Ottawa replaces much-maligned loan program for tech firms
To focus on sharing ‘ risks’, rather than ‘ cost recovery’
The federal government axed a heavily criticized loan program for technology companies yesterday and replaced it with a broader program, a move that failed to appease critics.
The new program, called the Transformative Technologies Program, will focus on sharing “the risks of innovation” with Canadian companies, not “ cost recovery,” Industry Canada said in a release.
“ This is classic corporate welfare renamed,” said John Williamson, director of the Canadian Taxpayers Federation in Ottawa. “Politicians have always said the money from the [ TPC] program would be recouped. Now they are not even saying the money will be returned to taxpayers. [The federal government] is clearly moving off that stance now.”
The Technology Partnerships Canada agency, which has been called a slush fund for ailing technology companies, will be phased out on April 1.
David Emerson, the Industry Minister, hinted at the changes last week in a speech at the St. John’s Board of Trade. On Friday, he said the program has had “great success” but needs to be reworked.
The new TTP is supposed to give small and medium- sized tech firms from all sectors greater ac- cess to funds. The new program comes into effect on April 1.
Critics have said for years the government should scrap the TPC, which pumps about $300million a year into Canadian companies.
The TPC has earned a reputation for secrecy, breaking promises and a lack of transparency.
In theory, companies that receive money from TPC were supposed to make payments via royalties. But since TPC was launched in 1996, it has collected only $115-million from the more than $2-billion in funds it has dispersed to companies, a return on investment of 5%.
Ian Jack, an Industry Canada spokesman, said the TPC returns compare favourably to those of a private equity firm.
But the new program is designed to be more transparent, he added.
Mr. Jack said a limited number of repayment options will be available to companies and they will be posted on the Internet.
Expert panels, including privaterepresentatives, will help to evaluate loan candidates.
“ We expect to get better projects greenlighted through the door,” he said. “These are going to be long-term investments.”
James Rajotte, the Conservative industry critic, said the government should be more accountable.
He said taxpayers should be given a chart of the money that has been loaned that can be traced to all the money that has been paid back. The public should also be given a “complete public accounting of all payments” by TPC.
Claude Haw, a partner with Skypoint Capital in Ottawa, couldn’t say if the government’s TPC track record compared favourably to the private sector.
He says the government should allow private equity firms to play a larger role in the fund.
Financial Post
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