The federal government has done its diagnostic on the state of Canada’s economy and now it’s beginning the investments it believes will spark innovation going forward.
That’s the message Minister of Finance Bill Morneau emphasized at this week’s Economist Summit held in downtown Toronto. The event was built around the theme of disruption and included both panels and on-stage interviews. In a question and answer session with Economist U.S. business editor and New York bureau chief Matthew Bishop, he said forthcoming investments in infrastructures are a key part of improving the lives of Canadians in an environment of slow growth and demographic challenges. Now is the time to make those investments as interest rates are low and the country’s debt-to-GDP ratio favourable.
Morneau said Canada needs to do a better job of negotiating with institutional and private sector investors who have found better opportunities offshore than they have at home to fund infrastructure projects, as well as develop networks and clusters that exploit the country’s strengths.
“The Toronto-Waterloo corridor is a good example of where we have been successful,” he said, alluding to investments made in research universities. “Universities are already putting forward proposals.” In addition to research investment, which Morneau said includes recognizing the value of basic science research, student grants are a part of the government’s strategy. “A starting point is human capital investment.”
The Toronto-Waterloo technology corridor is something Toronto mayor John Tory talked up during his opening remarks to kick off the Economist Summit, which he also sees as playing to his city’s strengths, as well as the country’s. He said Canada needs to put the necessary tools in place, which includes infrastructure. “We can’t have a world-class technology corridor if we can’t catch a train between Toronto and Waterloo.”
Tory said his world travels, including a visit to Silicon Valley, have made it clear that Canada needs not only be more competitive on the world stage but be prepared to boast about its successes. “We have to get out there and sell.”
Morneau believes it’s important to bring in outsiders with deep expertise to help identify Canada’s key enablers and opportunities. Now that the government is past the diagnostic phase, he said the next budget will further its strategy, which includes looking at current vehicles such as Export Development Corp. and the Business Development Bank of Canada to help startups grow to become larger concerns. “We want to focus on how to get companies from the startup phase to the significant phase.”
One of the sectors that is ripe for innovation is power generation as populations grow, which came up in a panel discussing whether falling oil prices would curb energy innovation, Jessica McDonald, president and CEO at BC Hydro, said the utility produces 98 per cent of its electricity through renewable resources including solar and wind. “We have really great outcomes from our system.” However, BC Hydro’s infrastructure is aging and she expects it will need $25 billion in investment in the next decade as the number of people living in the province is expected to grow by 1 million in the same period.
McDonald sees innovation helping customers shape their energy use and encouraging conservation. “Demand-side management is a huge focus.” The utility is also looking to drive electrification to take advantage of its grid while effectively distributing loads as electric vehicle use picks up. “The future is going to look very different than the past.”
Since taking office, it could be said that Prime Minister Justin Trudeau’s view for the country has also been about making sure that the future is different than the past. In an on-stage interview with Economist Americas editor Brooke Under, he said that includes spending on investment rather than cutting, a “big bet” that is getting support from the Internal Monetary Fund and the Organization for Economic Co-operation and Development, which are seeing it as an example of a way to tackle low global growth.
Trudeau acknowledged there is skepticism around the federal government investing in infrastructure projects as they can become politicized with some ridings getting preferential treatment. “These questions creep into infrastructure spending,” he said. “We are going to trust local experts to determine what projects are needed.”
The conditions the federal government will set around will be that infrastructure projects have to contribute to long-term growth and productivity, said Trudeau, such as public transit. He also echoed Morneau’s statement that the government must leverage private and institutional investors.
The PM also sees diversity as a key enabler to innovation, including equal pay and opportunity for women in the workforce because of how the conversation changes when you have gender balance. “That’s disruptive,” he said. Thinking around a problem from many different directions is core part of innovating forward, Trudeau added. “New ideas and perspectives from around the world are a source of strength.”
Not surprisingly, the subject of low oil prices came up in the conversation, but also the falling prices for renewable energy such as solar. Trudeau said the short term, Canada is going to have to rely on fossil fuels in a global economy, while at the same time leap into renewables as a long-term strategy to eliminate dependence on oil. “That’s the path we have to be on.”