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Jim Balsillie, former co-CEO of BlackBerry Ltd. and chair of the Council of Canadian Innovators, attributes the eagerness to woo Amazon to a ‘colonial dumbness.’

Fred Lum/The Globe and Mail

Mayors of Canada's largest cities are keen to attract Amazon.com Inc.'s second headquarters, eager for the thousands of jobs and billions of dollars in spending the Internet retailer could bring.

Leaders of Canada's technology sector are decidedly less enthusiastic. They say Amazon's arrival would make it even harder for their companies to find and retain talented software engineers. And they wonder why governments are not offering them the package of incentives Amazon is expected to field as it sifts through the bids from cities throughout North America.

Jim Balsillie, former co-CEO of BlackBerry Ltd. and chair of the Council of Canadian Innovators, attributes the eagerness to woo Amazon to a "colonial dumbness" that will more deeply entrench Canada's branch-plant economy and hurt the domestic companies that create jobs and economic growth.

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"This latest initiative is just another in a long line of dumb innovation policies where the Canadian taxpayer creates prosperity south of the border," Mr. Balsillie said in an interview from Waterloo, Ont.

Amazon has set an Oct. 19 deadline for bids on the new headquarters. The company will spend as much as $5-billion (U.S.) on construction over several years and employ as many as 50,000 people over the next 10 or 15 years. In outlining what a winning bid will look like, Amazon, which has a market capitalization of $470-billion, says it seeks a "business friendly" tax structure and incentives that include land and work force grants.

"Incentives offered by the state/province and local communities to offset initial capital outlay and ongoing operating costs will be significant factors in the decision-making process," the company says in its eight-page request for proposals.

An Amazon spokesman declined to comment.

The people running the bids from Canadian cities are saying little publicly about what they are offering Amazon to locate in their cities. And any Canadian city is believed to be a long shot, given the bad publicity and political ill will Amazon risks in the United States if it said it was moving such a big project to another country.

But that has not deterred the leaders of the Canadian bids.

Offers are being assembled by teams in several places, including Vancouver, Calgary, Edmonton, Montreal, Toronto and Windsor, Ont., which is teaming with Detroit.

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Ottawa Mayor Jim Watson said the cities' bids are backed by federal and provincial governments and will include the same tax credits and training grants to which Canadian companies are entitled. Canadian "cities can't offer financial incentives because it's against the municipal act," Mr. Watson said in an interview.

He said he is aware of concerns in parts of the tech sector but the "vast majority" of the city's business community supports the effort.

"We don't want to put at a disadvantage our existing talent network here in Ottawa, but at the same time it would be irresponsible for us not to at least explore the option of getting such a global corporation to locate here," he said, adding although Ottawa faces an "uphill battle" in the bidding contest, there's a chance Amazon could choose the city for other, smaller projects.

He said it's possible Amazon could lure employees from other companies, but that it would also draw people from around the world, and bolster Ottawa's status as a technology hub.

Paul Vallee, co-founder of Ottawa-based information technology company Pythian Group Inc., says the city's tech companies need a U.S. giant to move in and hire their best employees "like we need a hole in the head."

"Are we creating jobs or are we stealing jobs from Canadian companies?" asked Carl Rodrigues, founder and chief executive officer of Southern Ontario-based software company SOTI Inc. "This is what people don't get – when you invest in a Canadian company, all the revenues go back to the home country. The benefits come back to Canada. The taxes from those revenues come back to Canada. The [intellectual property] that's generated becomes Canadian," Mr. Rodrigues said. "With a foreign entity, a bunch of the revenue goes back to the United States or where ever it's from. The tax revenues are going to go back to the U.S. and the [intellectual property] goes back to the U.S."

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Mr. Balsillie said the arrival of a large tech company has a different effect on the economy than a new manufacturing plant. A factory usually creates spinoff jobs and business for surrounding companies that supply it with raw materials or components. A tech company, on the other hand, steals the best talent and drives up wages for the established companies.

"Branch plants in [intellectual property] intensive industries, such as e-commerce, are completely different than how they work in traditional sectors. Supply chains in tech are based on winner-take-all economics because the wealth is created with IP," Mr. Balsillie said.

According to the Information and Communications Technology Council, Canadian tech companies will face a staffing shortfall of about 200,000 people by 2020. The group, which lobbies on behalf of Canada's IT sector, says in a paper published last year that there are not enough graduates of Canadian schools to meet the demand.

It's a problem Mr. Rodrigues of SOTI faces daily.

He started a software company in his basement and now employs 700 people around the world. Finding developers is a constant problem, said Mr. Rodrigues, whose company makes software for the remote operation of tablets, refrigerators and other devices.

"Where are all these engineers going to come from?" Mr. Rodrigues said by phone. "We're scrambling because these people do not exist. … We're always looking for engineers. If I could hire 100 engineers today, I would."

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Mr. Rodrigues said governments should focus on helping Canadian companies, not foreign ones, and develop policies and programs that encourage graduates to remain and work in the country. He said several other countries are constantly wooing businesses like his, and Canadian governments risk great damage to their own economy by taking them for granted.

"You can't just be welcoming foreign entities. You've got to protect your own turf and make sure you're maximizing the expansion of Canadian companies in Canada because, guess what, those foreign governments are targeting us," he said.

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