Advocacy groups refine recommendations for boosting industrial R&D assistance

Forestry and high-tech sectors take the lead

The Canadian Advanced Technology Alliance (CATA) has followed up its call for a tech-heavy $60-billion stimulus package with a specific set of actions developed by serial high tech entrepreneur Terence Matthews. The Matthews stimulus package contains several radical proposals such the removal of the Industrial Research Assistance Program (IRAP) from the National Research Council (NRC) and associating it with another (unnamed) department or agency and establishing a parallel program for the high-tech sector modeled on the Strategic Aerospace and Defence Initiative (SADI).

The CATA initiatives have been followed by recommendations from other organizations as diverse as the Conference Board of Canada (CBoC) and the Forest Products Association of Canada (FPAC), underlying growing concern that the impact of the recession could irreparably damage Canada's fragile high-tech and forestry sectors unless dramatic action is taken.

FPAC is advocating a five-point plan that carries a $600-million pricetag over five years to allow the beleaguered forest products sector to weather the current crisis.

"Active fiscal stimulus is the only means of breaking a recessionary mindset and restoring confidence in the economy." — Conference Board of Canada

The industry is under siege as US housing starts have fallen 60% from their 2006 peak and newsprint demand continues to decline. The FPAC stimulus package focuses heavily on R&D as the best way to emerge from the recession in globally competitive shape. It includes making scientific research and experimental development (SR&ED) tax credits refundable with the possibility of capping the amount eligible for refundability to keep costs in check.

It is also calling for the extension of several federally funded R&D programs specific to the forest products sector including the FP Innovations Transformative Technologies Program and several smaller targeted programs introduced when Canada's three forestry research institutes joined forces as FP Innovations (R$, March 8/07). Extending those programs would cost $300 million over five years, while the creation of a new Forest Industry Bio-Economy Fund would cost $300 million over five years starting in 2010.

The Alberta government has also joined the stimulus request line, asking the government to match its $2-billion commitment to develop and deploy carbon capture and storage technology.

Whatever the nature of the stimulus being requested it is generally agreed upon that massive stimulus during times of economic turmoil represent a good bet for the future.

CBoC is recommending temporary stimulus of up to 1% of GDP in 2009, adding $10-13 billion to the federal deficit. Such a move would add more than $600 million to annual debt service charges that would have to be paid down over the medium term.

The Matthews plan

CATA's follow-up to its original stimulus call includes 21 directives within six broad areas of action prepared by Matthews. It outlines a wide range of measures aimed at alleviating the severe financial pressures many firms are experiencing. They include:

* creation of a facility to provide temporary injections of equity or loans to tech firms to close sales contracts;

* Immediately allow tech firms to convert up to 50% of unused investment tax credits (ITCs) (SR&ED) into refundable ITCs over the next two years;

* eliminate the distinction between Canadian private corporations and others in the eyes of the SR&ED program;

* introduce a shared federal/provincial venture capital investment tax credit system based on the British Columbia model;

* Urgently remove – as promised in the 2007 and 2008 Budgets – Section 116 Certificate and Limited Liability Companies impediments to US investors;

* immediately broaden the range of technologies under the new Strategic Aerospace and Defence Initiative (SADI) program or create parallel program;

* expand the NRC-IRAP mandate to include technology adaptation and commercialization;

* Consider whether IRAP should remain a part of NRC or be associated with another agency or department;

* Support and fund the Department of Foreign Affairs and International Trade's Global Innovation Strategy;

* Require departments and agencies to contract with Canadian firms to conduct underlying R&D for future tech-based needs;

* Include increased R&D and commercialization of green technologies in any economic stimulus package; and,

* Include digital networks, teleworker support, remote medicine tools and advanced homecare and monitoring under green tech energy management and energy efficiency.

Matthews, who is chairman of both March Networks and Mitel Corp and a member of the Science, Technology and Innovation Council (STIC), issued a similar statement in September but this version is more prescriptive and timed to fit into the government's truncated Budget deliberation cycle.

R$