According to a report published by the National Science and Technology Council, the Korean government, research institutes, universities and corporations invested a total of 43.85 trillion won ($37.93 billion) in R&D in 2010, up 15.6 percent from the previous year. The high increase rate is noteworthy as it demonstrates the commitment of the Korean government as well as private companies to R&D.

Last year’s R&D expenditure represented 3.74 percent of the nation’s GDP, the third highest ratio in the OECD. Only Israel and Finland were ahead of Korea with 4.25 and 3.84 percent, respectively. The top three remained unchanged from 2009.

But in terms of the absolute amount of R&D investment, Korea still does not stack up against major advanced economies. The nation’s spending was less than one tenth of the United States’ $398.19 billion and about one fifth of Japan’s $169.05 billion. This suggests the need for the Korean government and private corporations to continue to step up R&D spending to catch up with the world’s leading economic powerhouses.

According to the NSTC report, 72 percent of R&D funds came from the private sector, indicating the need to increase the share of the public sector. One of the incumbent government’s declared goals is to expand its R&D spending to 5 percent of the annual budget by 2012. For this, it has increased the R&D budget by a double-digit figure each year. But even if this goal is achieved, the public sector’s share would be still not large enough.

The report also showed that about 62 percent of the funds were spent on the development phase of R&D, while applied and basic research each took up less than 20 percent. To correct the heavy concentration of R&D activities in development projects, the government announced years ago that it would allocate more of its R&D budget to basic research. But the share of basic research in the total R&D spending increased a mere 0.1 percentage point in 2010.

While the government needs to make sure that the share and absolute amount of public sector R&D spending continue to grow, it also needs to ensure that taxpayers’ money is used more productively. NSTC Chairman Kim Do-yeon recently said about 20 percent of state R&D expenditure is wasted.

One main reason, according to Kim, is duplication of R&D projects among state-funded research centers. Duplication wouldn’t matter much if these centers are in competition. But this is not the case because they are insulated from one another. The government needs to tear down the walls between these centers to promote competition and collaboration.

Another important task for the government is to use its R&D budget in a way that promotes collaboration between large companies and small enterprises. One way to do this is to finance R&D projects where academia and public research institutes, as well as large corporations and small firms, participate.

Universities usually suffer a shortage of funds and equipment. Public research institutes often lack commercialization experience. Small enterprises are in want of high-caliber research staff and information on new technologies. One way to remedy these deficiencies is to induce them to participate in state-funded R&D projects.