BC has not been spared the effects of the worst global recession in 70 years and the drastic reduction of government revenues has created larger provincial deficits than the government and most private sector economists had predicted in February.  As such, the Government of British Columbia had to make some tough choices in the recent Budget Update.

Finance Minister Colin Hansen pointed out that the two main drivers behind the budget decisions were the protection of core services and ensuring that BC is well positioned to benefit from the economic recovery. Faced with tough fiscal challenges, the government chose to focus on its core mandates of health care, education and social services while accelerating capital spending as an economic stimulus and cutting spending on selected programs and administrative expenses.

For the technology industry, our most relevant ministries, Small Business, Technology and Economic Development (STED) and Advanced Education and Labour Market Development (AVED), were both spared budget cuts. In fact, STED received a $9M increase in its budget for Asia Pacific, Trade and Investment for the next three years.

The key programs supporting the technology sector continue to be funded, including:
• investment tax credits under the Small Business Venture Capital Tax Act;
• provincial SR&ED tax credits; and,
• The Innovative Clean Energy (ICE) fund.

This is not to say that the BCTIA would not support the expansion of these programs or the introduction of new initiatives for advancing the industry, but in light of the government’s fiscal conservatism, we believe that the decision not to reduce existing programs is an indicator that the government indeed recognizes that the future of growth industries cannot be sacrificed due to present constraints. This impression is certainly validated with respect to the clean tech and clean energy sectors, which were strongly endorsed in the recent Throne Speech.  The BCTIA will continue to work with government to ensure that other sectors of our industry are also featured prominently in the government’s overall economic development strategy.

The BCTIA is concerned that the cuts to general discretionary spending further reduces the government’s ability to support new opportunities in general and for the advancement of the knowledge industries in particular.

Notwithstanding the current economic and fiscal challenges, these industries play an increasingly important role for job creation, growth of exports and of GDP. Therefore, the BCTIA strongly encourages the government to focus their efforts and attention on activities and initiatives that will foster the further growth and success of the industries that have the proven resilience to sustain our economy today and into the future.

Pascal Spothelfer
President & CEO
BC Technology Industry Association

For more insights into how the BCTIA believes that industry can work with government to help create and advanced technology sector here in BC, attend the October 20 Forum Positioning for Prosperity: Commercial and Industrial Opportunities for a New BC Economy hosted by the BC Business Council.  Go to www.bcbc.com for more information.

Last week’s announcement by the BC government to replace the current GST/PST system with the Harmonized Sales Tax (HST) in 2010 came as a surprise for many British Columbians. The adoption of the HST has been advocated by industry and business associations for quite some time.

Following the announcement last week, Premier Gordon Campbell and Finance Minister Colin Hansen invited representatives from key business associations to a briefing on Friday, July 24. This meeting served to provide more background information on the new HST system, and to offer associations the opportunity to work with the BC government on the implementation.

The government was questioned over the timing of the announcement.  Minister Hansen explained that there were two factors that influenced the timing of the decision. One was the adoption of HST by the Ontario government, and the second was an increased flexibility on the part of the federal government   (for example, BC will be able to implement a 12% HST, whereas previously the federal government required it to be 13%). Furthermore, any HST agreements with the federal government had to be completed by September, hence the suddenness of the announcement.

The May 12 provincial election race is on and both the NDP and the Liberal Party have released their election platforms. With the global economic crisis as a backdrop, jobs, social issues and the economic response dominate the agenda. Neither party gives the technology industry more than a passing mention.

NDP Platform – "Take Back BC"

The NDP positions itself as the party that will bring change, but their platform provides limited vision for the province, focusing on small pain points rather than the big picture.

We do applaud the NDP for (indirectly) acknowledging the access to capital issues that encumber our industry by committing $200M of their Green Bond to fund clean technology over the next ten years. However, we disagree with the fiscal instrument chosen. A $10B bond issue, however it is branded, still creates $10B in new provincial debt. Thus, we prefer the Innovative Clean Energy (ICE) fund introduced in 2008 by the Liberal government that funds $25M per year for clean energy technology projects through a revenue-neutral energy levy.

Ultimately, capital needs to come from capital markets and from a strong financial services sector. As such, we cannot support the NDP’s re-introduction of a capital tax that burdens BC’s financial services sector.

However, we do recognize the NDP for making specific technology recommendations: fuelling technology transfer; acquiring lands in Vancouver’s False Creek Flats to help build the high-tech cluster; developing more technology parks across the province in partnership with local post-secondary institutions.

How technology transfers are to be fuelled is left open, but the principle itself is certainly valuable. Given the ongoing development of the Great Northern Way lands and Discovery Park’s acquisition of the adjoining QLT property, we wonder how the acquisition of dedicated high-tech land will fit into the picture. In the past, the BCTIA has called for high-tech start-up space and infrastructure, and regional tech parks to facilitate the spin-outs from post-secondary institutions outside the Lower Mainland, and it is an initiative we continue to support.

One area in which we disagree with the NDP’s position is energy. The NDP bashes independent power producers (many of whom use alternative energy technologies) and intends to eliminate BC Hydro’s Smart Metering Program. A key component of the Smart Grid, smart meters will help consumers manage their own energy consumption and allow them to sell excess energy back into the grid through net metering. Smart metering improves the potential for local power generation, much of which is based on alternative and green technologies.

Clean energy is one area where BC can lead North America and generate wealth for the province, both from energy sales and the export of our technologies and know-how, and we can do this while also reducing our carbon footprint. It does not make sense to sacrifice this future for the sake of votes today.

Liberal Party Platform – "Keep BC Strong"

The Liberal Party platform contains no surprises, reflecting the budget presented in February. As such, the platform does not introduce any new major initiatives and instead focuses on the party’s proven leadership and continuity in difficult times. The technology industry does receive a brief mention that commits the Liberals to working with all stakeholders within the sector for its advancement, but does not contain specific initiatives.

With the incumbent government we have the benefit of looking at its track record. This yields better insights than the analysis of the platform document. The technology industry as part of the overall business sector has certainly benefited from the Liberals’ re-establishment of a business-friendly environment over the past eight years.

Overall the Campbell government has a strong record for improving the business environment in BC. Lowering both corporate and personal taxes has provided benefits in the areas of investments, job creation and talent attraction by helping to make BC a desirable destination for capital and people. The technology sector has also been helped by incentive programs such as the Venture Capital Corporation (VCC) and Eligible Business Corporation (EBC) tax credits, the ongoing support of the province for the Employee Venture Capital Corp. (EVCC), as well as the formation of the BC Renaissance Fund, designed to improve access to later-stage funding. In addition, the Campbell government has taken a leadership position in the reduction of greenhouse gas emissions and has provided a fertile environment for our clean technology companies, which are expected to be a major source of growth for the technology sector in the years to come.

A detailed review of actions taken by the Liberal government over the past eight years is provided in the 12th Report of the Premier’s Technology Council, released in mid-April. This report, unlike previous ones, makes few new recommendations. However, it does review the ways in which previous recommendations have been implemented, as well as providing a strategic context for this review. The report also indicates areas where further improvements are required going forward.

There are two areas in the respective party platforms that warrant additional commentary. The first is government procurement. The NDP provides a discussion of potential policies to encourage buying locally, while the Liberals focus on breaking down inter-provincial trade barriers to help create new markets within Canada. The BCTIA supports efforts for procurement provincially and locally, provided such policies don’t incent our companies to stay small by limiting competition through an inefficient market. Domestic procurement by governments (and industry) can facilitate the growth of our companies, allowing them to grow and then export proven solutions outside BC using economies of scale, and in the process create real wealth for the province. We do support stronger procurement policies.

The second issue is workplace training, and we urge both parties to reassess their thinking in this area. Both the Liberals and the NDP focus on apprenticeships and corresponding training tax credits for companies with apprentices. While a focus on apprenticeships is beneficial for traditional industries, it completely misses the mark in helping knowledge workers upgrade their skills to retain their relevance and competitive edge, and to commercialize intellectual property. With the BCTIA’s focus on talent, this is one area where we will continue to push for solutions that include the technology sector.

We understand that this election is not being fought over big future concepts, but rather the issues that British Columbians face today in a difficult economic climate. However, once the election is in the books, attention will have to be paid to our economic future.

In our recent work with the Business Council of BC on the Opportunities BC 2020 project, it became clear that knowledge-based industries will have to complement our traditional reliance on resource-based industries for BC to maintain and expand its prosperity. The technology industry will play a key role in this transition over the next ten years. In addition to providing a favourable business environment and supportive initiatives, the government will have to take a strategic approach in building a more knowledge-based economy.

To that end we will require proactive initiatives that grow our exports, facilitate the growth of larger technology companies, allow us to build on our existing strength in ITC, Life Sciences, Clean Tech and New Media, structurally enable the government to plan and act strategically, and continue to improve our education system.

The BCTIA will be working closely with the provincial government and all interested stakeholders in the months and years ahead.

Pascal Spothelfer,President & CEO

BC Technology Industry Association

With a balance between reduced government spending and modest deficits for the next two years, BC’s Budget 2009 has answered the call of the federal government to co-invest in the nation’s infrastructure, while staying true to the government’s brand of fiscal prudence.  As key elements of the federal stimulus investment require regional leverage, the Campbell government commitments should ensure that BC receives our fair share nationally.

By protecting current health care and education spending levels, while running a lower than expected deficit, the government had little room for spending in other areas. Therefore, Budget 2009 provides few direct benefits for the technology industry.

Some of the specific commitments mentioned in the budget include:

• $1.7 billion in investment in post-secondary education infrastructure, leveraging the federal commitments to renovate, retrofit and expand post-secondary research facilities.
• Additional $5 million over 3 years for the Connecting Citizen’s Grant Program to encourage delivery of ‘last mile’ broadband internet connectivity and wireless coverage for rural and remote communities.
• $15 million to support health research at the Michael Smith Foundation.
• Extension of the BC Mining Flow-Through Share Tax Credit.  This should encourage further mineral exploration across BC and provide additional opportunities for technology and engineering firms that service this sector.
• Improving access to highly-qualified personnel by investing $16 million over three years to remove barriers to employment for BC’s immigrant workforce.