Issue Brief
Thematic Area: Digital Transformation, Advanced Technologies, and Cyber Security
Tracking R&D expenditure across G20 nations
Introduction
Technology and innovation are critical components in the competitiveness of an economy. Therefore, countries devote significant resources and capital towards research and development to improve the quality of goods and services exports, which, in turn, improves the quality of exports and increases revenue generated on higher value-added goods.
Globally, countries spend an average of 2.62% of national GDP on research and development (R&D) efforts. Based on latest World Bank data1 , G20 nations spend an average of 3.03% of national GDP on R&D. Within the G20, South Korea has the largest expenditure on R&D as a percentage of GDP with 4.93%. This is followed by the United States with 3.46%, Japan with 3.30%, Germany with 3.14%, and the United Kingdom with 2.91%. Conversely, Mexico and Indonesia comparatively spend the least amount on R&D as a percentage of GDP with expenditure ratios of 0.27% and 0.28% respectively. Broadly, G20 nations with higher per capita GDPs have larger expenditure ratios on R&D than developing and low to middle income G20 nations.
Top G20 nations on R&D
Republic of Korea: The Republic of Korea has the largest expenditure of R&D as a percentage of GDP and has a budget of KRW 24.8 trillion for R&D in 20252 . This year’s budget is a significant increase from 2024’s budget of KRW 21.9 trillion. The corpus is focused on developing the Republic of Korea’s acumen in advanced and emerging technologies such as artificial intelligence (AI), semiconductors, advanced biotechnology, and quantum technology.
Specifically, the Republic of Korea plans to invest in digital bio fostering infrastructure, core technologies for quantum computing, and OLED and iLED technologies. Moreover, the Republic of Korea plans to increase funding for Korea AeroSpace Association (KASA) to KRW 1 trillion to achieve the goal of landing on the moon in 2032 and reaching Mars in 2045.
Finally, the Republic of Korea plans to invest in defence R&D and enhancing competitiveness of defence weapon export systems like the K-9 self-propelled artillery and the Korean Medium-range Surface-to-Air Missile (KM-SAM).
United States: According to the National Science Foundation (NSF), the United States Government spent approximately USD 885.6 billion on R&D as of 20223 . The commercial sector is the largest contributor to R&D spending in the United States with nearly USD 693 billion spent in domestic R&D, which is a 78% share of R&D spending in the country.
Higher education and the federal government also contribute significantly with USD 91.4 billion and USD 73.3 billion in funding for R&D initiatives. Within the private sector, five industries contributed approximately 79% to R&D funding in the United States. These industries are information and software publishing, chemicals manufacturing, computer and electronics products manufacturing, professional, scientific, and technical services, and transportation equipment manufacturing.
Japan: Japan spent approximately JPY 20.7 trillion on R&D in 2022, an increase of 4.9% over the previous year, with the largest amount of funding being directed to artificial intelligence (JPY 272.5 billion), biotechnology (JPY 385 billion), and quantum technology (JPY 132.2 billion)4 .
Japan employs approximately 910,400 individuals in the R&D space and spends approximately JPY 22.74 million per researcher as of 2022. Like the United States, businesses account for the largest share of R&D spending in Japan with the sector contributing approximately JPY 15.13 trillion, or 73.1%, to Japanese R&D spending. Universities were the second largest investor in R&D with approximately JPY 3.84 trillion, or an 18.6% share of Japanese R&D spending.
Germany: German R&D expenditure reached record highs in 2023 with approximately EUR 132 billion in expenditure5 . The German R&D sector employs approximately 785,000 individuals. Like the United States and Japan, the German commercial sector contributes 67% of total R&D spending in Germany. This is followed by the higher education sector with 18% and the government sector which contributes approximately 15% to spending6 . Germany is the largest spender on R&D in Europe with a contribution of approximately 36% to European R&D spending7 .
United Kingdom: The United Kingdom spent approximately GBP 70.2 billion on R&D expenditure as of 2022, which was an increase of approximately GBP 4.4 billion over the previous year8 . Within the R&D sector, the commercial sector is the largest contributor to R&D spending with approximately GBP 49.9 billion (71% of total). This is followed by the higher education sector, which contributes approximately GBP 16.3 billion, or 23% of total R&D spending. Finally, the government and non-profit sectors spent approximately GBP 3.6 billion and 0.9 billion respectively, which corresponds to 5% and `1% of the total R&D spending in the United Kingdom.
B20 initiatives to promote R&D
The B20 has taken an active role to promote R&D activities within B20 member nations. The B20 India Task Force on Tech, Innovation, and R&D proposed actions that B20 member nations could take to strengthen R&D in member nations. The first recommendation of the Task Force was to promote a Virtual Digital Lab & Library to promote broader cross-collaboration on R&D in B20 member nations.
Additionally, the Task Force recommended that G20 members institutionalize a Collaboration Forum for Deep and Emerging Tech Advancement to better facilitate innovation and R&D. Moreover, the Task Force recommended the G20 create a Collaboration Body for technology-driven Cancer research that would promote advancements for cancer treatment. Finally, the Task Force recommended that G20 nations develop a program that provides opportunities for women in STEM and funding for women-led startups.
The B20 Brazil Task Force on Digital Transformation similarly called for the development of educational programs and digital learning resources to close digital skill gaps, which in turn may make the global R&D landscape more equitable and inclusive.
The G20 and B20 should improve access to funding and develop multilateral initiatives to improve the global R&D investment.