sources, their culture, their institutions and their technology. More investment in AKST can make important contribu­tions to the goals of economically sustainable development, hunger and poverty reduction, environmental sustainability, and improvement of nutrition and health
.          The private sector will not make major investments in the provision of public goods, poverty reduction, and the provision of environmental services and health services for which there is no market (see 8.3.5). Therefore most govern­ments, especially in developing countries, need more pub­lic sector investments into AKST that will produce public goods and services necessary to reach development and sus­tainability goals. Few countries are likely to reach the 2% research intensity level of OECD countries, but they will need a major increase in investment in agricultural research intensity from the current level of 0.5% (see 8.1).
          As reported in 8.2.8, studies of seven countries in Asia and Africa showed the returns to agricultural research were high relative to other investments that countries could make such as irrigation, roads, electricity, and other government programs (Fan et al., 2000, 2004ab, 2005; Fan and Zhang, 2004). Agricultural research was one of the leading invest­ments that governments could make to reduce poverty. Re­search by itself will not lead to poverty reduction, but it can be an important component of a poverty reduction strategy. The other component of AKST in these studies was primary education which also made a major contribution to poverty reduction. The evidence shows that research alone cannot reduce poverty and thus funding for AKST must be accom­panied by other pro-poor policies, such as access to natural resources, equity of distribution, good governance practices, and local market development.        Projections in Chapter 5 of this report show that the baseline scenario will have a limited impact on reducing child malnutrition—it would decline 15% in the reference world (see 5.3). However, with increased levels of AKST investments accompanied by other complementary invest­ments, the share of malnourished children is expected to decline. In addition, projections suggest that returns to re­search will stay high. Under the business-as-usual scenario, the demand for agricultural products will continue to grow rapidly in the next 50 years; resources that are now used to produce agricultural products will be increasingly in short supply—water, land, and clean air; and basic science will move rapidly ahead creating new opportunities for applied science and technology, which will also increase returns to research.         An additional factor that will be required to keep re­turns high is good governance (see 8.3). Specifically, the farmers, who will be the primary users of the research, must be included in determining how public money is invested in AKST and how that funding is allocated. In addition, con­sumers of food and other ecosystem services from agricul­ture must be represented. Finally, the private sector, which provides inputs to the agricultural sector and purchases, markets and processes agricultural products, must also be represented.
          Private sector investments in agricultural research, in­novation, and diffusion of technology and management systems in developing countries are also essential to meet­ing development and sustainability goals (Pray et al., 2007).

While the private sector will not make major investment in the provision of public goods and poverty reduction for which there is no market, private agricultural input compa­nies can be an efficient way to provide poor farmers with inputs such as improved seeds and livestock, which can help improve the incomes of the poor and other private compa­nies can develop and supply farmers with inputs needed to increase their supply of ecosystem services (see 8.1.2 and 8.3.5). By encouraging companies to develop and supply technology and management systems to the commercial sec­tor, the public sector can concentrate its limited resources on research to produce public goods, the development and sup­ply of technology to the poor and the development and dif­fusion of environmental and health services.
         It appears that the underinvestment in private research in developing countries is even greater than in public sector research. Because of the spillovers of the benefits of tech­nology from private suppliers of technology to farmers and consumers, substantial benefits have accrued to farmers and consumers from private sector research (see 8.2.4 and 8.2.7). The median rate of return to society from research by private firms is 50% (Evenson, 2001). Aggregate stud­ies in India (Evenson et al., 2001) and the US (Huffman and Evenson, 1993) have shown that private research and private imported technology have made major contribu­tions to agricultural productivity growth. Case studies of specific private research programs have shown that the ben­efits of private research can reach farmers growing poor peoples' crops such as pearl millet and sorghum in rainfed environments such as the semiarid tropics of India (Pray et al., 1991). Despite these benefits, research investments by the private sector in developing countries lags even farther behind OECD countries than by the public sector invest­ments, both in absolute amounts and in research intensity. Private research investment as a share of Agricultural GDP is 0.03% in developing countries and almost 3% in industri­alized countries (see 8.1). To induce more private research, governments can invest in educating scientists and techni­cians and developing research infrastructure such as ex situ and in situ germplasm collections and basic research pro­grams such as enhancing the diversity of plant and animal germplasm, which will generate ideas for new technology in the private sector. It also requires an enabling business envi­ronment for private investment (see 8.1). The components of an enabling business environment include a system for protecting intellectual property rights, the ability to enforce contracts, a stable regulatory environment, functioning mar­kets for agricultural inputs and outputs, and so on. To make sure that private investments in AKST meet societies' goals, governments need to put in place incentives that will induce private firms to meet social goals. These incentives can be positive such as payments for environmental services that could induce firms to develop technology to more effectively provide those services. These incentives can also be negative, for example environmental and food safety regulations and liability laws that penalize negative externalities from intro­duced technologies. In addition, industrial policies that limit monopoly power will also be needed. Government alone cannot enforce regulations and industrial policies. The ac­tive involvement of NGOs and other parts of civil society is essential.