6.4 Enabling environment for agricultural innovation in select countries

TABLE 6.4 Enabling environment for agricultural innovation in select countries

COUNTRY INTELLECTUAL PROPERTY RIGHTS REGULATORY FRAMEWORKS INFRASTRUCTURE: ROADS, IRRIGATION, ENERGY, MARKET, ICT CONNECTIVITY FINANCE LAND

China WIPO (2007) WTO-TRIPS (2001) Patents (1994) Copyright (1992) Trademarks

Plant Variety Protection (1999) UPOV Convention member (1999) IPR are not properly protected, serving as a barrier to FDI and domestic private R&D

Indonesia WIPO (1979) WTO-TRIPS (1995) Patent (2001) Copyright (2014) Trademarks (2001) Plant Variety Protection (2000) Weak enforcement of patents and licenses a disincentive to private sector The Food and Drug Administration was established in 2013.

The Food Safety Law was revised in 2015 to establish a more scientific and strict supervision system for food safety. Biosafety regulation on transgenic organisms updated in 2016; plan to establish biosafety evaluation system, but enforcement shows weaknesses. Good road and rail infrastructure—higher than OECD average. ICT connectivity: electricity in 100% of the villages. ICT connectivity significantly improved but still limits widespread use of e-services and precision agriculture.

Regulatory framework for environmental protection in place but poorly enforced. Regulation on pesticide use strengthened. Affordability and availability of financial services are limited.

Tax incentives for private sector R&D in place. Barriers to FDI: foreign companies are not allowed to conduct transgenic crop breeding. Nontransgenic plant breeding and seed production are ’’restricted” and require foreign investors to establish a joint venture with Chinese firms.

Relatively weak food safety regulations and enforcement.

Biosafety regulations in place, enforcement shows weaknesses. Infrastructure requires strengthening albeit irrigation infrastructure has improved. ICT connectivity limiting widespread use of e-services and precision agriculture. Farmer access to finance is limited.

Malaysia WIPO (1989) WTO-TRIPS (1995) Patent (2006) Copyright (2006) Trademarks (2002) Plant Variety Protection (2004)

Philippines WIPO (1980) WTO-TRIPS (1995) Patent (1998) Copyright (2013) Trademarks (1998) Plant Variety Protection (2002) Food safety and quality standards in place. Enforcement of environmental regulations good. Biosafety regulations in place.

Relatively weak food safety regulations and enforcement.

Environmental regulations and their enforcement are relatively weak. Biosafety regulations in place. Good infrastructure and ICT connectivity. Access to finance is relatively good. Tax incentives for private sector investment are available.

Infrastructure, including in agriculture, requires strengthening. ICT connectivity limits widespread use of e-services and precision agriculture. Farmers’ access to finance is limited.

Tax incentives for private sector R&D in place. Land reform instituted enabling consolidation, sale, and rent as well as use as collateral.

Land availability and land market rights require strengthening.

Land market rights and access require strengthening.

A complex issue—current land reform redistributes private land; land leasehold system in place.

(continued)

TABLE 6.4, continued

COUNTRY INTELLECTUAL PROPERTY RIGHTS REGULATORY FRAMEWORKS INFRASTRUCTURE: ROADS, IRRIGATION, ENERGY, MARKET, ICT CONNECTIVITY FINANCE LAND

Thailand WIPO (1989) WTO-TRIPS (1995) Patent (1999) Copyright (2015) Trademarks (2000) Plant Variety Protection (1999) Plant Breeder’s Rights Regime enforced IP support from science parks Food safety and quality standards in place. Enforcement of environmental regulations. No biosafety regime; significant problem for biotechnology innovation. A draft submitted to WTO for review. Infrastructure and well-functioning markets. ICT connectivity limits widespread use of e-services and precision agriculture. Farmers’ access to finance is relatively good. Tax incentives for private sector R&D in place. Strong land market rights.

Vietnam WIPO (1976) WTO-TRIPS (2007) Patent (2009) Copyright (2009) Trademarks (2009) Plant Variety Protection (2004) UPOV Convention member (2006) Weak IPR protection and market for technology, disincentive for researchers and private sector Relatively weak food safety regulations and enforcement. Biosafety regulations in place, enforcement shows weaknesses. ICT connectivity limits widespread use of e-services and precision agriculture. Access to finance a major constraint for private sector. New incentives have been put in place to support start-ups in agri-food sector. Tax incentives for private sector R&D in place. Land rental enables farm consolidation and mechanization but is not consistently practiced across the country.

Sources: Original table for this publication. FAO GM Platform 2020 (http://www.fao.org/food/food-safety-quality/gm-foods-platform); OECD 2016, 2017a, 2017b, 2018a; UNCTAD 2018; World Bank, n.d., 2016, 2019. Note: FDI = foreign direct investment; ICT = information and communication technology; IPR = intellectual property rights; OECD = Organisation for Economic Co-operation and Development; R&D = research and development; WIPO = World IPR Organization; WTO-TRIPS = World Trade Organization–Trade-Related Aspects of Intellectual Property Rights.

and Cambodia, Indonesia, Lao PDR, Myanmar, and Thailand have been in contact with the uPOV Office for assistance in developing laws based on the uPOV Convention (OECD 2017b; uPOV 2020). Cambodia, Lao PDR, and Myanmar do not yet have laws governing the protection of plant varieties.

IPR legislation in developing East Asia is generally adequate, but the institutional capacity to manage and enforce IPR is weak in some countries. Although IPR policies and regulations are largely in line with international rules and guidelines, China’s protection of IPR still lags behind that of most OECD countries, particularly with regard to enforcement (OECD 2016, 2018a). In China, which is at the forefront in the use of GM and gene editing technology globally, lack of IPR protection has slowed both public and private R&D and commercialization of GM crops (box 5.5; OECD 2018a). The developing East Asian countries other than China, Malaysia, and Thailand often lack the institutional capacity to manage and provide legal support to IPR cases. For instance, in Vietnam, weak patent and plant variety protection limits the performance of its AIS. In Indonesia, weak enforcement of IPR, such as for patents and licenses, is a disincentive for private sector investment in agricultural R&D (OECD 2017b).

Regulations provide a basic economic environment within which all firms operate and make investment decisions. Regulations also play an important role in the creation of incentives to use natural resources in an environment-friendly

manner. Although standards are an important element of regulations, only food safety and biosafety are addressed here because of data limitations.

All developing East Asian countries have food safety regulations in place; however, their capacity to respond to new challenges and to enforce the regulations varies significantly (table 6.4 and the section titled “Readiness of developing East Asian countries to embrace transformative innovations” in chapter 5). The region’s high-income countries, such as Korea and Singapore, have well-established food safety systems (World Bank 2019). Whereas China, Malaysia, and Thailand are building their capacity and modernizing their food safety systems, Indonesia, the Philippines, and Vietnam have significant challenges in meeting the food safety requirements of their quickly changing agri-food systems (World Bank 2019). Cambodia, Lao PDR, and Myanmar28 have limited capacity; however, their food safety concerns are not yet as prominent.

A well-defined and consistently applied biosafety regulatory system can be a powerful stimulus for investments in innovation. Investments needed to operationalize a biosafety regulatory system should promote interministerial cooperation, sound and pragmatic policy development, scientific risk assessment and risk management, rational inspection and enforcement activities, and meaningful stakeholder consultation and public participation (World Bank 2012). Most developing East Asian countries have devised or are in the process of devising regulatory systems to manage biosafety and enable innovation in GM products (tables 5.3 and 6.4), yet enforcement of biosafety rules has been challenging (in, for example, China, Indonesia, Vietnam). Although Thailand does not have a biosafety regime in place, it has submitted a draft for World Trade Organization review. Lao PDR has no biosafety law.29

Efficient and well-developed infrastructure plays an important role in connecting farms and firms to market opportunities, innovations, and services. In contrast, inefficient and underdeveloped infrastructure can significantly increase farms’ and firms’ costs (OECD 2017b). The countries’ infrastructure (roads, railway, irrigation, electricity, market, ICT connectivity) varies significantly (table 6.4). China has drastically improved its transport infrastructure, with almost all administrative villages having gained access to the public road system by the end of 2006 (OECD 2009). China has developed an overall higher-quality transport infrastructure than the OECD average (OECD 2018a). Although ICT connectivity in rural areas is still incomplete, China has higher ICT penetration than the other BRICS countries (Brazil, Russia, India, and South Africa) but lower penetration than the OECD average (OECD 2018a). Similarly, Malaysia and Thailand have good infrastructure, although ICT connectivity is still lacking in Thailand (OECD 2017b). In the mid-range and lower MICs, inadequate infrastructure investment still limits private sector potential.

Access to finance by farms and firms has remained stubbornly difficult in the agri-food sector (table 6.4). Other than in Malaysia and Thailand, financial services to farmers and other private actors are an investment-limiting factor in developing East Asia (OECD 2017b, 2018a) (also see the sections titled “Providing the incentives and breaking the barriers to increase private sector R&D” and “International collaboration for a regionwide response to agri-food system challenges”). In Vietnam, for instance, limited access to finance is a significant constraint for private sector investment, despite the recent introduction of tax incentives for start-ups. In China, affordability and availability of finance services is limited. In addition, foreign investment in agricultural innovation is restricted, for example, on transgenic crops (OECD 2016, 2018a).