will be needed to carefully monitor, evaluate and learn from the lessons in order to derive best practices. Investment is also required for strengthening capacity in order to institu­tionalize such practices.

9. More government funding and better targeted gov­ernment investments in AKST in developing countries can make major contributions to meeting develop­ment and sustainability goals. Developing countries need to increase the intensity of AKST investments. This would involve a major increase in public sector investments, which is justified given the high rates of return to research and the evidence that AKST investments can reduce poverty. How­ever, to do this, public investments must be targeted using evidence other than simply overall RORs, as they usually do not include environmental and human health impacts, posi­tive or negative, or information on the distribution of costs and benefits among different groups.

10. Major public and private research and develop­ment investments will be needed in plant and animal pest and disease control. Continued intensification of ag­ricultural production, changes in agriculture due to global warming, the development of pests and diseases that are re­sistant to current methods of controlling them, and changes in demand for agricultural products, will lead to new chal­lenges for farmers and the research system. Investments in this area by the public and private sector have provided high returns in the past and are likely to provide even higher re­turns in the future. In addition, these investments could lead to less environmental degradation by reducing the use of older pesticides and livestock production methods; in­creased demand for labor, which could reduce poverty; and positively improve human health of farmers and their fami­lies by reducing their exposure to pesticides. This is an area in which public and private collaboration is essential.

11. Increasing investments in agricultural research, innovation, and diffusion of technology by for-profit firms can also make major contributions to meeting development and  sustainability goals.  Private firms (large and small) have been and will in the future continue to be major suppliers of inputs and innovations to commer­cial and subsistence farmers. They will not provide public goods or supply good and services for which there is no market, but there could be spillovers from private suppli­ers of technology to farmers and consumers. To make the best use of private investments in AKST, governments must provide regulations to guard against negative externalities and monopolistic behavior, and support good environmen­tal practices, while at the same time providing firms with incentives to invest in AKST.

12. AKST investment that increases agricultural pro­ductivity and improves existing traditional agricultural and aquaculture systems in order to conserve scarce resources such as land, water and biodiversity remains as a high priority; these investments can improve live­lihoods and reduce poverty and hunger. The major re­source constraint on increasing agricultural production in the future will continue to be agricultural land. AKST must

focus on increasing output per unit of land through tech­nology and management practices. Water is the next most important resource constraint to agricultural production and is likely to become more of a constraint in the future. AKST resources need to be reallocated into water-saving techniques, improved policies and management techniques. Fossil fuels reserves are limited; high fuel prices and environ­mental concerns have recently focused attention on the need for agriculture to more efficiently use this resource. Govern­ment investment in AKST may be necessary to reduce the dependence of the agricultural sector on petroleum.

13. AKST investment to reduce greenhouse gas emis­sions and provide other ecosystem services is another priority investment area. AKST investments are needed to develop policies, technologies and management strate­gies that reduce agriculture's contribution to greenhouse gas (GHG) emissions, and consequent global warming. This requires the development of new farming systems, which use better technologies, produce less GHG, and build on lo­cal and traditional knowledge to improve current cropping systems in order to become more sustainable. Investments are also needed to underpin policies such as payments for environmental services to farmers, which could induce the development and adoption of practices that provide stron­ger environmental services. Some of the agricultural tech­nologies and policies that provide these ecosystem services can be designed to use the assets of the poor, such as labor in labor-abundant economies.

8.1 Spending and funding trends in AKST
8.1.1 Trends in agricultural R&D spending

8.1.1.1 Public sector spending
Worldwide, public investments in agricultural research and development (R&D) increased, in inflation-adjusted terms, over the past two decades from an estimated $15 billion in 1981 to $23 billion in 2000 (in 2000 international dollars); an increase of about one-half (Table 8-1 and Figure 8-2).1 2 The share of the developing countries as a group have in­creased considerably over the years; during the 1990s the
1 Public includes government, higher education, and nonprofit. 2 Unless otherwise stated, financial figures in this subchapter have been expressed in inflation adjusted "international dollars" using the benchmark year 2000 and purchasing power parities (PPPs). PPPs are synthetic exchange rates used to reflect the purchasing power of currencies, typically comparing prices among a broader range of goods and services than conventional exchange rates. Using PPPs as conversion factors to denominate value aggregates in international dollars results in more realistic and directly com­parable agricultural research spending amounts in countries than if market exchange rates are used. This is because the latter tends to underestimate the quantity of spending used in economies with relatively low prices while overestimating the quantity for those countries with high prices. This is particularly a problem when valuing something like expenditures on agricultural R&D, where normally about two-thirds of the resources are spent on local sci­entist and support staff salaries and not on capital or other goods and services that are normally traded internationally.