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Emerging Economies' Catch-up Strategies Target Biotechnology Development

The nineteenth century was the age of steam, the twentieth century was the age of electricity, and the twenty-first century is likely to become the age of biotechnology. The life sciences have seen some of the most spectacular growth in recent decades. Life science-based applications are expected to provide solutions to many of the most pressing problems modern societies face—specifically, the ever-growing challenges of healthcare, such as how to provide better and broader care for aging populations and how to address increasing concerns over the safety and efficacy of drugs and treatment methods. In addition, emerging economies must greatly expand access to modern healthcare for their populations. The entire world faces the problems of environmental degradation and climate change, the need to improve agricultural productivity, and the need to find alternative sources of energy to fossil fuels. Innovation within the life sciences is expected to provide key solutions to these problems. These solutions may come in the form of new drugs and treatments, new medical devices and diagnostic methods, better biofuels, genetically modified crops, and industrial applications of biotechnology (including techniques for providing clean water and fighting pollution), to name but a few examples.

In the next chapter, we explore how leading emerging economies have embraced the idea of the knowledge economy and developed national strategies for catching up with the developed world. Those national strategies target the development of the key technologies of the future. For example, the Chinese 11th five-year plan targets, among others, such future technologies as high-end general-purpose chips and fundamental software, next-generation broadband wireless communication, advanced nuclear power plants, and large aircraft. In addition, several of the designated fields in the plan are related directly to biotechnology, such as transgenic organism cultivation and major new medicines that feature prominently on the list.

So far, the following emerging economies have formulated national biotechnology development strategies: Singapore (2000), South Africa (2001), Thailand (2004), Malaysia (2005), South Korea (2000, updated 2005), India (2007), and Brazil (2007). China has been developing life sciences and biotechnology since the 1980s; its most recent comprehensive biotech industry development strategy was published in 2006. Most of these national strategies list multiple goals, such as creating an innovation-oriented economy, creating a national biotechnology industry, attracting foreign R&D, and developing human resources. A few countries, such as Singapore and Thailand, have more focused strategies with narrower priorities, and Hong Kong lists the goal of creating an export-oriented biotech industry through foreign direct investment or FDI (homegrown biotech is a "secondary concern"). As a component of their national knowledge economy development strategies, most Asian nations have signed the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), thus committing themselves to international standards of intellectual property (IP) protection (see Table 1-1). This commitment to observing international standards of IP protection has made the countries attractive to R&D investment from abroad and has also helped transform their domestic industries.

Table 1-1. Year of Adoption of Biotech Strategies and TRIPS, by Country11

Country

Biotech Strategy

TRIPS

India

2007

2005

China

2006

2001

Singapore

2000

2000

South Korea

2000

1995

Taiwan

2002

2002

Malaysia

2005

1995

Biotechnology and the life sciences feature prominently among the knowledge economy development strategies. The national plans usually entail establishing specialized committees or task forces, or creating an agency that is responsible for coordinating government efforts to support and regulate the biotechnology industry. Several strategies envision substantial public spending on biotech research, to be accompanied by corresponding private spending. Thailand spent the equivalent of more than $599 million on biotech research in 2007, of which $214 million (35%) came from the private sector. Brazil plans to spend 10 billion reais on biotech over the next ten years; the private sector is expected to contribute 40% of that.12 Other countries do not specify the ratios of public-to-private spending, but are spending substantial sums on research, commercialization, and investment incentives.

On a per-capita basis, countries such as Korea and Singapore are already spending more than the average E.U. nation on biotech research.13 In 2007, public spending on biotech research of just three Asian emerging economies—China, Korea, and Singapore—easily exceeded 10% of all such spending by all developed economies. Of the approximately 460 international biotech agreements concluded between 2005 and 2008 (involving R&D, technology transfer manufacturing, marketing. distribution, and so on), 46 were with emerging economies; the vast majority were with India14 and China.15 Prior to 2005, such deals were rare; they are now expected to accelerate quickly. Add to that expected expenditures by India and recent commitments made by other big emerging economies such as Brazil, and the biotech research spending challenge by emerging economies is likely to become much more substantial in the next five years.16

As we detail in Chapter 6, "Accelerating Innovation," the total number of bioparks in operation or under advanced development in such countries as India, China, Thailand, Korea, and Malaysia exceeds 100. Many of these parks variously denominated as technology or science parks offer assorted incentives for firms to locate inside them. The policy objective is to help evolve those parks into biotechnology clusters that will attract collaboration and major investments, especially as multinational biopharma companies increase their offshoring of advanced manufacturing and of R&D.

Any country embarking on a program of bioindustry development should keep in mind that biotech is a long-term game in terms of return on investment. Both the American and European biotechnology industries have been operating at net loss for a long time (global biotech losses were 2.7 billion USD in 2007). Only a few countries, such as Australia and Switzerland, have had profitable biotech sectors. Nevertheless, the Asian governments seem determined to make the necessary investments to create life science industry capabilities. They have embraced a long-term vision of development based on the knowledge economy.

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