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Minister of Economic Development Mary Ng speaks at a news conference on the Canadian Digital Adoption Program, in Ottawa, on March 3.Justin Tang/The Canadian Press

Ottawa’s new $4-billion program to upgrade the technology of small businesses amounts to a subsidy for foreign-owned tech giants, industry leaders say.

The federal government announced the Canada Digital Adoption Program earlier this month, which provides grants and loans for small and medium-sized businesses to pay for a variety of digital needs, from social-media advertising to network security software.

But experts in the tech industry say the program has no provision to direct that spending toward domestic firms, so most of the money will end up flowing to giant foreign-owned platforms, such as Facebook, Google and Microsoft.

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“The Trudeau government has a long history of economic policies that principally suit foreign tech firms,” said Jim Balsillie, chair of the Council of Canadian Innovators and former BlackBerry Ltd. chairman and co-chief executive officer.

“We should be using these grants to get outcomes that generate the maximum benefit to Canada, such as working directly with a range of domestic e-commerce providers and media starved of advertising dollars, all to shape an ecosystem that supports both our prosperity and democracy,” he said.

In announcing the $4-billion program, the government said its goal is to make Canadian companies more competitive by helping them adopt new technologies that could make them more productive and profitable.

Microgrants of up to $2,400 can be spent on e-commerce expenses such as social-media advertising and subscription fees for digital platforms. Grants of up to $15,000 are available for medium-sized firms that want to develop a plan to upgrade their technology.

Those businesses are also eligible for loans of up to $100,000 from the Business Development Bank of Canada to fund upgrades in software (such as for network security) or hardware (such as new robotics).

But tech industry leaders say the whole program is a missed opportunity.

Jim Hinton, a leading intellectual property lawyer and co-founder of the Innovation Asset Collective, said money spent through the program should be directed to domestic tech firms, which would help fuel longer-term growth of the Canadian economy.

“My big concern would be, who ultimately is benefiting from this?” Mr. Hinton said. “And you see this from government and policy-makers quite a bit, is the confusion around what counts as innovation. Adopting someone else’s technology is not innovation. Being the one having their technology adopted is.”

He said his concerns run the gamut of the program, from the microgrants, which could be spent on Facebook advertising, to the larger loans, which could be used to purchase software from large enterprise computing companies such as Oracle Corp.

Of the seven tech firms listed as featured vendors by Digital Main Street, a non-profit that’s helping the government implement its program, just two are Canadian: Ottawa-founded e-commerce giant Shopify Inc. and Montreal-based point-of-sale provider Lightspeed Commerce Inc. The other five vendors – Google, Mastercard Inc., Microsoft, Intuit Inc.’s QuickBooks and Block Inc.’s Square – are headquartered in the United States.

Digital Main Street is also one of a dozen providers of support services to small businesses that sign up with the government’s program to improve their e-commerce services. The organization told The Globe and Mail that its advisers are trained in how to help small businesses set up online stores and sell their products and services through social media.

Vass Bednar, executive director of McMaster University’s master of public policy in digital society program, said it would be valuable for small-business owners to be instructed on what it is really like to compete against tech giants. For example, Ms. Bednar said there have been documented instances of small firms having their products getting copied by large competitors after the items were sold on Amazon Marketplace.

“Encouraging companies to go online without acknowledging some of the challenges or realities of what it means to try to compete online is like telling people to go swimming without telling them there’s an algae bloom or a parasite [in the water],” Ms. Bednar said.

She said she would also like to see the government track how much of the program’s funds end up being spent on digital advertising.

Conservative MP Tracy Gray, her party’s small-business critic, said the new program also means the government’s advisers are unfairly competing against private firms offering the same services.

“We are concerned that the Trudeau Liberals have designed a program that will do little more than line the pockets of foreign tech giants, while leaving small businesses to struggle with record debts and growing inflationary pressures,” Ms. Gray said in a statement.

The government wants to leave it up to the recipients of the grants to decide on which online tools they spend their money, said Alice Hansen, a spokesperson for Mary Ng, the Minister of International Trade, Export Promotion, Small Business and Economic Development, in a statement.

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