Wednesday, December 07, 2011

Southwestern Ontario Development Fund: Challenges and decisions ahead (part 1)

Consultations—or at least “pre-consultations”—began last Friday for the Ontario government’s proposed Southwestern Ontario Development Fund (SWODF) to promote economic development in the region, modelled after a similar fund for Eastern Ontario created in 2008.

If passed by the legislature, the fund would provide $20 million a year to projects in Southwestern Ontario—an area that hasn’t been defined yet—with the goal of attracting and retaining investment, creating and retaining jobs, and promoting innovation, collaboration and cluster development.

Dalton McGuinty announced SWODF while on a tour of Digital Extremes in London and the bill was introduced the following day by Brad Duguid, Minister of Economic Development and Innovation (MEDI). Along with creating the new fund, the bill would also make permanent the Eastern Ontario Development Fund (EODF), which is currently a four-year program scheduled to end next year.

It’s only been a week since Bill 11—the Attracting Investment and Creating Jobs Act, 2011—was introduced and we’re already seeing some of the issues that the government—and the opposition parties—will have to wrestle with over the weeks and months ahead. Potentially opposing voices—rural vs urban, region vs region, sector vs sector—will all want to be heard as details of the proposed fund are developed.

Challenge 1: Who’s in and who’s out

One of the challenges will be establishing the boundaries of the fund. The map in the consultation paper—which MEDI emphasized was for illustrative purposes only—went as far east as Simcoe County, the area around Barrie and Orillia (Kitchener-Waterloo-Barrie is actually defined as an economic unit in many government studies, especially at the federal level), and also included the City of Hamilton and Niagara Region.

That’s going to be too big an area for a $20 million-a-year fund, so where should we draw the line? With money on the table, you’d have to think that borderline areas will be eager to make the case that they be included, but I don’t expect Simcoe and Dufferin to make the cut. Including Hamilton would significantly dilute the impact of the fund, and from the comments and actions of the government, I don’t expect that it will be part of the SWODF territory. Once you take out Hamilton, it’s difficult to include Niagara. That leaves Wellington and Haldimand on the eastern edge of eligibility, and that seems like a reasonable cut-off point.

Challenge 2: Urban vs rural

Outside of Hamilton, the largest city in the region is London. The EODF excludes from eligibility projects in the urban ridings of the City of Ottawa, but from the comments made by London mayor Joe Fontana at the first pre-consultation meeting, it’s clear that he fully expects his city to be eligible for SWODF (which looks like a safe bet, given the area’s high unemployment numbers and the fact that the fund was announced in London).

So the region will likely include the urban areas of London, Kitchener, Cambridge, Waterloo, Windsor, and Guelph and a large rural area spread out among at least 14 counties or county-sized municipalities (e.g. Chatham-Kent).

Urban and rural areas both need economic development, but their economic development priorities are very different. This is something I’ve had to work through at TechAlliance, which is now the ONE Regional Innovation Centre serving an area from Goderich and Huron County in the northwest to Norfolk County in the southeast. Across that region, most areas have no interest in pinning their economic hopes on medical devices and digital gaming—two of London’s priorities. On the other hand, you don’t hear a lot of discussions about agriculture in London (outside of Dave Sparling’s office, anyway), but it’s at or near the top of nearly everyone’s mind outside the city when it comes to economic development. Which is a segue to...

Challenge 3: Sector vs sector

Closely coupled with the urban/rural issue is the question of whether the fund should give preference to particular industry sectors. This was a concern raised at the first pre-consultation meeting by Stratford mayor Dan Mathieson, who also chairs the Southwest Economic Alliance (SWEA), which lobbied for the creation of the fund. He said that no single sector—and specified technology, in case there were any doubts—should receive a disproportionate amount of the funding.

Given that the two areas of growth and investment identified in the consultation paper were ICT and digital media in “Kitchener-Waterloo” and London, it seems like a legitimate concern. The paper also says applicants should be aligned with priority sectors and lists advanced manufacturing, science and technology, and food processing as three examples. It doesn’t ask if certain sectors should be favoured, it asks which sectors the fund should concentrate on.

Until a year ago, I’d lived all my life in Toronto, Boston and Waterloo and have primarily worked in the technology sector for more than 15 years. It turns out that not every area has much in common with those places. London should, and is ambling along down that road. But I’ve spent much of the last four months trying to find technology companies across the less urbanized parts of Southwestern Ontario, and it hasn’t been easy. They exist, but it often requires a different notion of “technology” and “innovation” than you can apply in places like Waterloo or London. The MEDI program I work with is explicitly focused on technology sectors, but it would be a mistake for SWODF to be so narrowly targeted.

Favouring some sectors over others is fine (I don’t expect we’ll see much of this money going to restaurants, for example), but the fund needs to accommodate economic development priorities across the region, and not just the sectors favoured by urban areas.

Challenge 4: Region vs region

I’m not sure that anyone’s going to say this in front of a microphone, but having lived in Waterloo for years, worked in London for a year, and spent the last year living in—and now working in—small urban/rural areas in Southwestern Ontario, I’ve seen first-hand that London is looked upon with suspicion by many of the surrounding municipalities and the entire area is wary of Waterloo Region. And with this fund, there’s a possibility that we may also have to deal with some additional areas that hardly anyone even considers to be part of Southwestern Ontario.

That in itself can make collaboration a challenge, but what could be an even bigger issue is that different parts of Southwestern Ontario have very different priorities. Sometimes it’s because their strengths are in different sectors, sometimes it's because they’re at different points in their development. London would love to have a facility like the Hub, but it’s not a priority for Waterloo Region because they already have one (two, really, with the Accelerator Centre). In other parts of the region, something like the Hub would make no sense at all, except maybe at a very different scale and with a very different focus (which would make it not much like the Hub).

Some see SWODF as a great motivator for inter-regional collaboration. And it should be. But there will be challenges in an area where some regions are cautious of others and where there are significant differences in priorities between regions. Many potential partners won’t have common priorities. Where there is going to be collaboration, it has to be toward priorities that are legitimately shared by all partners. What we don’t need to encourage are artificial partnerships awkwardly forced together for the sake of a funding proposal.

Coming in part 2: Who should get the money, and what kind of money should they get?