Finance Committee on Oct. 21st, 2016

[Michael Conway, President and Chief Executive Officer, Financial Executives International Canada]

Thank you, Mr. Chair.

Good morning, ladies and gentlemen.

Thank you for allowing Financial Executives International Canada to appear before you today to elaborate on the details of our written submission tabled with you this summer.

FEI Canada is a not-for-profit professional membership association representing senior financial executives, including chief financial officers from across our great country.

As Canada's economy has developed, so have we. Our membership reflects a wide range of industries from coast to coast, such as energy, forestry, food and agriculture, manufacturing, retail, technology, health, education, crown corporations, and yes, even government.

FEI Canada provides its members with thought leadership and advocacy services to help develop Canada's business leaders. We help build value in our members' companies and ultimately drive economic growth and job creation in Canada. Our members are at the forefront of the investment and decision-making processes in their organizations, and they have a unique ability and valuable perspective on what drives the Canadian economy. As such, the goal of fostering economic prosperity in all regions within Canada forms the cornerstone of our remarks to you today.

We will address three imperatives for Canada: firstly, the importance of investing in innovation all the way through to commercialization; secondly, the importance of strong infrastructure in all areas, most importantly to speed Canada's products and services to the global market; and finally, the importance of fostering a competitive business landscape.

We recommend that the government increase support for innovation. Our country's economy is driven by natural resources, but Canada needs to diversify by developing its technology sector, supporting start-ups, and fostering innovation. While the federal government has taken important steps to address this need, funding needs to extend beyond promoting research and development.

Canada has many components of a healthy innovation ecosystem. We have a highly educated workforce, world-class research institutions, and low barriers to starting a business. However, more needs to be done to assist in commercialization, as bringing our products to market is what opens the door to economic growth and job creation for Canada. We thus encourage the government to partner with the private sector to fund the commercialization of innovation through the use of flow-through shares.

Our second imperative is infrastructure investment. This is vital to support our export-driven economy. Put more simply, we need to open up access to global markets and improve how quickly and efficiently we move our goods and services to those markets. Infrastructure priorities should focus on creating lasting economic benefits for all Canadians, protecting our environment, and meeting regional needs.

FEI Canada has three suggested priorities: first, the construction and long-term operation of port and pipeline infrastructure, which would provide better access to new energy customers and increase export opportunities for all of Canada; second, the investment in renewable energy infrastructure that would help meet long-term energy needs for Canada, which would diversify the economy and provoke the development of new technologies and value-added products; third, reliable high-speed Internet for businesses and individuals in remote and rural areas.

We encourage the government to invest in these forms of infrastructure, partnering with the private sector using such measures as the private-public partnerships and the national infrastructure bank initiative recommended yesterday by the Advisory Council on Economic Growth.

Our third imperative is that we need to keep Canada globally competitive. While FEI Canada agrees that well-placed infrastructure spending that spurs employment should be undertaken even if it temporarily causes a deficit, it is important to lay out the future steps to return to a balanced budget. There are also ways to streamline regulation while still offering appropriate protections. This red tape reduction could benefit both businesses and government.

We have three suggestions here.

Our fist recommendation is to simplify the Income Tax Act. FEI Canada has previously suggested to this committee ways of doing that. We'd be pleased to elaborate, should you wish.

Our second recommendation would be to continue to share details on the expanded CPP. This is a measure FEI Canada has supported in principle and we look forward to learning more details about this initiative.

Finally, for our third recommendation, we suggest that you harmonize interprovincial and federal processes. This goal should promote the removal of barriers to labour mobility and coordinate interprovincial reporting on various measures, such as those to reduce Canada's carbon footprint.

FEI Canada would like to thank the committee for the opportunity to present to you and we would welcome any questions you might have.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Conway, I just can't help thinking when I touch my IPad to bring up one of your briefs, a blink and it's done. You mentioned reliable high-speed Internet, if I was at home, I'd sit here looking at that thing for three minutes and probably restart it three times. It makes a huge difference.

Next we have Mr. Price with the Canadian Stem Cell Foundation.

[James Price, President and Chief Executive Officer, Canadian Stem Cell Foundation]

Good morning, I'm James Price, President and CEO of the Canadian Stem Cell Foundation and I'm joined by Dr. Allen Eaves. Dr. Eaves is one of Canada's leading hematologists. He started the first bone marrow transplant programs in western Canada, founded the Terry Fox laboratory at the BC Cancer Agency, and now leads Vancouver-based STEMCELL Technologies, Canada's largest and most successful biotechnology company.

Thank you for having us here today. The Canadian Stem Cell Foundation is an independent, non-profit, charitable organization that champions stem cell science and builds Canada's role as a stem cell leader. We want to speak to you about how the stem cell sector is poised to not only treat a vast number of currently incurable diseases, but also to ease the financial burden on the health care system, create thousands of high-skill jobs, and set the course for Canada to lead the way in what is about to become a booming global market.

Stem cells represent the biggest innovation in medicine in the past 50 years. For decades, bone marrow stem cell transplants have been a difference maker in defeating leukemia and other blood cancers. Here in Canada, stem cell researchers are making inroads against multiple sclerosis and Crohn's disease. They are conducting clinical trials to relieve diabetics of the need for insulin injections, treat heart attacks, and reverse arthritis.

That this is happening in Canada should come as no surprise. Stem cells were first discovered here by Dr. James Till and Dr. Ernest McCulloch in the early 1960s. Subsequent generations of researchers have kept Canada at the global forefront in stem cell science and indeed, Canada ranks as one of the top three countries in the world.

However, we've yet to fully turn our research prowess into new therapies and commercial successes. What is lacking is a coordinated national strategy, one with significant private sector support to align the key players, including the scientists and clinicians, industry, philanthropy, academia, and Canada's health charities. The Canadian stem cell strategy reflects the government's innovation objectives of investing in pan-Canadian initiatives to create sustainable growth and economic opportunities for Canadians. It is a shovel-ready, innovation-based plan for health, health care, and economic growth.

The strategy goals are clear: deliver up to 10 new therapies to the clinic within a decade, create 12,000 high-skill jobs, and position Canada to capture 10% of the global market. The strategy calls for a total investment of $1.5 billion over 10 years. We would, however, emphasize that this is a joint private-public sector plan with two-thirds of the funding from non-federal sources. Already our foundation has secured $500 million in private funding pledges towards the strategy if the government commits.

Our ask is that the federal government invest one-third of the fund with a scale to average annual commitment to $50 million over the next 10 years. We realize this is a significant amount of money. The Canadian stem cell strategy is a bold, innovative plan. We built it that way—after more than a year of consulting with experts and our coalition of researchers, doctors, industrial leaders, major philanthropists, and health charity executives—because it will take such a bold plan to secure Canada's role in a global market that Bloomberg News reports will grow to $120 billion and set off a medical and industrial revolution.

Other jurisdictions realize this and have taken steps already. California has committed $3 billion and Japan has invested more than $1 billion in its stem cell program. Both are working with the private sector to attract clinical trials and advance their regenerative medicine programs in order to reap the rewards in terms of jobs and expanded economy.

Canada has made good investments in the field, but we must do more so that we aren't left behind. We need a coordinated, national effort to make the leap from great research results to great new treatments, to great new companies and jobs, and to great new economic prospects for all Canadians. The Canadian stem cell strategy provides a pan-Canadian approach to align investments and create accountability to deliver these results. A true reflection of Canadian innovation, it will deliver up to 10 new therapies to the clinic within a decade. It will transform health care by easing the burden of having to provide continuous care for currently incurable conditions, thereby relieving system stress and generating long-term savings. It will attract private investment, generate thousands of jobs, and drive economic growth.

I urge you to include funding for the Canadian stem cell strategy in budget 2017.

Thank you. Dr. Eaves and I look forward to any questions you may have.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Price.

We turn last, then, in this panel to the Royal Conservatory of Music, Mr. Simon.

Welcome.

[Peter Simon, President and Chief Executive Officer, Royal Conservatory of Music]

Thank you.

Mr. Chair, members of the committee, thank you for giving me the opportunity to speak with you today.

For those of you who aren't familiar with our organization, the conservatory is recognized as providing the definitive standard in music curriculum design and assessment—some of the music tests you may have taken, I hope—teacher certification, artist training, and concert presentation. The conservatory is considered one of the most respected cultural institutions in the world today.

Today I believe it's widely acknowledged that the capacity for creative thought is necessary to drive the innovation required for economic success in every single field. The point I want to make is that the creative impulse needs to be nourished, if we want people who can conceive what does not yet exist. Long-term participation in the study of music is the best means we have to achieve that aim. No less a figure than Albert Einstein used music as a stimulus to his imagination and credited the revelation about the theory of relativity to music making.

Today there is conclusive scientific evidence that music study stimulates the connections of the brains of young people and contributes to higher order thinking skills. Schools that have strong arts-based learning programs inevitably lead in academic achievement. There is no better example than an initiative that the conservatory led in Fort McMurray, which increased the provincial test scores of indigenous students by more than 20%, closing the gap for the first time with all students in the province.

If Canada is to lead in the innovation economy, it is clear that extended participation in music and the arts by its young people will provide a significant competitive advantage.

The conservatory sees an enormous opportunity to merge the extraordinary power of the arts with digital technology to usher in a new era of innovation among all Canadians. We want to build a digital educational platform that provides access to creative activity for all Canadians, especially in underserved regions. This digital platform will also enable us to promote and sell our successful Canadian IP to a vast international audience, which I can tell you includes 41 million young people in China alone who are studying the piano.

The learning systems and content of the conservatory today are used by more than 30,000 private music teachers across the country operating as small business owners in urban, suburban, rural, and remote communities from coast to coast, and these teachers instruct more than 500,000 students each year in every community in the nation. The RCM is also active in professional training for teachers, who subsequently provide this infrastructure in our communities and for artists. We have more than five million alumni, and they include many of the great musicians who drive our music industry, from the late Glenn Gould and Oscar Peterson to Diana Krall, Sarah McLachlan, Gordon Lightfoot, Chilly Gonzales, producers David Foster and Bob Ezrin, the Tragically Hip, Blue Rodeo, etc.

My recommendation to this committee is to support a major investment in building digital infrastructure for Canadian cultural IP and content that can enable Canada to become a global leader and brand in a very important economic area. Success in this undertaking would create jobs and generate economic growth in the cultural sector, which as you know is a $47-billion industry. It will boost the earning potential of tens of thousands of independent small business-owners, enhance the success of our artists and creators, and stimulate international growth. In providing greater access, it will also support the middle class, who believe in the importance of music study as a means of personal, social, and intellectual development in their children. Ultimately, it will lead to stronger connections and understanding among our people and strengthen social cohesion.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Simon, and thank you for coming on short notice. I know you were only called yesterday, as we were trying to juggle witness lists here, there, and the other place. Thank you for that extra effort.

We turn, then, to our first series of questions, and we'll have to go to five minutes.

Mr. Grewal.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair, and thank you to the witnesses for coming out today and testifying.

My first question is for the Canadian Urban Transit Research and Innovation Consortium.

You listed a lot of projects that you feel are worthy of funding. Although you don't like to use the term “shovel-ready”, we hear that term a lot. We also hear the term “shovel-worthy”.

What is the economic ask of funding projects that you feel will have a net positive return on investment in Canada and the Canadian economy? Does your organization have any statistics showing the dollar impact on the Canadian economy for every dollar invested by the federal or provincial government?

[Josipa Gordana Petrunic]

That's a great series of questions.

To respond to your query about the economic ask, you'll see in the brief that we've identified $185 million as the ask. To put it in context, that automotive partnership Canada fund I referred to was $145 million over four years, so it's about the same scale and scope. It's a slightly larger amount, because we've indicated not just automobile, but bus, rail, and integrated mobility, as well.

As for the existing projects within our pipeline, we have 54 projects that were proposed this year in three cluster areas: the greater Toronto area, the greater Montreal area, and the greater Vancouver area. We have an additional 20 projects that have recently been proposed, not in written form, in the greater Edmonton and greater Winnipeg areas. Quantitatively, right now, if there was a magical pot of gold that we could access to co-fund those projects at 50% or 30%, those are the number of projects we have where companies have said, in the private sector or in the transit industry, that they're ready to put cash on the table to do the project. Those projects are all valued between $1 million and $5 million, unless it's a large-scale demo project, and then it's $45 million.

The $185-million ask we have come to is a direct empirical calculation of the 54 projects we have, plus an assumed growth rate of 100% over the four years. These are projects that are between one to three years in length. Over four years, we would expect a doubling in the number of projects, if the funding was there and assuming that the rate of the project is between $1 million to $5 million for early-stage technology development and piloting, prototyping, and simulation modelling. There are also several projects that are large-scale demo projects.

What that tells you, to sum it all up, is that if there was a magical pot of money right now, the 54 projects we have amount to a $66-million federal ask. If we assume the 100% growth rate, then it comes to $185 million. Within that we have assumed the pan-Ontario electric bus demo, and that's $45 million, a hydrogen fuel cell integration—

[Raj Grewal, Liberal, Brampton East, ON]

I don't need that much detail, but thank you.

[Josipa Gordana Petrunic]

Okay, sure, but those are the economic data, if you're interested.

[Raj Grewal, Liberal, Brampton East, ON]

More importantly, what will be the job creation numbers, and what will be the dollar impact on the economy?

[Josipa Gordana Petrunic]

For job creation numbers, the reality is that nobody has statistics on integrated advanced mobility numbers. We do have statistics we can use as rough guides. Automotive industry tends to work with a 1:9 ratio, so $1 invested results in $9 down the line in income, or one job to nine jobs through the supply chain. Is that a perfect analogy for transit? No. Transit has no data right now that it has crunched about job creation. We do know that innovation in a small to medium-sized enterprise, whether it is in automotive or heavy duty rail, tends to have a multiplier effect from 1:5 to 1:9. Those are the numbers we're working with.

[Raj Grewal, Liberal, Brampton East, ON]

That's very high.

I have one last question. Do you keep data on previous projects that have been funded by the government on how well they've done?

[Josipa Gordana Petrunic]

That's a great question, because one challenge we've highlighted to the government is that you people don't track the effects of your projects. What we have done at CUTRIC is we've said that, as part of this $185-million ask, we want to be obligated to track it, for the sheer reason that we do not know, effectively, what the job creation out the door is.

I'll just put it in context. That APC project, which I identified to you, funded dozens of projects in electric mobility, and hydrogen fuel cells, etc. Generally, those were $2 million to $5 million projects each. They hired approximately five to 15 highly qualified personnel, such as Ph.D.s and master technicians, in each project. Nobody knows how many of those people, funded on paper, were actually hired. Nobody knows how many of them ended up with jobs. Nobody knows whether they finished the project. Nobody, in government or outside government, audits or measures the extent to which one dollar from NSERC or APC resulted in how many dollars economically. We don't do that federally, and that's not just with NSERC or SSHRC. It's also with ASIP or AIF funding across the board. Part of our ask is to identify that those metrics have to be there.

[Raj Grewal, Liberal, Brampton East, ON]

That's a very important recommendation, and I think all my colleagues can agree that the government should do a better job of tracking their funding.

My last question, and I'm sorry I didn't get a chance to ask everybody a question, is to the Canadian Cancer Society. You're asking for more of a federal government role in tobacco control. What is your financial ask on that? I'm sorry, if it's in your brief, but I don't have it up on my screen.

[Gabriel Miller]

It isn't spelled out in the brief. We're giving some flexibility for exactly what we think should be spent. We think that the strategy should be returned to its original target budget, which was about $100 million a year. It's currently $38 million.

[Raj Grewal, Liberal, Brampton East, ON]

When it was $100 million a year, what was the impact on the Canadian population for a decrease in Canadians' smoking?

[Gabriel Miller]

It's a bit tricky separating all of the factors and attributing to any one of them, but I can tell you that Canada began a historic turnaround in smoking rates about 30 years ago. The federal government's commitment to that strategy also accompanied actions on a number of fronts.

[Raj Grewal, Liberal, Brampton East, ON]

Sorry, I'm going to get cut off by the chair. This is my last question here.

[Gabriel Miller]

Federal leadership has been key.

[Raj Grewal, Liberal, Brampton East, ON]

When it was $100 million, what was the rate of Canadians who smoked; and when it was $38 million, what was the rate of Canadians who smoked?

[Gabriel Miller]

Well, today, about 18% of Canadians are smokers.

[Raj Grewal, Liberal, Brampton East, ON]

That's at $38 million, and what was it at $100 million?

[Gabriel Miller]

With respect, I'm not even going to answer the question, because the comparison that's being drawn would be deeply misleading. The fact of the matter is that an enormous number of things have been done to reduce smoking, and if the suggestion is that we can do as good a job saving lives by spending less money than spending more, I couldn't disagree more.

[The Chair, Liberal, Wayne Easter]

Okay, we'll have to end it there.

Mr. Deltell.