India, China most favoured by global majors as R&D locations

Developing countries are fast becoming favoured research and development destinations for transnational corporations with China and India being ranked among the top three most attractive R&D locations, according to UNCTAD's World Investment Report 2005.

R&D is being increasingly internationalised including in developing countries said the report. A survey conducted by UNCTAD found that as many as 69 per cent of the world's largest R&D spending Transnational Coporations are expecting their share of foreign R&D to increase.

Greater involvement of developing countries in R&D is also contributing to a "reverse brain drain" in countries like India and China, the report said.

"It has been estimated that firms can reduce costs by 20-30 per cent by moving their R&D activities to India," the report said.

It pointed out that savings for firms going for clinical trials in India come from hiring researchers, nurses and IT staff at less than a third of wages in the West, in addition to differences in the costs associated with the patients.

Though India is well-endowed with skilled personnel, it also has a substantial number of people with diseases that exist in developed countries, making it a favoured destination for clinical trials.

Despite the advantages, factors like the slow approval process is holding back the development of clinical reasearch in the country, the report said.

"Another one is India's reverence for animals, which makes it difficult to use certain animals (like monkeys)," it said.

It is estimated that the number of clinical research organisations based in India increased fourfold between 2001 and 2003, UNCTAD said adding that Indian firms, too, are participating in this new industrial activity.

Indian TNCs are globalising their R&D, focusing mainly on serving their customers in specific regional markets, the report said, adding that leading software firms including Infosys, Wipro, Birlasoft and HCL technologies have all invested in developed countries abroad.

They are also moving into selected developing country locations where they have major customers like China, southeast Europe and the CIS. lucrative investment opportunities are being offered to investors through tax incentives and customs concessions for import of plant and machinery