Throwing money

Christopher Gooding
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In the run of one year the Atlantic Canada Opportunities Agency has lost nearly $14 million to floundering businesses. Which is about par for the course, officials with ACOA say.
A list of ACOA write-offs obtained by the Canadian Press not only identified the losers for the 2007-2008 year but also brought to the public's attention repeat borrowers who eventually failed, like King Metal Fabricators who received funding from ACOA on 11 different occasions before filing bankruptcy after receiving one last loan worth more than $317,000.
Since 1995, ACOA has reportedly awarded more than $960 million in loans to local industry, of which $415 million has be paid back, a significant amount. Annually, however, losses of up to $15 million are normal for the loans agency after some businesses it chooses to continually support file for bankruptcy.
Repeat subsidies is an offense to economics. Frankly, the need to continuously subsidize any business indicates there is a general lack of faith in the long-term success of the organization or that it has goals outside of its abilities. There are institutions -- banks -- that have for generations made fortunes and wealth from supporting successful businesses, generating interest off their investment and encouraging industry to grow as its debts are recouped. ACOA, on the other hand, is awarding feel-good solutions to less than guaranteed ventures. Indeed, there is a certain amount of risk to industry but shouldn't that risk be weighed and measured by its peers, not some government agency awarding tax dollars to businesses whose model of operations requires more than just start-up capital? Start-up capital is one thing but when a business requires annual loans to remain operational or competitive concerns should be raised whether the business is attempting to adopt more than it can chew or is functioning less than expected.
ACOA needs to step up its game and cut the umbilical on some of these businesses and allow them to face the market like big boys and not hold their hand anymore. If they survive then the value of their work proves the merits of ACOA. If they don't then it has helped reduce the long term strain on our tax dollars.

Organizations: Atlantic Canada Opportunities Agency, Canadian Press

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