Diversification can have some disadvantages

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Noah Decter-Jackson, of Complex Games Inc., has eight people working at his video game development company. (JOE.BRYKSA@FREEPRESS.MB.CA)

THE Conference Board of Canada's latest municipal forecast shows quantitatively once again just how diversified the Winnipeg economy is.

But diversification can also mean that some elements of the economy get spread thinly.

A case in point are the efforts that have gone into development of knowledge-based industries.

In the Economic Review and Outlook part of the recent provincial budget documents, it is stated clearly: "In the current economic environment, it is important to continue to focus on and invest in Manitoba's innovation system."

What is not stated -- clearly or otherwise -- in any of the budget documents is that the province decided to close down the $500,000 per year Manitoba Interactive Digital Media Fund (MIDMF).

New media players were surprised by the news in a meeting with department officials just days after the budget.

The Department of Innovation Energy and Mines did sustain the largest departmental cut and it seems that was part of the rationale for ending the fund.

MIDMF provided funding -- some of it repayable -- for new media producers to develop prototypes of key elements that might become games or web-based applications designed to ultimately get launched into the commercial marketplace.

Four years ago, Complex Games Inc. was an idea that existed in the mind of Noah Decter-Jackson. He applied for some funds from the MIDMF three years ago and now he has eight people working at his video game development company with a few small products on the market and others wrapping up.

"We have seen the industry slowly growing," he said. "Part of that ability to grow is thanks to this fund. To see it go away will definitely affect the growth of small one-two-three person firms that we need to create the grassroots industry."

Kevin Hnatiuk, executive director of New Media Manitoba, an industry association, said the news was a total surprise, even though he knew there was belt tightening and tough budget decisions that had to be made.

"The sad thing about it all is that nationally no one is cutting their incentive programs," he said. "We are the first to cut this kind of program."

Let's assume those kinds of decision on budget cuts are not taken lightly and its elimination was probably easier to stomach than others because it was not a particularly large line item.

Doug McCartney, the province's lead official on innovation, research and technology policies and initiatives, said one issue considered was that uptake on the fund was weak and the province needs to see evidence of real impact.

"The reality now is that we need to see what the outcomes are going to be," McCartney said. "That lens is even sharper now because the demand is so great."

Without putting too fine a point on it, the province is also relying on a larger federal government New Media fund that was recently launched to pick up some of the slack.

A provincial new media tax credit was enhanced and the province also increased the refundable portion of the 20 per cent provincial scientific research and experimental development (SR&ED) tax credit. An actual tax refund for research spending can be applied for rather than having to wait to use the tax credit until the entity becomes profitable (which sometimes never happens).

Those are developments that industry people have fought for for years.

But with a provincial deficit looming and incentive schemes becoming scarce in a post-recession climate, the bloom will start to come off the fairly robust economic growth the province has experienced in the last few years.

The Conference Board's municipal outlook that came out Wednesday clearly indicates that Winnipeg's economic growth is likely to slip back into its traditional position in the bottom quartile of Canadian cities.

For all the brave talk that regularly comes out of Broadway on this government's commitment to growing the knowledge-based industries, it is passing strange that so little attention is being paid to that sector at a time when the global economic order is getting rewritten.

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition April 8, 2010 B5