Industry Committee on May 15th, 2008

[The Chair, Conservative, James Rajotte]

Mr. Van Kesteren, you have two and a half minutes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Mr. Simoneau, as a crown corporation, what were your profits last year?

[Jacques Simoneau]

The profits last year? From memory, I believe they were $130-some million.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you; that's very commendable.

We're developing a picture here showing that Canadians, by and large, as we found in another study, are very good at banking; that means we don't lose money. Are we a little bit cautious? Is that part of the problem?

I see your hand, but I want to just finish my statement here first. I'm wondering: if investors don't want to make the plunge, the first thing we start to do is point at the government; but will we then become part of that three-F as taxpayers? Is it just part of our national identity that we're very cautious, that we don't like to take those plunges?

Okay, Mr. Wilkes

[Andrew Wilkes]

Absolutely. Part of the problem is that we criticize our entrepreneurs when they fail. In the United States, failure is a good thing. They've gone out and tried to build a business and they move on to the next business. It is a mindset; yes, we are risk-averse. But you can't train somebody to do their first paper route. They just go out and do it and they collect the money—or the lemonade stand, or getting on the airplane and going to Southeast Asia.

I'm sorry; you were going to add...?

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I want you to finish my statement. I know where this is going to lead. If we can't get the money from investors, there's going to be pressure put on the government to start investing. Is that a good idea?

[Andrew Wilkes]

I would argue that you should let private enterprise do it.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

So we shouldn't take the profits from the crown corporations, for instance, and say “We want that $100 million”?

[Andrew Wilkes]

No. I think you should develop a program--you know, we had tax credits that went into the labour sponsored investment funds program--and let private enterprise work alongside and decide which entrepreneurs to back. It's a private-public partnership that is really going to help these entrepreneurs. As Mr. Mothersill mentioned, what the angel investor brings is the passion of doing it before. They understand the passion of the entrepreneurs, and they work alongside the entrepreneurs. They don't charge for their time and they try to help them out.

[The Chair, Conservative, James Rajotte]

Thank you.

Go ahead, Mr. Mothersill, just briefly, please.

[W. Daniel Mothersill]

Very briefly, I think the role of government is not to try to pick sectors and solve all the problems. It is to incentivize those people who are already risking dollars and mentoring these companies. Government should never, in my understanding, be a substitute for encouraging serial entrepreneurs and angel investors to get involved, roll up their sleeves, and do it. Andy has a couple of tax recommendations and whatever, which we support, which would help attract many more people to this field in terms of helping to commercialize innovation.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Mothersill. Thank you, Mr. Van Kesteren.

We'll go to Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, Mr. Chair.

Should there be a better balance between investing in research and development, in any industry, whether it be in the universities or elsewhere, and the money invested in commercialization? I have the feeling that we invest far too much money in research and development of new products in comparison to what we invest to commercialize those products which may in fact remain on shelves because nobody can really use them.

[W. Daniel Mothersill]

Absolutely. I would argue that we invest far too much in R and D. Our universities have become warehouses of innovation. The problem is that we can't get it out. Roughly speaking, about 2% of what is warehoused in universities is actually commercialized. We put very few dollars against the commercialization of what we already have. To me, the balance is way out of whack with respect to what we're spending on R and D and what we're spending on commercialization. Just look at the numbers, look at the success rate, or the lack of a success rate, and, gee, maybe there should be just a little better balance there. That's kind of a “doh” statement, at least from my perspective. You raise an excellent point.

[Jacques Simoneau]

I would not be so critical. Basic research is important for preparation. Results can only be seen in the long run. Canadian universities carry out research in all kinds of fields which do not necessarily lead to commercialization and I would not want to criticize that. However, as far as commercialization is concerned, with a bit more money we might be able to get much more from research by a leverage effect. That is why we say that more money has to be invested in commercialization, in order to ensure a smoother transition from research to commercialization.

[Robert Vincent, Bloc, Shefford, QC]

If we invest three dollars in innovation and one dollar in commercialization, it is not balanced. What would you recommend to rebalance that in order to market our products and create new jobs?

[Jacques Simoneau]

There is no magical ratio. Some say that there is a gap between the moment when an idea funded by research is sufficiently developed--up to being patented, even-- and the moment when it can be marketed.

The granting phase should be progressively reduced and eliminated to be replaced by private capital in order to ensure a continuum. We must begin by selecting, among the research projects, those that can be marketed. From then on, we might try to establish a reasonable ratio.

[W. Daniel Mothersill]

We agree, but there is a problem in terms of getting it out, particularly in getting it out of the universities. There's no standard with respect to who owns intellectual property. It's very difficult sometimes to get this, to commercialize this, because the universities say they own it, or that at least they own a huge percentage of it. And it's very difficult, sometimes, to raise money on that. We're finding that some of our universities--at the risk of being unpopular--are almost double-dipping, because they get the money to operate, then claim that they own the intellectual property.

Therefore, if you're going to commercialize this, because there's no standard, it's very difficult sometimes to break it out. Some of the best universities in Canada have gotten around this problem. But getting that technology out, from an angel investor point of view, still remains for many a hurdle.

[The Chair, Conservative, James Rajotte]

You have one minute left.

[Robert Vincent, Bloc, Shefford, QC]

Mr. Johnston, I see that Precarn is suggesting a five-point program, one of those points being priority research and development, collaborative projects led by industry and involving small and large companies with the establishment of international links.

I would like to know what you think of that approach.

[Paul Johnston]

I apologize, but there was no translation of that question.

[Robert Vincent, Bloc, Shefford, QC]

On its website, Precarn offers an integrated five-step program where research and development is a priority. They are collaborative projects led by industry and involving small and large companies with the establishment of international links.

I would like you to tell us more about this new approach.

[Paul Johnston]

Thank you.

Precarn jointly submitted to the international science and technology program of the Department of Foreign Affairs and International Trade to run the program that they refer to as the ISTP program. We jointly formed another not-for-profit company called ISTP Canada, which is working with funding to form relationships between Canadian companies and companies in the three developing countries of China, India, and Brazil. The hope is that will then be expanded. The point of that is to establish R and D in Canadian companies with a specific view that they will hopefully form trade linkages into other countries, so that they will form relationships with organizations in these other countries, and their marketing will have a natural link already built in.

So the point of our international aspect is to try to link--in a more formal way--a Canadian development to an international partner.

[The Chair, Conservative, James Rajotte]

Thank you.

Merci, Monsieur Vincent.

We'll go to Mr. Arthur.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Thank you, sir.

It is extremely interesting to follow this discussion between people asking questions and people having answers and suggestions. It is impossible to avoid the conclusion that Canada has a cultural problem.

A while ago, I asked my colleagues why these people are so depressing. Their answer was that it is quite normal because they are bankers. I have been told that Canadians make excellent bankers.

In Quebec, we would like to make entrepreneurs but, if you talk to entrepreneurs in our province, they will tell you that, if you suggest a business opportunity to a Quebec entrepreneur, he will immediately ask you how much money you want to make. On the other hand, if you make the same suggestion to an American, he will tell you how much money he will make.

If you were to gather ten Canadians, you could easily get them to admit after a few minutes that what government does is never very successful and that government is not very effective. However, if you were to continue your conversation with those same ten Canadians and were to submit a specific problem to them, they would tell you in a few minutes that government should do something about it.

In a country where economics is not taught in high schools, do you think we will ever be able to have a culture of entrepreneurship where people are willing to risk their money on other people's ideas? Are we not rather moving more and more towards a society where people ask government to resolve their problems and, if there is any money to be made, they want to know how much the other guy is going to get? Is there any hope that the Canadian economic culture, in Quebec or English Canada, will one day be able to change if we do not start soon to teach economics to our children?