By: Mike Shanahan
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A UN report released last week warns of a widening technological gap between developing countries taking part in the ‘global innovation network’ and those failing to do so.
The report points out that developing nations, particularly in Asia, are becoming increasingly successful in attracting investment in research and development from multinational corporations.
But, it says, developing countries that are weak in research and development (R&D) need to adopt appropriate policies — for instance by protecting intellectual property rights — if they are to benefit from this trend.
According to the report, by the UN Conference on Trade and Development (UNCTAD), the proportion of research and development (R&D) that US-based multinationals conducted in Asia rose from three to ten per cent between 1994 and 2002.
For example, there are currently more than 700 foreign-owned R&D facilities today; there were none in 1993.
The report says these figures will continue to grow. More than 60 per cent of the multinational corporations surveyed by the UN agency plan to expand their research activities in China. For India, the figure was 29.5 per cent.
In contrast, however, few of the corporations plan to increase R&D in Africa or Latin America, except in Brazil, Mexico, Morocco and South Africa.
In fact, the report notes that the Middle East and North Africa have overtaken Latin America and the Caribbean in ‘innovative capability’ — a key indicator of a country or region’s ability to attract R&D investment from multinationals.
UNCTAD warns that developing countries that currently have weak capacities for innovation should not expect multinationals to spend more on R&D within their borders in the short term.
Instead, they should take examples from Asian countries that are emerging as important R&D centres, such as China, India and Taiwan, and implement similar policies. These include increasing government support for R&D and education, setting up systems to protect intellectual property, and creating policies to promote foreign investment.
In 2002, multinational corporations provided about half of the US$677 billion spent on R&D worldwide, says the report. Many of them spent more on R&D than most developing countries.
The report notes that the efforts of multinationals in developing countries previously focused on adapting existing products to local markets.
Now, however, their branches in developing countries are increasingly becoming centres of innovation in their own right, where new products are developed for regional or even global markets.
This is largely as a result of government efforts to invest in R&D, and willingness to make it easier for multinationals to create branches on their soil.
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