1.6 Investments in science and technology are increasingly important for economic growth

While it is not possible to demonstrate a direct causation between the rates of investment in research and development⁸ and outcomes in terms of increased GDP, it is true that a growing level of investment in research and development is generally correlated with improved GDP-growth outcomes. But how much should countries invest in research and development, and in what kind, to ensure for their citizens the material benefits that science and technology can bring? Alternatively put, given the many competing claims on scarce public resources, what would be an 'appropriate' level of invest-ment for countries at different levels of economic development?⁹

When national activities in research and development are taken as a whole, it is seen that the wealthy industrialized nations - Australia, Canada, Japan, South Korea, the United States, and northern and western Europe - all spend between 1.5 percent and 3.8 percent of their GDP on research and development, whereas the countries of eastern and southern Europe tend to have R&D/GDP ratios of less than 1.5 percent.¹⁰ It is clear that countries making heavy investment in research and development also have strong high-technology industrial and service sectors. And it is noteworthy that the private sector finances most of the research in these countries.¹¹

By contrast, the lower the per capita income of a country, the greater tends to be the role of government in funding research and development. With severe competitive pressures for limited government budgets, the re-sult is modest overall spending for research and development and relatively low R&D/GDP ratios. While developing nations with large economies have approached the lower-end R&D/GDP ratios of OECD countries (for example, India allocates 1.2 percent; Brazil, 0.91 percent; and China, 0.69 percent), most developing nations devote less than 0.5 percent of their GDP to research and development.¹²

This situation makes it essential that efforts to improve the overall capac-ity in science and technology be accompanied by increased public spending on research and development, with initial investments normally occurring at the development end of the spectrum and supporting more fundamental research as an economy grows. National governments in developing na-tions should increase their spending considerably, certainly above 1 percent of GDP and preferably closer to 1.5 percent, if there is to be any hope of not falling farther behind the industrialized states.

Precedents do exist. Successful economies, such as those of the 'East Asian Tigers,' have achieved much by focusing on education and investing in research and development. The figures from South Korea (2.55 percent), Taiwan-China (1.97 percent), and Singapore (1.47 percent), and the con-siderable material benefits accruing to the people of those countries, are renowned stories of success.¹³

A strong S&T capacity can thus translate into accelerated industrial and economic development in what can be termed a positive spiral of mutual reinforcement. However, the Study Panel is also convinced that simply limiting actions in science and technology to the utilitarian needs of the 'productive sector' will limit the effectiveness of the effort in this very rapidly changing environment, especially in areas where scientific and technological knowledge are likely to play an exponentially increasing role.