High-tech firms deserve support

High-tech firms deserve support

Province needs strategy to keep technology sector from leaving

Calgary Herald
Monday, April 03, 2006

The Alberta government is unlikely to ride to the rescue of the province's high-tech companies, half of whom are threatening to leave for greener pastures. The complaints raised in a recent report aren't particularly new; when he was economic development minister, Mark Norris tried hard to convince his cabinet colleagues to help the sector -- to no avail.

But it would be wise for the province to take another long look at technology, especially if it wants to pay more than lip service to its objective of diversifying the economy.

A report released last week by Ernst & Young LLP, based on a survey of Alberta high-tech firms, found 49 per cent are considering relocating to provinces that offer tax credits and other incentives to encourage investment in technology ventures. Alberta companies say their biggest challenge is securing financing from either equity markets or government.

B.C. and Ontario, for example, offer investor and R&D tax credits and have labour-sponsored venture capital pools to draw on.

The survey isn't the final word, of course. Of the 1,100 companies invited to respond, only 128 did. And, interestingly, although three-quarters of them identify the lack of R&D grants as a key challenge, far less than half had taken advantage of the tax incentives and assistance programs that do exist. This raises suspicion that there's a bit of saber-rattling going on.

That said, the report does reveal that Alberta's prosperity has not always been kind to this sector. Labour shortages are intense, as the lure of quick oilsands cash is proving too tempting for many workers to pass up. The energy boom is too good a deal for investors, as well, who are sinking dollars into the ground, instead of into tech firms whose returns are often years away.

The biggest stumbling block for the technology sector, though, according to 83 per cent of those surveyed, remains the lack of capital investment and government support.

Norris tried to implement public policies to nurture sectors such as information technology, wireless communications and biotechnology, but kept hitting a brick wall. That's not entirely a bad thing. In general, we agree that markets work best when left alone, and that governments should leave business to business.

But governments can play an effective role in stimulating investment, without propping up losing propositions. Alberta did it with the oilsands. It set up a $200-million research fund for oil and gas -- not unlike a tax credit. It gave oilsands companies a break on energy royalties while they were starting up.

Such creative approaches to high-tech would be welcome. There are some encouraging signs: The government recently invested $30 million to help new technology firms thrive and is helping connect investors and high-tech entrepreneurs. That's the kind of Alberta advantage that technology firms could use more of.

© The Calgary Herald 2006

Thank you

Norman Greenfield

Calgary, Alberta, Canada
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