As the Government of Canada prepares to table its Budget 2021 on Monday, Canadian tech is wondering how much the sector will factor into the federal recovery plan.
With much of Canada struggling with a third wave of COVID-19, the federal government’s recent efforts have been focused on near-term pandemic responses. However, as more vaccines are rolled out, eyes are turning to post-pandemic recovery. Current expectations are that the budget will focus on both pandemic measures and post-pandemic recovery.
“What we’re really looking for is to see if the government understands how the economy has changed,” said Ben Bergen, executive director of the Council of Canadian Innovators, a lobbying group that advocates on behalf of more than 100 of Canada’s tech leaders.
“What we’re really looking for is to see if the government understands how the economy has changed.”
– Ben Bergen, CCI
In an interview with BetaKit, Bergen forecasted some commitments to the innovation sector in the federal budget based on conversations with government officials. However, the ongoing COVID-19 health crisis has created uncertainty as to how much the innovation sector will factor into federal budget commitments. Bergen noted almost a “whiplash” effect when speaking to government bodies of late, with economic recovery a focus for a short period before COVID-19 demands take over again following new waves of the virus.
“We’re now actually in kind of the third iteration of this, and my response to you a month ago probably would have been quite different than my response today,” said Bergen regarding what can realistically be expected from the federal budget in terms of the tech sector.
A report by the Industry Strategy Council (ISC), a federal group created last year to make recommendations on Canada’s economic recovery from the COVID-19 pandemic, included the innovation economy as a key factor for that post-pandemic world. Meant to act as an advisory board to the government, the group cited innovation and the acceleration of digital transformation as key components in its recommendations for the recovery and re-imagining of Canada’s economy.
The report from the ISC may give some indication as to where the federal government is looking to invest in the tech sector with Budget 2021. The report made suggestions towards additional research and development funding; creating access to capital in order to accelerate the growth of Canadian firms; investing in diversity, talent, and workforce innovation; and building out strategic procurement opportunities.
The recommendations align with what some in Canada’s tech sector are hoping to see in the upcoming budget. In its pre-budget submission, CCI called for a focus on foreign direct investment frameworks, increased access to capital, increased IP capacity, and a national data strategy — the latter two long-touted by CCI as key for Canadian competitiveness on a global stage.
The lobbying group also asked the federal government to improve supply chain resiliency by opening up procurement to more domestic firms. Improved procurement has also been called for by Technation president and CEO, Angela Mondou, and Senator Colin Deacon, a vocal advocate for the sector.
Many technology and innovation organizations have called for the sector to play an important part of Canada’s economic recovery.
A report from last year by the Innovation Economy Council (IEC), an independent organization created by the likes of MaRS Discovery District, Ontario Centres of Excellence, Communitech, DMZ, CCRM, and Invest Ottawa, found that innovation companies create an outsized share of new jobs and grow at a much faster rate than the overall economy.
The group’s study looked at the impact of the COVID-19 pandemic on Canadian tech startups and how startups could drive the economic recovery. A follow-up report by the group from December found jobs in STEM fields are holding up much better than employment in the rest of the Canadian economy. In its initial months, the pandemic wiped out about three million jobs in Canada. While many of those have returned, February reports show there were still 858,000 fewer jobs compared to last year.
There are still challenges in the tech sector, however. Despite higher rates of hiring and employment in the space, labour demand has not yet fully recovered to its pre-pandemic levels, according to a February report by job board site Prospect. Notably, however, software engineering and sales and business development professionals have continued to be the most sought out workers.
On a global scale, intangible assets like IP make up more than 84 percent of S&P 500 firm values, whereas less than 40 years ago tangible assets dominated the market. This points to a major shift in the global economy that shows the importance of the tech sector moving forward.
“Understanding the IP and data game in terms of wealth creation is kind of mission-critical,” said Bergen. “So what we’ll really be looking for [from Budget 2021] is a strategy that has these concepts and industries really at the centre of them.”
Prime Minister Justin Trudeau’s Liberal government has made several investments in the innovation sector over the last five years, with programs like VCCI, the Supercluster Initiative, BDC’s Women in Technology Fund, and the Global Talent Stream, to name a few.
Amid the pandemic, following calls for changes to programs that excluded or were difficult for startups to participate in, the federal government created programs like the Industrial Research Assistance Program’s Innovation Assistance Program (IRAP IAP). Former innovation minister Navdeep Bains called retaining top Canadian tech talent key to the recovery when speaking with BetaKit in April of last year.
In March, new Minister of Innovation François-Philippe Champagne released updated guidelines for national security reviews of foreign investments into Canada, signalling the federal government was stepping up efforts to protect Canadian intellectual property (IP), as well as sensitive information and technology from falling into the hands of foreign governments or related entities.
However, the Liberal government’s financial commitment to innovation has lessened over the years. Budget 2019 notably had fewer significant capital commitments towards Canadian tech and innovation compared to prior budgets.
Last year, an open letter from CCI’s members to the federal government about its innovation policies stated, “in the years since 2015, innovation is barely mentioned. We see less of a bold, cohesive plan for innovation in Canada and more of a patchwork — pilot programs and furtive policies rolled out in the hope they will amount to something greater than the sum of the parts.”
“If the government is serious about an economic recovery, if they don’t have innovative firms at the centre of it, there’s not going to be a recovery,” said Bergen.
Image source Justin Trudeau via Flickr.