Tech industry insiders and analysts have expressed optimism over Prime Minister Stephen Harper’s plans to provide tax incentives and pour $9.2 billion into initiatives that bolster growth of Canada’s IT sector.
The new strategy will alter government’s decades-long focus on traditional industries, such as automobiles and manufacturing, and train the spotlight on an emerging growth area, they say.
Harper unveiled his plans in a speech delivered in Waterloo, Ont., last Thursday. “Building up our science and technology assets and expertise is as important to the economic future of Canada as the development of our physical structure,” the prime minister said during a press conference at the Perimeter Institute for Theoretical Physics building.
The facility is used for research on the relationships between space, time, matter and information.
Harper made a commitment to improve the government’s scientific and experimental development program, and encourage research and development within the business sector.
He earmarked $9.2 billion for this fiscal year to foster Canada’s competitiveness in technology and science. About $1.9 billion of that amount is new infusion, while the rest was carried over from previous years.
The new approach, contained in a document titled Mobilizing Science and Technology to Canada’s Advantage, will focus on four key technology areas:
– Information and communication
– Environment
– Natural resources
– Health and life sciences.
The head of a country-wide IT organization said the prime minister is on the “right track.”
“This is a good strategy and the government is headed in the right direction,” according to Bernard Courtois, president and CEO, Information Technology Association of Canada (ITAC).
Smart procurement, government regulation and health are ITAC’s priority areas to help achieve Canada information and communications technology (ICT) potential.
ITAC’s mandate is to identify and lead on issues that affect our industry and to advocate initiatives, which will enable its continued growth and development.
Courtois said Harper has targeted four areas targeted “where Canada has the ability to be a world leader.”
A similar view was offered by an official of a Toronto-based technology and science “incubator.”
The strategy reflects the “need to balance the research and business side” of the tech sector and has been “well received by stakeholders,” according to Ross Wallace, director, corporate strategy, MaRS Landing.
The MaRS Landing program seeks to promote the “commercialization of innovation” in the agriculture and food sectors.
Harper’s announcement confirms the importance of IT professionals in today’s economy, another insider said.
The government is now “recognizing that economic growth will come largely from technology,” said John Cash, account executive, Bell Canada.
Cash said government incentives were previously “skewed” towards the automotive and manufacturing industries. “However, market realities are shifting and we now have more than 600,000 people employed in ITC (information technology and communication).”
He said the government is playing catch up. While, in the past, there had been government support for the IT industry, this paled in comparison with backing provided to traditional industries, according to one Canadian analyst.
The reason for this was partly political, according to Vito Mabrucco, managing director, IDC Canada Ltd. in Toronto. “There were a lot of jobs in the core industries. Jobs meant votes.”
Mabrucco believes the government is trying to move away from a commodity-based economy to one that ensures growth in the future. “Dependence on commodities is not a good thing because another country can always manufacture products at a lower cost.
“By developing science and technology, we can create viable intellectual properties that can be taken to the global market,” he added.
Other industry insiders say planned tax incentives are crucial for encouraging growth. “Tax credits are key to fostering research,” said Cash.
He said tax breaks provide a nurturing environment, and ease the financial burdens on fledgling tech companies and “incubators” such as MaRS Landing.
Small and medium-sized businesses (SMBs) account for 95 per cent of Canadian companies and provide more than 80 per cent of the jobs in the country, but they have been largely hesitant to invest in technology due to budget constraints.
Courtois, on the other hand, said he is optimistic tax incentives will be made more available to mid-sized and large companies.
He said this will encourage bigger companies to set up shop in the country rather than push existing ones away.
The ITAC president also hopes the new strategy will result in tax breaks for high income earners. “The tax rate these people get is not attractive. If we can fix that we can encourage bright talents to stay.”
He said this will also help in convincing more local students to consider taking up science and technology courses. Recent surveys suggest Canadian schools are not producing enough tech graduates.
Mabrucco said the tax incentives will be a boon for SMBs, but urged the government to help develop “clusters of technology” that encourage a symbiotic existence among companies.
He cited the example Research in Motion in Waterloo, Ont., whose research has have spawned a number of smaller tech firms that do business with the communication company.
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