion. These countries are increasing their R&D investments at an average rate of nearly 5%. Major high-technology countries are included in this sector: Japan, Canada, South Korea, Taiwan, Singapore, Israel, Ukraine, and even Iran. There is no limit to the geographical distribution of R&D investments—each region and country has both drivers and limitations on R&D spending.

South Africa is considered the fifth member of the BRIC group, and South African representatives attend BRIC meetings. However, South Africa is not truly considered an emerging economy as much as Brazil, Russia, India, and China. Its GDP, R&D investment as a share of GDP, and R&D growth are all considered moderate compared to other major and emerging R&D spending countries.


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Major R&D Investors
Japan, for example, has had a long-standing large R&D investment. R&D as a share of GDP is 3.5%, although it had reached 3.7% earlier in the decade. However, demographics, economics, and the Fukushima tsunami and nuclear disaster have had negative effects on Japan's R&D investments. Japan has an aging population, and academic enrollments have stagnated at the bachelor's level and rapidly declined at the graduate and doctorate levels. Part of this is also due to a decline in expected employment demand for these scientists and engineers. The 2009-10 global recession also affected the Japanese economy and the ability to strongly support R&D investments. Toyota's manufacturing quality problems affected its (and its suppliers) production and trade capabilities, which were further affected by the tsunami. The economic stresses have now largely abated and Japanese industrial output has resumed, along with increased R&D investments.

South Korea's R&D investment continues to increase at about 4% annually, with similar increases in its economy. South Korea ranks fifth in our Top 40 largest R&D investors with nearly 4% share of the global R&D investment, which is impressive considering it ranks 25th in population with 49 million and 15th in total GDP. South Korea invests about 3.5% of it GDP in R&D with the largest portion invested in industrial production and technology. About a third of the country's R&D spending is supplied by the government. Large corporate tax deductions are allowed by the government for R&D and facility investments. Patent registrations are also encouraged and have quadrupled over the past ten years. Scientific publications authored by South Korean researchers have similarly doubled over the past five years. And while the 2009-10 global recession affected the economies of numerous countries, the South Korean economy continued to grow through the recession.


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Significant Others
Singapore is another strong R&D investor with nearly 1% of the total global output, especially when considering its population of only 5 million—less than a tenth of 1% of the world's population. Singapore GERD nearly tripled over the past ten years, and its R&D as a share of GDP increased from 1.9% to 2.7%, surpassing that of the U.S. GERD per capita also exceeds that of the U.S., the U.K., and Japan. Singapore ranks 19th out of 146 economies on the World Bank's Knowledge Economy Index (KEI). Singapore also leads the Southeast Asian regions in terms of the number of science and technology personnel. However, its relatively small size is a limitation on its long-term S&T growth potential. The number of scientific articles authored in Singapore is limited by its relatively small number of scientists and engineers, but it is still on a per capita level comparable to other countries in the region.

Israel is another ROW country with unique R&D capabilities and potential. Israel is the only country in the world with R&D as a share of GDP that exceeds 4% (4.2%). A significant portion of its $10.6 billion in 2013 R&D investments is allocated to development of new defense systems. Nine of the 13 east European countries fall within the ROW category, with an overall average R&D as a percent of GDP of 0.8% and an average R&D budget per country of $500 million. These countries' R&D budgets are expected to increase 2% in 2013, which is ahead of their expected GDP growth of 1.6%.


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