Canada’s total R&D spending set to dip in 2002 as high tech turndown continues

The long upward climb of total R&D spending in Canada appears to have stalled, posing a serious challenge to Ottawa as it attempts to gear up the nation to become one of the world’s top five R&D jurisdictions. Statistics Canada’s latest survey of the country’s R&D effort estimates that total R&D outlays for 2002 are slated to drop 0.4% to $20.7 billion from a 2001 high of $20.8 billion.

While the overall decline is negligible, the biggest drop is occurring in the business sector, which is projected to slump $729 million or 6.1% from $11.973 billion in 2001 to $11.244 billion this year. The gloomy scenario comes just as the federal government wrapped consultations on its innovation strategy, which exhorted all sectors but particularly industry to dramatically ramp up R&D spending.

The modest decline also forced down Canada’s GERD to 1.85 in 2002 from an all-time high of 1.91 in 2001. A comparison to selected OECD nations shows that Canada is slowly improving its performance relative to its competitors. In 2000 — the last year for which data are available for most countries — Canada’s GERD of 1.84 is slightly behind that of the UK, which posted 1.86 for that year.

Like Canada, however, the UK has announced plans to significantly boost R&D expenditures. Whether Canada can overtake the UK and other nations in its quest to move into the top five R&D performing nations depends to a great degree on recovery in the business sectors responsible for most of Canada’s private sector R&D outlays.

The survey was conducted in late 2001 and early 2002, just prior to the launch of the innovation strategy, but nothing in the intervening months suggests an increase in confidence since that time. The government’s strategy comes complete with ambitious targets including tripling gross expenditures on R&D (GERD) between 1999 and 2010 to approximately $48 billion.

Federal expenditures on R&D also appear to be levelling off after a remarkable four-year period between 1998 and 2001 when outlays increased more than $1billion or 35.4%. For 2002, the increase is modest — just $138 million or 3.6% — suggesting that the impact of new programs such as the Canada Foundation for Innovation, Genome Canada and the Canada Research Chairs are becoming fully reflected.

BC AND ONTARIO FORGE AHEAD

When the national GERD is broken down on a provincial basis, British Columbia and Ontario emerge as the biggest winners. For the year 2000 (the most recent year for which provincial data are available), BC was home to $1.5 billion in R&D, up $217 million or 20.4% from 1999. Ontario enjoyed the largest dollar jump, forging ahead $1.33 billion to $9.3 billion in 2000, up from $7.975 billion in 1999. The national increase in that timeframe was 12.1%.

All provinces with the exception of New Brunswick experienced increases in R&D expenditures for 2000 (see story on page 3). Alberta increased R&D expenditures by 11.1% from 1.155 billion to $1.283 billion, while the remaining provinces had percentage increases in the single digits.

Ontario’s jump in 2000 R&D outlays was largely fuelled by increased spending by high tech businesses, which had yet to experience the downturn that continues to plague the sector. Businesses accounted for the majority of Ontario’s gains, increasing expenditures in the province by nearly $1 billion from $5.659 billion in 1999 to $6.607 billion in 2000. That’s more than double what the private sector spent in Quebec, where there were $3.148 billion in outlays. Together the two provinces accounted for 85.2% of all business spending in Canada.

Following a distant third is British Columbia, which was home to $850 million or 7.4% of business spending. Alberta ranked fourth with $530 million or 4.6% of the total. Manitoba and Saskatchewan secured $125 million and $69 million respectively. The four Atlantic provinces accounted for $120 million, with more than half ($64 million) spent in Nova Scotia.

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