Budget 1999
Building a Strong Economy through Knowledge and Innovation - 2
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Archived - The Role of Knowledge and Innovation in the Productivity Framework

There is more to productivity growth than sound fiscal management, tax relief and overall business confidence. In today's economy, investment in knowledge and innovation is crucial.

To be able to compete successfully in the global marketplace, firms must continually innovate. This is essential not only for high-tech companies, but in all sectors.

The creation of new technologies and the development of new products and production processes require people who have leading-edge research skills and people who know how to put new technology to work. They also require a modern, sophisticated infrastructure.

To harness the opportunities of the new economy for Canadians, the government has been making strategic investments in knowledge and innovation over the past five years. Here are some examples:

Through Technology Partnerships Canada and the Industrial Research Assistance Program, the government is working with companies throughout Canada on specific research and development opportunities. Through these two programs, the government commits about $380 million annually in support of jobs and growth in the knowledge-based economy.

  Claims under the federal scientific research and experimental development (SR&ED) tax credit now total $1.3 billion annually. The SR&ED tax credit is widely recognized as one of the most generous incentives for research and development in the world.

  The federal government estimates that it will fund about $3.3 billion in research and development (R&D) in 1998-99, or 22 per cent of all R&D in Canada. The government is committed to increasing the effectiveness and diffusion of federal research, thereby maximizing economic and social benefits for all Canadians.

The government has also actively encouraged the use of information and communications technologies. It has done this partly by maintaining a policy and regulatory framework that ensures competition in the local, long-distance and cellular telephone markets, as well as in the markets for cable- and satellite-based television and other advanced telecommunications services. Canadian consumers may now choose from an increasing array of more affordable and powerful communications equipment and services. These developments are significant in light of the role of telecommunications as an enabling technology that increases the capacity for innovation throughout the economy.

Canadian Opportunities Strategy

Another key federal initiative is the Canadian Opportunities Strategy, which was introduced in the 1998 budget. The Canadian Opportunities Strategy is a comprehensive plan to expand access to the knowledge, skills and learning that Canadians need to get better jobs and achieve a higher standard of living in the 21st century. It targets strategic investments in seven areas:

A separate 1999 budget pamphlet entitled Canadian Opportunities Strategy: Update outlines the status of federal investments in these seven areas

  providing financial assistance for students;

  providing support for advanced research;

  helping individuals manage their student debt;

  encouraging families to save for education;

  helping Canadians upgrade their skills;

  supporting youth employment; and

  connecting Canadians to information and knowledge.

Through this strategy, the government is investing over $1.2 billion next year to support Canadians in the acquisition of knowledge and skills. In addition, starting in 2000, the Canada Millennium Scholarship Foundation will provide over $300 million annually in awards to 100,000 students from low- and middle-income families. The Foundation was established in June 1998 with a $2.5-billion contribution from the federal government.

Another feature of the Canadian Opportunities Strategy is the Canada Education Savings Grant (CESG), which provides a 20-per-cent bonus on the first $2,000 in annual contributions to registered education savings plans (RESPs). The CESG makes it highly attractive for Canadians to use RESPs to save for the education of their children and grandchildren.

1999 Budget -- Building on the Canadian Opportunities Strategy

The 1999 budget builds on the Canadian Opportunities Strategy by investing more than $1.8 billion over the remainder of this fiscal year and the next three years in additional support for the creation, dissemination and commercialization of knowledge, and in support of employment.

The creation of knowledge

In 1997, the federal government established the Canada Foundation for Innovation (CFI) with a contribution of $800 million. The CFI awards funding to universities and colleges, research hospitals and not-for-profit institutions. The 1999 budget commits an additional $200 million to help the CFI meet the demand for research infrastructure in the areas of health, the environment, science and engineering.

The CFI makes investments in partnership with provincial governments, universities, and the private and voluntary sectors. Partnerships provide important leverage. Every $40 contributed by the CFI can generate $100 in total funding. Thus, the CFI has the potential to generate investments in research infrastructure amounting to $2.5 billion -- $1.5 billion more than the $1 billion contributed by the federal government to date.

In the 1998 budget, as part of the Canadian Opportunities Strategy, the federal government committed an additional $405 million over three years to the three federal granting councils -- the Natural Sciences and Engineering Research Council (NSERC), the Medical Research Council (MRC) and the Social Sciences and Humanities Research Council (SSHRC). These councils support advanced research, primarily through grants, fellowships and scholarships for graduate and post-graduate students. The funding announced in last year's budget restored the councils' budgets to their previous peak levels and helped them raise the value and number of research grants and scholarships.

The 1999 budget builds on last year's measures by providing increased funding over three years of $75 million for NSERC and $15 million for the SSHRC. This is in addition to funding that NSERC and the SSHRC are receiving under other measures in this budget that increase federal financial support for health research.

Investing in the National Research Council

For more than 80 years, the National Research Council (NRC) has been the main science and technology agency of the federal government. Through its funding and research activities, the NRC spends about $500 million annually. The 1999 budget provides $16 million in 1998-99 to the NRC to invest in advanced equipment plus $15 million over three years to better support national and regional research goals.

Increasing federal support for biotechnology research and development

Biotechnology is changing our understanding of the basic "building blocks" of life processes. This knowledge gives scientists new ways of improving the quality of human life -- for example, through improved health care products and procedures, as well as through advances in agriculture and the food system. Canada is committed to being a world leader in biotechnology. This budget builds on current federal investments in biotechnology by adding $55 million over three years for biotechnology research and development by science-based government departments and agencies.

The dissemination of knowledge

Connecting Canadians

The federal government has been implementing a plan to make Canada the most connected country in the world -- ensuring that all Canadians will be able to benefit from the knowledge and opportunities for learning that the information highway has created. To this end, the 1998 budget included $205 million over three years to build on the success of the Community Access Program and SchoolNet, and to help the voluntary sector enhance its capacity through Voluntary Sector Network Support. An additional $55 million was made available for the Canadian Network for the Advancement of Research, Industry and Education (CANARIE) to build the world's first national optical Internet -- a next-generation Internet for research and development.

Sharing ideas through Smart Communities

This budget will invest $60 million over three years to establish one Smart Community Demonstration Project in each province, in the North and in an Aboriginal community. The purpose of this initiative is to pave the way for innovative uses of information technology -- linking people and organizations together to share ideas and interests, and to promote community economic development. Communities will explore ways of developing electronic Internet-based information and services so that the benefits of this technology can be delivered to users in a more integrated and accessible fashion. The lessons learned in the course of these demonstration projects will advance the use of information technology at the community level across Canada.

Disseminating information through GeoConnections

This budget also makes a commitment to fund the GeoConnections initiative at $60 million over five years beginning in 1999-2000. The goal of this initiative is to develop and make available -- through the information highway -- comprehensive and integrated data about Canada's geography, environment, people and resources. Information will be categorized by geographical location to give users a detailed and timely profile of the physical, demographic and economic characteristics of any given region. In addition to keeping Canada at the forefront of mapping, GeoConnections will have applications in areas ranging from climate change monitoring to business development.

The commercialization of knowledge

Transferring knowledge from the lab to market

It is important that new ideas generated through research be transferred quickly from labs to firms that can use these ideas in commercial applications. It is the creation of new products that leads to jobs and economic growth.

The Networks of Centres of Excellence (NCE) program, renewed in the 1997 budget with a commitment of $47 million in annual funding, supports partnerships among world-class researchers and the private sector across Canada. The 1999 budget will give the NCE program an additional $90 million over three years starting in 1999-2000. This will fund up to eight new networks and enable the program to initiate a new competition in 1999 rather than waiting for its next planned competition in 2001.

Opening doors for high-tech industries through Technology Partnerships Canada

Technology Partnerships Canada (TPC) was created in 1996. TPC makes strategic investments with companies to commercialize innovative products and processes. It operates on the basis of partnership agreements between the government and the private sector in which both the risks and the benefits are shared, and the conditions for repayment of investments are specified. TPC invests in research, development and market development projects in the aerospace and defence industries, environmental technologies, and enabling technologies such as advanced manufacturing and advanced materials. This budget makes an additional $150 million available to TPC over a three-year period starting in 1999-2000. This investment will foster new market opportunities and facilitate the creation and growth of high-technology industries.

Small- and medium-sized enterprises (SMEs) continue to be the growth engine of the Canadian economy -- accounting for approximately 50 per cent of all private-sector employment. SMEs need access to capital to innovate and improve their productivity performance. Parliament recently passed the new Canada Small Business Financing Act. This Act will provide guarantees to commercial lenders, who lend approximately $2 billion to SMEs each year under this program.

The Business Development Bank of Canada (BDC) has also been given an important role in this area and has substantially increased its lending and investment efforts to help businesses in strategic sectors. In this budget, the government will inject an additional $50 million in equity into the BDC through a purchase of dividend-paying preferred shares. This will allow the BDC to provide additional financing for knowledge-based and export-oriented businesses.

Canadian Space Agency

The Canadian Space Agency (CSA) plays a leading role in the development and application of space knowledge. It has been instrumental in the success of Canadian space technology firms in such fields as space robotics, earth observation, science and satellite communications. In the past, the CSA has been funded on a project-by-project basis. This situation has created uncertainty for the agency and its clients. In this budget, the government is providing the CSA with additional resources of $430 million over three years and thereafter will stabilize funding at a level of $300 million annually. These resources will support significant federal investments in space projects, science and technology.

Supporting employment

Additional funding for the Youth Employment Strategy …

In recognition of the importance of work experience in building skills and knowledge among Canada's youth, the government has announced the renewal of the Youth Employment Strategy with funding of $465 million over three years. This is a 50-per-cent increase in funding. For young Canadians, this measure will mean opportunities for summer employment, internships, and career and labour-market information services.

… and the Canada Jobs Fund

The government will provide $110 million per year for a Canada Jobs Fund to create sustainable jobs in high-unemployment regions of Canada. The Minister of Human Resources Development will work closely with other levels of government, the private sector, regional development agencies and community organizations to stimulate employment in these regions.

Building on the Canadian Opportunities Strategy

	1998-99	1999-00	2000-01	2001-02	Total
	(millions of dollars)
Creating knowledge Canada Foundation for Innovation1	100				100
SSHRC		5	5	5	15
NSERC		25	25	25	75
National Research Council	16	5	5	5	31
Biotechnology		15	20	20	55
Disseminating knowledge
Smart Communities		15	30	15	60
GeoConnections		12	12	12	36
Commercializing knowledge
Networks of Centres of Excellence		30	30	30	90
Technology Partnerships Canada		50	50	50	150
Business Development Bank of Canada2	50
Canadian Space Agency		41	152	237	430
Supporting employment
Youth Employment Strategy		155	155	155	465
Canada Jobs Fund		110	110	110	330
Total	166	463	594	664	1,887
1 Funding for the Canada Foundation for Innovation will be increased by $200 million. Based on awards in 1998, it is expected that about half of this amount will support research infrastructure in the environment, sciences and engineering. 2 Federal support for the Business Development Bank of Canada is in the form of an equity injection -- i.e. the purchase of shares. As such, it is not counted as a budgetary expenditure.

Conclusion

The 1999 budget adds more than $1.8 billion over the remainder of this fiscal year and the next three years to promote the creation, dissemination and commercialization of knowledge, and to support employment. These investments build on the Canadian Opportunities Strategy, and represent a balanced and comprehensive approach to advancing Canada's knowledge and innovation agenda.

These investments will help turn ideas into value-added, job-creating industries of the future, and are consistent with the government's commitment to spur Canada's productivity growth by helping businesses, organizations and individuals put new ideas to work. For Canadians, continued productivity growth will mean a better standard of living and a better quality of life.

How can I get more information on the 1999 budget?

Information is available on the Internet at: http://www.fin.gc.ca.

You can also obtain copies of this brochure or other budget documents from:

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