When will Canada finally invest in Canadian companies?

This was designed as another one of those win-win events. Nokia, the giant Finnish telecommunications company, was announcing a big new investment in Ottawa’s 'Silicon Valley' North. Prime Minister Justin Trudeau was there to cheer this on, declaring, “this is about building a strong economy and a better future for everyone.” To make it a happier event, Trudeau was there with a cheque book, as well. Nokia is a respected company and will provide good jobs for its employees, as well as expanding on the knowledge base in the Ottawa telecommunications sector. It is now the largest telecom employer in Ottawa’s cluster of telecom companies. But the irony of the event was probably lost on everyone there. We continue to rely excessively on foreign corporations to create jobs and bring investment. Trudeau announced the Strategic Investment Fund would provide up to $40-million towards Nokia's plan to invest up to $340-million to expand its research and development (R&D) capacity there. Justin Trudeau and Doug Ford at the announcement of an investment in Finnish telecommunications company Nokia's plan to invest up to $340-million to expand its research and development capacity in Ottawa's telecommunications cluster. The Hill Times photograph by Andrew Meade What is forgotten is that this world-respected R&D campus was originally established in 1986 by the fast-growing Canadian-owned company, Newbridge Networks, which quickly became a world leader in wireless data and voice networking technology. In 2000, in need of new capital and with a lack of interest by Canadian investors or policymakers, it, including its extra-bodily rich patent portfolio, was sold to the French company Alcatel, for US$7.1-billion. In 2006, Alcatel merged with U.S.-based Lucent to form Alcatel-Lucent. And then, in 2015, it was acquired by Nokia. Through this period of changing ownership, the Ottawa-based R&D lab, with its high quality engineers, was kept alive. As a core asset with global excellence, it churned out a steady flow of intellectual property for changing foreign owners. This is what it will continue to do. It is a Canadian-based research centre that continues to lead in networking technology, but the valuable knowledge it produces will be owned in another country, not Canada. A different decision in 2000, to inject more Canadian capital, could have meant that today we would have had one of the world’s most important networking technology giants in Canada. In fact, Ottawa is now an R&D base for a number of world-leading telecommunications companies, including Sweden’s Ericsson, along with Ciena Corp. and Avaya, multinationals from the U.S. As with Nokia, they all acquired existing Canadian-owned businesses with world-class technology. In this case, when the federal government green-lit the decision by bankruptcy trustees to sell off Northern Telecom’s rich assets to foreign corporations, rather than intervene for a Canadian solution. This approach to economic development and job creation can be seen in spades in Canada’s much ballyhooed effort to portray itself as an electric vehicle and battery powerhouse. Industry Minister François-Philippe Champagne is jetting around the world—to Germany, Japan, the U.S., and next, South Korea—to attract foreign corporations to build electric vehicle assembly plants, battery plants and components for electric vehicles, and develop mining and processing facilities for critical minerals. Armed with the Strategic Investment Fund, Champagne is attracting investments that will ensure the survival of an automotive manufacturing industry in Canada, and create battery and critical minerals facilities. This will cost well over $1-billion in federal subsidies. But while attracting all of this investment will maintain and create new jobs, this will not make Canada an electric vehicle powerhouse. You are not a powerhouse if all the technology in use is being deployed here by branch plants of foreign corporations. After the 2015 federal election, Trudeau was strongly criticized—and rightly so—for spending so much time attracting big American tech companies to establish R&D branch plants here, as well as embracing Amazon warehouses as a source of good, middle class jobs, while doing little to advance Canadian tech companies. This continues to be a government with a branch plant mentality that seems more at home with foreign multinationals than advancing our own home-grown companies. Can this change? We should see later this year. Finance Minister Chrystia Freeland has to deliver an operations plan for her planned $15-billion Canada Growth Fund will operate. Will there be a focus on scaling up Canadian companies, or will it be yet another source of money to subsidize foreign corporations here? The Canada Growth Fund, it appears, will resemble some hybrid of an investment bank and private equity fund, with an initial federal contribution of $1.5-billion of equity over five years. Whether it will help achieve one of Canada’s biggest economic challenges—how to build a new generation of Canadian global businesses that are headquartered in Canada with their own proprietary technology—is far from assured. There are benefits to attracting foreign investment, largely from jobs and exposure to new technologies and new business practices. But a successful economy also needs its own legion of domestically owned and controlled corporations with their own proprietary technologies and other intangible assets, to prosper and grow in world markets. It is here that Canada is failing, with too much of our economic future being determined in the head offices of foreign corporations, reducing our governments to supplicants flying around the world waving a cheque book. David Crane can be reached at crane@interlog.com. The Hill Times