Canada's Future Seen in Natural Resources

Canada's Future Seen in Natural Resources

Canada should focus on developing its natural resource industries instead of pouring money into unsuccessful high-tech companies in hopes they'll eventually become world-class competitors, says a new report on international competitiveness.

The natural resource industry is a part of the economy already succeeding in the global marketplace, says the report, which was commissioned by Kodak Canada Inc. and made public yesterday.

It takes issue with groups such as the Ontario Premier's Council that suggest that Canada's economic future depends on developing new, high-tech industries.

It says every segment of Canada's economy - including service industries, which appear to believe they need only concern themselves with the domestic marketplace - must think globally, and work according to international standards of productivity.

The Premier's Council, established by Premier David Peterson to develop an economic strategy for the province, came to a similar conclusion in report, said the co-authors of the Kodak study, professors Alan Rugman and Joseph D'Cruz of the University of Toronto's Faculty of Management.

But they criticized the council for recommending that governments target a few, select high-tech industries that it believes might be able to trade globally, and for also suggesting that profits from natural resource industries be used to subsidize the new ventures.

"The medicine prescribed by the Premier's Council report will bankrupt the patient," the Kodak report states. "Industrial policy should not focus exclusively on a relatively uncompetitive and small sector of Canada's industrial base (but) build upon the existing current success of Canada's natural resource industries."

The council wants to create six more companies like Northern Telecom, one of Canada's main research and trade success stories, D'Cruz said. "That's a wonderful idea, but the chance of getting it is very low."

The Kodak report's recommendation doesn't mean Canadians should revert to being hewers of wood and drawers of water, who simply harvest and sell natural resources for others to process, Rudman said in an interview.

But Canada should focus on industries that process natural resources, rather than focusing entirely on other technologies, he said.

"You can't afford to write off our natural resources, you have to develop them into industries."

The 48-page report also attacks government policies aimed at increasing spending on original research and development in Canada.

Developing original products is expensive, D'Cruz said. "For a small country like Canada, it's always better to try to buy (knowledge) than to produce it. If we try to create it, we'll be worse off."

Canada should shop the world for the best available technology and then work on incorporating it into products that can be exported, the report says. "Instead of engaging in a futile effort to become world-class producers of scientific knowledge and technology, the Canadian business community needs to become a world- class consumer of technology."

The report also endorses the business community's standard prescription for economic health, including better education and training - more oriented toward business needs - and deep spending cuts to eliminate the federal deficit.

If the federal government chopped its bureaucracy by about 15 per cent annually, it would not only cut the national deficit but also improve the delivery of government services, the two professors said, in answer to questions about their report.