Developing Strategies for the Province of Ontario
by www.canadastar.com Chief Editor Mr.F. Jiang 2015.1.13
Ontario is Canada's most important province, there are more than 100 million square kilometers of land (Canada 2), over 13.6 million people (2014, Canada 1),Canadian GDP US$ 1,794 Billion(2014, 11 in the world), Ontario GDP C$ 674,485mil (2012, Canada 1); there are many important cities, the capital of Canada-Ottawa (political, cultural), Metropolitan Toronto (economic, cultural, educational, medical), Hamilton (steal, food processing, education, health care), London(life sciences-biotechnology, Insurance ,Manufacturing and education), Windsor (automobile), Kingston (health care, education and government) , Waterloo (insurance, high-tech, education ), Guelph(Manufacturing, Education, agri-food and biotechnology) ; rich in natural resources (minerals, farm animal resources and the world's largest freshwater resources), and tourist attractions (Niagara Falls, Algonquin Provincial Park, the Royal Museum).
1 Now, the Ontario Government is concerning for the following:
(1) A huge debt (C$ 277 billion, more than C$20,000 /resident of Ontario, http: //www.debtclock.ca/provincial-debtclocks/ontario)
(2) Youth unemployment is high, the government investment in technical training, investment in education.
(3) With an increasing aging population, social welfare and medical expenses will continue to increase.
(4) Every year investment in research and innovation, there are a lot of innovations every year, but rarely successful high-tech companies. Return on investment is very low.
(5) Fall of historical companies, including Nortel, Stelco and the current struggles of Blackberry.
(6) Government rely on traditional heavy investment in repair highways and build bridges, in order to stimulate the economy; but it has added new debt, I do not know what year can repay?
2 My strategies for the Ontario Government
My advice is to develop novel important trading partners, strengthen the venture capital (shares of new companies), enhance the competitiveness of current enterprises and enhance Canada's youth employment rate. Strengthening the resources sector would increase the added value and increase the employment rate. Optimizing elderly services would reduce medical expenses and burdens on the welfare system. Optimizing government management of tax funds would reduce costs. As Ontario hosts more well-known large companies, the Ontario debt can accelerate the repayment of the debt, the employment rate will increase and social security will become more stable. Specific strategies are as follows:
(1). Developing novel Ontario trading partners
Ontario's largest current trading partner is the United States （roughly 90%, major in manufactured goods), followed by the UK and China. If we consider the proportion of the immigrant population and its market size, Canada can easily raise exports to Europe, China, and the Indian market. This will create more jobs opportunities and can allow new immigrants to play a role in trade transactions.
(2). Supporting Canadian research:
Research fields include: materials, telecommunications, aircraft, automotive, pharmaceuticals and vaccines, agriculture and livestock, cultivation, and environmental protection.
(3). Strengthening the venture capital (shares of new enterprises) to enhance the competitiveness of Canadian businesses and enhance youth employment rate.
Ontario is home to many world-renowned universities. There is federal support for various research projects each year however the government receives very little in return. Gaining provincial and municipal cooperation to strengthen the University Technology Park will continue to offer venture capital (possession of certain shares) and allow us to focus on supporting emerging research fields in Ontario. Not only would this support the strength of enterprises and emerging companies in Ontario, it would also increase employment of college graduates. Once a business becomes successful, the government will earn high returns and can turn that to support new enterprises and reduce debt, resulting in a virtuous circle that allows us to pay off debt early.
I would suggest that all levels of government in Canada should focus on managing the economic slowdown that led to previously-encountered economic debt. Starting with roadwork and building of infrastructure acts only as a passive approach. This approach is not the most effective way to reverse the economic slowdown and may make it more difficult to repay the debt in the long run.
Specifically, I would suggest for the government to reverse a portion of the fund invested in the economic slowdown and divert it to many of the innovative technologies of new businesses
(eg. new materials, telecommunications, aircraft, train, automotive, pharmaceuticals, vaccines, agriculture, livestock, cultivation, environmental protection), new food processing enterprises, new elderly services, new network services,
and then occupy a certain share. For example, if governments fund C$1 billion for venture capital, an investment of $500 000 allows you to hold 10% shareholder stake in the new business and hire two related technical services staff. Coupled with the entrepreneur himself this equates to three staff persons.
As such one can support up to 2000 new businesses to create at least 6000 direct employment opportunities. Based on the estimation of a 10% success rate to the venture investments, this would result in 200 successful businesses locally, and would play out to redeem long-term economic benefits.
The federal government can then withdraw funds from IPO to fund other new companies and repay debt.
In comparison, how many direct and indirect jobs can be created through investing C$1 billion in repair highways and build bridges? How many years would it take to repay the debt and interest?
3 Initiating a joint investment as a pilot
I would suggest initiating a joint investment from the federal, provincial and municipal Hamilton government toward the Hamilton City Development Zone as a pilot, and in addition, offer $30 million annually as venture capital for three consecutive years, then wait to see results. Investments should gear toward the characteristics of Hamilton with emphasis on innovation and new technological enterprises.
I would suggest for the government to divert a portion of the funds invested in the economic recession toward the following:
（1）Innovative technologies of new businesses (with innovative advantages of McMaster University, such as new materials, telecommunications, automotive, pharmaceuticals and vaccines, and environmental protection and other fields.)
（2）Food processing businesses (in cooperation with surrounding farms and a majority of Ontario's prominent food processing enterprises)
（3）Elderly services (with the advantage of the Hamilton health sciences group, the establishment of the elderly living area, ancillary services, entertainment, attracting families to settle retirement.)
（5）To encourage and support the establishment of a private art – antique museums, support for antique, art, auction enterprises (focusing on the United States, Britain, Canada, China and India). This will help attract a larger number of tourists and collectors to the city, which will help promote the development of the catering and hotel industry. Near 14 mil tourists visited Toronto in 2013 and 12 million tourists visited Niagara Falls each year. That means at least 10 mil tourists by pass Hamilton each year.
A sustained venture capital investment of $30 million annually for three years can help reduce the risk of venture capital.
If $500,000 is invested into each new company, VC fund will have 10% stake in the new company, two technical services staff need be hired. Coupled with the entrepreneur himself this equates to three staff persons. Up to 180 new businesses can be supported in these 3 years, creating at least 540 direct jobs. Based on the estimation of a 10% success rate to the venture capital investments, there will be 18 successful businesses locally that would act as new pillars of enterprise that can draw long-term economic benefits. Each level of government can then withdraw from the successful IPO of companies to help repay their debts and fund new companies.
In comparison, how many direct and indirect jobs can be created through investing $90 million in roads and bridges alone? How many years would it take to repay the debt and the accumulated interest?
In my view, if government has huge debt, during the economic slowdown or recession, government should put money on the area which can create more jobs and have high return in the future. Otherwise, they will build up the dept and face bankruptcy.
If the pilot succeed, then it can across the Ontario, so that most cities can cut the debt, increase employment, make Ontario the best place in the world to live and work.