Dramatic increase in spending fuels double digit increases in Canadian R&D

GERD/GDP propelled to historic high

R&D spending increases in all sectors combined to give Canada’s gross domestic expenditures on research and development (GERD) a major boost to $19.129 billion in 2000, up nearly 11% from $17.242 billion in 1999. The collective R&D spending binge also pushed Canada’s GERD as a percentage of gross domestic product (GDP) to an all-time high of 1.81 — an encouraging hike that apparently lifts Canada’s into 14th place internationally.

The reasons for the unexpected jump are three-fold. Firstly, Statistics Canada’s science, innovation and electronic information division, which released the data in its latest bulletin, has been improving its methodology for determining R&D expenditures. Secondly, additional data from Canada Customs and Revenue Agency (CCRA) continues to trickle in and StatsCan relies upon CCRA for firms spending less than $1 million annually on R&D. Thirdly, there have been recent changes for estimating R&D spending in the higher education sector.

All factors helped to dramatically improve the picture of R&D spending in Canada.

The new data stand in stark contrast to those produced by StatsCan less than a year ago. In the previous edition of the GERD bulletin, StatsCan projected that 2000 would see R&D spending of $16.554 billion, $2.57 billion or 15% less than what is now being estimated. Bert Plaus, chief of the science and innovation surveys section, says there are several reasons for the dramatically higher estimates. “We’re always trying to improve on our methodology and there have also been minor changes in the estimation of higher education,” he says.

In addition to improved methodology and changes to the estimation of higher education spending, he points to the impact of increased government spending at the federal and provincial levels

The new bulletin estimates a further 9.1% increase in 2001 to $20.871 billion, but StatsCan notes that the survey upon which the data are drawn was conducted before “current economic circumstances” — the high technology meltdown and the economic ramifications of the fallout of the attacks on the US and the bioterrorist threat. Therefore, it’s virtually certain that 2001 will not be another banner year as businesses — which were projected to perform $11.656 billion or 55.8% of all R&D in 2001 — are cutting back R&D expenditures to weather the economic downturn. Nortel Networks Corp, for example, spent nearly $6 billion on R&D in 2000, more than 30% of the Canadian total. And it has suggested that its 2001 expenditures could fall to $4 billion.

Higher education ranks second after the business sector in terms of R&D performance, with an estimated $6.8 billion in 2001. That’s up $889 million or 15% from 2000 and $1.7 billion or 32.2% from 1999. Higher education accounts for 32.7% of 2001 GERD.

The federal government ranks third in R&D performance with $1.9 billion, up 2.3% from 2000 and accounting for 9.4% of GERD. As a funder of research, the federal contribution grew from $3.5 billion in 2000 to $3.7 billion this year, up 7.4%.

Foreign funding of research continues to increase at a steady pace, up 7.5% to $3.2 billion in 2001and up 19.1% from 1999 levels. As of 2001, foreign funding accounts for 11.5% of GERD, compared to just 9.2% in 1990. The private non-profit sector is also demonstrating strong growth, performing $193 million in 2001,up from $184 million in 2000. Its importance is better demonstrated as an R&D funder with $565 million in 2001, up 13.2% from $499 million in 2000.

ONTARIO & QUEBEC CONTINUE TO DOMINATE

From a regional perspective, Ontario maintains its traditional stranglehold on the top spot for R&D spending, with $7.9 billion or 46.1% of the 1999 total (the latest year for which a provincial breakdown is available). Quebec weighs in at second with $4.8 billion in expenditures for 27.9% of the total. As a percentage of GDP, however, the number one and two positions are switched, with Quebec enjoying a 2.4 GERD to Provincial GDP (PGDP) value compared to 2.0 for Ontario. Ontario fares far better if R&D performed in the National Capital Region (NCR) is included. In 1999, $807 million was conducted in the NCR, with the majority ($766 million) occurring on the Ontario side of the region. If it is included in the Ontario tally, its GERD/ PGDP jumps to 2.2.

As always, there is a significant gap between top-ranked Ontario and Quebec and the rest of the pack, both in terms of R&D expenditures and GERD/PGDP. British Columbia advances into third spot with $1.2 billion and achieves a GERD/PGDP of 1.0, thanks to a 10.3% increase in R&D from 1998 levels. Alberta falls from third to fourth place with R&D performance of $1.1 billion and a GERD/PGDP of 0.9. That represents a 6.8% drop from 1998 when it was home to R&D expenditures of $1.2 billion.

Manitoba registered a surprisingly strong showing with R&D expenditures of $370 million, up 26.3% from the year before, fuelled by an increase in spending by the business sector from $96 million to $134 million.

Saskatchewan also posted a strong year-over-year increase of 13.6% to $317 million, but it was nudged out of sixth spot by Nova Scotia, which increased R&D spending by 9.9% to $343 million. Rounding out the provincial roster are New Brunswick ($162 million, up 4.5%), Newfoundland ($125 million, up 5.0%) and Prince Edward Island ($26 million, up 13.0%).

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