Technology companies have emerged as clear winners during the COVID-19 pandemic. Jurisdictions without a traditional tech imprint – like Alberta – have funnelled funds to facilitate startups.
That’s a good diversification strategy, but they should be careful not to veer into protectionism and favouritism.
It came as no surprise that in 2020 retail sales through e-commerce grew by 20.7 per cent, whereas those through brick-and-mortar stores decreased by 0.8 per cent.
What many might not have heard is that one year after the health crisis started, Canada has added 100,000 jobs in STEM (science, technology, engineering and math) disciplines. Nearly 23,000 foreign STEM workers moved to Canada through permanent residency and temporary worker visas, and tens of thousands of expatriates returned with new job opportunities in the tech sector.
According to a study conducted by the media investment company GroupM, Canada’s e-commerce market is still small compared to those of the United States or China.
However, Canada had the fastest-growing market in 2020 among the seven studied countries, including the U.S., China, the United Kingdom, Japan, Germany and Australia.
According to GroupM, total online spending in Canada increased by 72.7 per cent last year, totalling US$28.6 billion (C$36.1 billion). GroupM estimates an annual growth of 8.3 per cent as Canadians will continue to increase online spending throughout 2021.
So it’s a no-brainer to work with tech companies to create new economic opportunities in the aftermath of the pandemic. This industry is not only growing at a rapid pace, it’s providing high-paying jobs and boosting gross domestic product (GDP).
Ontario and Quebec are home to almost two-thirds of tech companies in Canada, and Toronto ranked fourth in the 2020 Talent Report’s top tech markets in North America. Nevertheless, Calgary and the rest of Alberta are now on the radar of entrepreneurs and foreign venture and angel investors. Although its economy leans heavily on the energy sector, Alberta has seen steady growth in the tech industry since 2016.
Recognizing the importance of technology and innovation for the province’s economic recovery, the Alberta government announced in 2020 a grant to boost its related industries. Small and medium enterprises that qualify for the program will receive eight to 20 per cent of their base-level spending for research and development.
Tech startups and entrepreneurs can also access early-stage funding worth $15 million through the Alberta Enterprise Corp.’s Accelerate Fund. The Alberta government has also awarded the University of Calgary $11.8 million for research in cutting-edge fields such as quantum technologies, antimicrobial resistance and enhanced satellite imaging.
These announcements were part of Alberta’s Recovery Plan, which attempts to spark investment and job creation, particularly in e-commerce, cybersecurity, artificial intelligence and clean technology. For this purpose, the government also reduced the corporate tax rate from 10 to eight per cent, the lowest in Canada.
Such measures will give a welcome boost to Alberta’s innovation but that’s not all. Additional advantages include a high quality of life at a moderate cost, competitive real-estate prices and a great talent pool.
The latter has lured the Indian tech giant Infosys, which announced its expansion to Calgary in early March 2021. The firm vows to spur 500 jobs in the city over the next three years, taking advantage of the highly-educated local workforce.
Alongside investing and funding, the government of Alberta must emphasize entrepreneurship and keep co-operating with the private sector. Ensuring a favourable business environment to attract capital and spark jobs is key. This includes speeding up bureaucratic procedures and easing labour regulations to enable the oft-disruptive gig economy.
It also involves striking a delicate balance between promoting nascent local firms and being open to healthy competition nationwide and abroad. Despite betting on Canadian ideas and companies, Alberta should listen to economists, who have shouted from the rooftops for decades that protectionism makes local companies less competitive and therefore less efficient.
Alberta has witnessed the ineffectiveness of its film subsidies, which totalled $12.6 billion between 2010 and 2016. These have been great for photo ops and inflating a dependent, crony sector. They have been bad for fiscal health, but the United Conservative Party government has not had the mettle to eliminate them.
Rather than expanded funding and top-down planning, provincial authorities should listen to startups’ needs and let tech companies set up their ecosystems and strategies.
Last year, the pandemic and the oil-price crash delivered a double blow to Alberta’s economy, leading to thousands of job losses. Diversification is healthy insurance against a repeat.
The province should continue to make room for an online service-focused economy but remain aware there’s such a thing as too much help.
Paz Gómez is a research associate with the Frontier Centre for Public Policy.