New Alberta innovation minister hopes tech-focused recovery plan will help province compete for capital, talent – The Logic

On Thursday, Alberta reported its worst-ever deficit, projecting a $24.2 billion budget shortfall for the 2020–21 fiscal year amid a pandemic and drop in oil demand. It falls to newly-appointed Innovation Minister Doug Schweitzer to implement the province’s tech-focused recovery plan. 

The current United Conservative Party government is not the first to try to diversify the traditionally energy-heavy provincial economy, and tech executives have questioned its commitment to the sector following a series of cuts last year. Schweitzer said the government has heard their concerns, and believes its new incentives and programs will attract capital and talent. “Technology-driven companies aren’t geographically determined,” he told The Logic in a Thursday interview. “We have to make sure that Alberta is competitive.” 

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New Alberta Innovation Minister Doug Schweitzer is charged with implementing his government’s post-pandemic recovery plan, including a new R&D incentive, funding for VC firms, and an investment attraction agency set up to rival other provinces and countries for capital. The local tech sector has welcomed the new efforts, but remains wary following cuts to tax credits and programming last year.

The pandemic exacerbated the downturn of an already-struggling Alberta economy. In June, RBC Economics real GDP in the province would contract 8.7 per cent in 2020, behind only Newfoundland and Labrador, after shrinking an estimated 0.6 per cent last year.

Announced that same month, the province’s economic recovery effort $175 million in new money for the Alberta Enterprise Corporation (AEC) fund-of-funds, an investment-attraction agency, and an R&D grant to be introduced in January 2021. Schweitzer’s department is also working on plans for industries like technology and innovation and finance and fintech, among others, to be unveiled in the fall. 

The pandemic has made companies reconsider the factors that inform their location decisions, Schweitzer suggested, noting that “a lot of those big banks are working out of kitchen tables right now, where people are at home on Zoom calls.” Last month’s reduction in the provincial corporate tax rate, now at eight per cent, gives firms the best chance to get a return on their investment, he said. “That’s in Alberta; it’s not in Ontario.”

Tech executives expressed concern about the new UCP government’s plan for the sector last year after it first and then five tax credits including ones for scientific research and experimental development (SR&ED) and startup investment. Some they were considering leaving the province. In December 2019, The Logic Toronto-based Wattpad had picked Halifax over Calgary for its second headquarters.

In making the cuts, Finance Minister Travis Towes the additional administrative and compliance costs of applying for and administering targeted incentives, touting instead the broad-based rate reduction. His budget also claimed “the federal government already provides generous supports for research and development.”

Despite this, the province’s new innovation employment grant covers the same innovation activities as Ottawa’s SR&ED credit, although the province says its payout—eight per cent for the regular level of annual expenses and up to 20 per cent for anything above, up to $4 million in spending—is the best in the country. The incentive is a response to feedback from the business community, Schweitzer acknowledged. “We heard loud and clear that [for] startups that don’t necessarily generate profit out the gates—sometimes it can take them years—Alberta had to do more to be to be competitive [and] attract that growth capital,” he said. He believes it’s not too late to win the tech sector back. 

Innovation economy executives who the government for last year’s credit cuts offered cautious praise of the new grant. “It could very well mean more money in the hands of businesses that actually take new ideas and commercialize them,” James Keirstead, CEO of Edmonton-based electronics company Levven, told The Logic shortly after some program details were in July. But he called for a replacement to the investor tax credit, which incentivize local sources of capital to consider backing the startups around them. “[There’s] lots of oil and gas money that’s done billions of dollars in investment deals, but not in the tech space because they don’t know [it],” he said. 

The government is looking further afield. It’s currently scouting for a CEO for Invest Alberta Corporation (IAC), set up to the province and court outside capital. The arms-length agency will highlight the low cost of living and office space, highly-educated workforce and tax differential, according to Schweitzer. It’ll have offices in Singapore, Hong Kong, London, New York and Houston, as well as domestic ones. “We’re going into the heart of Vancouver, Toronto,” he said. 

The agency will pursue potential investors, acting as a concierge, but will not be “investing directly in projects,” Schweitzer’s spokesperson Justin Brattinga told The Logic. By contrast, Invest Ontario, last month, will fund companies that choose to locate there. “That’s one failing that I think governments of yesteryear [had], when they were too hands-on … in making strategic investment decisions,” Schweitzer said, claiming he will instead rely on the domain expertise of AEC and IAC to make calls with the province’s money.

The new minister also touted the province’s commercialization success, citing Alberta Innovates. The agency “has done an amazing job over the last long time actually developing technologies” in the environmental and pharmaceutical sectors, he said. “Investors around the world [should] know this is a tool that they can use to help develop their startup [and] technologies that are going to create the next unicorn for Alberta.”

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Despite this, the October 2019 provincial budget Alberta Innovates’s budget by $129.7 million over the following two fiscal years, and it later laid off 125 staff. Asked about the cuts in light of his praise of the agency, Schweitzer cited the recency of his appointment. “A lot of things have changed over the last while in the province, with the pandemic and other areas,” he said, adding that his portfolio will expand in the near future. 

With files from Catherine McIntyre.