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Ontario sticks with $220 million Cisco deal; says layoffs won't have impact

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TORONTO - Cisco System Inc.'s plans to lay off about 6,000 workers globally as it restructures to cope with increasing competition will have little to no impact in Ontario, the governing Liberals said Friday.

It also won't affect the deal they struck with the company's Canadian division to provide $220 million over a decade to expand its operations in the province and create 1,700 jobs, said Economic Development and Employment Minister Brad Duguid.

"It's important to know that on all of these partnerships, we have strict performance measures in place that hold companies to account for the number of jobs and the timetable for the creation of those jobs," he said.

"In this case, there's nothing at risk."

But the government isn't coming clean with the specific terms of their contract with Cisco Canada, such as the number of jobs that need to be created annually to receive taxpayer dollars, said the New Democrats.

They obtained a copy of the contract through freedom of information laws, but those key details were redacted, said economic development critic Wayne Gates.

"(Cisco is) getting people of Ontario money to go into their company, and I believe that the taxpayer should know exactly where their money is going and exactly what the guarantees are," he said.

"We've seen with other companies in the province of Ontario receive money, whether it be from the Liberal government, and they've got up and they've left."

Progressive Conservative finance critic Vic Fedeli agreed.

"Whenever you're dealing with public dollars, there should be full disclosure," he said.

Duguid said no money has gone to Cisco yet, but it will be forwarded over time as performance measures are met.

"The good news is they've indicated that our partnership is fully continuing and those 1,700 new jobs are going forward."

Cisco said it has about 1,600 employees in Canada. While the company can't provide specifics about the location of the cuts, not all business units or entities within the high-tech giant will be affected, said a company spokeswoman.

"I will also note that there is no hiring freeze, and we will continue to invest in the talent that will drive our future," Karin Scott said in an email.

"Our job development agreement with the province of Ontario remains unchanged."

A government source said the bulk of the money for Cisco — up to $190 million — will be available within the first six years, which will help them invest in training, as well as labs and testing facilities. It includes a performance payment once they meet their targets and an audit is done.

There will be clawbacks if Cisco doesn't meet their targets, the source said. The project could also be halted.

But specific target figures were not disclosed.

The Liberals have been criticized for the subsidies they're providing businesses, which they say are necessary to complete with other North American jurisdictions and expand key industries to bolster Ontario's economy.

Both Kellogg and Novartis, which received government help, announced plans last year to shutter factories in the province, resulting in the loss of more than 800 jobs.

But the government is sticking to its plan to give $120 million to Canada's largest software company, Open Text Corp. (TSX:OTC), and disburse $2.5 billion over 10 years to lure and keep businesses in the province.

Critics complain that writing cheques to big corporations is a bad idea and the government should clean up their own balance sheet — including eliminating a $12.5-billion deficit — to attract business.

Cisco's U.S. parent company — which makes network equipment — rakes in billions of dollars each year, while Waterloo-based Open Text's annual revenues have reached over a billion dollars.

"Cisco is paid taxpayer money to create jobs, we see that they're laying people off," Fedeli said.

"The money was supposed to create jobs, not pink slips, so we're looking forward to full disclosure from the government as to what they're getting for the $220 million."

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