Background

Prime Minister Chrétien, along with the four regional Ministers for Atlantic Canada, announced the Atlantic Investment Partnership (AIP) during a news conference in Halifax on June 29, 2000. This five-year federal initiative features a balanced mix of strategic investments and initiatives designed to strengthen the capacity of Atlantic Canadians to innovate and compete in the global, knowledge-based economy.

The AIP is intended to help close the region's skills, innovation and productivity gaps with other parts of Canada. It puts forward an approach that builds on existing regional strengths but brings new resources and an enhanced innovation focus to regional economic development.

The AIP draws upon partnerships with key stakeholders including other levels of government, communities, businesses, universities, colleges, and research institutes. Most of the elements of the AIP will be delivered by the Atlantic Canada Opportunities Agency (ACOA), and will build upon ACOA's proven successes in the region as well as its existing strategies, priorities and programs. The National Research Council will also participate, building on its network of research centers in Atlantic Canada.

Atlantic Canada's small population and domestic marketplace mean that real growth-in both commercial activity and employment-must come in large part through increased exports and international trade and investment. Thus, a concerted effort to enhance the region's innovation infrastructure-with the resulting increased quality, value and marketability of the region's goods and services-is required to increase long-term prosperity.

There is also a need to address gaps in business management skills, particularly those related to innovation and technology, which hobble the ability of the region's small- and medium-sized enterprises to compete in the changing economy. As well, efforts are needed to help build and retain the pool of skilled, talented Atlantic Canadians, particularly young people, who are needed to help make the region's economy more innovative and competitive.

Major investments under the Partnership will include:

• $300-million for the Atlantic Innovation Fund (AIF) which is designed to strengthen innovation capacity, increase the region's competitiveness and encourage the region's transition to a more knowledge-based economy. Investments will be overseen by an Advisory Board which includes academics, business leaders, individuals experienced in the research and development and high-technology fields, as well as leaders in economic policy.
• $110 million for the expansion of National Research Council facilities in Atlantic Canada.
• $135 million for a Strategic Community Investment Fund to improve access to funding for strategic community-level projects. This initiative is intended to help communities strengthen their economic base, thereby creating opportunities for investment and job creation.
• $123.6 million for Trade and Investment as well as Entrepreneurship and Business Skills Development initiatives. The AIP will make investments to strengthen Atlantic Canada's trade and direct foreign investment performance by increasing these activities with the U.S. and other countries. It will contribute to the development of trade skills in business, initiate a new foreign direct investment strategy and augment the region's international tourist trade.

The AIP will make investments aimed at increasing the number of Atlantic Canadians who want to start a business and improve the ability of existing businesses to compete and grow successfully. It will also help small business owners and their employees acquire the management skills needed to succeed in the new economy; provide more entrepreneurial opportunities and services for young people and women; and provide more career opportunities within the region for young people.

Consultations

The Atlantic Investment Partnership was developed in consultation with key stakeholders in Atlantic Canada, such as other levels of government, businesses, colleges, universities and other research institutes.

Rationale for the Atlantic Investment Partnership

With its many universities and research institutes, expanding entrepreneurial culture, increasingly export-oriented economy and growing knowledge-based sectors, Atlantic Canada has many of the ingredients required to take advantage of the opportunities that the 21st century has to offer. However the region needs to address the following gaps:

• Research and development efforts in the region are lower than national levels. During 1998, total expenditures on R&D; in Atlantic Canada as a percentage of GDP was 1.0%, compared to 1.7% for Canada.
• Over the 1989 to 1998 period, expenditures on R&D; in Atlantic Canada on a per capita basis averaged 50% of the national average.
• Business expenditures on R&D;, as a percentage of GDP in the region, was 0.2% in 1998 compared to the national figure of 0.8%, which in turn, lags G-7 levels.
• Lower levels of R&D; ultimately lead to a less innovative economy, as evidenced by the low number of patents being granted in the region. Patents granted to residents in Atlantic Canada in 1996-1997 reached only 2.0 % of the national level.
• While Atlantic Canada's growth in the high-knowledge sectors is accelerating, the region's share of national knowledge-based economy activity has not yet caught up to national levels.
• A less innovative economy is a less competitive economy - an obvious effect of this in the region is the stubbornly higher overall unemployment rate relative to the Canadian average (11.2 % versus 6.8 % for year 2000).
• With the region's limited population base and small domestic market, the economy is reliant on exports, and its growth is dependent upon increased trade and investment. While the region has enjoyed significant export growth in recent years, it has not kept pace with the rest of the country. Between 1989 and 1999, international exports of goods and services from the region increased by 98% as compared to an increase of 145% for Canada as a whole. Between 1993 and 1997, the total number of Atlantic exporters grew by 11.4 % compared with 28.7 % nationally.
• More and more, growth in exports internationally is based in goods and services with increasing knowledge content. Thus there is an important connection between a number of the elements of the AIP, namely, innovation, trade and investment, and entrepreneurship and business skills development.

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Atlantic Innovation Fund

Innovation and technology are powerful engines of growth. Atlantic Canada's capacity to innovate will determine its ability to compete and prosper in the future. The Atlantic Innovation Fund (AIF) is an initiative through which the Government of Canada is making strategic investments in leading edge research and development that directly contributes to the development of technology-based economic activity. The AIF will be funded at $300 million over five years beginning in the 2001/2002 fiscal year.

Objectives

The objectives of the AIF are to:

• increase activity in and to build capacity for innovation and research and development (R&D;) which leads to technologies, products, processes or services which contribute to economic growth in Atlantic Canada;
• increase the capacity for commercialization of R&D; outputs;
• strengthen the region's innovation capacity by supporting research, development and commercialization partnerships and alliances among private sector firms, universities, research institutions and other organizations in the Atlantic system of innovation; and
• maximize benefits from national R&D; programs.

Types of projects eligible for funding

The AIF will focus on R&D; projects and related initiatives in the areas of natural and applied sciences, as well as social sciences and humanities where these are explicitly linked to the development of technology-based products, processes or services, or their commercialization.

Atlantic Canada has demonstrated capabilities in a number of emerging sectors that possess good global growth prospects. These include: aquaculture, environmental technologies, information technologies (including communications and geomatics), health and medical technologies, ocean technologies, and biotechnology. Investments made through the AIF will focus on, but will not be restricted to, these growth sectors. The AIF will also encourage the development of technologies that allow resource sectors such as oil and gas, agriculture and agri-food, fisheries, forestry and mining, to improve their competitive positions.

The AIF will support partnerships, alliances and networks, and will encourage initiatives that strengthen the Atlantic system of innovation including initiatives that bridge the gap between research institutions and the marketplace.

Who is eligible?

The AIF will entertain proposals from commercial and non-commercial entities such as, universities, colleges, other post-secondary educational institutions, business associations, research institutions and private sector firms.

Federal departments, including federal research laboratories and institutes, and provincial government departments are not eligible recipients. Nevertheless, they may be active participants in, and may contribute funding to, AIF projects.

What level of financial assistance is available?

Contributions will be determined on the basis of what is required to allow a project to proceed. The upper limit of assistance for commercial projects will be 75% of total eligible costs, and the limit of assistance for projects undertaken by not-for-profit organizations will be 80% of total eligible costs. Proponents of either type of project will be encouraged to seek financing from other sources. For private sector commercial operations, the AIF will consider proposals where the level of assistance is over $500,000. Commercial applicants seeking assistance of $500,000 or less should direct their requests to the ACOA Business Development Program's Innovation Element, which can provide a similar type of contribution.

Building and major renovation costs will be eligible under the AIF, but only on a very selective basis. AIF assistance will not exceed 30% of such costs.

Contributions under the AIF to the private sector that involve the commercialization of a technology, product, process or service will be conditionally repayable based on the commercial success of the project. Contributions to non-commercial organizations will normally be non-repayable.

Delivery

The AIF is guided by an Advisory Board that makes recommendations on specific project proposals, and provides advice to the Minister of State on policy matters related to the AIF. ACOA provides administrative support to the Advisory Board.

As of June 22, 2001, the Minister is soliciting proposals through a request for project proposals process. The deadline for submission of proposals is September 28, 2001. Proposals should be sent to the following address:

The Atlantic Canada Opportunities Agency
Atlantic Innovation Fund Secretariat
P.O. Box 6051
Blue Cross Centre
644 Main Street
Moncton, New Brunswick E1C 9J8

Proposals can also be sent electronically at http://www.acoa-apeca.gc.ca/e/financial/aif/index.shtml

A package is available to assist prospective proponents in developing a proposal for submission to the AIF. The package is now available on ACOA's web site at http://www.acoa-apeca.gc.ca/e/financial/aif/rfp.shtml or by contacting:

ACOA New Brunswick - 1-800-561-4030
ACOA Newfoundland and Labrador - 1-800-668-1010
ACOA Nova Scotia - 1-800-565-1228
ACOA Prince Edward Island and Tourism - 1-800-871-2596
Enterprise Cape Breton Corporation - 1-800-705-3926
ACOA Head Office - 1-800-561-7862

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Program Description

The AIP Strategic Community Investment Fund (SCIF) will invest $135 million in Community Economic Development and is designed to support strategic initiatives that respond to the economic development needs of Atlantic Canada. These initiatives will help communities strengthen their economic base.

More than half of Atlantic Canadians live in rural communities and face economic challenges and opportunities requiring strategies tailored to the individual community needs. The Federal Framework for Action in Rural Canada affirms that a cornerstone of community economic development is community involvement. This involvement is crucial in supporting communities to take increased responsibility for their own economic agenda.

The SCIF will focus on rural communities and will support strategic initiatives that help communities adopt new technologies; improve the competitiveness of their industrial base; and develop selective infrastructure that communities have identified as being critical to their economic development. These projects will have broad community support and could include activities such as industrial prospecting, business development, or workforce and skills development.

Projects supported through the SCIF will arise from an analysis of local and regional economic opportunities, will demonstrate economic benefits, and will be compatible with the federal government's policies and priorities.

The SCIF is administered by the Atlantic Canada Opportunities Agency (ACOA), and will be an Agency-led, pro-active process that engages proponents such as community leaders, regional development organizations, boards of trade, etc. The Agency will inform this network of the objectives and parameters of SCIF and invite the appropriate groups to engage in discussions on and to develop applications for the program.

Objectives

The Strategic Community Investment Fund helps communities throughout Atlantic Canada create opportunities for economic development in order to stimulate investment and job creation.

The Fund assists in creating an environment in Atlantic communities that encourages and enhances:

· the development of strategic sectors,
· adjustment to the knowledge-based economy,
· the adoption of new technology and innovative practices, and
· capacity to compete in the global economy.

Available Assistance

The program is funded with $135 million over the next five years. Assistance is non-repayable, and the amount provided to each individual project will be determined by an assessment of the level of funding necessary to allow the project to proceed.

Eligible Recipients

Eligible recipients include non-commercial/not-for-profit organizations such as local development associations, municipalities and their agencies, business or technology institutes, industry associations, economic development associations, universities, educational institutions, local cooperatives or other business entities undertaking not-for-profit initiatives.

Funding Criteria

To be considered for funding, projects should meet the following criteria:
(a) Be consistent with the overall objectives of the Program
(b) Have potential to further the economic development of a community or a group of communities and should not benefit one community at the expense of another
(c) Arise from an analysis of regional economic opportunities
(d) Be incremental in nature
(e) Be of a fixed duration
(f) Be viable and or sustainable over the relevant term
(g) Be compatible with existing federal policies
(h) Demonstrate economic benefits
(i) Demonstrate adequate managerial, financial and technical capability to conduct the proposed activity

* The Fund is not intended for initiatives related to basic municipal infrastructure, or for projects of a primarily social or recreational nature.

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The Atlantic Canada Opportunities Agency (ACOA) has an established and successful history of providing support to entrepreneurs and exporters at various stages of development. This support has taken many forms such as the provision of educational resources exposing young people to entrepreneurship as a career option, to more specialized initiatives such as support to firms wishing to enter the global marketplace and to existing traders seeking increases in the value of their international sales. The Entrepreneurship and Business Skills Development and the Trade and Investment components of the AIP build directly on ACOA's past work. It will enhance ACOA's efforts in these areas through a series of strategic, targeted investments. A strong focus will be placed on enhancing the skills of the region's SMEs, particularly as they apply to trade, investment, business and innovation management skills.

These components of the AIP will build on the existing Business Development Program, which is a well-established and effective mechanism. However, additional funding through the AIP mean that additional resources are available to do incremental and more strategic activities. These components of the AIP will allow ACOA to build on past success and to focus on more pan-Atlantic activities.

Entrepreneurship and Business Skills Development

Description

While Atlantic Investment Partnership (AIP) initiatives such as the Atlantic Innovation Fund will increase activity in innovation and Research and Development (R&D;), it is essential that the region's SMEs be prepared to adopt and commercialize the research results. Entrepreneurs equipped with the best available technological, innovation and management skills will play a key role in maximizing the economic impact of the AIP and allowing Atlantic Canada to attain its highest potential.

The Entrepreneurship and Business Skills Development component of the AIP will respond to the challenges facing the Atlantic Canadian economy by providing more entrepreneurial opportunities and services for young people and women, by helping small business owners and their staff acquire the latest in business and technological skills, and by helping to provide career opportunities for youth within the region.

Objectives

The objectives of the AIP investments in Entrepreneurship and Business Skills Development are to:

• increase the number of Atlantic Canadians who choose to start their own businesses;
• improve the ability of existing businesses to compete and grow successfully; and
• improve the innovation and technical competencies of Atlantic Canada's SMEs.

Types of projects

The enhancement of management skills within Atlantic SMEs is an important element of the AIP. The region's industries are becoming increasingly knowledge intensive, and commonly identify skills gaps as a major impediment to further growth. Of particular concern is the ability of firms to adopt enhanced innovation management and technical skills in order to make them more productive and globally competitive. Investments could include such initiatives as building the capabilities of SMEs' existing management and senior technical staff to develop, commercialize or adopt new technologies; and assisting with the recruitment of recent technology graduates who have the leading-edge skills required for R&D; and other technology-related activities. Initiatives such as these, in addition to addressing critical skills deficiencies, will also contribute to reducing the out-migration of young, skilled Atlantic Canadians.

The provision of support to young entrepreneurs and women entrepreneurs also figures prominently in the AIP. With recent research indicating that one in five young Atlantic Canadians aged 15-29 now intend to start a business within two years, a shift in strategy is needed to nurture this intent and translate it into the emergence of more successful entrepreneurs in the economy. The initiative will therefore enable young people who aspire to become entrepreneurs to develop the skills needed to successfully launch businesses and grow in the knowledge economy. Investments could include facilitating community-level participation which supports the development of young entrepreneurs; providing aspiring young entrepreneurs with opportunities to develop business skills; and improving the ability of existing young entrepreneurs to succeed and grow.

Women continue to remain under-represented among the self-employed, accounting for almost 50% of the labour force but only 34% of total self-employment in the region. Between 1989 and 1999, female self-employment grew by only 35% in Atlantic Canada compared to 54% in Canada. Women represent an under-utilized source of skills and knowledge, and have the potential to significantly contribute to the Atlantic economy in coming years. Therefore, the AIP can support activities which target prospective and existing women entrepreneurs; address their needs in the start-up and growth of their businesses; enhance their business skills; and, generally assist them in exploiting business opportunities and growth to their fullest potential.

Trade and Investment

Description

The Atlantic region's capacity to expand sales to international markets and attract foreign direct investment, together with its capacity to innovate, are key drivers of its future growth. Both exports and foreign investment have grown dramatically over the past decade with the globalization of world economies and policies geared to the liberalization of trade and investment flows. As generators of higher wages, benefits and productivity, trade and investment are seen as a major contributor to the region's growth and workplace stability.

This component of the AIP will strengthen the export performance of the Atlantic region by enhancing the capabilities of SMEs to establish and expand export activity and increase foreign direct investment.

Objectives

The objectives of AIP investments in Trade and Investment are to:

• increase trade and foreign investment with Atlantic Canada's major trading partners in the United States and Europe;
• increase exports of those Atlantic Canada industry sectors, which have a strong, export potential.
• increase the export skills of Atlantic Canada's potential, export-ready and exporting firms;
• increase the quality and number of Atlantic Canadian trade consultants;
• increase the number of trained university graduates pursuing a career in trade and investment;
• provide opportunities for university graduates to work in the international marketing field;
• increase Foreign Direct Investment in Atlantic Canada through a Pan-Atlantic cooperative effort in the areas of investment research and promotion.

Types of projects

Given the economic development significance of increasing exports and investment in Atlantic Canada, the Trade and Investment component includes a strategic, comprehensive and flexible initiative to expand export activity and increase Foreign Direct Investment. It will allow for the development of a variety of trade and investment activities over time while drawing on the following five key elements: Team Canada Atlantic Trade Missions, Sector Export Strategies, Trade Education and Skills Development, Export Internship and the Pan-Atlantic Investment Strategy.

Partnership and coordination with other federal and provincial departments as well as the participation of universities, colleges and industry associations will be employed to maintain the viability and positive impacts of these international business development activities.

Building on a strong partnership with the private sector and the Atlantic Provinces, a number of Team Canada-Atlantic missions to the United States and other destination will be held along with complementary pre- and post-mission activities. These missions will modeled on the success of the pilot trade mission to New England in 2000.

The missions, which will be led by federal ministers (including the Prime Minister on occasion) and the Atlantic Premiers, are multi-sector in nature and include up to 20 companies from each Atlantic province. The missions will establish new business partnerships, increase trade and investment and build strategic alliances between businesses in Atlantic Canada and foreign firms. Matchmaking of Atlantic firms with companies in target markets is an integral part of the mission concept. The mix of export-ready and exporting firms will vary according to the market destination of the various missions.

The Sector specific Trade Development initiatives will allow for the development of Pan-Atlantic export strategies and the implementation of related trade development activities primarily in the knowledge-based economy sectors as well as the value-added areas of Atlantic Canada's resource sectors.

The Trade initiative will provide skill-specific export training for potential, export-ready and exporting firms, competency training for trade consultants and enhance trade training for university and college-level students. It may also support an internship program for university and college graduates who have completed the trade courses/seminars offered by their institutions. The students would be placed among selected companies in Atlantic Canada, which need qualified human resources to develop and implement their export marketing plan.

The AIP's initiative in foreign investment will focus on regional investment research and promotional activities. The initiative, to be undertaken on a cooperative basis with the Atlantic Canadian provinces, will allow for pan-Atlantic investment promotion activities that target selected investment communities abroad, provide for attendance at site locator conferences and ensure participation on Atlantic Canada and Investment Partnership Canada missions.

Tourism, which complements export-oriented trade development, will be further expanded through an Atlantic Tourism Development Initiative designed to support tourism growth for mid to long haul markets by strategically focusing on such challenges as seasonality and air access. This would include activities designed to promote and develop tourism in winter, spring and fall, and enhance airlift capacity into the region.

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