Summary
The Regional Development Incentives Regulations, 1974 establish a subsidy and loan guarantee program for businesses establishing or expanding facilities in designated regions. It defines eligible assets (excluding land, vehicles, patents, goodwill), eligible operations (manufacturing/processing but excluding resource extraction, construction, publishing, etc.), and ties incentives to approved capital costs and/or job creation. The Minister has wide discretion over approvals, asset valuations, job counts, and compliance monitoring. Recipients must maintain specified equity levels, local hiring, Canadian supplier preferences, and continue operations for 24-36 months. Incentives are subject to clawbacks if jobs/asset use targets aren't met, assets are sold, or plans change without approval.
Reason
This industrial subsidy program imposes direct taxpayer costs while distorting capital allocation away from market signals to ministerial discretion. It creates perverse incentives for rent-seeking, locks businesses into artificial locations, imposes burdensome reporting requirements, and props up ventures that may be economically marginal without continuous support. The unseen cost is the foregone wealth from capital diverted from its most productive uses—resources that would have been deployed through voluntary exchange in response to genuine consumer demand instead flow to politically-favored projects, perpetuating misallocation and undermining the economic dynamism that free markets generate.