Government Operations Committee on Dec. 1st, 2011

[Chungsen Leung, Conservative, Willowdale, ON]

Seneca College is in my riding of Willowdale. It has programs dedicated to the digital industry. We also have another company called ViXS, which apparently is also in that third or fourth generation of the digital economy. I have also been a director of a public company that is involved with software engineering.

Perhaps you could share your comments with regard to our trading patterns. Why do we have the development of these high-tech digital technologies and yet we cannot commercialize them as easily as would be the case in the United States, Japan, or China?

[Richard Dicerni]

I wish I had an answer to that conundrum. We've had a number of different people or bodies looking into the issue of commercialization. Some of the answers that have emerged are that Canadians, compared to Americans, for example, are not as taken with entrepreneurship. Canadians are slightly less risk-oriented than Americans are. That information is based on a report done by a group of business people who identified culture as one element.

Second is venture capital. In Canada there is not as much venture capital as you would find, obviously, in Silicon Valley or around Route 128 in Boston. We have not developed in this country a sustained venture capital industry to support entrepreneurs and to help them grow.

A third factor, if you look at small, medium, and large firms, is that we have a tremendous number of small firms getting larger, a decreasing number of medium-sized firms, and the same number of large firms.

With the BDC and with EDC, we have to work to increase the number of medium-sized firms, because that is where you get the R and D. That's where you can attract more capital. And that's where you can engender, on a sustained basis, more economic growth.

I don't think there's one specific answer to explain the situation you described. I've mentioned three or four factors.

[The Chair, NDP, Pat Martin]

Thank you, Mr. Leung. That concludes your five minutes.

For the Liberals, we have Mr. John McCallum.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair.

Thank you very much for being here.

My first question has to do with Genome Canada. I think the government has spoken very positively about that. I see that the contributions to Genome Canada are up $9.4 million, whereas the grant to Genome Canada is down $12.9 million, for a net drop of $3.5 million. I wonder if you could explain what that is.

[Richard Dicerni]

I can provide some general comments and Kelly can give you the specifics.

To a large degree it's based on certain competitions that were not fully completed. They did not end up spending the money because their process did not yield an expenditure. Therefore the funds get reprofiled.

[Kelly Gillis, Chief Financial Officer, Comptrollership and Administration Sector, Department of Industry]

We see a grant and a contribution because previously under the transfer payment policy issued by Treasury Board it was considered a grant. In 2008 they actually changed the policy; so going forward, next year will be the last year you'll see grants. It will be transitioned out to continual contributions, which is better for the providing organization because there is more reporting and accountability back to the funds of a contribution versus a grant.

In 2008, where you see the decrease, it's moving the money actually to next year. It relates to the $140 million from budget 2008. So it's not a decrease, it's just a cash flow, so the money will be paid out next year, versus the $9.4 million, which relates to budget 2010-2011.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you.

My second question has to do with strategic review savings. I've asked other departments this too, because the description in the budget is very vague, like “meeting the priorities of Canadians”, etc.

I notice you have a $5 million reduction in grants and contributions, and $945,000 in operating. Are you able to tell us in a bit more detail what those grants and contribution reductions are?

[Richard Dicerni]

Not in as much detail as we will when we answer the parliamentary question that you have put on the order paper, which I think will provide an opportunity for a rather fulsome discussion and description of everything.

[John McCallum, Liberal, Markham—Unionville, ON]

My last question is returning to the subject raised by Mr. Leung about commercialization and Canada's deficiencies in this area.

This recent report suggested that we have a bit of a shift in policy, that we focus less on tax credits, SR and ED, for example, and more on direct investments by the government, possibly through BDC. Do you think that's a good idea?

[Richard Dicerni]

The government has not come to a view as to which parts of the Jenkins panel report it will adopt. So as advisors to the government on this, we are at the stage where we don't have any thoughts.

[John McCallum, Liberal, Markham—Unionville, ON]

Okay.

You may not have any thoughts on this either, but I'll try. In terms of BDC, I've heard conflicting views as to whether BDC would be effective in this area. Even assuming you wanted to go in the direction of more direct investment, some people think BDC is a bit bureaucratic and not terribly effective. Others say they've changed their culture and organization and they are effective.

[Richard Dicerni]

On that, I'll have a view.

I am a fan of the BDC. It's not easy dispensing and being stewards of public funds, and I think they do a very good job.

A few examples.... During the economic difficulties, the BDC increased its risk and put a lot more money out in the economy. It took greater risks and I think was successful--not in providing a loan to everybody and anybody.... Getting a loan from the BDC is not a charter right under section 15; people still have to meet certain obligations. I think BDC was very effective in that.

Second, they are improving their game in regard to venture capital. They've reorganized. They're going to focus on certain key areas.

When you're a government agency it's not easy to invest in venture capital, because the success of most is not very high. I think the board does a good job of balancing risk and reward.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you very much.

[The Chair, NDP, Pat Martin]

Thank you. Your time has just expired.

For the Conservatives, Kelly Block, for five minutes, please.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you very much, Mr. Chair.

I welcome you to the committee. It's good to be able to have the opportunity to ask you questions.

The first question I have is regarding the line “Funding to modernize BizPal...”. Recently Minister Bernier announced that our government would make this program permanent. As a government, we seek to support small and medium-sized enterprises “by putting in place initiatives that enable them and entrepreneurs to continue to grow and create jobs”.

Could you explain the BizPal program further? How does it help Canadian SMEs? How many provinces and municipalities are signed on to this program?

[Richard Dicerni]

At least nine provinces, and we are in discussion with one remaining province. I don't have the specific number of municipalities, but I can get that information to you through the committee.

Fundamentally, BizPal seeks to create a one-stop shop for entrepreneurs to have easy access to what is available in a given province, in a given municipality so that it can ease setting up a new business, getting a handle as to what the pertinent rules and regulations are in that municipality.

I think it has stood the test of time. There aren't that many programs that have been around that have constantly been recognized as making a contribution. BizPal is one. The IRAP program, from the NRC, is another. I think those make a very good contribution. I've appeared before many parliamentary committees—as I was mentioning to Mr. Braid, yesterday I was in front of the industry committee—and every time the BizPal program gets raised, it's always positive. I've been doing this for five and a half years, and I've never heard a negative comment about it, or IRAP, for that matter.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you.

Our government also passed the Fairness at the Pumps Act. This act will ensure that customers get what they pay for. At least that was the intent. As you know, it seeks regular inspections for eight trade sectors, including the retail petroleum sector. This is a vital issue to consumers across Canada.

I'm wondering if you could just explain this to me. When I see this in the estimates and its funding for the implementation of the Fairness at the Pumps Act, what is involved in the implementation of an act like this? Then, could you tell me at what stage the consultations are at on this act?

[Richard Dicerni]

A key point is that we're going to have a few more inspectors. Another key point is that we are going to have many more serious fines if some of our inspectors find that someone is using measuring instruments that are flawed. And we will empower third parties to assist all of those sectors you mentioned to do the checking.

It is part, if you wish, of our consumer mandate that many people look at the Department of Industry and focus on the Jenkins report, or we can focus on digital strategy. But we also have a very active and aggressive consumer affairs volet to our activities. We have a consumer affairs bureau. The Competition Bureau is extraordinarily active. The spectrum policy we took on set-asides for options contributes to better prices, if you wish, for consumers who use cellphones. The Fairness at the Pumps Act is a further step to reinforce our consumer affairs responsibilities to Canadians.

The Department of Industry, when it was created in 1993, was an amalgamation of a number of departments, including the Department of Communications and the Department of Consumer and Corporate Affairs. This is one part of our mandate that doesn't get much of a profile but that we take quite seriously.

[The Chair, NDP, Pat Martin]

That's your five minutes. Thank you.

Thank you very much. That concludes our first round of questioning. I think we'll have time for almost a complete second round.

In the interim, I'd like some clarification on a point you raised and where questions were asked. In the context of asking for authority for supplementary spending, you mentioned that the technology partnership program continues to yield some return on previous loans made. What is the percentage of payback of the technology partnership loans paid out compared with what's been paid back? I ask this because in the context of previous testimony we heard in the student loans program, 87% to 90% of all student loans are paid back in full and about 5% or 6% are written off. A few years ago--

[Richard Dicerni]

The only number I have in my head is the annual repayment that we receive. It's somewhere between--

[The Chair, NDP, Pat Martin]

It's about $110 million--

[Richard Dicerni]

It depends on how successful companies are at selling these products. TPC had a wide range of companies they got involved in. Some were IT companies. Some were environmental technologies. Some were aerospace. It's a diversified portfolio.

[The Chair, NDP, Pat Martin]

I ask only because I know, in previous committees I've sat on, the figure came out that the payback was 2% of the tens of billions of dollars loaned out.

[Richard Dicerni]

No. I'll get back to you--

[The Chair, NDP, Pat Martin]

Well, you're assuring us that this has changed. I'm actually pleased there's $110 million worth of revenue coming in, especially during an economic downturn. But I'd like to know, statistically, how much money is being paid back. When a loan is not paid back, it's no longer a loan; it's a handout.