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Policy Changes Can Boost Technology Adoption

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David MacLean.

Edmonton is home to many dynamic manufacturing businesses who are on the forefront of digitization and technology adoption. These companies are benefiting from lower costs, greater efficiencies, and increased capacity to deliver innovative and, in some cases, more customizable products.

As a result, many are seeing rapid growth in their business. Indeed, a growing number of Canadian manufacturers are embracing Industry 4.0 (the digitization of manufacturing) and are investing in digitization and advanced technologies.

However, advanced technology adoption is still more the exception than the rule. More than half of Canadian manufacturers are not investing in advanced technologies today and close to half have no immediate plans to do so. Real spending on machinery, equipment and intellectual property products in Canadian manufacturing was about 21 per cent lower in 2017 than it was in 2005, and investment levels have not grown at all since 2010.

Canadian (and Albertan) manufacturers lag behind their international counterparts when it comes to investing in new machinery, equipment and technologies. Data from the OECD suggest that we’re close to the bottom of advanced economies in terms of capital investment growth over the last five years. Canadian gross fixed capital formation (GFCF) has risen by 6.0 per cent over the last five years. That’s well below the OECD average of 24.6 per cent. The US growth rate was 26 per cent. The EU’s was 30 per cent. In countries like Ireland and Iceland, GFCF has more than doubled in the last five years.

This must change because we know that, like yeast in bread, technology adoption drives growth.

A recent study by Canadian Manufacturers & Exporters (CME) lays out three key obstacles that need to be overcome to reverse these trends. First, Canadian companies lack information and testing opportunities for new equipment and technologies. Second, new technologies are too expensive and the return on investment is uncertain for inherently risk-averse Canadian manufacturers. Third, businesses lack the skilled workers needed to take full advantage of the opportunities presented by digitization and automation.

Overcoming these challenges won’t be easy, but CME has laid out some recommendations that will help.

The federal and provincial governments, in conjunction with institutions like NAIT and University of Alberta, can facilitate testing and demonstration hubs that give manufacturers the opportunity to learn about and test new and emerging technologies. The feds should also introduce a shared 20 per cent investment tax credit on the purchase of new technology. This can be accomplished partially by extending the 10 per cent credit currently only available only to Atlantic Canadian manufacturers to the rest of the country. Finally, the well-used Canada Job Grant should be expanded and made permanent.

Canadians are great manufacturers but, if we want to see future growth, we need to embrace Industry 4.0. In 2020, let’s design a national strategy that will unleash Canada’s potential.

Canadian Manufacturers & Exporters (CME) is the voice of Canadian manufacturing. CME represents more than 2,500 companies who account for an estimated 82 per cent of manufacturing output and 90 per cent of Canada’s exports.

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