WHAT DO INDUSTRIES IN CANADA WANT TO BOOST COMPETITIVENESS? SIX KEY SECTORS LIST THEIR TARGETS.
AS OTTAWA LOOKS TO QUELL COMPETITIVENESS CONCERNS, SIX RECENTLY TABLED REPORTS MAY SHOW THE WAY
The recent decision by Royal Dutch Shell to build a liquefied natural gas (LNG) facility in B.C. will go a long way in helping Ottawa meet one of six industry targets laid out last week, part of a sweeping Liberal plan to address competitiveness worries in Canada.
The massive $40-billion project, which could be completed around 2023, would substantially boost Canada’s natural resources exports. It is just one example of how various Canadian industries might hope to meet a set of highly ambitious targets presented to Innovation Minister Navdeep Bains on Sept. 25.
The targets were set by chief executives in six different industries, from natural resources to agri-foods to manufacturing. They were included in a series of reports, which offered recommendations on how to improve Canada’s competitiveness, boost exports and attract foreign capital.
Taken together, the reports underscore stark shortcomings in Canada’s tax policies, government grant programs, regulatory processes and overall ability to secure funding. They point to an issue that has simmered behind the scenes for years in Canada, but failed to make headlines until U.S. President Donald Trump introduced a series of tax reforms and regulatory rollbacks last year.
The reports also represent Ottawa’s latest attempt to address growing concerns over waning competitiveness in Canada, where businesses argue they are increasingly losing out to foreign rivals. Industry, for its part, applauded Ottawa’s attempt to understand these challenges by commissioning the reports. Below is a brief outline of the targets set by industry and the challenges they face.
Industry: Natural Resources Target: Increase resource exports 40 per cent by 2025, to $350 billion
The value of natural resources exports in Canada have been badly constrained in recent years, in no small part because of a lack of pipeline capacity for oil producers. Raising exports of natural resources to $350 billion — a $100-billion increase from 2017 — could prove challenging.
The report, tabled by former Shell Canada president Lorraine Mitchelmore, describes a regulatory system with “no defined outcomes” that breeds “inefficiency, delays, administrative burden and unnecessary costs for resource companies,” which has in turn curbed foreign investment. The most stark example might be the failure to build the Trans Mountain pipeline, first proposed in 2012 and still marred by delays.
The report suggests a number of possible solutions, like removing regulatory overlap between the feds and provinces, and even creating a “Made in Canada” branding to distinguish Canadian products from foreign oil blends.
Industry: Agri-foods
Target: Expand exports 32 per cent by 2025, to $85 billion
The report said there was a “lack of strong Canadian firms” in the agri-food space, which has broadly suffered from lagging investment and a tight labour market. Canada currently ranks 14th among OECD countries in its measure of government regulatory burden.
It proposed a number of modernizations that would streamline Canada’s regulatory barriers, but admitted that such moves are “usually a long, technical process that draws considerable resources.”
It also suggested establishing 100-per-cent broadband coverage across all of Canada by 2025, as part of a sprawling transportation and IT network in Canada. The agri-foods export target is more ambitious than the $75-billion goal that was set out in Ottawa’s 2017 budget. Industry: Digital
Target: Double number of companies earning over $1 billion by 2025
Meeting the target would raise the number of $1-billion companies to 26, from 13 today. The report underscores a widespread failure by smaller, nimbler digital companies to scale up their firms and access capital. “It’s an extreme rarity to reach the billion-dollar benchmark in Canada,” said the report, chaired by Shopify CEO Tobias Lutke. Around 85 per cent of information communications technology (ICT) companies in Canada have fewer than 10 employees. The report suggests more generous tax credits for smaller firms and a more streamlined application process for government grants, among other things.
Industry: Advanced manufacturing
Target: Boost manufacturing sales 50 per cent by 2030, to $1 trillion; increase exports by 50 per cent by 2030, to $540 billion
The report, chaired by Kinova Robotics CEO Charles Deguire, said Canadian firms are slower to adopt new technologies than their competitors, in part because of “unclear regulations,” a lack of skilled workers, and “investment uncertainty.”
“While we have manufacturing firms with growth rates above 15 per cent, overall the sector is stagnant,” the report said.
It said that meeting its targets for advanced manufacturers, which use robotics and additive manufacturing techniques to create products, was “ambitious but achievable.”
The industry has been hindered by a number of problems, including a lack of co-ordination between levels of government, and a failure to provide tailored pitches to would-be investors. Foreign direct investment into Canada plummeted by half in 2016 compared to pre-recession levels, the report said, while U.S. FDI grew 110 per cent over the same period.
Proposals for remedies included a dedicated fund for manufacturers and other incentives like the immediate expensing of capital costs and $1 billion in repayable loans.
Industry: Health and biosciences
Target: Double exports by 2025 to $26 billion, and double the number of health and bioscience firms to 1,800
The report points to “complex regulatory, reimbursement and procurement processes” that “impede” technology adoption by companies. In particular the “risk-averse” procurement system with a short-term focus on cost, lack of integration between health technologies and restricted labour force has hindered Canada’s 900-odd pharmaceutical and generics firms. The report’s recommendations include widening tax incentives for research and development and setting a broader strategy for the digital health sector in Canada.
Industry: Clean Technology Target: Triple exports by 2025, to $20 billion
The clean technology report said one of the main challenges facing the sector is a failure by small companies to scale up to the commercial level.
Budget 2017 rolled out $2.3 billion in funding for clean tech firms, but the report said companies nonetheless “still face obstacles associated with access to capital when seeking to commercialize and scale up their technologies.”
It suggested making the government a leading buyer of technologies to boost their adoption, among several other recommendations. Meeting the report’s target would effectively make clean technology one of the top five exports in Canada.