FINANCING THE NEW ECONOMY

• World economies are changing rapidly. New ideas and innovations are becoming increasingly the drivers of economic growth and societal progress. Industries are becoming knowledge-intensive. Even traditional industries are caught in the swing of the information revolution. Powerful new industries unimaginable a few years ago are now emerging. However, the most important phenomenon is the globalization of the economy and the net increase in international competition. It is in this tough and vibrant environment called the New Economy that Canadian firms must grow and prosper.

• It is a well-known fact that Canada's industrial structure is truncated, lacking the manufacturing strength of several advanced countries and small economies like those of Switzerland, Denmark, Sweden and others. It is also a recognized fact that small and medium-sized enterprises (SMEs) are playing a very significant role in the New Economy, particularly with regard to innovation and new job creation.

• However, it is also a fact that even though the technology-based SMEs are thriving on innovative products and services, relatively very few of them in Canada even have an engineer in their employ. This is in strong contrast with SMEs in Germany, France, U.S., and several other countries. How can these SMEs hope to successfully enter world markets without having the basic requirements to deal with fast advancing technologies? How can they enter the world of total quality without having engineers in design, production and services to clients? How can they position themselves with regards to emerging technologies? How can they benefit from research carried out in our universities with regard to emerging technologies transfers when they do not even have an "interpreter" of technology or of scientific advances?

• Yet, is is anachronic that due to the present recession, many competent engineers, including many new graduates, cannot find employment in their field of competence.

• Another basic problem facing SMEs is their chronic undercapitalization and unsufficient involvement in R&D. The Federal Government should recognize that financing has become a critical determinant of the success of knowledge-based SMEs, of which there are thousands now in Canada. Many studies have shown the great difficulties encountered by SMEs in obtaining both debt and equity financing.

The Federal Government must move ahead with its intention to help finance the new economy as announced in the Budget Speech on February 22, 1994. It must facilitate to small business, particularly the emerging high-tech companies, access to adequate capital.

Recommendation No.8

The Federal Government in collaboration with the provincial governments and the engineering community, should establish the "Engineers and Scientists Program", as announced in the 1994 budget, to increase rapidly the employment of engineers in small and medium size entreprises following the very successful PSES program in Quebec.