Finance Committee on June 4th, 2020

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much, Mr. Chair.

Thanks to all our witnesses for being here. We certainly hope that you and your families are safe and healthy.

I'm going to start with questions to Mr. Lee and Mr. Rakievich.

I am quite disturbed by the concerns you've raised around access to financing. As you are probably aware, the Office of the Superintendent of Financial Institutions has indicated to us that $750 billion in support—in measures by various institutions connected with the federal government—has gone to Canada's big banks. As you are probably also aware, they announced $5 billion in profits last week.

I'd like to hear from both of you. What is the impact on financing of not having access to credit? Do you believe that the federal government should be imposing conditions, that the $750 billion in largesse should come with some responsibility toward actually helping to finance the recovery?

[The Chair, Liberal, Wayne Easter]

We'll start with Mr. Lee and then go to Mr. Rakievich.

Mr. Lee.

[Kevin Lee]

Thanks for the question.

Yes, absolutely. With all the liquidity that's been injected through the programming, it's really important that the financial institutions do in fact go ahead and make those lending amounts available.

At this stage, it's really about new development. If we're having trouble getting access to those funds, it's definitely a more risky time, depending on the projections. Under the conditions, I would think that some of the loan rules and considerations should be a little different, to ensure that we can be part of the recovery.

The same holds true where, in some cases, homeowners who did make a purchase are not qualifying for their mortgage anymore, and that sort of thing, which means that some additional financing is going to be required while builders and developers hold onto this inventory longer until such time as they can move the product in a different way.

Whether it's more regulation, whether it's influence, nudge, whatever the case may be, we do think there needs to be some discussion to make sure that money can be released in the way it should be at this time.

[The Chair, Liberal, Wayne Easter]

Mr. Rakievich.

[Jim Rakievich]

I echo those remarks exactly. Considering the federal government's support, the chartered banks should have some criteria around where they can provide support to good companies that need the help right now.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much for that. Yes, I think the public agrees too. I'm hearing from small businesses and individuals in our riding. There have been massive penalties—$30,000 to sell your home. There seems to be an incredible amount of largesse, unprecedented in Canadian history, not accompanied by any responsibility at all. I appreciate your remarks.

I'd like to go to Mr. Semple now.

Mr. Semple, the NDP, of course, pushed for the wage subsidy. We wanted it to echo what you have said: Rather than losing their employees, businesses could have a wage subsidy. As a result of that, they can continue, through this pandemic and emerging out of it, to keep their labour force intact.

What you have said to us doesn't make any sense at all. In essence, because you've merged your firm, there is a takeover and you're not eligible for the wage subsidy. How have your discussions been with the finance ministry around this? You actually fit the ticket of what we pushed to have the wage subsidy set up for. What has been the response from the government so far?

[Gavin Semple]

Thank you for the question.

We've been working with them since mid-April, mostly through associations that have been representing not only us but other companies as well. We've also had direct contact. The problem seems to be acknowledged—there seems to be an acknowledgement there—but there has been no resolution to it, no action to correct it.

Our point has been pretty straightforward: that where an eligible company acquires another eligible company and the ownership of that company, and they've bought the entirety of the company and all or substantially all of the assets, it should be no different than if it were a share purchase. It's a simple, straightforward proposition. It seemed to be acknowledged. This appears to be a technicality in the legislation, perhaps an unintended consequence in the drafting of the legislation.

We've been pushing our case for quite some time and holding off on further layoffs, at much risk to the company, but doing it in the hope that we will qualify eventually and keep all of the employees we have. I would say that we've made many representations, and there seems to be an acknowledgement of the problem, but just no resolution at this point.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Sorry, Peter, you're a little over. Go very quickly.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Mr. Rakievich, you said that the EDC confirmed yesterday your credit facility. Do you believe that if you weren't appearing before the finance committee today you would have had that confirmation?

[Jim Rakievich]

I'm not even going to consider that as a direct relationship. We've been working with them very closely, trust me. We've talked to EDC every week for weeks and weeks, if not months.

Remember, this is a draft term sheet. We finally got the actual term sheet, which I signed last night after hours. It still has to be approved by a committee, and then we have to get through all of the regulatory pieces of it where they double-check and triple-check everything.

I don't have the money in the bank. That will be sometime in August, if we're lucky, but that's where we are today. I don't think it had an impact, frankly.

[The Chair, Liberal, Wayne Easter]

That's a bridge best not crossed, Mr. Rakievich. You could wait another 65 days to get the money in your hands, for heaven's sake.

Next is Mr. Cumming, followed by Ms. Koutrakis. We will have to go to four minutes.

[James Cumming, Conservative, Edmonton Centre, AB]

Great.

Thank you to all the witnesses.

I'll start with Mr. Rakievich. To me, the difference in timing of the funding you received in the U.S. versus the funding from the programs here in Canada was remarkable, but I'm not going to belabour that point.

It was tough for the industry in Alberta prior to COVID, and tough after COVID. In your opinion, Mr. Rakievich, what do we have to do to encourage companies to reinvest in Canada?

I look at your company. It has expanded. You've adapted to the times. You're working internationally—great. You're still headquartered in Edmonton. A lot of companies, however, took a different path, and they've relocated to the United States and moved their capital. What do you think we have to do to get this investment back into Canada, particularly in the sectors you're operating in?

[Jim Rakievich]

I'll preface my answer by quickly saying that our move internationally started in about 2004, from zero. We've invested in playing in what I would consider the largest sandbox, playing around the world, and I think that from a Canadian perspective, it's a great story. We design and develop technologies and ship them around the world for new money coming into the country, and we've done that tremendously well.

To put it into perspective, in 2019, Canada represented about 3.5% of our revenue. The Canadian oil and gas industry has been significantly decimated. In any industry or any business, I look at the top of the food chain and its investment from exploration companies—I am talking about the Exxons and Shells and those large companies. The capital has left Canada.

When big companies are making investments, part of the investment decision is certainty and risk, risk around policy and the changing of policies. In Canada, if the government changes, the rules change a bit. My opinion is that there's a lot of uncertainty around the business climate in the oil and gas industry in Canada. That capital is gone. That capital is working in the U.S. We operate around the world, and a lot of that capital got reallocated.

To me, the attraction to invest in the Canadian oil and gas industry at the top of the food chain has disappeared. Until that gets restored, it's just going to continue to decline.

[James Cumming, Conservative, Edmonton Centre, AB]

We see this with a lot of companies that get into growth. You're growing your technology. However, a lot of companies hit a ceiling. They stop expanding, and they stop growing. What do you think was the success of your company that allowed you to continue to grow and continue to build out and do some international trade?

[Jim Rakievich]

I would say that we were fully committed to working with international customers. We built very strong relationships. Our customers are names that may be familiar to some folks here: Schlumberger, Baker Hughes, all of the national oil companies around the world. We have a very strong client base. We built those relationships and nurtured them.

The other thing is technology investment. The biggest reason we have been able to be successful is that we were always committed to making better and safer technology, having a better integrity of wells so they don't leak and cause environmental damage, and assisting our customers in doing so. We've always been curious about technology.

Our largest group of employees in this company is the engineers, everything from digital technologies to mechanical engineers to software writers. We've been searching continuously for a better solution for our customers.

[The Chair, Liberal, Wayne Easter]

This has been a most interesting discussion, but we will have to move on. Thank you, both.

Next is Ms. Koutrakis, followed by Mr. Morantz.

Annie.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you, Mr. Chair.

Thank you to all the witnesses here this afternoon.

My first question is for Genome Canada.

Can you please comment on the different COVID-19-related projects and partnerships that Genome Canada is currently funding and partnered with throughout the country? Is the existing federal support sufficient for these various research projects and programs?

[Dr. Rob Annan]

There are a few different pieces.

Very early on, Genome Canada participated in a coordinated response that involved a variety of federal research organizations. It was led by the Canadian Institutes of Health Research. In that competition, we funded a project at the University of Calgary, led by Dr. Dylan Pillai, which looks at rapid diagnostics. That project has now been proven to have great success. They're going through a process now of miniaturizing this diagnostic tool to take it to bedside, and they hope that within the next couple of months it will actually be on the market. So, early-stage stuff was really important.

However, as COVID was spreading and as the community was engaging, we realized that there had to be a large national coordinated effort, which led to the CanCOGeN initiative. This was funded as part of the government's medical countermeasures package, and $40 million was allocated to two projects. The first is to look at patients in Canada and the genetic causes for why some people have terrible reactions and other people seem to be asymptomatic. That's really focused on looking at some interventions through drugs and so on. The other piece is looking at sequencing virus samples from patients across Canada so that we can actually do a better job of understanding the sources of those outbreaks and then tracking their progression.

This is now a big national project, but it's tying into other initiatives, like the immunity task force that was announced at the same time, the NRC initiatives that my colleagues described earlier, and a number of provincial initiatives. Coordination is actually a big piece of what we're doing now across the board.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you.

That's a great segue into my next question to the NRC. As we've all heard, a key step in addressing this pandemic is increasing our capacity to test and trace cases. In what way is the NRC supporting the development of Canadian testing and tracking solutions? Once these have been developed and produced, is there a business opportunity to export these solutions globally?

[Roger Scott-Douglas]

I think Jean-François Houle would be best suited to respond to your question.

JF, could you take that?

[Jean-François Houle, Vice-President, Pandemic Response Challenge Program, National Research Council of Canada]

Sure. I will probably talk more about the technology and the solution development around diagnostic testing, and then my colleague David Lisk can talk about the work they're doing with companies that are closer to market and dealing with more mature technologies.

Within the pandemic response challenge program, we do have a “detect and diagnose” pillar of research. That one is aimed at identifying platforms that are maybe six to 12 months out in terms of development to maturity. Our role is really to act as an accelerator to help develop those technologies. In some cases, these technologies come from academic centres. Some have in fact been supported by Rob and his group, maybe at Genome Canada or the CIHR. We provide them with the expertise and knowledge to help them robustize the technology and eventually scale it, with the hope that this will be transferred over to a company. We also work with SMEs that have promising technologies and need to deal with some thorny research issues in order to get this technology to market as well.

That has been the approach within the pandemic response challenge program. We are also launching challenges for loftier goals—higher risk, higher reward. We actually launched recently a call for proposals for technologies from academic centres and small companies that could augment some internal technology at the NRC. That would allow for a chewable diagnostic or something that could be deployed somewhere else or closer to the patient, or maybe even at home.

With that, maybe I'll turn it over to Dr. David Lisk to talk about the work we're doing with companies.

[The Chair, Liberal, Wayne Easter]

Dr. Lisk, perhaps you could do it in about 30 seconds.

[David Lisk, Vice-President, Industrial Research Assistance Program, National Research Council of Canada]

Okay.

We work with 8,000 companies a year. Many of them are in the health space. We have invested currently in 12 COVID test companies that are going to test solutions to find the virus or the antibodies; plus, we have current clients who have technology and tracking space. One of them is Thrive Health, which currently has seven million users in Canada who are actively tracking.

I'll stop there in the interest of time.

[The Chair, Liberal, Wayne Easter]

I'm sorry to have to rush people, but we have no choice today.

We have Mr. Morantz, followed by Ms. Dzerowicz.

Marty.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Mr. Lee, I want to thank you for being here today. I think the housing industry is such a fundamental industry in the country in normal times, but in terms of economic recovery, certainly this sector ranks up there with oil, gas, agriculture, and others.

A couple of weeks ago, we had the president of CMHC on the panel, and he was saying that pricing, down payments and credit scores were on the table. When I asked him about it, he said they were considering the possibility of restrictions, making it even more difficult for Canadians to qualify for CMHC-insured mortgages. I'm just wondering what your thoughts around that would be, and whether you think this would have a negative impact on the recovery.