Monday, April 2, 2012

#Budget2012 Analysis - Part 4 - Supporting Jobs and Growth - Supporting Entrepreneurs, Innovators and World-Class Research

We'll now cover section 3.1 of the budget. The highlights are as follows:

Creating Value-Added Jobs Through Innovation 

  • $400 million to help increase private sector investments in early-stage risk capital, and to support the creation of large-scale venture capital funds led by the private sector.
  • $100 million to the Business Development Bank of Canada to support its venture capital activities.
  • $110 million per year to the National Research Council to double support to companies through the Industrial Research Assistance Program.
  • $14 million over two years to double the Industrial Research and Development Internship program.
  • $12 million per year to make the Business-Led Networks of Centres of Excellence program permanent.
  • $105 million over two years to support forestry innovation and market development.
  • $95 million over three years, starting in 2013–14, and $40 million per year thereafter to make the Canadian Innovation Commercialization Program permanent and to add a military procurement component.
  • $67 million in 2012–13 as the National Research Council refocuses on business-led, industry-relevant research.
  • Streamlining and improving the Scientific Research and Experimental Development tax incentive program.

Support for Research, Education and Training

  • $37 million annually starting in 2012–13 to the granting councils to enhance their support for industry-academic research partnerships.
  • $60 million for Genome Canada to launch a new applied research competition in the area of human health, and to sustain the Science and Technology Centres until 2014–15.
  • $6.5 million over three years for a research project at McMaster University to evaluate team-based approaches to health care delivery.
  • $17 million over two years to further advance the development of alternatives to existing isotope production technologies.
  • $10 million over two years to the Canadian Institute for Advanced Research to link Canadians to global research networks.
  • $500 million over five years, starting in 2014–15, to the Canada Foundation for Innovation to support advanced research infrastructure.
  • $40 million over two years to support CANARIE’s operation of Canada’s ultra-high speed research network.
  • $23 million over two years to Natural Resources Canada to enhance satellite data reception capacity.
Overall I am fairly happy with what I am seeing here and it is in line with what I believe would be considered "good" financial support of small & medium business to accomplish what is needed. Only two items targeted for cutbacks appear in their list:
Scientific Research and Experimental Development
Tax Incentive Program      
  Increasing Cost-Effectiveness      
    Reduce Overhead Proxy Rate From 65 per cent to 55 per cent: -10 -10
    Remove the Profit Element From Arm’s Length Contract Payments: -25 -25
What actions are actually taken to meet the new overhead reduction will have to remain to be seen but I doubt few will complain about removing the profit element from arms-length contracts.

Aside from this, a few certain paragraphs provide clues as to what the government currently believes and the trends it is following as a result. Perhaps most important in regards to this is the medical isotope situation which I believe governments world-wide are not being honest about how serious the shortages are nor how long they will last (indeed I believe they do not even know how long it will last, indefinitely is what I imagine they wish they could tell you). As I've pointed out on twitter the "nationwide" drug shortage is actually a "worldwide" drug shortage. I am positive all governments are aware that nuclear as a source for isotopes is no longer sustainable in the long term. They seem to be acting on this assertion.
Medical isotopes are used in a variety of treatments and diagnostic procedures that help save lives. In Budget 2010, the Government provided $35 million over two years to Natural Resources Canada to support research and development towards new technologies for the production of medical isotopes to help replace reactor-based isotope supplies. Very promising results have been demonstrated to date, but more work is required to bring these new technologies to commercial scale. To further advance the development of alternatives to existing isotope production technologies and help secure the supply of medical isotopes for Canadians, Economic Action Plan 2012 proposes an additional $17 million over two years to Natural Resources Canada.

Atomic Energy of Canada Limited (AECL) is a federal Crown corporation that specializes in a range of nuclear products and services. The Government has taken an important step in positioning Canada’s nuclear industry for future success with the sale of AECL’s CANDU Reactor Division last October. The second phase of the restructuring of AECL—the restructuring of its nuclear laboratories—is now underway. To ensure a secure supply of medical isotopes and maintain safe and reliable operations at the Chalk River Laboratories, Economic Action Plan 2012 proposes $107 million over two years for AECL’s laboratory operations.
This is a problem to keep your eyes on. I personally would suggest keeping close tabs on medicine you require and if possible stockpile it.

A few other paragraphs confirm for me that the government believes fully in climate change and that it is occuring now and is inevitable as earlier signs have indicated.
Canada’s Economic Action Plan laid the groundwork to establish a world-class research station in the North. As announced by the Prime Minister in August 2010, the station will be located in Cambridge Bay. Once established, the station will provide a year-round presence in the region and anchor the network of research infrastructure across Canada’s North, making a significant contribution towards the Government’s Northern Strategy. The Government will be announcing next steps in the establishment of the Canadian High Arctic Research Station in the coming months.
Combine the link, the "research station", and the explicit mission we have for research directly from section 3.1:
The Government’s science and technology strategy, Mobilizing Science and Technology to Canada’s Advantage, emphasizes the importance of ensuring that federally supported research contributes to the commercialization of new products, processes and services that create high-value jobs and economic growth. Guided by this strategy, the Government provides significant resources to support research, development and technology.
It's not unreasonable to assume the research station will be heavily involved in arctic mining research as thats one of few products, services, or processes that can be commercialized. This compliments another paragraph in regards to climate change (from the section on GMO research):
•Increasing the competitiveness of the forest industry. Spruce trees are the most widely used species in Canada’s forest plantations. Researchers at Universit√© Laval are working to develop tools and protocols that make it possible to select high-performance spruce trees with better quality wood and high potential to adapt to climate change. Government and industry have partnered to transfer molecular breeding technology to commercial application across a broader range of tree species, to increase the competitiveness of the Canadian forest industry.
I'm more convinced than ever now that the government's climate change strategy is adaptation and not prevention (indeed I believe they believe it is now impossible to prevent). Take note of the wording "better quality wood with high potential to adapt to climate change". It's current tense and matter-of-fact. I anticipate most policy will be geared towards adaptation with climate change simply becoming a reality.

I found one other paragraph of particular interest:

To help increase private sector investments in early-stage risk capital, and to support the creation of large-scale venture capital funds led by the private sector, Economic Action Plan 2012 proposes to make available $400 million for venture capital activities. This will increase the amount of funding available for growth-oriented innovative firms while focusing resources on those that are likeliest to become global leaders. In the coming months, the Government will consider how to structure its support in order to incent private sector investments and management of seed and large-scale venture capital funds.
It's unfortunate as the government choosing the "likeliest to become global leaders" - which in nature seems generally very anti-conservative taints what more or less reads as an industry-neutral list of innovation funding.

All in all, the focus on small & medium business is a good thing should Canadians use these opportunities responsibly. The general sense of budget 2012 is a worldy sense with a focus on exporting as the primary key to economic success. I believe the opposite in that I do not think we will have any economic stability depending entirely on the health of the global supply chain. Canadians need to trade more with each other to create the kind of resilience to actually withstand economic hard-times - instead of pretending central bank policy can do the hard work. There is nothing in section 3.1 that really specificies what sort of industry is applicable (outside of the specification normally found). If Canadians come to understand the need for a stronger local economy than I believe the funds provided here can contribute towards our prosperity (note I didn't say economic growth).

Part 5, coming soon.

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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

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