Ontario repayable loan program not enough CPIA says

Ontario’s Economic Development and Trade Minister Joseph Cordiano announced in December 2005 a $500 million repayable loan program for manufacturing firms investing $50 million or more in the province.

However, whether Canada’s plastics processors and moldmakers will be able to take advantage of program is a different matter entirely.

Eligibility for the program requires a company to invest either $50 million or more in the province, or create or retain 150 jobs.

“This is a good step in the right direction,” said Atul Sharma, director of Ontario region at the Canadian Plastics Industry Association in Mississauga, Ont. “There needs to be more focus on small- to medium-sized enterprises (SMEs) to help them flourish and grow. [The CPIA] certainly continues to push the government to look at the majority of the businesses in the plastics industry.”

With the majority of plastics processors and moldmakers falling into SME category, only the major players in Canada’s industry will be eligible to take advantage of the repayable loan program, Sharma said. However, some smaller firms might be able to squeeze in by satisfying the criteria for job retention or creation, he noted.

The Ministry is looking to fund projects that are developing cutting edge manufacturing technology and processes, materials innovations, waste management and energy efficiencies.

Projects chosen can receive up to $10 million per project, but only 10 per cent of the total project costs will be funded. The repayable loans are interest-free for up to the first five years. The $500 million strategy provides up to 10 per cent of eligible project costs.

The deadline for the first round of proposals was Jan. 31, 2006.

“The program could have as many as three proposal calls per year for five years depending on the number of successful submissions,” the CPIA noted. “It is possible that there may other proposal calls in 2006, but it is not guaranteed.”

However, even if companies in the plastics industry don’t receive any of these loans, it is likely plastics processors and moldmakers will realize indirect benefits from the repayable loan program from companies that either use the incentive to set up shop in Ontario, or expand their operations.

Sharma said the CPIA is also lobbying both the provincial and federal governments to accelerate the depreciation of machinery.

“This would allow companies to write-off equipment faster and be able to invest in new technologies, which would certainly enhance productivity,” Sharma said.

Additionally, the CPIA is pressuring the Ontario provincial government to re-think capital taxes.

The CPIA is also calling on the province to tackle energy supply — another key issue for processors and moldmakers, especially in Ontario, where the supply is rapidly reaching capacity, Sharma said. And it is taking its toll on the manufacturing community.

“Companies lower the amount of electricity coming through the grid, which results in a brown-out, meaning they have to shut down their machinery and re-start it,” he added. Brown-outs drive up their costs and curtail productivity, he noted. The amount of energy needed to start machinery is generally quite high.

However, it is common for all manufacturers in Ontario — not just in the plastics industry — to experience brown-outs

On a whole, Sharma said the Canadian plastics industry is not in trouble. Although the final numbers for 2005 are still not available, Sharma said the industry is on an upward wing, in terms of shipments.

“Historically, the plastics industry has outperformed other manufacturing sectors,” he said.