90 | Agricultural Innovation in Developing East Asia
BOX 6.4
Drivers of agriculture sector growth in China In China, complementary public investments into ag r icult ura l tech nolog y a nd t he resea rch- extension-training system have served as the primary engine of agricultural growth (along with the Household Responsibility System). Despite experiencing a twisting path of reform in agricultural research and extension, China has developed a strong research and development system. After the 1960s, China’s research institutions grew rapidly, from almost none in the 1950s to a system that now produces a steady flow of new varieties and other technologies. During the 1980s and 1990s China’s producers were replacing varieties from about 20–25 percent of their land during each cropping season (World Bank 2020). The government provided all funding for research before the reforms were initiated in the mid-1980s. There has since been a gradual shift from formula-based financing to competitive grants. Agricultural research institutes also generate revenue from commercial activities, accounting for 41 percent of the budget (FAO 2005). Since the mid-1980s, public investment in agricultural biotechnology has increased significantly (FAO 2005), reaching more than $800 million in purchasing power parity terms (FAO 2006). Estimates of government support to agricultural research and development vary. In 2013, China’s public funding of agricultural research was close to $10 billion, whereas in 2015 the estimates ranged from 26 billion to 55 billion renminbi (about $3.7–$7.8 billion, based on the June 2020 exchange rate). Over the past decade, both state-owned and other enterprises have engaged in agricultural science and technology activities in China (Huang and Rozelle 2018). China’s experience with special economic zones (SEZs) has developed over time, beginning in the early
1980s when market-oriented reforms were introduced in selected SEZ areas to attract foreign direct investment (FDI), followed by the establishment of open coastal cities, high-tech development zones, and later diverse regional zones. The SEZ incentives for stimulating growth and FDI entailed, for example, tax incentives for foreign investments, greater independence from the central government, and a focus on primarily export-oriented products and market-led activities (CDB 2015). Today, SEZs vary in scope and function. Some are designated geographical spaces where special policies and measures support specific economic functions. Others include free-trade areas, industry parks, technical innovation parks, and bonded zones that facilitate experimentation and innovation in a wide range of industries. By 2014, China was home to 31 bonded areas, 114 national hightech development parks, 164 national agricultural technology parks, 85 national eco-industrial parks, 55 national ecological civilization demonstration areas, and 283 national modern agriculture demonstration areas (CDB 2015). FDI has been one of the most significant features of China’s economic reform and opening to the outside world. China became the world’s largest recipient of FDI in 2004 (FAO 2006), with agriculture’s share of FDI standing at 2.33 percent (1997–2014). The large volumes of FDI have led to more efficient resource allocation, rapid dissemination of new agricultural technologies, and the widespread application of agricultural mechanization (Chen 2018). China also has significantly increased its own net FDI to agriculture, from $190 million in 2006 to $3.29 billion in 2016, an average annual increase of 33 percent (Jiang, Chen, and Wang 2018).
Thailand’s R&D spending is surprisingly low (0.42 percent of agricultural GDP) and heavily concentrated around the Greater Bangkok area (UNCTAD 2018). This concentration has resulted in limited co-innovation and diffusion of innovations to farmers and entrepreneurs. The bulk of the research falls under the Ministry of Agriculture and Cooperatives, which oversees four main research departments that focus on rice, other crops, livestock, and fisheries. The country’s universities, Kasetsart University in particular, play a critical role in agricultural research (OECD 2017b). The lack of R&D coordination is a concern; there
