South Korea is the world’s leading spender on research and development (R&D) as a percentage of gross domestic product (GDP). In pure dollar terms, however, the United States is consistently the largest spender on R&D, followed by China and then Japan.
South Korea replaced Israel as the leader on a percentage basis, spending 4.36% of its GDP on R&D in 2014. This compared with 3.93% for Israel and an Organization for Economic Co-operation and Development (OECD) average of 2.4%.
Elsewhere in Asia, Japan and Taiwan are notable performers, spending 3.35% and 3.06% of GDP on research and development, respectively. Part of the reason for the comparative strength of spending by Asian economies compared with the U.S. and Europe, reflects the fact that developed economies have faced bigger challenges to their public finances following the global financial crisis. Budgets in many of these countries have levelled off or even declined.
The OECD experienced a 1.6% yearly growth in gross expenditure on R&D during the economic crisis years and their aftermath from 2008 to 2012. This growth was half the pace during the period from 2001 to 2008.
The exception to the Asian spending growth story is Japan, whose fortunes are more correlated with trends seen in Europe and the U.S., rather than those of its fiscally robust neighboring Asian nations.
Within Asia, China is a key driver. The OECD Science, Technology and Industry Outlook 2014 indicates that China is planning to ramp up its R&D investment, focusing on science and technology innovation. The country’s ambition is to invest 2.5% of its GDP on research by 2020. This would see the country overtake the U.S. as the largest spender in dollar terms.
Significant investment into the information and communications technology (ICT) and electronics sectors has allowed South Korea to become one of the fastest-growing economies in the OECD in the last decade. The country’s focus on development is also reflected in the fact that globally it ranks third in terms of the share of GDP spent on higher education. The country does, though, face challenges. The population is aging, economic growth is becoming more challenging and environmental problems are emerging.
From a dollar perspective the U.S. remains the big spender, still dwarfing R&D spending elsewhere. It spent in the region of $450 billion in 2013. But as a percentage of total U.S. federal spending, R&D levels in 2014 were at their lowest since 1956. According to data from the Congressional Budget Office (CBO), funding for R&D in areas such as medicine, defense, energy and agriculture dropped 10% from 2009 to 2014, after adjusting for inflation. At the same time, between 2008 and 2012 China doubled its R&D spending.