Industry Committee on Dec. 2nd, 2009

[Brian Masse, NDP, Windsor West, ON]

I have a point of clarification, Mr. Chair. Our standing order says from 3:30 to 5 p.m.

[The Vice-Chair, Liberal, Anthony Rota]

There was a misunderstanding. It's from 3:30 to 4:30, and 4:30 to 5:30 with the National Research Council. There was a mix-up.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

We heard some information from April. There's more accurate information based on the testimony of the last meeting when the BDC and the Canadian Bankers Association were here. Small business loans are up 54%, and in the high-risk category they're up to 60%, year over year. That's already on the record in testimony, but it will be a little easier for the researchers when they're doing a report to understand that this is what's on the ground right now.

[The Vice-Chair, Liberal, Anthony Rota]

Thank you for sharing that with us, Mr. Sweet.

Minister Ablonczy, thank you for coming out today. We appreciate your presence and your answers.

We'll now take a short break while we change over from the minister to the officials from the National Research Council.

Merci beaucoup.

[The Vice-Chair, Liberal, Anthony Rota]

Everyone take your seats, please.

We now have officials from the National Research Council.

We have with us Mr. Pierre Coulombe, President of the National Research Council of Canada.

We also have Pat Mortimer, vice-president of technology and industry support.

Mr. Coulombe, you have 10 minutes. Thank you.

[Pierre Coulombe, President, National Research Council Canada]

Mr. Chair, members of the committee, as a productive and internationally respected research and development organization, the National Research Council, or NRC, continues to bring advanced knowledge and new technologies to Canadian industries, helping them to compete more effectively on the world stage.

We have a long history of scientific breakthroughs such as the atomic clock, the Canadarm, and the synthetic meningitis C vaccine, to name just a few. While these achievements are important for NRC and the country, they represent only one aspect of NRC's impact. NRC's day-to-day interactions, support, and research collaborations with small and medium-sized enterprises result in the creation of new technologies, new jobs, new firms, and greater prosperity for Canadians.

NRC works closely with Canadian SMEs in a number of ways, from collaborative research projects between Canadian firms and any one of our 21 research institutes, technology licensing, the creation of new firms, and most significantly through the work of our Industrial Research Assistance Program, IRAP.

NRC also operates a national network 15 industrial partnership facilities, or IPFs, as we call them. These are specialized business incubators affiliated with our research institutes across the country. Companies, often start-ups or SMEs, link to our R and D capacity, our expertise, and our specialized equipment, and benefit from the synergy that comes from interaction with our advisors from the industrial research assistance program, IRAP.

In 2008-09, 13 firms graduated from our facilities, bringing their innovations to a higher level of technology readiness. We currently have 137 companies incubating in these facilities. It is worth noting that graduates from NRC's industrial partnership facilities tend to enter the commercial market on a stronger footing and have a higher survival rate than the regular startup.

As I mentioned earlier, our most significant interaction with SMEs is through NRC's IRAP program. IRAP is delivered by 240 field staff located in 100 communities across the country. On average, NRC-IRAP works with 8,000 small and medium-sized firms each year. NRC-IRAP provides non-repayable contributions on a cost-shared basis to Canadian technology-based SMEs focused on growth in Canadian and international markets. NRC-IRAP also provides mentoring support and business support to these firms. NRC-IRAP's partner organizations also receive contributions to provide technical and research assistance to Canadian SMEs.

The program supports the government's Youth Employment Strategy with its internship program which provides firms with support to hire post–secondary graduates. Both firms and graduates benefit from these programs: firms benefit from the graduates' expertise in a diverse variety of disciplines and graduates gain valuable work experience that will help open the doors for future employment.

In 2008-2009, NRC-IRAP signed financial contribution agreements worth more than $70 million with more than 1,400 Canadian SMEs. IRAP worked with another 6,349 firms to provide technical, research and business assistance. These contributions translated into close to 5,740 new jobs and employment for 540 youth graduates.

An example of one of the countless successes emanating from NRC-IRAP's SME collaborations is Vancouver-based Angiotech Pharmaceuticals. As a small firm, Angiotech began a working relationship with NRC-IRAP in 1993. Within five years the company had developed technology to help control chronic inflammation and angiogenesis and had signed a $30 million licensing agreement. Today Angiotech has more than 1,500 employees worldwide, with operations in Canada, the U.S., and Europe.

This year, as part of the Government of Canada's economic action plan, NRC-IRAP was allocated an additional $200 million over two years to provide supplementary support to SMEs. This includes $170 million to double its financial contribution to firms, with a goal of reaching an extra 1,360 SMEs over the next two years, and $30 million to help companies hire over 1,000 new post-secondary graduates.

l'm pleased to report that as of October 31, this funding has already reached over 1,200 firms and created 4,536 new jobs, on top of the 455 new graduates that were hired in 376 firms.

To mention a few examples of SMEs that will receive funding as part of this initiative, AV-BASE Systems, a London, Ontario-based company, will receive over $348,000 to develop state-of-the-art maintenance and inventory-control software for the aviation industry. Clear Flow Consulting will receive close to $125,000 to develop environmentally friendly polymers to treat waste water from both aquaculture ponds and rural, small-scale waste water treatment plants.

In conclusion, I hope that I have made clear that the National Research Council is committed to working with small and medium-sized enterprises, boosting their growth and competitiveness while they realize their full potential.

After all, NRC's role is all about turning knowledge and innovation into strategic opportunities, jobs, and prosperity for all Canadians.

Thank you, Mr. Chairman.

[The Vice-Chair, Liberal, Anthony Rota]

Thank you, Mr. Coulombe.

We'll start our first round with Ms. Coady.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you very much.

Thank you, Mr. Coulombe, for your testimony and for being here today. I thank all the witnesses for coming this afternoon.

First of all, a paid announcement. I think NRC and IRAP do an incredible job in our communities across the country. I thank you for the efforts that you put in. I work very closely with Kirsten McBride in St. John's, Newfoundland and Labrador, and they do a truly outstanding job of integrating into the community and working very closely with their firms, encouraging them and being part of their teams. I was in biotechnology, and they certainly were a resource to me, not only a funding resource but a resource for market development and so on. I congratulate you and thank you for that.

I have a couple of questions.

You talked a little bit about what you've been able to do over the last year. You talked about the $200 million that you've received over the two years and about how you were really working towards getting that money into the communities. Could you elaborate a little bit? We're not quite one year, but almost one year, into this. You gave some statistics as to your success.

My concern is for the year coming forward. We're not out of this economic crisis as of yet. We just spoke a little bit about venture capital funding being in a crisis state. I think some of these companies will be looking to NRC to continue their role over the next year or two. I'd like you to comment as to where you feel NRC will be situated this year coming forward--not the year we're just ending, but the year coming forward. Do you think you're going to need additional moneys? Do you think you're well situated?

[Pierre Coulombe]

Thank you, Mr. Chair.

As I mentioned earlier in my presentation, NRC received an additional $200 million through the IRAP program to continue to support the SMEs of this country. At this point in time, most of this money is already committed. Again, we will receive another $100 million in the next fiscal year. Therefore, we should be in a good position to continue to support the SMEs of this country.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Good.

Last year I noted in the 2008-09 estimates a reduction of about $5 million. I just want to make sure that we're not going to be in the same situation where money actually lapses. I know there's a very high demand. I know there's a pent-up demand really for assistance in this particular area. I'm hearing assurances from you that you have enough money for next year and you feel quite confident that you'll be able to get the money out the door.

[Pierre Coulombe]

Yes, I believe I can say that. Regarding lapsed money, as you know, when an IRAP contribution is accepted, we very much depend on the company to be able to deliver and to invoice NRC, because these are not payments that we make in advance. We pay when companies invoice us. We put a lot of effort in following all of those projects to make sure that a contribution will indeed be delivered to those companies.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you for that.

You talked about 1,000 new post-secondary graduates in your programs. Could you talk a little bit about post-doctoral positions? Are you specifically targeting to ensure that companies can have post-doctorates working in their companies, or is it just post-secondary?

I know there is a demand in the country to ensure that we have more post-doctorates. There have been some programs that have been developed to ensure that they are placed in small and medium-sized companies. I'd like your viewpoint on this.

[Pierre Coulombe]

I will ask Mrs. Pat Mortimer, who is managing this program, to provide you with an accurate answer to this particular point.

[Pat Mortimer, Vice-President, Technology and Industry Support, National Research Council Canada]

Actually, you are right, it is just postgraduates, recent graduates, who we place within companies. They can also be from colleges. We find that many SMEs find technical staff from colleges as well. We are aware of other programs in the government for placing post-doctorates. Actually, NSERC has one, and we're linking up with them, since they have the graduates and we have the companies.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

So you're working cooperatively with them. We do need to have more of an attraction to small and medium-sized businesses.

We've talked a bit about commercialization and some of the challenges to commercialization in this country. Of course, NRC, with IRAP, is very much on the ground. Would you care to comment on some of the commercialization challenges and how you think we can ameliorate them?

[Pierre Coulombe]

Commercialization in Canada, as we all know, is a topic that is a bit difficult. Through IRAP we are providing not only a financial contribution, but we provide a lot of advice and expertise to SMEs. As a matter of fact, more than 10,000 companies receive IRAP support in one way or another. A small fraction of those companies are receiving a financial contribution. Through the advice that the ITAs are providing to SMEs, I believe that in the end they are in a better position to commercialize their technologies.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

One of the outcomes of our discussions in the last week with the venture capital association was that they were saying there's just not enough commercialized activity. There aren't enough wins there for them to continue to place money. That was one of the issues.

Would you care to comment on that?

[Pat Mortimer]

I'll comment on that, because we had placed making the linkages between the SMEs and the venture capitalists as a priority for the IRAP program this year. There seemed to be a gap there. What we have to do through IRAP is mitigate the risk for the venture capitalists by further developing the technology, but we also have to make the SMEs VC-ready and help them see what the venture capitalists are looking for. We've put a number of programs in place. I don't know if Dragons' Den is copyrighted as a name, but we've done Dragons' Den-type activities in a couple of the provinces by bringing together the venture capitalists and the technology-based SMEs to pitch their technology.

I think you're right in saying that bridging that gap is a big thing for the SMEs, and we're looking at any way we can help them do that.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

There is a good program in Newfoundland and Labrador, the Newfoundland and Labrador Angel Network. I know that the Newfoundland and Labrador Angel Network has worked cooperatively with NRC as well. We should perhaps model that, because there is that gap, and one of the huge issues is how we fill that gap.

[Pat Mortimer]

When we talk venture capital, we have to also include the angel networks. In Canada the angel networks are becoming increasingly organized and important, and linkages to them and factoring them into the SME world is important.

[The Vice-Chair, Liberal, Anthony Rota]

Thank you. We continue with Mr. Bouchard.

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

Thank you, Mr. Chair.

I will share my time with Mr. Vincent.

Good afternoon, Mr. Coulombe and Ms. Mortimer. Thank you for being here this afternoon. I have two brief questions.

If I understand correctly, you said that you have 140 employees working for the National Research Council who are on the ground in about 100 locations in Canada.

How do you classify their work? Are they working in the aerospace industry, in the manufacturing industry? Also, how do you classify their work locations? Is it done by region only? I would like to have this information.

[Pierre Coulombe]

Indeed, IRAP has 240 technological advisors in about 100 communities in Canada. Most of them are either engineers who worked in the past in industry or entrepreneurs who have sold their business and have been hired by NRC to provide advice. Naturally, in regions such as Montreal, we do have some aerospace experts.

We try to hire our advisors according to the needs of Canadian industries. They all have entrepreneurial expertise, scientific expertise, technology expertise and business expertise.

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

You said that 6,000 companies have benefited from your expertise. You also said some of your resources have worked and contributed in the Montreal region.

Let us look at rural areas instead of urban centres. Do you provide your advice and your expertise in large communities only or also in rural areas?

[Pierre Coulombe]

As I have indicated, we have IRAP advisors in about 100 Canadian communities. Of course, they are present not only in large urban centres but also in several regions of Quebec. I would not go as far as saying that those regions are all rural areas but I would say that we are present in all the major economic regions of Canada.