# **III  R&D in East Asia**

Total world spending on R&D amounted to $830 billion in PPP terms in 2002<sup>18</sup> of which some 78 percent was performed by developed countries, much higher than their 59 percent share in world GDP (in PPP terms). That proportion has fallen over the last decade, however, as developing or emerging economies raised their share from 13 percent in 1992 to 22 percent in 2002. East Asia has been at the heart of the rise in developing country R&D, contributing almost three quarters of the increase and quintupling over the decade (in nominal terms) to reach $112 billion in 2002 or 13.5 percent of the world total. R&D intensity in East Asia – the ratio of R&D spending to GDP – rose from 0.7 percent in 1992 to 1.2 percent in 2002.

As Table 4 indicates, however, East Asian economies differ widely in R&D performance. Korea, Singapore and Taiwan (China) now devote 2.2-2.5 percent of GDP to R&D spending, comparable to levels in the US and the upper end of the scale among developed economies. On the other hand R&D spending in economies such as Indonesia, Philippines and Thailand is only

**Table 4.  Research and Development Expenditures**

|R&D Spending2002<br>R&D as|% GDP*|
|---|---|
|US$ Bill<br>% f||
|.<br>(PPP)<br>o<br>World<br>1992|2002|
|East Asia<br>111.7<br>13.5<br>0.7|1.2|
|NIEs.<br>36.4<br>4.4<br>1.6|2.2|
|Hong Kong<br>1.1<br>0.1<br>0.3(b)|0.6|
|Korea<br>20.8<br>2.5<br>1.9|2.5|
|Singapore<br>2.2<br>0.3<br>1.2|2.2|
|Taiwan, China<br>12.2<br>1.5<br>1.8|2.3|
|South East Asia<br>3.3<br>0.4<br>0.1|0.2|
|Indonesia<br>0.3<br>0.0<br>0.1(c)|0.1(a)|
|Malaysia<br>1.5<br>0.2<br>0.4|0.7|
|Philippines<br>0.4<br>0.0<br>0.2|0.1|
|Thailand<br>1.1<br>0.1<br>0.2|0.2|
|China<br>72.0<br>8.7<br>0.8|1.2|
|World<br>829.9<br>100.0<br>1.7|1.7|
|Developed<br>645.8<br>77.8<br>2.3|2.3|
|Japan<br>106.4<br>12.8<br>2.9|3.1|
|USA<br>275.1<br>33.1<br>2.6|2.6|
|Developing<br>184.1<br>22.1<br>0.6|0.9|
|Latin America<br>21.7<br>2.6<br>0.5|0.6|
|Emerg. Europe<br>30.3<br>3.7<br>1.0|1.2|
|Source: UNESCO (2004, 2006). (a) 2001 ( b) 1995 (c)<br>*Regional data are sum of R&D divided bysum of PP|1994.<br>P GDP.|

0.1-0.2 percent of GDP, among the lowest of all economies for which we have data. In between these two extremes is China, where R&D spending risen at 20 percent a year over the last decade to reach 1.4 percent of GDP by 2004, or $109 billion in PPP terms.<sup>19</sup> R&D spending in Malaysia also accelerated after the mid 1990s, reaching 0.7 percent of GDP by 2002.

In East Asia, as elsewhere, richer countries like Korea tend to have much higher R&D intensities than poorer ones like Indonesia. Exhibit 7 shows a scatter plot of panel data for R&D intensity and per capita GDP for a sample of developed and developing economies between the mid 1970s and the early to mid 2000s. R&D intensity not only increases with per capita GDP but does so at an 18 UNESCO (2005, 2006). There is R&D data available for numbers of economies through 2004 or even 2005. But 2002 seems to be the most recent year for which there is comprehensive data for the world as a whole. 19 It is worth noting that the absolute value of China’s R&D in PPP (purchasing power parity) terms is particularly affected by the unusually large disparity between its PPP exchange rate (as calculated by the World Bank and other researchers) and its market exchange rate. Thus China’s R&D expenditures in 2004 at market exchange rates were, according to data from UNESCO (2006), $23.8 billion, or only 21 percent of the PPP figure. By comparison Korea’s R&D spending in 2003 was $22.8 billion in PPP terms and $16 billion at market exchange rates, or 70 percent of the PPP figure. In Malaysia R&D at market rates was 42 percent of R&D in PPP terms. Note, however, that while this issue is relevant for measuring absolute levels of R&D, it does not affect R&D intensity (the ratio of R&D to GDP), since both the numerator and denominator of that ratio use the same conversion rate.

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