Thank you, Mr. Chair and committee members, for allowing me to provide you with a brief overview of Industry Canada’s response to chapter 6 of the Auditor General’s 2012 fall report.
Accompanying me is Mitch Davies, who is the associate assistant deputy minister of the science and innovation sector at Industry Canada.
As you know, Canada is among the leading aerospace nations in the world. Our aerospace manufacturing industry is the fifth largest in the OECD in terms of revenues. This industry generates $22 billion in annual revenues, employs a workforce of almost 70,000, and exports 80% of its output. Canada has the world's third largest commercial aircraft manufacturer and a wide range of global leaders in helicopters, landing gear, simulators, engines, aero structures, and maintenance, repair, and overhaul services.
A sustained effort over decades has contributed to Canada's success in building an internationally competitive aerospace industry. Fiscal, monetary and tax policies have established a supportive business environment. Programs provide complementary incentives to invest in research and development in order to foster economic growth and competitiveness.
No one feels the benefits more than the Canadians directly employed, often with high-skilled and high-paying jobs in everything from design to manufacturing, marketing and servicing. Employees earn 37% more in the aerospace sector than the average for all industries, and 23% more than those working in other manufacturing sectors.
As you know, our future prosperity depends on innovation. Business investments in research and development are central to our ability to introduce new and improved products, services, and production processes. Moving up the value chain is the key to succeeding in a global knowledge-based economy.
That's why the government’s science and technology strategy, which was released in 2007, focuses on using the levers available to government to encourage more private sector innovation. It's in this context that the federal government has supported the aerospace and defence sector since 1959, starting with the defence industry productivity program, then through technology partnerships Canada, and now with the strategic aerospace and defence initiative, SADI.
Many companies have benefited from SADI and its predecessor programs over the years—large companies like CAE and Pratt and Whitney Canada; medium-sized companies like Ultra Electronics Canada and GasTOPS; and small companies like NGrain and Integran.
Many countries have research and development programs to encourage innovation in the aerospace and defence sector. Like Canada, they have renewed their programs as a result of their success in supporting the competitiveness of a sector that generates significant employment, technical, environmental and other benefits to their nations.
The department is pleased that the Auditor General concluded that Industry Canada is managing its aerospace programs in a sound manner. Detailed due diligence is completed before signing contribution agreements; new projects meet eligibility criteria; claims are carefully reviewed before issuing payments; appropriate steps are taken to obtain repayments; and sufficient information is collected to determine progress against objectives.
The Auditor General’s report also made recommendations in areas where the department can improve. We fully agree with the findings and are committed to continual improvement in the following areas: We are ensuring that monitoring and reporting requirements are fully met and documented. We are continuing our best practice of including objectives and anticipated benefits in contribution agreements. We will evaluate Industry Canada’s transfer payment programs in keeping with our multi-year plan.
We have put more information on our website on SADI results and accomplishments, and will continue this practice.
We have documented our approach to monitoring and reporting on SADI projects commensurate with their risk and size.
We are implementing a plan to document that our policies, procedures and processes meet the Treasury Board policy on transfer payments.
We have amended our claims service standard to include all claims.
To sum up, I would reiterate that Industry Canada’s transfer payment programs are designed to support the strength and growth of the aerospace and defence sector. Industry Canada was pleased that the Auditor General concluded that its transfer payment programs are well managed, and we welcome the recommendations that will contribute to further administrative improvement to these important programs.
Thank you, Mr. Chair and committee members. We'd be pleased to respond to your questions.