Federal budget funding to stimulate ICT draws darts and laurels
29 January, 2009
By Liam Lahey |
While one Canuck high tech association has praise for the economic stimuli Ottawa is providing to the ICT industry, another says it's not nearly enough.
The 2009 federal budget contains several major initiatives the Information Technology Association of Canada (ITAC) finds agreeable to ensure a "sound 21st century economy for Canada" and the health of the ICT (information and communications technology) sector. ITAC said the budget proposes a 100 per cent capital cost allowance rate for computer hardware and systems software acquired between January 27, 2009 and February 1, 2011.
That measure would allow business taxpayers to fully expense all of the value of their investment in computers and systems in one year.
Meanwhile, the Canadian Advanced Technology Alliance (CATA) said the federal government is taking the right step by reaching for economic stimulus. But CATA asserts that the amount of stimulus needs to be double the overall $34 billion Ottawa is providing in order to match the intensity of the American response.
"We need two more success ingredients," said CATA president John Reid. "First, we need to treat the crises with the same depth of concern as (U.S.) President (Barack) Obama, which for Canada means an investment of more than $60 billion. Second, we need to invest the funds in jobs for the future.
"The Americans may have learned their lesson and be more willing to spend, because they underestimated the global financial crises at first. Now they -- and we -- are in much more serious trouble. If a nation doesn't react with enough force, the crises will deepen."
Bernard Courtois, president and CEO of ITAC, noted the budget would have a nearly $700 million impact on the ICT marketplace over the next two years.
"It is a clear indication that the government understands the strong linkage between productivity growth and ICT investment," he said. "This is good for our industry but it is also a great benefit for the broader economy. It's very wise public policy."
ITAC said it advocated spending in the budget should include funds for a 21st century infrastructure, such as the funding of Canada's electronic health record and the expansion of Canada's broadband networks. The budget has a $500 million provision to help fund Canada Health Infoway and its goal of enabling 50 per cent of Canadians to access their electronic health record by 2010.
The budget contains $225 million allocation over three years to develop and implement a strategy on extending broadband coverage to un-served communities. This initiative would engage additional funding from other levels of government and the private sector to continue to expand Canada's broadband network, ITAC said.
CATA cited a recent Web poll of its membership of high-tech executives that showed 60 per cent urged the federal Conservative government in Ottawa to keep up with the example of the American government. Almost three-quarters of the executives felt that if the current situation continues, their businesses would decline or be "badly wounded".
CATA officials said the ICT component is one of the country's strongest performers and that spending on the scale of World War II is needed to break the downward spiral of a constricting economy.
"The compelling need for the right level of spending, we will be creating human assets that will have the most to do with our global competitiveness five years down the line," Reid added. "We can demonstrate that putting the infrastructure investment into knowledge-intensive services sector jobs will help Canada most, by driving job creation, exports and long term sustainable competitiveness. Only a big vision, with the right level of commitment, will work at this time."
ITAC too called upon Ottawa to increase funding for the National Research Council's Industrial Research Assistance Program, noting that IRAP funding for 2008 had been virtually depleted by mid year. This budget provides $200 million over two years and would allow the program to double its contributions to emerging knowledge-based companies. The budget also renewed commitments to public investment in research by expanding the Canada Graduate Scholarships Program and funding for the national granting councils. Waterloo's Institute for Quantum Computing received a $50 million allocation for the construction of its new facility.
"This was not a simple budget," Courtois said. "The government faced the urgent requirements of many distressed sectors. Our concern was that they keep their eyes on the future while addressing pressing present need. They have done this in a commendable way that helps to ensure that we have some key tools at our disposal -- 21st century infrastructure, a well-educated workforce, a competitive tax structure and a more productive economy -- to recover quickly from the economic downturn we face."
However, ITAC continues to be "deeply concerned" about the virtual drought of venture capital in Canada for early stage technology ventures.
"This budget contains measures to increase access to funding for EDC and BDC and there is the increase to the IRAP program that will help very early ventures," Courtois added. "But we still need to address the needs of companies who rely on venture capital for growth. If we don't figure out a way to get venture capital flowing again in Canada we could lose a whole generation of promising technology ventures. We plan to continue to work with our stakeholders and with government to address this urgent matter."
Warren Shiau, lead analyst, IT research, The Strategic Counsel, said the CCA adjustment is a nice thing that fits under general business/tax breaks. Other than that, what's been announced doesn't go far beyond what could have been anticipated if the economic situation were normal. But given the circumstances, there are more pressing needs for the government to attend to in other areas.
"This is where the divergence of opinion comes in," Shiau said. "On the one hand it's certainly fair to say more ought to be going towards sectors that hold promise for the future. On the other hand it's also fair to say these sectors already have good chances of being properly funded through normal market mechanisms/processes, so what's been earmarked toward ICT is fine."
What is needed from the federal and provincial governments, IT-wise, is an end to the mish-mash of authority and decision/strategy making power that poses for management of IT infrastructure that is critical to Canada at a national level, he continued.
"Given our political set-up this is virtually impossible. But that's only because everyone continues to act in their own interest rather than the national interest," Shiau remarked. "Hopefully the times will drive a change in attitude." |
