CATA Economy Transformation Federal Budget: High-Tech Sector says stimulus package needs to be doubled to have impact; calls for transformational employment investment
January 27, 2009

Ottawa, January 27, 2009  --  Canada’s high-tech sector says the federal government is taking the right step by reaching for economic stimulus, but asserts that the amount of stimulation needs to be double the $34-billion in the current budget, and needs to be invested in “jobs for the future”, in transformation not bail-outs.

  The 33,000-member Canadian Advanced Technology Alliance (CATA) estimates that at least $60-billion needs to be spent to match the intensity of the American response to what is clearly perceived by the American President Obama as an emerging Depression.

 “While we are pleased to see the government heading our call for economic stimulus, we need two more success ingredients,” said CATA President John Reid.

 First, we need to treat this crises with the same depth of concern as President Obama, which for Canada means an investment of more than $60-billion.

Second, we need to invest the funds in jobs for the future.

 “The Americans may have learned their lesson and be more willing to spend, because they underestimated the global financial crises at first.  Now they  --  and we  --  are in much more serious trouble.  If a nation doesn’t react with enough force, the crises deepens,” said Mr. Reid.

 Investment in the Future: Keeping Up

 “The Americans will be investing in jobs for the future  --  those sectors which are largely knowledge-based, with leverage to enhance productivity.  We cannot let the Americans fast-forward like this, without a response.  Here, Canada is presented with a huge opportunity:  we can also transform our economy by judicious but adequate spending on ‘jobs for the future’,” said CATA Executive Vice President Barry Gander.

 Some sixty percent of recently-polled  high-tech executives urged Canada to keep up with the example of our American neighbours.  In proportion, Canada should be prepared to spend $60-billion.

 Almost three-quarters of the executives felt that if the current situation continues, their businesses would decline or be “badly wounded”.

 The advanced technology executives are the advance guard of the Service Economy, which makes up 76 per cent of all jobs and 69 per cent of Canada’s GDP.  Spending on job sectors employing high tech delivers fast growth, immediate employment, recession-resistance, and improved productivity.

 CATA advised Government to consult immediately with industry to prioritize the projects that would create the best long-term value for stimulus spending in terms of future employment  --  employment that would be sustainable on the global export stage after the depression is conquered.

 A first-cut of high-level input from the CATA members indicated their priorities for proposed transformation spending:

 ·  Smart Infrastructure development ( Smart infrastructures include networks to link vehicles to themselves and ground services, city-wide wireless access for mobile devices, the provision of online services for communities and other public sector organizations, innovations in the services sector, and the creation of advanced materials);

·  Traditional infrastructure development ;

·  Green technology;

·  Alternate Energy; and

·  Healthcare

 Spend on Ourselves: The ICT Rule

 Spending on the scale of World War II is needed to break the downward spiral of a constricting economy.  “If our neighbours the Americans are not spending, we are not producing,” said Mr. Gander.  “We need to break the spiral by spending on ourselves. 

 “In all sectors, our ‘spending on ourselves’ should follow the rule that the parts of a sector that have a significant and growing information and communications technology (ICT) component are good bets for investment. “

 The ICT component of Canada’s economy is one of the country’s strongest performers:

Fast Growth: Average annual growth rates since 1997 have been more than double those for the overall economy. 

Large Sector: Comprised of nearly 32,000 companies, this sector employs close to 600,000 people and contributes $133 billion in revenues to our economy.

Recession-resistant: The service sector has a longer lag-time built into it for periods of downturn.

Best Productivity Value:  Investments in Service Sector productivity have four times the impact on the Canadian economy as do investments in manufacturing productivity.

Global Spread:  Half of Canadian service revenues are made selling to countries other than America, as ICT services are digital, without borders. 

Brings Investment: Half of the revenue for the high tech sector comes from outside Canada and represents net new money being pumped into the Canadian economy, the best kind of investment.

Boosts Employees: More than two-thirds of a high tech company’s cash flow is devoted to payroll.  Few other sectors can show that ratio of money going to job creation.

Returns to Government: Some 35% of that payroll amount goes straight back to the government on an operating basis in the form of source deductions such as PST, GST, HST, so governments get most of it back anyway.

 Canadian Advantage: We have the touch-stone of prosperity for the ICTS sector: a well-educated workforce.

 “With all these advantages, and the compelling need for the right level of spending, we will be creating human assets that will have the most to do with our global competitiveness five years down the line,” advised Mr. Reid.  “We can demonstrate that putting the infrastructure investment into knowledge-intensive services sector jobs will help Canada most, by driving job creation, exports and long term sustainable competitiveness.

 “Only a big vision, with the right level of commitment, will work at this time,” concluded Mr. Reid.

 For further information or to participate in the discussion of the economic transformation opportunity, please see the CATA Blog, at:

 www.cata.ca  

 Or call John Reid or Barry Gander at: 613-234-6091