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RIM slump highlights government inaction

The ongoing events at Canada's Research In Motion (RIM-T) are a travesty for all stakeholders. The job losses speak for themselves, as do the negative impact on the already challenged Ontario economy and the shareholder wealth that has been decimated. The list goes on; and of course, there's the wounded national pride to have a Canadian company which had the world in its palm, shrink to be a skeleton of its former self.

The technology and management of RIM were Canadian, and RIM catalyzed the, relatively speaking, wasteland of the post Nortel technology sector in central Canada.

True, RIM's new CEO Thorsten Heins presented a brave face in his Globe and Mail op-ed on Tuesday. However, it's pretty tough to be optimistic about the likelihood that the RIM we like to remember, ever returns. Anyway enough of being a romantic.

What I've really got a bee in my bonnet about is for Canada not to lose the ecosystem that developed around RIM. Less than 3 years ago, based on market capitalization, RIM was the most valuable company in Canada. A thriving, commensurate direct support system had developed in Waterloo and Ottawa, with secondary benefits in other regions of Canada.

But post the flame-out of Nortel after the turn of the millennium, Canada lost a significant portion of the technological breadth that had developed around that industry leader. With venture capital scarce, engineers and management talent fled to the more adventuresome climate south of the border.

This concern is not meant to diminish the contribution being made by the many thriving entities and start-ups in various parts of Canada. In fact, Toronto has witnessed a record number of tech start-ups in each of 2010 and 2011.

But back to RIM; why did we lose a lot of the Nortel ecosystem 10 years ago. Cutting to the core, it's because Canada, and many of its provinces, have suffered from an absence of pragmatic industrial policies for a long time.

Look at the Toronto Stock Exchange. In 1981, 44% of the market capitalization was in resource stocks. What's that percent today? Still 50%. Ten years ago, more than 80% of our exports went to the USA; today, Canada is still dependent upon the USA for almost 75% of our exports.

Politicians speak many good words but appear to make little headway in advancing Canada beyond being hewers of wood and drawers of water. The Americans have Apple and the South Koreans have Samsung. Aside from our world class, but long coddled financial services sector, the vast majority of our largest companies merely extract resources from the ground.

Last Friday, Federal Minister of Finance, The Honourable Jim Flaherty said it's up to RIM to identify its own path to salvation. The day before RIM had announced its intention to axe 5,000 jobs from its workforce of 16,000.

The governments of Canada and Ontario bent over backwards to bail-out the non-Canadian owned General Motors a few years ago. More than $3 billion was lent to the company, and now there's chatter that GM may not live up to maintaining the minimum number of Canadian jobs it had agreed to when it wanted help.

Ottawa and Ontario need to coordinate the appropriate group of individuals, to brainstorm on how to identify actions to mitigate the fallout from what could happen to the ecosystem surrounding RIM.

We must transform the current adversity into a formula for success, then support the drawn conclusions with the appropriate mix of incentives and capital to ensure success.

Analysis shows that the U.S. government created Qualcomm and many other high value added, world class companies. Let's get off our pulpit in this country and make things happen.

Ottawa and Queen's Park, over to you


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