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The public sector may also facilitate and provide incentives for co-innovation through different innovation funds (matching grants, competitive research grants, consortia) and other resources to initiate and sustain novel partnerships (World Bank 2012). Often such innovation funds set criteria to address market failures (for example, engagement with or services to smallholders, e-services, precision agriculture, sustainable practices in commodity production) and may create opportunities to address emerging needs. Venture capital targeting the agri-food system is still limited in the region. The agriculture sector is far behind other sectors in venture capital investment. However, the scene began to change with the 2007–08 food price crisis, and global venture capital firms have begun showing interest in the agriculture sector. The Southeast Asian market has great potential if the solutions are for the smallholder market (Burwood-Taylor 2018; OECD 2013). Venture capital investment in agriculture has often been constrained by perceptions of high risk and low returns. Governments can foster an attractive environment for venture capital funds and corporate ventures focusing on agricultural innovation and help ensure that private sector investments make a greater impact. Box 6.11 features experiences in soft loans and venture capital in China, Malaysia, and Thailand. Area-based approaches that combine incentives, support, and infrastructure can foster firm-level innovation. Clusters that enable stakeholders from a subsector or a value chain to benefit from economies of scale, geographic proximity, and complementary public investments have also been used in the region. China has attracted private investment particularly through its special economic zones and many other area-based instruments, such as science parks, demo zones, and high-tech parks (box 6.4). Special economic zones have contributed significantly to innovation in China, for example, through technology transfer and business model innovation. One of Thailand’s key innovation policies has been promotion of the cluster approach, especially in the food sector (box F.8 in appendix F). Vietnam has also implemented area-based approaches, attracting private investment through high-tech agro parks (box 6.6) and an innovation challenge fund for start-ups (box 6.11). Although the innovation scene is changing quickly in the region, some aspects remain the same. All the instruments require cooperation between governments, private agribusiness, and farmers, and tend to work best when the policy and regulatory environment is most appealing to the private sector.
INNOVATION CAPACITY AND SKILLS FOR LONG-TERM SUSTAINABILITY Agricultural education and training institutions develop human resources and serve as a source of knowledge and innovations for the agri-food system. Successful transition to an innovation-driven agri-food system therefore requires consistent efforts to increase the education level and skills of farmers, firms, scientists, and AIS decision-makers. The primary constraint is that institutions have not kept pace with the labor market’s demand for knowledge and practical competencies, especially in agribusiness and program management and in the problem-solving and interpersonal skills that are essential for actors to function in an AIS (World Bank 2012). ICT has also taken on a prominent position in the development of the agri-food sector (chapter 5), and its role in enhancing the functions of education institutions, curricula, and graduates’ skills is warranted.
