Illustrations by Murat Yukselir/The Globe and Mail
Canadian governments have tapped the brains of business leaders time and time again for ideas on how to propel the country’s economy forward. Yet our nation appears no closer to drawing up a credible road map for its future prosperity.
When the COVID-19 pandemic hit in early 2020, Ottawa again turned to the private sector for insight on how to respond. That May, it announced the blandly named Industry Strategy Council, and gave it a not-so-bland mandate: Assess the scope and depth of the pandemic’s impact on industries and inform government’s understanding of specific sectoral pressures.
The dominant mantra out of Ottawa at the time was: Let’s build back and build back better. As a country, the crisis offered a rare chance, the politicians told us, to rethink how to improve our economic lot and emerge from the health crisis as a stronger, more resilient global competitor.
It’s now been just over a year since the council and its chairwoman, former Desjardins Group chief executive Monique Leroux, delivered its final report. In that time, our lives have been repeatedly shaken. The effects of climate change deepened. Trends such as digitization accelerated. And geopolitics continued to reshape the world.
Against that backdrop, Prime Minister Justin Trudeau’s Liberals were re-elected. His government has spent or committed $365-billion to prop up Canada’s economy during the pandemic, with policies emphasizing middle-class jobs and boosting child care. But little effort seems to have been expended on developing a new economic paradigm for the 21st century.
True, almost all of the council’s most time-sensitive recommendations have been implemented, such as extending the Canada Emergency Wage Subsidy. And yes, Mr. Trudeau’s government has acted on many of the council’s proposals for reigniting growth, such as speeding up a plan to ensure access to high-quality internet for all Canadians by 2026.
But the council’s big-picture ideas on reimagining the economy for the decades to come remain an early work in progress. And they risk dying of neglect like so many others before them.
The council called for a new national industrial strategy anchored on four major pillars of activity where Canada has distinct, world-leading strengths, including high-value manufacturing, natural resources and agriculture. It also wants Canada to be a digital economy, with purposeful research and development and connectivity investments that cut across all sectors.
A lot of it sounds very familiar because it is. Some of the recommendations and 10,000-foot-high language could have been lifted from any of a string of previous reports from past economic advisers. And that’s part of the problem. Such big-picture ideas have been communicated to successive governments in Ottawa over and over again. But so far, they haven’t gelled into any sort of cohesive public policy that could rally the country.
As the Canadian economy remains disproportionately tethered to housing and oil and gas, other countries such as China, the United States and Britain are staking ever-bigger claims on global wealth creation. They’re playing to win in a world where growth is increasingly coming from intangible assets such as intellectual property and data. Without quick and decisive action, business leaders say Canada risks falling further behind.
“We need to be a little bit more intentional in what we want to do” as a country, Ms. Leroux said in an interview this past week. “We need to have a more robust, long-term vision about what we want to achieve … If you want to engage the provinces, if you want to engage the private sector, you need to have a story. You need to have a strategy. That’s the only way.”
This is at least the third time that the Trudeau government has enlisted the help of a private-sector advisory group to offer guidance on the economy. In early 2016, it mandated Dominic Barton, a McKinsey & Co. consultant and diplomat, to lead a blue-chip panel called the Advisory Council on Economic Growth, which made a range of recommendations in areas such as skills training, attracting investment through a new Canada Infrastructure Bank and a major ramp-up in annual immigration targets.
The government’s response to that advice has been mixed. It has largely followed through on the move to higher immigration levels and it did create an infrastructure bank, but the Crown corporation has yet to deliver on the promise that it would attract massive investment in Canada from global pension funds.
A year later, the government set up the Economic Strategy Tables, which brought together 90 CEOs and federal deputy ministers for a series of meetings culminating in what was billed as “an ambitious plan for innovation-led, long-term growth for the Canadian economy.” The government said it has acted on many of the group’s proposals, including changes to the accelerated investment incentive, a government tax program that allows businesses to write off more of the cost of their depreciable property.
The Trudeau government has waved the innovation flag over the past six-plus years, putting money into artificial intelligence, quantum computing and the venture capital sector, and introducing fast-track visas to make it easier for tech companies to bring in foreign workers. It also adopted the country’s first intellectual property strategy.
Many of these moves have felt like good first steps, but larger-scale efforts have fallen short. The flagship $950-million supercluster program, adopted in 2017, aimed to double down on the country’s innovative strengths in five sectors. Instead, it looked at times more like a regional development program that has not produced meaningful results. There was no mention of it in the Liberal 2021 campaign platform.
Whether Canada’s government will ever adopt anything more than piecemeal measures, whether it can take the business sector’s biggest ideas and engineer and articulate its own meaningful philosophy and strategy for long-term prosperity, remains to be seen. Policy-makers and business leaders have little trouble pinpointing the problems. The issues have popped up in report after report to government going back several regimes. And yet the actions governments have taken to address them often underwhelm.
The blueprint put forward by Ms. Leroux’s group is a ready-made game plan. So far, Mr. Trudeau’s team has shown little sense of urgency to act on it. With a federal budget coming up and Canada’s future on the line like never before, will it finally heed the call?
Here are five examples of how to build a 21st-century economy.
Reimagining resources
By Emma Graney
While a lot has changed since Ottawa’s Industry Strategy Council released its report in 2020 – high vaccination rates, the oil sector booming – Mark Little is confident that the core recommendations still hold true.
Yet the chair of the council’s Resources of the Future table, and chief executive of Suncor Energy Inc., is also concerned Canada’s economic muscle in many sectors is withering, particularly as the United States and other countries seem to be recovering faster. That, he says, needs to be addressed – fast.
Unlike many sectors, oil and gas has bounced back somewhat since 2020. Not because of investment levels, which continue to languish, but because global crude prices are up and demand is “through the roof,” Mr. Little says.
But restaurants, tourism and travel – sectors the group flagged in the report as being hardest hit – “are still really getting hammered,” Mr. Little says.
One major shift he has seen is significant movement by the oil and gas sector to address the environmental, social and governance (ESG) concerns that have driven investors more than ever over the past 18 months.
The importance of ESG measures was referenced repeatedly by the council. It set the lofty goal of Canada becoming “the ESG world leader in resources, clean energy and clean technology.”
Assessing the strengths and weaknesses of different economic sectors, the group tried to identify where Canada had natural strategic advantages, such as the level of clean technology investment in the oil and gas sector.
“How can we be the absolute best companies, industries and country for delivering those resources to the globe?” Mr. Little says.
Climate and ESG discussions have already de-commoditized oil to some degree, he says, because the question for investors and consumers is no longer based solely on the price of a barrel of crude.
“People are now starting to attribute other aspects to it that fit into ESG, like, what’s the carbon footprint of the barrel?” While the focus now is mostly on greenhouse gas emissions, Mr. Little foresees a future in which that expands to include inclusion and diversity, human rights and political governance.
And the resources sector needs to be ready for that, he says.
Mr. Little points to the formation of the Oil Sands Pathways to Net Zero Alliance as evidence the oil sector has moved “some distance” on emissions since the release of the report. The alliance saw the six largest oil sands producers put aside their competitive differences to work together to reach that target by 2050.
And while the group’s conversations with the federal and Alberta governments are going well, Mr. Little would like to see a new funding framework under which returns from the industry are used to help it decarbonize.
“We think if we do that, we can position this industry as being the best provider anywhere globally of resources to the globe.”
Other areas of the resources sector, however, need to make more tangible movement toward net zero goals if the Canadian is to get cracking on the “reimagine” pillar of the ISC report. In other words, “We need to move from talking about it to action,” Mr. Little says.
“I think whether you were sitting in the federal government or the provincial government or the industry, we would all say we wish we had gone faster and we were further down the path, but I’m optimistic we’re going to get this across the goal-line,” he says.
Our plant-based advantage
By Ann Hui
To hear Murad al-Katib describe it, this should be Canada’s big moment.
For many political and business leaders, the twin challenges facing the planet – how to feed a growing global population while preventing further effects of climate change – would appear to be at conflict. Yet, to Mr. Al-Katib, it’s an opportunity.
“Plant-based protein. Renewable fuels. Innovation. Bringing our crops in Western Canada to the world’s demand for protein and demand for plant-based crops,” said the CEO of AGT Food and Ingredients – a producer of lentils, peas and other plant-based proteins – and member of Ottawa’s Industry Strategy Council.
“This is where I’d say Canada truly has a generational opportunity with agriculture.”
This too is what the strategy council describes as its fourth major priority: to “leverage our agri-food advantage to feed the planet.”
But the council’s 2020 report warns that, in order to capitalize, Ottawa needs to act quickly to address the country’s lagging infrastructure. That means planning and building roads, bridges and ports with a long-term approach, not just around election cycles.
The vastness of Canada’s geography, and the fact that food products sometimes travel thousands of kilometres to reach a port or railway, makes this critical to global competitiveness, says the report.
“Even starting to extend that planning to decades, and not just years, is essential for us to meet the physical trade infrastructure requirements of 10, 20, 30, 40 and 50 years from now,” said Mr. Al-Katib.
Also critical, he said, is digital infrastructure: ensuring high-speed internet access in rural areas, given the increasing importance of technology, innovation and data in agriculture.
The biggest message he’d like the government to hear is that farming and getting products to market aren’t what they were decades ago.
“This isn’t just about income support programs and farmers’ issues of the past,” he said. Instead, it’s about data and analytics, making better decisions – and using all of that to seize the opportunity now.
“Because it’s tens of billions of dollars of new economic value that will go to the winner of the race for protein.”
The digital imperative
By Sean Silcoff
A key to Canada’s future prosperity, says John Baker, CEO of Kitchener education software vendor D2L Corp., is for Ottawa to support a category of companies his own one belongs to: fast-growing “upper-middle” businesses with $75-million to $1.5-billion in revenues and global ambitions.
It’s part of the action plan he co-wrote in 2020 as a member of Canada’s Industry Strategy Council to help the federal government build its economic future around the country’s digital and data economy. Key recommendations included creating a “Canadian digital network” that would accelerate national data and cybersecurity standards and regulations, establishing “digital trading outposts and routes” for Canadian technology vendors who sell globally and building out digital infrastructure such as broadband and 5G networks.
But supporting the upper-middle also requires training more digitally skilled workers and keeping them here. The government did introduce labour re-skilling plans in last year’s budget, as per the council’s recommendation, though those programs haven’t fully rolled out yet. The government has also committed to ensure all Canadians have broadband access by 2026.
Mr. Baker wants to see more. Canada needs to update innovation funding programs, such as the National Research Council of Canada’s Industrial Research Assistance Program, he said. It needs to build out a work force innovation strategy, including expanding a fast-track immigration program for high-skilled workers offered jobs here, and retaining university graduates in high-demand areas such as computer science. Many of them now leave Canada immediately after school for jobs abroad.
“We’re literally educating the world but we’re not retaining the talent,” he says, recommending tax credits or other incentives to entice graduates to stay. The war for digital talent has grown during the pandemic; foreign companies are paying Silicon Valley salaries to Canadians to work here but contribute to economic growth elsewhere.
Other suggestions include building on a recent government procurement program to buy more breakthrough technology from Canadian firms, encourage adoption of digital technologies by large Canadian firms and strengthen the government’s intellectual property (IP) strategy, introduced in its last mandate, to support the creation and ownership of IP by Canadian companies
Mr. Baker says there is no time to waste and is “shocked” the government hasn’t moved faster to adopt more of the council’s recommendations. Research firm IDC forecast in 2020 the economic contribution by “digital and data-transformed companies” globally would more than quadruple to $50-trillion in four years.
“If we’re not building it then we’ll be buying it,” he says. “The pace of digital transformation is unprecedented. We have to capture it or we jeopardize our future. Because, in a blink of an eye, it’s over.”
Big biosciences champions wanted – and needed
By Sean Silcoff
If there’s one sector in which the federal government has made the most progress during the pandemic, it’s health and biosciences – though that happened out of necessity. Caught off-guard by the lack of vaccine-making capacity, Ottawa earmarked $2.2-billion last year to rebuild medication manufacturing here, and it began writing cheques right after its April budget.
The government also committed hundreds of millions of dollars to support research institutions and capitalize biotechnology startups. It disbursed close to $450-million early in the pandemic to fund R&D and commercialization efforts by Canadian developers of COVID-19 treatments. And Health Canada streamlined the approval process for COVID-19 medications.
For Karimah Es Sabar, a member of the Industry Strategy Council and past chair of the health and biosciences economic strategy table, it’s proof government, industry and academia can come together and mobilize quickly. But to unleash the sector’s economic potential, “that needs to happen on an ongoing basis,” said the general partner of Vancouver-based Quark Venture. “Government can be the catalyst and the enabler.”
Her prescription for meaningful growth in the sector requires a 10- to 20-year strategic plan and would require buy-in from provincial governments.
Ms. Es Sabar says government health agencies and departments need to adopt an economic development mandate and spend in ways that support local providers, such as through domestic procurement. Ottawa could help by facilitating combined purchasing by provinces and using incentives to influence other provincial health expenditures.
The government should also work with the provinces and territories to streamline regulations, making it easier for innovative products to enter the market and encourage business investment, she said.
And it should invest in “world-leading digital infrastructure” that enables researchers to harness vast troves of medical data marooned in disparate databases across Canada to help develop groundbreaking medicines. “It is important that we take our single biggest investment – health care – and turn it into an economic engine,” she said.
Canada does have several promising drug developers and medical device makers, such as AbCellera, but has never had a life sciences company that grew from petri dish to Fortune 500-sized company. While Canada has above-average fundamental research output from universities, it also paradoxically lags the OECD average for overall research, development and innovation spending. That translates into an inability to grow companies and keep them here.
If Canada could create just two to four large anchor companies, she said, they would stimulate huge economic spinoffs and keep talent here that now frequently leaves for hot spots such as Boston and the San Francisco Bay Area.
That would require more efforts to connect research scientists with domestic entrepreneurs and executives. But the government would also have to spend billions more than it now does on the sector, she said. And rather than spreading the money in small amounts, support should be concentrated on niches in which Canada is a global leader, such as biologics, vaccine technologies and medical technologies.
Ottawa should also spur on Canada’s pension funds to invest in the domestic life sciences sector, which they don’t in any significant way, she said. That could involve some big funds jointly establishing a large investment pool, perhaps backstopped by government as it has done through other venture capital support programs.
“That would be huge and go a long way” toward ensuring domestic companies have the capital at home to grow into giants without risk of being picked off by foreign buyers, she said.
From clean-tech startups to scale-ups
By Jeffrey Jones
Green recovery became the catch phrase as the government dealt with the initial economic ravages of the pandemic. With society’s vulnerabilities exposed and the traditional energy industry under duress, Canada sought to join numerous countries in kick-starting low-carbon energy and clean tech, from renewable energy to batteries to electric vehicles to carbon capture.
But the country had problems it needed to solve to mobilize the effort. As the Industry Strategy Council report made clear, clean tech faces a talent gap in crucial areas such as financing and global marketing. It also required more co-ordination between the private sector and government, with a new focus on commercializing and scaling up technology, rather than just funding startups.
Today, those challenges have only become more daunting. For clean tech, economic hopes are married to scientific ones and the latter have become tougher. Last year, the federal government set a new interim target of reducing emissions by 40 to 45 per cent below 2005 levels by 2030, compared with the previous goal of a 30 per cent cut.
That’s a tight window for such a fundamental transition, said Karen Hamberg, the council’s clean technology sector member and chair of the Clean Technology Economic Strategy Table. The trick is getting industry and government to jointly develop strategies for implementing the best and readily available technology quickly enough to meet the target.
Co-ordination has begun, and that gives her some optimism. Government programs under way include the $8-billion net-zero accelerator, a fund geared mostly to helping high-emitting sectors transform through clean-tech investment. The federal government is also expected this year to unveil an investment tax credit for carbon capture, utilization and storage, which was one of the recommendations in the report. Meanwhile, private capital is flowing into the sector and the oil and gas industry has emerged as a key funder of decarbonization technology.
The next big push for clean tech is expanding the reach into global markets. Four years ago, the sector set a target to generate $20-billion in export revenues by 2025, and the council said that also requires a co-ordinated strategy. The sector logged $9.4-billion in exports in 2020, meaning it needs compound annual growth of more than 20 per cent to hit the mark. “That really just cements the urgency of deploying and selling more of what is commercially available now and making sure our Canadian exporters are set up for success,” Ms. Hamberg said.
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