Investing in emerging sectors to spur innovation key

Alberta’s NDP government tabled its 2018 Budget on March 22 by reiterating a long-standing objective of diversifying its economy, both in its traditional strengths in energy and in emerging sectors, including life sciences, clean technology and health innovation.

Economic diversification is one of the three pillars of Alberta’s $56.2-billion Budget, which is focused on rebuilding after getting hit by the oil crash in 2015. To diversify the economy, Alberta is committing investments in post-secondary education, technology for the future workplace and tax credits to encourage innovation and attract investment.

“We must support new and emerging industries, and we must make sure Albertans have the training and skills they need to get the jobs of tomorrow,” said Alberta Finance minister Joe Ceci in his Budget speech. “Beyond our energy sector, Budget 2018 helps businesses hire and grow and helps students train for the jobs of tomorrow.”

To supply the Alberta economy with appropriately skilled talent, the Budget is funding 3,000 post-secondary spaces in technology over the next five years and new scholarships in emerging sectors. For this, the province is investing an initial $6 million, which will grow to $43 million per year by 2022-23.

The 2018 budget also includes $60 million a year to extend the Alberta Investor Tax Credit and the Capital Investment Tax Credit up to FY2021-22. Ceci said these successful tax programs will help even more businesses grow and attract investment.

Budget 2018 also proposed $20 million a year by FY20-21 for a new Interactive Digital Media Tax Credit to attract more tech entrepreneurs to the province and retain its homegrown talent “to inspire the next generation of tech innovators.”

These plans are included in Bill 2, or the Growth and Diversification Act, proposed in the Legislative Assembly of Alberta in early March.

But Alberta’s former chair of the Premier’s Advisory Committee on the Economy tells RE$EARCH MONEY that diversifying an economy is easier said than done.

Dr Joseph Doucet, dean of Univ of Alberta’s Alberta School of Business and former chair of the defunct 11-member Premier’s committee, says that based on the strategy laid out in the 2018 Budget, there will be some successes in diversifying the economy. But it’s still a challenge for the province, and Canada as whole, to attract capital and retain talent.

“We should almost be revolutionary in our thinking, in attracting capital, being productive, in regulation. Until we begin to grow more wealth in the province and in the country, we will always be fighting a losing battle,” he says.

The challenge, in part, is Canada’s corporate and personal tax system compared to the US. Although there are new and extended tax credits proposed in the 2018 Budget, Doucet says these will have a small impact on the province’s economy.

“Digital media, that’s important. Will that $20 million a year in new interactive digital media tax credits have an impact? Sure, it will have an impact ... for some firms and workers in that technology sector …  But that will be a very small impact in a very big economy,” he adds.

Doucet says one success area in diversifying the province’s economy could be in focusing on high value-added in the petrochemical sector.

The Alberta budget includes $500 million in royalty credits for the second phase of the successful Petrochemicals Diversification Program.

“There’s still a lot of value and wealth to be created in hydrocarbons that are still to be developed. What we need to think of is how to continue to develop those hydrocarbons albeit with new technologies, new approaches that are less carbon-intensive, less water-intensive,” says Doucet.

He adds that Alberta could focus its research and post-secondary education on areas such as nanotechology, artificial intelligence and machine learning, to unlock value in hydrocarbons to ensure benefits for the next generation.

Compare this to digital media where Alberta competes with Toronto, Vancouver and the US. Doucet says Alberta can be more of a world leader in better extraction and refining technologies and the use of nanoparticles.

The provincial committee that Doucet chaired, which was tasked to advise Alberta Premier Rachel Notley on how to promote and support the resiliency and competitiveness of the province’s economic sector, included members from industry, academia, non-profit, labour, research and innovation.

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