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$190-million cheque helps Ontario seal jobs deal with Cisco

A Cisco logo is seen in this file photo.


Highly paid knowledge-economy jobs are prized by governments, and politicians all over are elbowing each other to attract them.

Robert Lloyd, president of development and sales at Cisco Systems Inc., says his company gets approached "every day" by policy makers from Poland to North Carolina who are vying to bring such jobs to their own jurisdictions. Ontario made its own pitch, with a large cheque attached – and on Friday, it won.

The world's largest maker of computer-networking equipment chose the province for a major expansion of its global research-and-development facilities.

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The move will lead to as many as 1,700 new high-tech jobs in the province within six years and make Canada one of Cisco's top five centres for R&D.

The deal was several years in the making, and involved multiple trips to Cisco headquarters in San Jose, Calif., by provincial officials such as Brad Duguid, the former economic development minister, and Eric Hoskins, his successor in that role.

The Ontario government is paying Cisco up to $190-million, with a pledge to pay as much as $30-million more if the technology company proceeds with a second wave of expansion to add more jobs.

In an interview at a Cisco office in downtown Toronto, Mr. Lloyd rattled off the criteria for what makes a place attractive to his firm: strong universities, competitive tax rates, a stable economy and loyal employees.

"We get all of that in Ontario and that's exactly why we made this decision, over all the other choices we have every day," said Mr. Lloyd, a Winnipeg native who is Cisco's second-highest-ranking executive and is considered a candidate to some day replace John Chambers as chief executive officer.

The company cited other attributes in Canada – a thriving immigrant population, strong engineering and business programs and a skilled work force. Its metrics also show relatively low staff turnover within its existing operations in Canada, which have more than 1,500 ployees.

Ontario Premier Kathleen Wynne said it is the largest job-creating announcement in the history of the province's tech sector. It comes at a time what the province's manufacturing sector is reeling from a series of plant clostures, including a Heinz ketchup plant in Leamington and a Kellogg cereal facility in London. The province has seen at least 2,400 factory jobs disappear in the past month alone, while troubled BlackBerry Ltd., continues to shed jobs, with plans to cut 4,500 positions by next spring.

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Some questioned the use of taxpayer dollars to attract already-profitable multinationals.

The "last thing Ontario should do is offer up a $200-million taxpayer bribe to one company," said Mark Milke, senior fellow at The Fraser Institute in Calgary.

"Besides prolonging the failed corporate welfare game where politicians and bureaucrats attempt to pick winners–a task to which they are ill-suited and that even private sector angel investors cannot always get right–Queen's Park is attempting the divine the future."

The government touted the partnership as a vote of confidence in the future of its economy, particularly its information and technology sector. It says the public funds are contingent on Cisco meeting targets for "job growth, retention and salary investment."

The 10-year agreement is planned in two phases. If the company goes through with the maximum investment, it will be putting up to $4-billion into its Canadian operations between now and 2024.

The benefits could ripple. Cisco has a venture capital fund worth more than $2-billion (U.S.) and suggested it might deploy some of that to backing Canadian start-ups.

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"In Canada, you don't yet have the same venture capital experience and environment that exists in the United States or Israel, or the U.K.," Mr. Lloyd told the Globe. "Over time...Canada needs to have a collaborative effort to up the VC industry."

Much of the new hiring will be in building its presence in Ottawa and Toronto, though the company may also expand in other cities. Many of the new jobs will be in engineering and high tech, and the company expects spin offs in other areas, from manufacturing to services, as a result of its expansion.

Mr. Milke believes provinces and NAFTA partners should agree to ban these government grants rather than compete with each other by giving ever-greater sweeteners.

"That would keep taxpayers out of this subsidy game and let companies fight it out in the market for capital and customers–without taxpayers being dragged into this every time a company spots a weak politician."

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About the Author

Tavia Grant has worked at The Globe and Mail since early 2005, covering topics from employment and currency markets to trade, microfinance and Latin American economies. She previously worked for Bloomberg News in Toronto and Zurich, writing on mining, stocks, currencies and secret Swiss bank accounts. More


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