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The Vital Role of Innovation in Agricultural Transformation
EAST ASIAN AGRI-FOOD SYSTEMS NEED TO EMBRACE INNOVATIONS THAT FOSTER PRODUCTIVITY, SUSTAINABILITY, AND HEALTH Amid the pressures on the agri-food system, developing East Asian countries also share the desire to move up the economic ladder. The countries can be categorized as agrarian, transition, or urban-mature on the basis of agriculture sector characteristics, development, and the sector’s importance for the overall economy (World Bank 2007). The three categories are well aligned with low-income country, middle-income country (MIC), and high-income country status. Table 3.1 summarizes the three categories and identifies East Asian countries that fall into each category and subcategory (upper, midrange, and lower MIC).1 Rapid income-level transitions are, however, challenging because they require rethinking the development model and simultaneously investing in old and new economic capabilities.2 Economies that have successfully made the transition from middle-income to high-income status (for example, the Republic of Korea; Taiwan, China; and Singapore) share several common characteristics: good governance, competition, labor mobility, innovation, integration into the global economy, financial development, investment in human capital, and sustainable infrastructure. Recent studies show that returns on innovation are highest in MICs3 (EBRD 2018). Although the returns to innovation are often positive and high, they may become negative with distance from the frontier, that is, when other conditions, such as existing capacity (public and private), scientific infrastructure, access to other inputs, cost of doing business, trade regime, intellectual property rights, and capital markets, limit the returns to innovation investment (Cirera and Maloney 2017; Goni and Maloney 2014). More than ever, country transition relies on moving to a knowledge-based economy, fueled by innovation and investment in research and development (R&D), and complemented with other necessary conditions and investments. Harnessing science and innovation will be critical for agri-food systems to make the transition toward resilience and sustainable growth. The region has witnessed impressive gains from past and current innovations, including 23
