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Public Funds Vital To Stay Competitive  
From the Toronto Star Feb. 18, 2005. Business Section Front Page
By: David Crane

If you want a sense of what many of our manufacturers and their employees are up against, just take a look at the plight of Axiom Group Inc. of Aurora, a small auto parts company.

Axiom was hit with a demand from its largest customer, Intier Automotive Inc., to immediately cut its prices 31.8 per cent, a demand that was truly life-threatening for the company. For its part, Intier may have been passing on similar price-cut pressures it was getting from its own customers, the big automotive assemblers.

The reality is that the competitive environment facing manufacturers has never been more intense, as they contend with demands for lower prices or risk losing their business to lower-cost companies in Mexico, China, India or elsewhere offshore. We are living in a new era, and many companies may not survive unless they can find radically new ways to produce what they sell, move to new and higher-value products, or relocate their businesses in low-cost jurisdictions. It is a Darwinian world where only the most adaptable survive.

This kind of change, to be sure, is not new. From coast to coast we have seen a succession of plant closings as new competitors, or new technologies, displaced the old.

But the intensity of the global competitive environment, and the pace of technological change, are much greater than in the past, raising critical questions about what kinds of activities will sustain our economy and our communities in the future.

A study by the New York Federal Reserve has argued that future jobs and wealth creation will have to come from new activities, not from trying to protect or artificially resuscitate old activities. This is a harsh message and why innovation is so important for Canada. But efforts to advance our capacity for innovation too often run into ill-informed and ideological blinkers that reveal a shocking lack of understanding of the process of innovation and wealth creation.

The constant criticism of Technology Partnerships Canada, a federal program launched in 1996 to help bring new technologies to commercial realization, provides a good example. Yet, according to an independent audit, the program has delivered "a high level of technical success" for the participating companies, leading to "improved technical capability and firm competitiveness."

Technology Partnerships was established to help companies advance technologies that, without some public assistance, would be unlikely to be developed, thus depriving the Canadian economy of future technologies and jobs. The federal program provides about 30 per cent of the cost of such projects, with the amount repayable in the form of royalties or direct payments on commercial success. Most of the projects go to small- and mid-size companies in Canada.

Many well-known mid-size companies have benefited, such as Research In Motion Ltd., Neurochem Inc., DALSA Corp., MacDonald, Detwiler and Associates Ltd., QuestAir Technologies Inc., Wi-Lan Inc., Westport Innovations Inc., ATS Automation Tooling Systems Inc., LPP Manufacturing Inc. (a Linamar Corp. subsidiary), SemBioSys Genetics Inc., Mechatronic Systems Inc., Northstar Energy Corp., ID Biomedical Corp., Com Dev Ltd., Sierra Wireless Inc., Zenon Environmental Inc., CRS Robotics Inc., Celmed Biosciences Inc., Tundra Semiconductor Corp., Ballard Power Systems Inc., Gallium Software Inc., Mosaid Technologies Inc. and Iogen Corp.

In fact, at the end of 2004 some 673 projects were being financed by the technology program, with commitments of $2.7 billion toward projects with a total investment of $13.6 billion, with the bulk of the financing coming from the companies themselves.

But without the federal funding, most of these initiatives by companies to develop new products or processes would not have been undertaken, based on findings by the external audit.

As we look to the future, we will continue to need risk-sharing between the private sector and government to bring forward high-risk projects that, like RIM's BlackBerry, have the potential to generate new jobs and wealth for Canada. Fortunately, Industry Minister David Emerson says he wants to make the program even more effective and extend it to a wider array of industries.

The reality is that in the fierce competitive world it is only through such collaboration that we will build a successful economy that can sustain a successful society.

Indeed, we will have to do more including more demonstration projects for new technologies and smarter use of government procurement to encourage innovation.

This is one reason why next week's federal budget is so important.

If the incentives and funding for innovation are not there, we are in serious trouble.

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