Increase in GERD fails to keep pace with Canada’s robust economic growth

Increased funding for the higher education sector is helping to boost Canada’s gross expenditures on R&D (GERD) to a projected $26.3 billion in 2005, up 4% increase from 2004, and 5.3% from 2003. Canada’s impressive R&D performance after a period of stagnation in 2001 and 2002 does not translate into a higher GERD/GDP ratio, however, due to robust economic growth that outstripped greater R&D expenditures. Canada’s GERD/GDP in 2004 was 1.96, down slightly from 1.97 in 2003 and 2.03 in 2002, according to the latest Statistics Canada data.

The healthy R&D increases were largely limited to the university sector, which has doubled over the past six years. The higher education sector accounted for $896 million or 90% of the increase in the 2005 GERD. As an R&D performer, the sector accounts for $9.84 billion in expenditures, while providing $4.33 billion in funding.

R&D performance in the business sector is up marginally in 2005, gaining $218 million or 1.6% to $13.85 billion. But it appears to be on the road to recovery, registering its second annual increase following a slight decline in 2003. Business R&D accounts for 52.7% of all R&D performed in 2005. The vast majority of business R&D — $12.35 billion or 89.3% — is funded internally.

The situation is somewhat gloomier for R&D performance by the federal government, which is projected to drop 5.3% in 2005 to $2.14 billion. During the same period that saw a doubling of university R&D (1999-2005), federal R&D spending has increased just 15%.

The federal government’s funding of R&D shows a modest increase in 2005 of 2.5% to $5.02 billion.

Foreign sources also appear to be rebounding as a funder of Canadian-based R&D. In 2005, foreign sources are projected to reach $2.15 billion, up from $2.1 billion the year before but well off the high mark of $3.6 billion in 2000.

NON-PROFIT GROUPS BOOST FUNDING

Private non-profit organizations are becoming a small but increasingly important source of R&D funding. In 2005, these organizations provided $755 million or 2.89% of the annual total, up 9.7% from 2004. That compares to $233 million or 2.27% of the total in 1990.

Ontario and Quebec continue to be the preferred location for R&D in all sectors. Together, the two largest provinces accounted for 73.2% of all R&D expenditures in 2003 (the latest year for which a geographical breakdown is available).

Ontario is home to $10.7 billion in R&D for a 44.6% share, followed by Quebec with $6.86 billion or 28.6%, the highest percentage in the past 14 years. Of the remaining provinces, British Columbia and Alberta continue to increase their share of the Canadian total. In 2003, BC, accounted for $1.97 billion or 8.2% in Canadian R&D, followed by Alberta with $1.82 billion and a 7.6% share.

The national capital region (NCR) — home to many federal labs — ranks fifth with $999 million or 4.2% of total R&D. Although the amount is the second highest in the past 14 years, the NCR’s overall share has declined from a high of 6.9% in 1990, reflecting the stagnant support for federal R&D over the same period.

Ranking sixth and seventh are Manitoba and Saskatchewan, which respectively account for $443 million (1.8%) and $391 million (1.6%), The latter represents a 10% decline from 2002, when Saskatchewan-based R&D expenditures spiked upwards to $434 million.

Ontario and Quebec capture an even greater share of business R&D. In 2003, Ontario was home to $7.1 billion in business R&D for 52.8% of the total. Quebec followed with $4.1 billion or 30.7% of the total. BC continues to holds it own with $1.1 billion (8%). Alberta’s share is $779 million but its share of the total (5.8%) has dropped from an historic high of 6.9% in 1990.

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