534 | IAASTD Global Report

based inputs and modern technology. There are indications from India and China that economic growth and develop­ment do not lead to a decline in (if not an increase of) the demand for the so-called traditional systems of food-making or nature-dependent health care systems. This underscores the importance of visualizing different scenarios of future and their likely influence on the investments of AKST. How­ever one probable scenario on the governance of AKST in the near future is outlined below.

8.3.5 The future roles of governance and institutional structure
In many developing countries the domestic private sector may continue to play only a small role in the near future. Even in industrialized countries, the new set of research in­struments is not going to replace the conventional public research model. It is envisaged that there will be a com­bination of public and private investments with the latter increasing over time. The additional costs associated with competitive funding would encourage the persistence of a combination of conventional forms of funding (such as for­mula funding) and competitive grants in the near future. However competitive funding as a mechanism complemen­tary to the regular budgetary support seems to be inevitable (Gage et al., 2001), or project funding and institutional grants may have to coexist (Becker, 1982).
        Similarly one should not expect that the private sector is going to replace the public sector even in areas such as agricultural biotechnology in which private organizations have an upper hand. Private sector research will concentrate on areas where (a greater part of the) benefits can be pri­vately appropriated as in export or plantation crops, hybrid seed development or in off-farm processing of agricultural products, and in the diffusion of capital goods such as agro-chemicals. For example, USAID recognizes that the private sector will not deliver biotechnology applications for many crops (such as minor or food security crops), will not ad­dress all biotic and abiotic production constraints, which are important in developing countries nor will it realize the development of commercial markets in all developing countries (Lewis, 2000). Public sector research will have to fill these gaps. Moreover, some of the conventional market failures associated with agricultural R&D are still impor­tant and hence some form of societal or state intervention may continue to be necessary. Some of these market failures, which make private investments alone inadequate, are the following:

•   Given the scale economies in specific research initia­tives, competition and existence of multiple firms may not be economical. This would lead to monopoly pow­ers of the existing firms, which would warrant certain regulations to remove entry barriers in order to avoid social losses;
•   Given the features of positive externality or public good associated with the development of agricultural innova­tions and knowledge, it is very likely that there can be underinvestment (less than the socially optimal levels) by private firms in such cases. This may be particularly so in the creation of what can be called basic or pure knowledge where the appropriation or excludability problem is acute;


•   Certain innovations or technologies may have negative externalities especially with regard to environmental pollution or long-term health hazard. This is an area where institutional intervention by the state or society is required to make the private firms internalize these externalities;
•   There can also be a distributional issue which would prompt governments to intervene (that need not neces­sarily be through state-owned research organizations) to see that technologies that help poorer farmers living in less resource-endowed areas (for example drought prone) are also generated. It is argued that the disburse­ment of funds in public sector research through com­petitive grants is likely to generate regional disparities as well as less money for activities such as managing natural resources and the environment, which need not be profitable in market value terms. This too can encourage public support for research, which are not solely based on commercial considerations;
•   Agricultural research has to stand on the firm founda­tion of higher education. In many countries, including those in the industrialized world, higher education in AKST is closely linked to research laboratories. Higher education is unlikely to thrive solely on profit-oriented investments. This would necessitate the functioning of public/private  organizations  involved  in  agricultural research based albeit partially on public funds and en­dowments or other nonprofit oriented investments.
However it is very likely that there is more and more re­thinking on the specific roles governments (both national and local), funding organizations and public sector research organizations in AKST investments. It is quite possible that state-owned institutions devote more resources on technol­ogies to be used by the poor, and also on environmental conservation and other related areas where due to the ex­ternalities, private firms are less likely to invest adequately. (This is based on the assumption that the distributional struggles, political economy and the overall governance, including the role of democracy, are such that poverty re­duction and mitigation of externalities become priorities of the governments.) In future there will be more and more public private partnerships in agricultural research and here the experience from OECD countries seem to be successful in making research systems more responsive to the rapid transformation of economy and their innovation require­ments (Guinet, 2004). There are multiple ways of enlisting private partnership in public research and here the choice of mechanisms is very important to enhance the overall ben­efits. Governments and public sector organizations may be more involved in regulation and quality control of products and technologies developed by the scientists from both pub­lic organizations and private firms. Scientists may have to encounter more competition in getting research funds not only from international organizations but also from their national governments. The labor market for scientists may also become more flexible with shorter-period incentive-based contracts rather than permanent jobs. Though there is evidence that participation by private partners enables publicly funded research to concentrate on areas where private incentives are weaker (Day-Rubenstein and Fuglie,