Friday, December 21, 2012

Ontario Jobs & Prosperity Council emphasizes exports, productivity, innovation

Advantage Ontario, the full report of the Ontario Jobs & Prosperity Council—chaired by Royal Bank CEO Gord Nixon—was released on Wednesday. It focuses on five areas: exports, productivity, innovation/entrepreneurship, skills/training, and regulation.

The report mostly repeats a lot of familiar observations at a very high level, so we get the usual (which isn't to say incorrect) plaints about how Ontario businesses underinvest in R&D, how the regulatory burden is an impediment to growth, that our companies need to focus more on exports to emerging markets, that government business support programs are too fragmented, immigration is vital, manufacturing is critical to the economy, not enough parents and students appreciate careers in the skilled trades, and so on. All things we've heard many times before.

Which would be fine, if the report facilitated action on fixing these issues, but in most cases the recommendations are only a notch or two above "something should be done about it" (or, in many cases, "something has been done, but we think there's need for more"). The report is heavy on obvious exhortations and light on anything that will change what anyone does tomorrow morning, and there are rarely specifics that would make their implementation any easier today than the last dozen times the same ideas have been suggested.

On innovation and entrepreneurship, the council suggests the creation of a "business-led commercialization voucher" to encourage collaboration between businesses and public research institutions. (How this would be different from the many existing subsidies for industry-academic partnerships isn't specified.) It says that funding in the Ontario Network of Excellence (ONE) program should be "better aligned" with the needs of "regional clusters with the greatest potential for growth"—which is one way to allocate increasingly scarce resources, although now that I've expanded my horizons from two of the biggest "have" clusters in the province (Toronto and Waterloo) to some of the "need-to-have" regions, I'd be worried about taking this approach too far. There's a lot of potential for strengthening the economy through innovation improvements in areas outside of the leading clusters.

The report also encourages the elimination of barriers to crowdfunding, and supports the exploration of other measures such as an angel investment tax credit.

The council wants the province to replace its current "too fragmented and too complex" business support programs with a "one-window" model that focuses on exports, productivity and innovation. The programs would be delivered through a Jobs and Prosperity Fund, which the report suggests should start at $150 million a year and expand as existing programs come to an end with those expenditures (minus spending cuts) then allocated to the fund. Incentives for foreign direct investment would be funded separately from the Jobs and Prosperity Fund.

Initiatives to help university and college students start their own businesses (Ryerson's Digital Media Zone and U of T's DesignWorks are specifically mentioned) are lauded by the council, which also recommends the creation of "entrepreneurship high schools" and more entrepreneurship education in secondary schools.

From a council with heavy representation from business (RIM's Mike Lazaridis and Linamar's Linda Hasenfratz were among the members), the section on productivity is disappointingly short on discussion that would be of value to business managers and is mostly written at the usual "sitting in my office crunching StatsCan data in a spreadsheet" level that has repeatedly been shown to be every bit as ineffective in shaping management decisions as you should expect.

The council was not enthusiastic about a proposed tax credit that would reimburse employers 10% of salaries of new hires in their first year of employment. And the report floats the idea that expanded user fees may be necessary to pay for all the infrastructure improvements the province will need to remain globally competitive.

Pages 29-35 summarize the report and its recommendations. The focus on productivity, innovation and exports captures much of the current "state of the province" thinking, and if the report doesn't exactly clear many new paths, it's useful in pointing the direction we're heading.