The initiative, administered by the Department of Innovation, Science, and Economic Development (ISED), identified five superclusters to develop: a digital technology supercluster in British Columbia, a protein industry supercluster in the Prairies, a next generation manufacturing supercluster in Ontario, an artificial intelligence supercluster in Montreal, and an ocean supercluster in the Atlantic provinces.
The Liberals said ISI would create 50,000 jobs and boost Canada’s gross domestic product (GDP) by $50 billion over a decade, based on projected federal funding of $918 million, combined with $1.1 billion from non federal entities, including provincial governments, universities, and private sector investors over a five-year period.
However, when the PBO report compared the actual spending by the federal government to the original budget as of Mar. 6, only $30 million (29 percent) of the planned $104 million for the first year had been spent.
The PBO report said that ISED has announced 45 specific research projects to date. Of the projects, the PBO says only 24 of them contain information related to job creation forecasts.
The PBO also estimates that even if spending lands on schedule, only slightly over 27,000 jobs will be created, far below the 50,000 mark. The report also mentioned that it is not known at this point if the jobs created will be “full-time, part-time, permanent or temporary.”
As to the projected GDP of $50 billion, the parliamentary watchdog noted the figure was based on the assumption that GDP would increase by 25 times the original spending ($918 million from ISED, and the $1.1 billion from non-federal partners), provided again that the spending objectives were met in the first place.
The PBO conducted a review of similar research and development projects but could not find one that achieved the huge multiples in GDP that the Liberals had projected.
“Based on the impacts of similar projects in other jurisdictions, the multiplier effect on GDP of investments in R&D is somewhere between 3 and 8,” the PBO reported. “At the higher end of that range was a multiplier of 8.82, based on U.S. data.”
“Nevertheless, based on the evidence found in the literature, it seems highly unlikely that the Government will meet its objective of increasing GDP by $50 billion over 10 years. For instance, a multiplier effect of 8.82, which would itself be optimistic, would lead to an increase in GDP of around $18 billion,” the report added.
In terms of measuring innovation, the PBO report questioned the ISED’s performance indicator metrics.
“Measuring innovation can be challenging. There is not one widely used metric that tells a complete story; instead there are many that can each provide valuable insights.”
The ISED, in response, provided the PBO with metrics it claimed can use an “increase in productivity or development of new products and processes” as a way to measure innovation.
“To PBO’s knowledge, ISED does not have quantifiable objectives for any of these metrics, and the data reports did not contain information that would have allowed PBO to measure these metrics. As such, PBO cannot draw conclusions about whether the ISI is, or will be, succeeding in accelerating innovation,” the report said.
The PBO explained that the data collected and the analysis of its report was done before the COVID-19 pandemic. It advised parliamentarians to take into consideration the impact caused by the pandemic to evaluate the implementation of ISI.