Canadian R&D intensity takes a dip despite a healthy increase in projected spending

Canada's spending on R&D is increasing at a respectable clip but the economy is growing even faster, pushing down the key ratio of gross expenditures on R&D (GERD) and gross domestic product (GDP). The impact of a rapidly expanding GDP leaves the ranking of Canada's R&D spending mired near the bottom of OECD nations and will make Finance minister Paul Martin's goal of moving into the top five by 2010 even more difficult to achieve (R$, October 2/00).

The latest Statistic Canada data contained in its survey of total R&D spending show that Canada's GERD/GDP ratio for 1999 is projected to be 1.64, down from 1.69 in 1998. That's in spite of a healthy hike in R&D spending projected for both 1999 ($15.703 billion) and 2000 ($16.554 billion), and higher historical values for prior years, which were adjusted upward as a result of changes made to StatsCan's survey of R&D spending in the higher education sector (see page 4). Higher education estimates for 1999, for example, have risen to a whopping $669 million in the latest survey, and spending in the sector is slated to reach $4.461 billion in 2000.

The new survey also reveals a significant increase in R&D funding by foreign sources not captured in previous surveys. Foreign sources account for $2.770 billion or 16.7% of the 2000 total. That compares to $1.804 billion in 1997, when the share of foreign source funding was just 12.2%. The hefty hike is largely due to increases of foreign funding in the industrial sector, which StatsCan will publish more details on in the near future. Since 1989, foreign spending on R&D has more than tripled, while total R&D spending has risen 74% in the same period.

For the year 2000, the business sector represents the largest single share of R&D spending, accounting for $9.9 billion or 59.8% of the total. Following a distant second is the higher education sector, with $4.461 billion in spending (26.9%).

The federal government is projected to spend $1.782 billion in the same year, roughly the same as the last 10 years, but representing an ever shrinking portion of the total, which has risen nearly $6.3 billion since 1990. The federal share of the 2000 total is just 10.8%, down from 16.1% in 1989 when it spent $1.533 billion. As an R&D funder, the federal government was projected to spend $3.335 billion in 2000, up $258 million or 8.3% from the previous year.

The federal government performed 46.6% of its R&D in the National Capital Region in 1998, which accounts for $805 million or 5.3% of the national total fort that year. Business spending in the NCR is included in overall total for Ontario.

For 1998 (the last year for which a provincial breakdown is available), the business sector conducted 56.9% of its R&D spending in Ontario, representing a significant jump from 1997 when Ontario accounted for 55.4%. The data seem to indicate that Ontario's gain was at the expense of Quebec and British Columbia, which experienced slight drops in their respective shares of business R&D spending.

In terms of total R&D spending, Ontario remains the dominant locale, accounting for $7.224 billion or 47.5% of the 1998 total for a GERD to GDP ratio of 1.9. Quebec accounts for 26.5% of the total for a GERD to GDP ratio of 2.1. The ratios for both provinces have remained the same for the past five years.

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