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(The Globe and Mail, iSTOCK)
(The Globe and Mail, iSTOCK)

Canada's innovation window of opportunity Add to ...

Canada boasts a stable government, sound finances, boundless resources and an educated work force. But for all of those strengths, there’s a dirty little secret about our economy.

We are underperformers – not compared with our overindebted G7 compatriots but compared with our economic potential. Canada’s record on productivity is poor, and the country suffers from a chronic innovation gap. Outside of the mining and energy sectors, the list of Canadian companies making a meaningful impact on a global stage is exceedingly short. The most innovative one of all, Research In Motion Ltd. of Waterloo, Ont., has been put on the defensive by foreign competitors that have been stealing market share with products that are more cutting-edge than the BlackBerry.

Were it not for an abundance of commodities that developing countries are demanding right now, such as potash and oil, our economic growth would be far weaker than it is.

But with the threat of a decade of stagnation hanging over the global economy, there’s a campaign under way to revive some neglected ideas to make Canada a much more competitive place – and to do it now.

The sense of urgency is driven by a number of factors. One is the economic and political dysfunction of our largest trading partner, the United States, which is still hobbled by the after-effects of a consumer debt binge and a banking crisis. Another is the changed political climate of Ottawa since voters granted the Conservatives a majority in the May election. For the first time since 2004, a government can tackle some difficult economic problems, and make policy shifts, without fear of triggering an election.

Putting Canada on a more competitive footing will likely mean diversifying trade links beyond the U.S., converting corporate profits into world-beating innovation and pursuing big infrastructure projects. It also means welcoming more foreign investment from places such as China and the Middle East and deregulating a host of stodgy pre-Internet industries, such as telecommunications, cable and transportation.

Such a campaign has a long way to go – as is highlighted by the comments of foreign investors like Naguib Sawiris, the Egyptian telecommunications tycoon. It was his money, controversially, that helped fund the startup of Wind Mobile in this country. In an interview with The Globe and Mail this week, he blamed Ottawa’s telecommunications policy for making it harder for new wireless companies to establish themselves.

“Anybody who asks me, I tell him look, we are the stupid investors that poured a billion dollars into Canada here and created 1,000 new jobs, please don’t do this mistake. Don’t come here,” Mr. Sawiris said. He also drew a direct link between the long-standing federal policy of limiting foreign investment and the lack of global presence of Canada’s major telcos.

“If they were that good, why are they just in Canada here? Why don’t we have Rogers in the U.K. or Germany? Why is Vodafone everywhere? Why is France Télécom everywhere? And this national champion Rogers is only in Canada? Because only in Canada it gets pampered and it can kill its competitors.”

A push for reform

In 2008, an expert panel set up by the Harper government to examine Canada’s competitiveness recommended a major shift in Ottawa’s approach to telecom, in favour of opening it up to far more foreign investment.

Three and half years later, the chairman of that panel, Red Wilson, looks back on his effort with a mixture of pride and regret. Pride because his panel’s findings are just as relevant today as they were then. But it’s tinged with disappointment because most of the 65 recommendations, including the one on foreign ownership of telecom companies, remain on the shelf even as the country’s innovation and productivity performance sputters.

“I was happy to see some of the things implemented. Others are still hanging,” Mr. Wilson, the 71-year-old former chairman of BCE Inc., says diplomatically.

He also laments that Ottawa never embraced his call to create a dedicated competition advocate to track the country’s progress on key measures such as productivity and to hold decision makers to account. General Electric chairman Jeffrey Immelt recently took on a similar post for U.S. President Barack Obama.

But Mr. Wilson’s agenda has plenty of converts. Bank of Canada Governor Mark Carney is talking up productivity at every opportunity – in speeches and private chats with chief executives. Software executive Tom Jenkins is out pushing his report on spurring innovation with an overhaul of federal research and development spending. And several eminent former ministers, top bureaucrats and policy experts, including Michael Wilson and John Manley, are prodding the Harper government to mount an ambitious economic agenda.

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