Subcommittee on Canadian Industrial Sectors Committee on May 14th, 2009

[The Chair, Conservative, Dave Van Kesteren]

Order. Good morning. Welcome to our subcommittee meeting. We've been commissioned to study the crisis faced by certain industrial sectors in Canada, such as aerospace, energy, forestry, high tech, and manufacturing.

Today we are very privileged to have with us the high-tech sector. From BIOTECanada, we have Peter Brenders and Rainer Engelhardt. From the Information Technology Association of Canada, we have Bernard Courtois, Terry Ansari, and Hicham Adra. It's very good to have you with us. We thank you.

You will be starting with some opening statements, I presume. One of you will make those. After that we will begin our rounds. We've become quite lax in our times. I try to stay very fair, but the opening round is ten minutes. If it gets a little bit longer than that, you might see me waving at you or something just to ask you to wrap it up. If you do have something that you feel that is very necessary for us to hear, by all means indicate that, and we'll certainly accommodate you.

Again, welcome.

Mr. Brenders, are you going to speak first?

[Peter Brenders, President and Chief Executive Officer, BIOTECanada]

We're both going to speak, but Dr. Engelhardt will kick us off.

[The Chair, Conservative, Dave Van Kesteren]

Okay. Wonderful.

Please proceed, sir.

[Dr. Rainer Engelhardt, Chief Executive Officer, Eulytica Biologics, BIOTECanada]

Thank you, first of all, for this opportunity to present the biotechnology sector as a Canadian sector to the committee.

I'd like to just briefly introduce myself. I've spent most of my working life in biotechnology, in one fashion or another, from an academic perspective and then as a government regulator, and then over the past 19 years now in the private sector altogether.

I run a small new start-up company here in Ottawa called Eulytica Biologics. It's just getting on its feet. I sold a previous company. I've been a director of BIOTECanada for a number of years, and up until just recently was its chairman for three years.

BIOTECanada is the national organization representing the biotechnology sector here in Canada. In that sense, it represents the interests of over 250 members that really span biotechnology as an industry from research all the way into sales. Its membership is from industry as well as public organizations.

When I talk about biotechnology, really I'm representing the Canadian industry sector that is broadly bio-based; that is to say, it carries out R and D and develops products with biology as a technology platform. That's the glue that binds the industry together. In fact, in that sense, the industry is similar in magnitude to other major industry sectors, compared to automotive, compared to aerospace, compared to information technologies.

We know you're hearing serious stories of several industries in dire circumstances in many sectors of our economy, and certainly the biotechnology industry sector is also seriously affected in the current economic times. What I would like to do is briefly give you an overview of that sector scenario and put it in the context of Canada's current and future national economy in the sense of what the contributions of the biotechnology industry do for that. And Peter will follow up, after my brief comments, with some specific details and with what BIOTECanada sees as proposals for action.

We know firsthand from our members that this financial crisis has had a profound impact on our biotechnology companies and therefore impacts on the continued innovation of biotechnology and, most importantly, on the value generation from that industry to the overall Canadian economy.

As a sector, the biotechnology industry in Canada is definitely entrepreneurial. Companies start out small on the basis of landmark innovations. This might be in health, it might be biofuels, new materials--a number of different areas--and the companies typically have gradual growth over several years, from two or three years to a decade or more, depending on what sector they're in. In particular, the health sector takes much longer to bring a product to market.

Over those years they grow, they hire, they spend their R and D money, and that R and D money will have come from capital investment or from grants. In fact, they tend to spend their R and D money back into Canada.

They might fund research and development, as I said, for more than a decade before they actually show any sales revenue. For Canada that's important, because the biotechnology industry is a new and emerging industry in Canada. So they're at that interim point.

For the most part, they use equity-based investor capital to do that. They're highly dependent on well-functioning capital markets, and, as we know, they are especially vulnerable to a market crisis. In fact, the same is true for companies in biotechnology outside of Canada, that are also actively striving towards a profitable and sustainable knowledge-based economy. That competition outside of Canada is real and in fact validates the basic value of biotechnology as a knowledge-based economy for any given country.

So what's the problem? First of all, as I said, few biotechnology companies in Canada are well-established mainstream producing companies. They're really in the middle of a development phase of products, as a generality, and they are transitioning to commercialization and product sales. That's true whether or not the biotechnology company is developing a cure for multiple sclerosis or breast cancer, or has approaches and products related to new carbon capture methods, or food safety, or biofuels. It's a broad sector in that sense.

When the credit markets seized up as they did last fall, there certainly was less capital that the equity investors wanted to put at risk.

We find that the capital that is put at risk--by VCs, for example, venture capital companies--is dedicated typically to shorter-term, lower-risk options providing earlier returns. In fact, VCs that had been investing in biotechnology are now investing in real estate. It's a very different scenario from an investment perspective.

The perspective for biotechnology is that biotech is a higher-risk investment by nature. It's high-risk, but there are also very high rewards, which comes fewer, at times. That has coloured the overall investment scenario in Canada. The current reality is that there are more emerging technology firms in Canada than ever, frankly, that are operating with less than six months of cash. That's a sobering fact that we have solidly researched through BIOTECanada. The majority of the small and emerging companies have less than one year of cash to survive.

The effect is that companies are closing product development programs at the moment and are starting to cease operations. If you look at the data over the last two months, you'll see employment in the biotechnology sector has decreased by about 8%. We think if this continues, many thousands of direct and indirect jobs are also going to be lost from the sector. What that does is threaten the promising earlier scenario of a healthy future growth of the biotechnology sector, its employment, and its value generation.

This short-term financing issue has also put the historical R and D investment in Canada at risk. Canada is a country that federally and provincially has invested well in R and D. Many innovations are generated, and they have brought breakthroughs in products that are entering our drug registries, put on our plates, put in our cars. The impact on the sector is that we have a risk scenario, and in order to keep that innovation, commercialization, and value generation going in Canada, actions need to be taken.

I'd like to leave it to Peter to provide a few points on this.

[Peter Brenders]

Thanks, Rainer.

As Rainer said, I'm with BIOTECanada. I'm Peter Brenders, the president and CEO.

On behalf of our members, we wrote to ministers Clement and Flaherty in December when the crisis was starting and suggested a three-point plan that we could put in place to sustain research and development in Canada, to stimulate new investments and new financing, and to support domestic jobs--three points that broadly will serve the biotechnology interests but will also serve the broader S and T interests of this country.

The first recommendation is help companies monetize tax losses. As Dr. Engelhardt mentioned, companies spend heavily on R and D, much more than revenue. A lot of times in their early development stage, they accumulate substantial tax losses. They look forward to the day they get to claim these tax losses. But we have a challenge of getting there.

Our recommendation is to grant a loan against these tax losses; use the tax losses as collateral, in a sense. We could use BDC as an entity to be able to flow capital to companies for a short term for them to spend on R and D. You can create limits on that. We're recommending that it be limited to the early-stage R and D companies that are spending more on R and D than they get in revenues, or revenues less than $10 million. You keep it focused on those emerging companies and you can create limits in terms of the amount of a loan they can apply for. You make it a no-payment, no-interest loan for two years and then amortize it over five years. It's a way to put capital into companies and keep those jobs going; stop the layoffs in that area.

We've talked about the second area in terms of new financing and we're suggesting we implement a capital gains exemption on new direct investments into companies that are doing R and D. There's no immediate cost for the government up front, potential opportunity cost down the road when the success is there, but again it puts money into the companies and creates a competitive advantage for a science-based industry.

The third recommendation is to sustain that R and D in Canada. Keep that business case that we have for Canadian R and D. We currently have an R and D tax credit program, the SR and ED program. I'm sure you're all aware of it. There is a limitation in the refundable credits. The refundable credits are a great program, but they're limited to Canadian-controlled private corporations. They're a very small subset of our R and D jobs. It made sense when it was put in place in 1985, back before free trade and all the policy atmosphere then. It makes no sense today. It's not about the ownership status of a company, it's about the Canadian jobs. Our recommendation is simply to eliminate that restriction, that CCPC, the canadian-controlled private corporation restriction. Allow all companies investing in R and D in Canadian jobs to benefit equally under the terms of the program.

We're putting forward those recommendations with two things in mind. One is that we have an urgent problem. We can't afford to have the industry decimated by the credit crisis. Too much has been built into these operations to get them into a commercialization cycle. The second one, and I'll close with it, is that we're dealing with a global landscape. These jobs are very portable.

We put in here the Globe and Mail cartoon from last week that talks about Canadians classically as hewers of wood and drawers of water. In the world of R and D, we run the risk of just simply exporting our IP as we've exported raw natural resources in the past. Our goal is to make sure that we create an environment, that we capture that value in Canada.

We see countries like China announcing $9 billion for emerging tech this week; the U.K. creating a $1.3 billion pool for investment in emerging tech; the U.S. dedicating 3% of GDP for growth and innovation; EU committing more than $47 billion for SMEs; Taiwan creating $2.18 billion in venture capital for their biotech. It goes on and on as countries around the world are investing and it makes it incredibly attractive for our emerging technologies to simply pick up and leave. That's not the goal we want in Canada.

We'll just close with that. We think Canada has a competitive advantage. We can compete globally in this space. We just need the tools to make sure we are globally competitive.

Thank you.

[The Chair, Conservative, Dave Van Kesteren]

Thank you, Mr. Brenders and Dr. Engelhardt.

Monsieur Courtois, I think you're next.

[Bernard Courtois, President and Chief Executive Officer, Information Technology Association of Canada]

Thank you, Mr. Chairman.

My name is Bernard Courtois and I am President of the Information Technology Association of Canada. I would be pleased to answer your questions and exchange with you in either French or English. I will make a few opening remarks and introduce to you the two colleagues who have accompanied me.

First of all, I'll say a few words about ITAC. We're the national association of Canada's information and communications technology industry, which covers information technology and telecommunications hardware, software, services, everything that makes the Internet work, Web businesses, and so on.

Our industry is a significant one. It employs about 600,000 Canadians, which in proportion is significantly larger than agriculture or forestry. We have 20% more people employed directly than the auto sector when it was at its peak. Our sector performs 38% of R and D carried out in the business sector in Canada, which is probably more than double any other sector.

In addition to our role in our own right, we have also been growing, by the way, at a higher rate than the economy for the last 10 to 15 years. Even though we went through a bubble and a crash around the turn of the millennium, the growth is steady through that. The bubble was an exaggeration upward and the crash an exaggeration downward, but generally speaking we have been a growth engine for the economy.

But we have a very unique role in that in addition to the 600,000 people employed in our industry, there are 500,000 information technology professionals working in the rest of the economy. That is just an illustration of the degree to which our industry has a unique role as an enabler in making the rest of the economy function and driving productivity. Indeed, the studies have been accumulating that productivity in a modern economy is dependent on, and really well correlated with, the degree of ICT adoption.

Our industry is very global, and it is also enabling. Because our technology is enabling work to be shifted around the globe so easily and because our companies operate that way, our industry is really in the front lines of what's happening to an economy, not just in our sector but in all sectors around the globe.

We have been affected by the recession, and different sectors are affected differently. Obviously, our customers are suffering at the present time and they're obviously not spending as much as they would in a booming economy. That's causing a recession in our industry itself. There are some layoffs, but I have to say that much of what's happening in our industry is some significant belt tightening but also some people just taking a hard look at their operations to make sure that when we dig ourselves out of the recession they're going to be stronger and more competitive.

So our situation is that we will continue to be a growth engine for the economy. Most importantly, we will be continuing to provide what is needed for the rest of the Canadian economy to be competitive in a modern environment.

Like the biotech sector, however, there is one dark side at the moment and that is the dearth of venture capital. Obviously we're going through a financial crisis, a crisis that emanates from the financial sector, so more than ever there's a shortage of venture capital. That is not a unique Canadian problem. That is a global problem. As governments around the world try to solve the problem of the banking sector and the financial sector, it is important to realize that there's a whole growth side of our economy that is dependent more on venture capital than on bank financing. This is something that really everyone is trying to address at the present time.

In Canada the problem hits on a base of venture capital that is thin and not very large to start with. So we had a challenge of venture capital already. The economic crisis of course makes it a lot worse.

Our view, therefore, about how we're going to move forward is we need to find a way of flowing money quickly in terms of venture capital to those firms. There are things that we should do in the longer term. We can try to improve this with R and D tax credits. We know that we have a very good program but we know that there are shortcomings.

When it works for a particular company, it works very well, but for a lot of companies it doesn't provide the cash flow needed. They reach up very quickly to the limitations about what size they can reach and so on, but the problem is very short term and therefore in our view we cannot address this very short-term problem with redesigned programs. To redesign a program takes a year or two. It takes a long time before money starts flowing. We have to find ways of getting money to flow quickly.

I'll move on, though, to say we're looking ahead to digging ourselves out of the recession as a country and to what we need to do to, in a way, make the best of a bad situation and capitalize on our advantages as a country and dig ourselves out in a way that will competitively differentiate us, restrengthen our competitive position and our growth position.

A couple of reports came out last week—from the Science, Technology and Innovation Council and the Council of Canadian Academies—both addressing the areas of innovation and R and D. Those reports point out the view we've held and we see around the world. That is, in Canada we're a relatively prosperous, developed economy, and therefore higher-cost. We're a small economy compared to many other countries around the world. We're not growing as fast inherently as the developing economies. But we do have the advantages of a well-educated population, high quality of life, proximity to the richest market in the world, advanced technology capability, and strong fiscal position in our country.

All that points to the fact that we are compelled to succeed in the future based on innovation. We believe that not just for our own sector, because obviously we're sort of a poster child for innovation, but we believe the entire Canadian economy should be looking at itself from that standpoint.

So when you talk to other sectors, and the people talk about how they're going to dig themselves out of this, we believe—we're having discourse inside our own industry, but we believe it should be true for those other sectors as well—that in Canada we need to start focusing, and we're a small enough country to be able to be focusing, on leadership in the use and development of technology in whatever sector we're in.

You're talking to other sectors. I can understand that oil sands is an industry that is very technologically dependent. And you can go across all kinds of sectors in our economy where we don't think of technology being a driver of their future, but it is of their competitiveness and their growth.

We believe it's important, when this committee writes its report, to pick up on the words of the Science, Technology and Innovation Council and the Council of Canadian Academies and the views of sectors like ours that see the economy worldwide, to emphasize innovation and the drive for leadership and innovation and technology in the future.

We see that as a best practice among our clients who are, even at the present time, investing to make themselves stronger as they come out of the recession. We see it in governments. Governments have an extraordinary opportunity at the present time to make themselves more efficient to do what they are saying to businesses that they should do, to invest in technology to improve their operations. In the short term, it's a win-win, because these people who we are laying off temporarily will have long-term jobs, will get soaked up by that, but the result will be, when we try to dig ourselves out of deficit, a much stronger position.

I'm just going to pass it on at this time briefly to Terry and to Hicham so they can introduce themselves and just lay a bit of a basis for which we can have our discussions with you.

Thank you.

[Terry Ansari, Vice-President, Business Solutions Group, Cisco Systems Canada Co., Information Technology Association of Canada]

Good morning, Mr. Chair and members of the committee.

Thank you very much. I really appreciate the opportunity. As Bernard said, Hicham and I are just going to make a few comments and then look forward to your questions.

I work for Cisco. We are the global leader in networking. Our vision is changing the way the world works, lives, learns, and plays. I would suggest to you that, at this juncture in time, that has become more profound than ever. As we look at what's happening around the world, the global stimulus package is, by our own estimation.... I'm part of Cisco's global advisory group, by the way. We've analyzed so far in the order of $2 trillion being set aside, so to speak, for the idea of economic stimulus.

When we look at that $2 trillion and dig into it, what we're seeing is a larger discussion that is not, if you will, about that traditional infrastructure dialogue. It is about a different message entirely, which is the notion of recovery through innovation. I think, very consistent with what you've already heard this morning as we look to recovering, it's really about how we position ourselves for the upturn, which is inevitable. As we do so, we have to appreciate that we're competing around the world with a completely different set of very well-financed constituencies and a tremendous number of focused leaders around the world who are saying that this is their opportunity to change the dynamic.

For us, as we look forward, we believe that technology is the enabling infrastructure of our time. In fact, it is so important to our future, it really is something that will have a profound impact on economic resilience and agility and also a deep and lasting impact on our society. From our perspective as a company, I believe that, writ large in the technology industry, we see a huge opportunity to be a value-added player in this discussion and to be much more collaborative.

To that point, as you've already heard from our colleagues, the idea of inter-organizational collaboration to drive innovation is something that we must embrace. What I mean by that is that the private sector, the public sector, and the not-for-profit sector must come together and look at collaboration for the purposes of innovation in a very different way. We believe that leadership has to come from you as our government.

Those are my brief comments. I will definitely look forward to questions as we go forward.

Now, over to my colleague Hicham.

[Hicham Adra, Member of the Executive Committee , Public Sector Business Committee, Information Technology Association of Canada]

Thank you, Terry.

I want to thank you for the opportunity to say a few words to you today.

It is an honour for me to be here, and I thank you.

I'm with CGI. I've been with CGI for 22 years. I've been able to participate in and witness CGI's growth into a company that today is over 25,000 people in strength. It's a company that was founded by two entrepreneurs here in Canada, in Quebec. It has grown today to have over 16,000 employees in Canada and over 25,000 worldwide.

One of the things we do observe is how other jurisdictions are applying technology as a best practice, as lead users and lead clients. I want to take two minutes to focus on that. Bernard introduced that. Governments obviously have a major role as policy-makers to ensure that we're creating the best policies to create the best environment for innovation and technology. I also believe a second important role for governments is to be a role model as a user of technology.

Governments are significant in size and in a country like Canada even more so, proportionately. The absolute numbers spent by governments on technology are in the billions of dollars. Over $7 billion is spent by governments on technology. It's important in scale. It's also important for small and larger companies in the sense that governments serve as model clients and references that companies can take, export, reapply, and use to win more business and create more economic value back into Canada. I think the role of government as a role user is a significant one.

The questions for me are these: Do we want to lead? Are we leading today? What areas are we leading in? How do we sustain that leadership position? How do we create other leadership positions? We are world leaders in the adoption and use of technology. This has been offset not only to help companies but also to help ourselves as government to become more efficient and to emerge out of this crisis in an even stronger leadership position.

I'm happy to take any questions. Thank you for the opportunity.

[The Chair, Conservative, Dave Van Kesteren]

Thank you, guests, for your opening remarks. I won't dwell on any of it. I just thought we had a good tag there: Recovery through innovation. That's a good tag line. We may use that. We'll ask your permission.

Thank you for your opening remarks. I think we're ready to start.

Mr. Garneau.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you, Mr. Chair.

Both the biotech and the ICT witnesses brought up venture capital, so I want to ask first about venture capital. I've also personally heard from the venture capital industry in the country.

We recently had a VP from BDC here, and although there was additional funding provided by the government specifically for venture capital, she basically said that it was not sufficient to address all the needs. Venture capital seems to be almost on life-support in this country, from the indications I'm getting.

One of the recommendations that's been made with respect to it is that the tax laws should be changed to increase foreign venture capital. I would be interested in hearing your views on that. Is there a significant potential pool of venture capital that could come from outside the country if Canadian tax laws were changed?

[Peter Brenders]

Maybe I'll start with that.

The short answer is yes. There is a significant pool of foreign investment that can come to Canada.

I don't know if it is tax laws so much as it might be application. We have one administrative issue that is preventing a lot of money from coming into Canada easily. We saw great movement in terms of changing the Canada-U.S. Tax Treaty in terms of recognition of limited liability companies. The problem is that we're still sitting on an administrative detail called the section 116 certificate, which requires a host of signatures that just can't be done. There was some movement to try to deal with that in the 2008 budget, but administratively, within the public service, that has been prevented from changing. That needs to be fixed. We need to get rid of the 116 certificate. It is an administrative detail that just prevents easy money from coming into Canada.

So the short answer is yes. We believe foreign direct investment is available for us, but our own rules are preventing that money from coming here.

[Dr. Rainer Engelhardt]

If I could answer that from the concept of Canadian VCs, venture capital investment is ultimately the lifeblood of technology companies as emerging technology companies.

Canadian venture capital never has been and probably never will be the only source that carries Canadian technology companies forward. Their history and their future expectations are such that there will not be enough capital. On the positive side, though, my observation of the VCs in Canada is that they're very willing to work with other VCs or other investment houses. They have a record of doing that.

As Peter says, by changing the investing climate...and ultimately the LLC issue is that an American VC coming into Canada gets taxed twice. That's obviously something you wouldn't want if you're going to be investing along with a Canadian VC.

So it has all the trappings or the elements of being a positive solution, but some things do have to be done.

[Bernard Courtois]

Ideally, you would like a mixture of domestic and foreign venture capital. There is an advantage.

The first choice of our companies is to go to domestic venture capital, because the investors like to be close to their investments, and the investees like to be reasonably close to the people who invest.

The fact is, the Canadian venture capital pool is always going to be too thin and not as experienced and mature as what can come from the U.S. Those investors bring more than money. They bring management experience. They bring experience in how to scale the company. I know, for example, that Israel has a policy of actually encouraging their companies to get their capital from outside the country, because they know that they have the science, but they don't have the global marketing and business development that comes with it.

In our case, we're so close to the U.S. that there's an attraction, but at the same time, there might be a little bit of a pull down there. Ideally, what you do is look at the impediments to investment from outside Canada and you aggressively and swiftly remove them. That has been lacking. There are still some barriers there that have been puzzling the industry. In theory, we've all agreed that they should be removed. That should be done.

Longer term, again, interaction between Canadian venture capital and American venture capital will help our venture capital industry mature and actually play a stronger role.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you.

I'm sorry; go ahead.

[Terry Ansari]

Sir, I support the view of my colleagues, and by no means am I going to make a statement that it's conditional. However, I would just add that one of the things that is related in utilizing VC is also to have some perspective on how we enrich the talent pool in this country and, furthermore, how we also help those wonderfully innovative organizations commercialize their practices. I think we have a collective obligation to make those things happen coincident with and in addition to the actual acquisition of and access to capital.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you.

I'd like to address a question to the BIOTECanada representatives. You've drawn a picture of what it is to be a small start-up biotech company: the fact that it takes a certain number of years to develop your promising idea into a product, the fact that currently many of the companies have only six months' or a year's worth of cash on hand. I think that very graphically describes the situation.

When that cash doesn't come and things have to stop, what most often happens to those companies? Do they just disappear? Do they get merged? Do they get acquired by bigger companies? What happens?

[Peter Brenders]

What we're seeing today is a reality check. When a board knows that they have six months of cash--and they're always raising new capital--the first thing they do is scale back their programs. The company's non-core programs get terminated, and along with that the scientists and the highly skilled jobs as well. The challenge is that once these people are let go from a company, they typically will reapply their skills elsewhere, so we start to lose the people. They either go to other institutes that might be taking that skill base or they simply leave the country, and we're starting to see an exodus of skills in that one. You don't retrain scientists; they simply go and apply their skills elsewhere.

That's the first stage. Then, as companies scale back down in size and put more and more programs on hold, they do become attractive targets, because they have intellectual property that's reached a certain stage, they're cash-poor, and their valuations are grossly undervalued. We are seeing companies being bought by multinationals, which can be a good thing if they keep their research going, but a lot of times you'll see companies being bought by a large, profitable company simply for the tax losses in that company.

We had an example of one in December. In this case the company went under and was finally sold for $1 million. A Canadian subsidiary bought it, and they got $28 million in tax losses, so the net was that the government paid them $5 million, in terms of avoiding taxes, to buy a company for a million bucks. If we lose the IP, we lose the jobs.

That's what we'll see more of, as these companies go into stasis. It becomes a fire sale.

[Dr. Rainer Engelhardt]

Well, I could add a very specific example, a personal one. When I said that the previous company that I was with and led was sold, it was not intentional at that point, earlier on. It was sold, and the deal closed with a multinational in Europe. The deal closed at the end of February, and that was a deal that we finally had to accept because we could not find, or close on, investment in the latter part of last year in Canada. It was simply impossible.

I guess the company was successful, in the sense that there were products in regulatory and there was lots of IP, but definitely Canada is not going to be benefiting from what would have been future growth of that entity within this country. It's regrettable in that sense.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you.

[The Chair, Conservative, Dave Van Kesteren]

Thank you, Mr. Engelhardt.

Monsieur Bouchard.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chairman.

Thank you for your presentations.

My first question is for BIOTECanada. I would like to know if you produce vaccines and if you work in the pharmaceutical field. You could perhaps tell us a little bit about your products.

[Peter Brenders]

The breadth of biotechnology in Canada covers a lot of areas. Most of our companies are health-based. They'll range from producing vaccines—we have some leading vaccine companies within our country—to therapeutic products to deal with diseases, unmet needs, oncology, neurology. And there are stem cells—we have some world-leading companies. But it goes beyond that. It goes into diagnostics, which is convergence with our ICT colleagues. You can look at it in terms of our ability to characterize things, such as being the first in the world to characterize H1N1, the flu pandemic virus.

But what's broader in the bio-based economy is that we also have companies in Canada that are able to take historical, traditional biomass and convert it into.... We all know about biofuels and bioethanol, but it's starting to lead into butanol, other products, fine chemicals. We see Sarnia in Ontario converting classical petrochemical into bio-based feedstock to make compostable plastics, bio-based materials; we see agricultural innovation across the west, which is introducing new, high-value crops for farmers.

Canada has a wealth of expertise in biotechnology. Everyone thinks about it as drugs, and that is the traditional field, but when you take biology as a platform and apply it with ICT and other areas, we become globally competitive.

It feeds into our traditional industries. We have a couple of companies in Ontario that are producing products for automobiles of bio-based materials. Woodbridge Foam makes the foam car seats for the Ford Mustang. We have polyols that are made for new plastics in automobiles. We have technologies that feed into the forestry industry to bleach the pulp, using enzymes instead of chemicals.

It is such a ubiquitous platform. It's Canadian technology that feeds into that one, which can be globally relevant, but we need to be able to help grow the companies a little bit further to commercialize it.

[Dr. Rainer Engelhardt]

Let me add one thing to this: calling biology an enabling platform for these diverse product lines is not just an association of convenience. The same technology as underlies developing a plant that is not a food plant into biofuels is very similar to, let's say, the DNA technology that develops a drug. The knowledge base of all of that is truly a biological, biochemical, molecular base, whether you're targeting biofuels or a new molecular drug. That's what unites this broad sector.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you very much. The businesses you represent are very varied and complex. I jotted down a few things with regard to BIOTECanada.

You mentioned that there is a limitation in the refundable credits and that the situation is urgent as far as the credit crunch is concerned. Many jobs are exportable. We risk seeing our technologies being exported. Several other countries invest heavily in this area. You are also saying that the companies you represent need tools.

Are credit availability and tax credits for research and development the two things that you are asking for on behalf of the companies you represent? If I understood correctly, these are non-refundable credits that could be converted into refundable credits. This would mean that the corporation would not be required to make a profit; it would be entitled to these funds even if it were not profitable. I would like to hear your comments in this regard. Are these the only two development tools that you are asking for?