National Post (National Edition)
ALBERTA'S RECOVERY DEPENDS ON INNOVATION IN NEW AND OLD ECONOMY, COUNCIL SAYS.
Must penetrate traditional, emerging sectors
Between the COVID-19 pandemic and the crash in oil markets, Albertans have felt the pain of economic turmoil worse than most. Twelve years ago, Alberta's energy sector drove Canada's recovery from the Great Recession. Today, a supply-demand imbalance has led to a collapse of oil prices, and it's unclear when or if the demand will come back to pre-COVID levels, putting enormous pressure on the government to design new prosperity strategies.
Recently, signs from the UCP government have been encouraging. Last month, Jason Kenney appointed Doug Schweitzer to be Alberta's new Minister of Jobs, Economy and Innovation, with the addition of “innovation” to ministry's mandate signalling that it's time to embrace the digital economy and support Alberta's innovators. Moreover, in late June, the provincial government committed $175 million to the Alberta Enterprise Corporation to provide venture capital for early-stage technology companies, and in July, the government announced a new “innovation tax credit” that provides startups a grant of up to 20 per cent towards qualifying research and development expenditures, starting in 2021. Just last week, we saw another promising sign, as Minister Schweitzer announced a $75-million Alberta Investment and Growth Strategy that aims to create the conditions for innovation to transform Alberta's economy in the future as a key priority.
Increasing access to capital and having a dedicated ministry are valuable first steps toward supporting Alberta-based innovators, but a meaningful and effective economic recovery is going to require building capacity in Alberta's policy ranks for the contemporary global economy in which every business is a technology business — starting with our energy sector. Such capacity can only emerge from regular engagement with local innovators so that our province can eventually have a high-functioning public-private framework on par with those in successful innovation nations.
From bitumen to canola to software, Albertans are no strangers to selling into global markets and supporting companies that can scale and sell innovative products around the world. But enthusiasm for the tech sector isn't enough to succeed in the innovation economy. Alberta's industry needs a government with a strong sense of how policies in the knowledge-based and data-driven economy are created and how they impact both domestic innovators and provincial prosperity.
Too often, our governments have focused on trying to entice foreign technology companies to set up branch plants in Canada thinking that the economic benefits will accrue to domestic ecosystem the same way they do in a traditional, production-based economy — new jobs, local supply chains and new tax revenue. But the knowledge-based and data-driven economies feature highly centralized executive structures, assets such as IP and data that flow effortlessly and directly to headquarters where they are commercialized and taxed; and, crucially — no domestic supply chains. Furthermore, subsidizing job creation in technology sector is counterproductive in Canada because the unemployment rate is already at zero among high-skilled workers.
The most successful post-pandemic economies will be the nimble ones that can pivot and reorient to support their domestic wealth driver — innovative companies that can scale their products and services across Canada and globally. These companies create high-paying jobs, develop sophisticated executive skills, and pay corporate taxes that are needed to help drive our economic recovery.
For years, experts have shown that one of the key components of a thriving innovation economy is a significant concentration of local “scale-up” companies that have the ability to go from millions to billions in revenue because their sustained growth drives creation of new private and public wealth. It is critical for the Alberta government to identify these potential anchor companies, and support them, starting with regular engagement.
Supporting Alberta-based innovators is about so much more than the economy of apps and websites. Competitive forces in the traditional industries have shifted to value-added structures including previously unthinkable industries such as hotels (Airbnb), taxis (Uber) and retail (Amazon). In today's economy, IP and data are used to devalue traditional, physical assets such as farms, factories, taxis, and buildings. Modern agriculture is already one of the most data-driven sectors and already relies on satellite imagery and advanced robotics. Halliburton Co., a U.S.-headquartered energy company, is by far the largest filer of IP in Canada. If we want Alberta's energy sector to stay competitive globally, we must both defend and extend our economic value-add. That means Canadian companies owning the ideas and technology that underpins these competitive levers.
Alberta's post-pandemic recovery requires a provincial prosperity strategy focused on positioning our province's innovators for success in the global economy. If we get this right, we can strengthen our energy, mining, and agriculture sectors, launch new clean-energy companies, and build new innovative products and services that we can sell to the world. Or we can position the province as cheap labour for tech branch plants and compete on lower wages with jurisdictions such as Poland, Ukraine and Bangalore, India, where highly skilled engineers already earn half of what Alberta workers do.
As the leaders of Alberta's fastest-growing technology companies, we want to be part of making Alberta a global leader in innovation and we are eager to talk to Premier Kenney and Minister Schweitzer about it. It's time the government stops relying on the same old advice rooted in an economy that no longer exists, even in Alberta. Instead, our leaders must engage experts who understand the intangible economy, and business leaders who intimately know the challenges and opportunities that come with it.
This is a conversation that can't wait.