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Experts warn that the latest Ottawa Innovation Fund may be under political influence

OTTAWA – There was a familiar announcement about the announcement made by Natural Resources Minister Amarjit Soha in Calgary on December 18, when he pledged $ 1.6 billion in funding for the affected oil and gas sector.

Among the loans and grants offered were $ 100 million for "projects related to energy and economic diversification." A source? The Strategic Innovation Fund (SIF) is a cash fund allocated by Ottawa in 2017 to “stimulate innovation for a better Canada,” according to its website. A few months earlier, SIF was used to provide $ 250 million to steel and aluminum companies as a result of the trade tariffs of US President Donald Trump.

These expenses forced observers to question the ruling philosophy behind the SIF. Some warn that the nascent fund may be in the usual situation for the past, when Ottawa's “innovative” financing has reliably coincided with the support of the private sector in a crisis — be it oil or gas, steel, or the aerospace industry.

“This is a very bad omen of what SIF is designed for over the next five years,” said Dan Breznitz, a professor at the University of Toronto and a long-time expert on innovation policy in Canada, in response to Sohi's statement.

Other investments within the fund include $ 110 million. US for Toyota Motor Manufacturing Canada to modernize the factories where it produces its RAV4 model, and $ 3.4 million. USA for a numbered company located in Nanaimo, British Columbia, to convert a Boeing 737 aircraft into an aircraft used to fight forest fires. To date, the government has spent $ 845 million on 32 projects, according to a public database.

Breznitz said that SIF, managed by Navdeep Bains, Minister of Innovation, Science and Economic Development, would ideally work without any specific industry focus and would choose investments based solely on merit to commercialize promising ideas.

“It’s definitely not sector oriented, because the government has no business to find out which company has the best projects,” said Breznitz. “And yet, even before it began to work properly, this government credited [the SIF] in a public relations political trick. "

Alberta’s thirty-five-year veteran of the pipeline and oil industry Gerrett Wins complains while watching a press conference at which the natural resources minister Amarcit Soha announced that the federal government will provide $ 1.6 billion in support for the Canadian oil and gas sector at Edmonton Tuesday, December 18, 2018 year

David bloom

The argument is part of a long-standing debate on innovation policy in Canada.

There are countless ways in which the government can direct money to innovative companies or ideas, but they usually come in the form of direct or indirect funding.

Indirect costs, often in the form of tax breaks, were a long-approved mechanism among politicians, and especially conservative ones. But in a world where governments are increasingly seeking to rely on direct incentives as a way to give their most innovative companies an advantage, experts increasingly insist on more direct spending measures like those taken by Ottawa since 2016.

SIF was launched in the summer of 2017 and initially had to spend 1.26 billion dollars over five years. This will be aimed at helping companies expand and raise capital, as well as subsidizing research and development costs, according to their website. Finance Minister Bill Morneau then increased SIF funding by another $ 800 million last month in his economic report.

In recent years, technical leaders have been delighted with Ottawa's innovative efforts. Some of them pointed to a number of costs within the SIF, which seem to be properly targeted to innovative products.

Hamid Arabzadeh, CEO of Ranovus Inc., based in Ottawa, received $ 20 million in SIF in November. The company manufactures fiber-optic products that can significantly reduce greenhouse gas emissions in data centers, which are one of the fastest growing sources of air pollution.

Natural Resources Minister Amarjit Sohey, International Trade Diversification Minister Jim Carr and Member of the Edmonton Center Randy Boissonno arrive at a press conference at which the federal government announced $ 1.6 billion to support Canada’s oil and gas sector in Edmonton on Tuesday 18 December 2018

David bloom

“In reality, it was not an investment in oil, gas or natural resources,” said Arabzade. “In our sector, what they did to us was very promising,” he said.

But several people in the technical sector who asked not to be named because of the sensitivity of the topic said that Ottawa instead used funds to support wounded industries. This instinct is very familiar to people who have followed the efforts of Canada's government spending on innovation.

“Essentially, all government funding in a particular industry is political,” said Aaron Woodrick, director of the Federation of Canadian Taxpayers.

The organization has criticized all sorts of government spending programs with various governments. Woodruck said that part of the problem lies in how such expenses are characterized: although government support for steel and aluminum producers can be a generally sensible idea, Ottawa should avoid wrapping up these costs as a clearly innovative policy.

“I think that people would be less cynical if they simply came out and said that this industry was unfairly affected by a trade dispute,” he said.

In a November November interview with the Financial Post, Jack Mintz, a researcher at the School of Public Policy at the University of Calgary, said that the government’s innovation efforts were historically ready for political interference. He specifically quoted SIF as a type of foundation that could be handled incorrectly when Ottawa finds itself in a quandary.

“The only criticism of the grant, rather than the tax credit, is that it can be used politically,” said Mints, adding that he is increasingly supporting efforts to direct costs to stimulate innovation if they are administered at a sufficient distance. from each other.

Innovation Minister Baines defended SIF as one of the most important job creators in Canada in an article published on the Globe and Mail website for Christmas.

“Simply put, the Strategic Innovation Fund makes our government the best business partner with industry for creating good middle-class jobs across the country,” he wrote.

The only criticism of the grant, not the tax credit, is that it can be used politically

In this part, Baines said that the government attracted $ 7.2 billion in “Investments from our partners” and saved or attracted 50,000 jobs in 2017, claiming that they were a direct result of Ottawa’s innovative spending.

However, according to the access to the information documents provided to the National Mail, the government cannot provide the number of jobs for all but one of the projects funded under the first $ 571 million. US SIF. In the document, the government says that "recipients are not required to report the number of jobs created."

When asked about the criticism of the SIF, Hans Parmar, a spokesman for Bains, wrote in an email that Ottawa "taking decisive action to help restore competitiveness, support innovation, improve environmental performance and create more jobs for the middle class. ”

During a statement by Soha’s Minister of Natural Resources earlier this month, he said that $ 100 million in oil and gas projects would be part of a $ 800 million new funding fund. Sokhi suggested that spending could go to petrochemical plants in Alberta.

A handful of the largest SIF expenses:

Cost: 110 million dollars

Company: Toyota

For the production facility for the assembly of an RAV4 SUV.

Cost: 150 million dollars

Company: CAE

To use artificial intelligence (AI), cloud computing, big data and virtual reality to create next-generation tutorials

Cost: $ 49.9 million

Company: ArcelorMittal Canada

To upgrade the company's facilities as a way to reduce fuel consumption

Cost: 60 million dollars

Company: Alcoa and Rio Tinto

For the joint venture Elysis, which will help develop an aluminum production process that produces oxygen and eliminates greenhouse gas

Cost: 49 million dollars

Company: Linamar

For additive manufacturing and artificial intelligence technologies to be included in the company's production process

Cost: 49.3 million dollars

Company: General Fusion

For the development of “affordable, abundant and safe” nuclear fusion energy “in the face of global economic challenges.”

Cost: $ 49.5 million

Company: Bell and 18 other industry and academic partners

For the development of fully autonomous helicopters with low emission profiles

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