Ontario Leads in Life Sciences, ICT, and Automotive Innovation
A favorable business climate, highly educated work force, and spirit of innovation are helping Ontario advance its economy.
Steve Stackhouse-Kaelble (June/July 10)

What will the next big thing be? The product that takes the world by storm and earns a handsome return for the company that created it? It may not have been invented yet - but it will be soon.

It makes sense for growth-oriented companies to plant themselves where innovation thrives, where great minds have converged, and where the business climate encourages research and development. The Canadian province of Ontario is working hard to be that kind of place, according to Sandra Pupatello, the province's minister of economic development and trade. "We've had a lot of companies, especially multinational companies, that are seeing the benefit of using Ontario to expand or initiate their business," she says.

Green energy, advanced manufacturing, life sciences and biotechnology, and information and communications technology all feed on Ontario's R&D. They thrive partly because of the province's talented work force and scientific community, and because of a tax structure that slashes companies' R&D costs.

Profitable Growth
Consider Advanced Micro Devices (AMD), a leading designer and manufacturer of computer processors. It's not surprising that this silicon-based business is located in California's Silicon Valley. But the company is investing significant resources in its Markham, Ontario facility as it develops next generation microprocessors.

AMD's Canadian operations will merge high-performance computer and graphics processors onto a single silicon die. The company aims to break new ground in performance, use less power, and enable breakthroughs in a wide range of computing devices. And it's counting on Canadian brains to help make that happen, pumping more than $370 million into its Markham operations over five years and adding approximately 100 jobs to its 500-strong work force.

A $56 million contribution from Ontario is easing the way. At the company's expansion announcement last February, AMD President and CEO Dirk Meyer lauded the province's commitment to innovations that promise to make Markham a hub for graphics and media processing. "Ontario's grant will help preserve jobs in the critical technology sector, strengthen the regional innovation economy, and make this next era of computing a reality," Meyer said.

The provincial government is also helping Open Text Corporation, Canada's largest independent software company. In March the province announced a $34 million grant through its Next Generation of Jobs Fund, which will serve as part of Open Text's planned five-year investment of $225 million to create nearly 400 high-value jobs at its operations in Waterloo, Richmond Hill, and Ottawa.

P. Thomas Jenkins, Open Text's executive chairman and chief strategy officer, explained the province's importance in the company's long-term growth strategy. "The digital media revolution is creating tremendous opportunities for growth and innovation," Jenkins said at the expansion announcement. "The province offers the talent and opportunities for collaboration that are essential to achieving our business goals."

Manufacturing plays a key role in the Ontario economy, according to an April announcement by NOVA Chemicals. The company is pumping $78 million in upgrades into its Mooretown plant, where it makes low-density polyethylene. The company is also investing in its Corunna, Ontario plant. The growth is part of $600 million in investments in NOVA's Ontario operations over the last five years. A $10 million equipment loan through Ontario's Advanced Manufacturing Investment Strategy is supporting the company. The result: NOVA will boost productivity by 50 percent, while Ontario retains 160 manufacturing jobs at a time when many places are watching manufacturing employment dry up.

Getting Greener
In January a consortium led by Samsung C&T and the Korea Electric Power Corporation announced a green energy investment of $7 billion. The project will triple Ontario's output from renewable wind and solar sources and generate thousands of new green energy jobs to build and operate renewable generation plants. Manufacturing plants providing wind and solar technology will also benefit and add more than 1,400 new manufacturing and related jobs.

In April Ontario Premier Dalton McGuinty announced the Green Energy Act, the largest green energy initiative in Canada. "Ontario has a vision for green energy - we will be a North American leader," McGuinty said. "We have practical, aggressive policies to secure green energy generation, research, and manufacturing which will create good jobs in a growing industry."

Enacted last year, the program will create up to 50,000 new green energy jobs. Some 20,000 of those jobs are tied to projects McGuinty highlighted this spring, supported by the act's feed-in tariff program. The province approved 184 new contracts for major green-energy projects, in addition to more than 500 mid-sized projects already approved. The new contracts will generate more than 2,500 megawatts of clean power, enough to support 600,000 homes. A domestic content requirement will boost Ontario's green energy sector.

"We've taken huge steps forward in green energy and green in general," Pupatello says. Ontario aims to eliminate coal power by 2014, signifying economic opportunities for companies that conserve and generate clean energy.

Canada's Solar Bancorp and India's multinational HHV Solar announced in May plans to open the province's first solar panel manufacturing center in Windsor, which will employ some 200 engineers and production workers.

"The Green Energy Act is progressive in many ways, most obviously because it will allow Ontario to phase out coal, but more importantly and more progressively in how it will go about creating local, green jobs here in the province," said Stuart Trew, trade campaigner at the Council of Canadians, at a May conference of the Centre for Civic Governance. "The plan involves using provincial procurement in a creative and proven way to incentivize companies to source components and labor locally."

According to the Conference Board of Canada, Ontario and Alberta have the highest levels of climate-friendly technology investments. Between 2010 and 2014, such spending will hit about $2 billion in Ontario, according to a May report. Those dollars will add to the province's gross domestic product and contribute to greater exports. Driving the Province's Economy
In recent years Ontario has overtaken Michigan as the North American capital of motor vehicle production, according to industry sources. Despite the auto industry's economic troubles, Pupatello says the sector is performing relatively well.

"Our automotive sector was less affected than competing jurisdictions," Pupatello says. "In 2004, 2005, and 2006 we partnered with the automotive sector and with international automotive companies to make massive investments in their facilities. So when big companies had to make decisions, they spared a lot of Ontario facilities."

And the auto recovery is heating up. Chrysler's Ontario minivan plant has added another shift, Toyota is adding a shift, and General Motors can hardly keep up with the demand for its Ontario-fabricated products. GM Canada recently announced that it will recall 700 employees to Oshawa and Ingersoll facilities, with a third shift planned at an Oshawa facility. Honda plans another shift at its assembly plant in Alliston next year, creating 400 jobs.

In March Ford announced the transformation of its Essex engine plant in Windsor, dubbed Project Renaissance. It will create a flexible manufacturing environment while establishing the North American Centre for Diesel and Advanced Powertrain Technology, Research and Innovation. The provincial government is offering about $81 million in addition to the $17 million it contributed two years ago that helped reopen the then-closed plant.

Cooperation and collaboration achieve such advancements, said James Tetreault, Ford's vice president of North American manufacturing, at the March announcement. "To be truly competitive at a world-class level we have to work together," he said. "We have to build partnerships between business, labor, and government. And it's that spirit of collaboration combined with a willingness to innovate that has breathed new life into the operations at the Essex engine plant."

Ontario felt the pain of the automotive sector's slump. But automakers' commitments to their Ontario facilities lessened the impact, Pupatello says, compared to other auto-centric areas.

The same can be said of the province's overall economy. Times were not quite as tough in Ontario for several reasons. "No question we suffered the same fate as the rest of the world," Pupatello says. "But it's not how you fall down, but how you get up."

Canada's sensible regulation of its financial sector helped. While Canadian governments are typically pro-business, they still enforced stricter capital requirements and took other measures that prevented the kind of meltdown that afflicted the American financial sector. "We didn't have bank failures, which allowed businesses to have some continuity here," Pupatello says. "The job losses were not as dramatic."

An Innovation Economy
Invention and innovation are not new to Ontario. This is where Alexander Graham Bell conducted groundbreaking research that shaped today's communications, and where Research In Motion created the BlackBerry. Insulin as a diabetes treatment, IMAX movies, and time zones were all born here.

Ontario's business-friendly tax environment for research and development is helping the province add to that list. For every $100 a company spends on R&D in Ontario, tax credits bring the actual cost as low as $35, Pupatello says. "Any of the sectors that require intensive R&D to innovate and get to the next generation of their product get a very healthy R&D tax credit," she says.

Ontario is generous in its criteria for claiming R&D expense credits. "The definition of what we include as a credited expense is much larger," Pupatello says. Salaries, a significant chunk of research money that isn't counted by some jurisdictions, are covered in Ontario. "That's a big thing to be able to count," Pupatello adds.

Besides R&D credits, three successive provincial budgets have decreased Ontario's corporate interest rate, Pupatello says, as well as tax changes favorable to small businesses.

The tax on business investment in Ontario is being cut practically in half due to business tax cuts and the move to a harmonized sales tax, making business in Ontario more competitive. And its 33 percent corporate tax is relatively low, according to a 2009 Deloitte study.

All the tax cuts in the world wouldn't be worth much if the province didn't have the resources and brainpower to support innovation. Ontario's work force is well-educated and highly skilled. More than half of workers ages 25 to 54 years have a postsecondary certificate, diploma, or university degree. "It's much easier to grow a cluster when you have the people to work in it," Pupatello says.

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