Industry Committee on Nov. 29th, 2012

[Phil McColeman, Conservative, Brant, ON]

Thank you, Minister, for being here.

It's interesting to hear this dialogue. I'm not going to spend a lot of time on it, except to say that the opposition, the NDP, are obviously focused on job creation just for the sake of job creation, not for results.

All your comments as you delivered them earlier today are on the results, the things that have been achieved, and the better efficiencies that have been achieved. Of course, their line of thinking is just to create more and more bureaucracy and administration and everything will be fine.... That's their job creation program.

I would like to talk to you about some of the results, and in particular, those that you have achieved in FedDev, sir. Those results that I'd like you to speak about relate to something that's very near and dear to municipalities.

The Federation of Canadian Municipalities talks about it constantly, and it's in the front of their minds all the time now: public infrastructure. I'd like you to speak about some of the investments that FedDev specifically has made, or some of the overall guidelines for FedDev programs in terms of assisting municipalities as well as other organizations in developing infrastructure in Ontario specifically.

[Gary Goodyear, Conservative, Cambridge, ON]

I think that's a great question, in this sense. FedDev was created for two reasons: one, because the nation was about to face a very significant economic downturn, not of our doing but coming to us from beyond our shores; and two, Ontario has some unique issues to deal with, such as the automotive industry and those types of things.

In the beginning at FedDev, we obviously had to stimulate the economy as quickly as possible. We chose the route of partnering with people who had experience on the ground: folks like the Canadian Manufacturers & Exporters, the Business Development Bank of Canada, and IRAP, to give you examples.

We looked at areas where we could move money into the economy. I will admit that, in the beginning, creating a job was necessary. We saw applications come in for rebuilding arenas and these sorts of short-term jobs—paving, infrastructure in terms of curbs—and we would approve those jobs. As the economy started to change, we also changed. We did not stagnate. It was vitally important that we remain nimble and quickly adapt to the changing economy.

Around that time, we started to look at.... I'll give you an example. If we were going to pave something, it would be an airport runway, meaning that this would not be just two weeks of paving jobs and stimulation in the economy, but that there was some future economic benefit because the runway would now be longer and could potentially handle larger aircraft.

Our thinking changed as well in moving forward around the advantages for Ontario. That means assistance in terms of venture capital for folks who are starting up, and assistance for businesses in entering some of these new export markets that we've opened up with these new trade agreements.

We would work with scientists, getting their products into the marketplace more quickly. We would work with putting students and recent graduates into businesses, so they had a job close to what they were trained to do. That would be a great advantage to the businesses, as we've mentioned, that are weak on research and development.

Those are the kinds of programs we now have. They are better-quality, longer-lasting jobs, completely aligned with the needs of the economy and with some very forward-thinking projects like the water consortium and this cloud computing project with the University of Toronto that I mentioned. Those are the areas that we believe are the high-technical, high-knowledge types of jobs that we want and need for Ontario, but with peripheral and transferable benefits across the nation.

[Phil McColeman, Conservative, Brant, ON]

To carry on with that, I would like to mention a couple of investments that FedDev has made in businesses in my community. I'll focus on one very cool company that started in the digital and software area of warehousing, as well as equipment, and their particular focus has been the United States market. They wanted to expand. They were small here in Canada, but they had clients, and now they've been able to move into the U.S. market with the assistance of a FedDev loan, repayable to the government, to bridge a gap in their financing. They didn't have the ability to do that through conventional financing.

It was interesting to discuss this with the owner and the angel investors, who were there the day we celebrated the fact that they had succeeded in opening up the U.S. market. Now they have quite a number of what you would call Fortune 500 company clients as part of their customer base. It was exciting to see the overwhelming acceptance, and I would say endorsement, of the angel investors themselves, and that we would bridge it with this kind of gap.

I bring that example to the table today, sir, because to those small entrepreneurs, to those small companies that have a desire to move forward but sometimes don't have the sophistication and such to do that, FedDev offers a whole menu of opportunities in different categories for those kinds of companies.

Since FedDev was created, what have you seen in terms of the key things—the best bang for the buck, as was mentioned earlier—coming out of FedDev for companies right across southern Ontario? It's no secret that southern Ontario is one of the most fragile industry-based...it is still very fragile.

[Gary Goodyear, Conservative, Cambridge, ON]

It's a difficult question to answer, because there isn't one area. The fact that we've more than doubled the amount of angel and venture capital available to new entrepreneurs is a great story. There's the fact that we have businesses that would never have thought of going to their local college or university for help in perfecting a product or improving a process actually doing it, and, as a result, becoming far more competitive in the global market. These are all good stories. I think that overall it's the partnerships being created between academia and industry that will be the most long-lasting.

We have done work on arenas in the recreational infrastructure program. These are great for communities. Healthy communities are always attractors for people to come from around the world and live and work. I have to say that I believe so strongly in collaboration and partnership, working together as a team, competing against the rest of the world—

[The Chair, Conservative, David Sweet]

Thank you, Minister. I have to partner with you on that on time.

Mr. Hsu, you have seven minutes.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Thank you very much, Mr. Chair.

Thank you, Minister, for being here today.

I want to start by talking about CANARIE, the high-speed Internet backbone that is very important for researchers across the country. There's a line on page 91 of the supplementary estimates for CANARIE. As you know, Minister, the funding for CANARIE has gone down a bit this year compared to previous years.

I want to read a press release from CANARIE from August 8, 2012. They say, and this will be no surprise to you: “In confirming the $22 million in funding for the third year of the mandate, the Government also reaffirmed a requirement for CANARIE to explore and implement cost-sharing strategies with its user community.”

I want to note that further on in the press release they talk about CANARIE's user community. Among those in the user community, we have universities, colleges, and hospitals.

My question for you, Minister, is whether you will tap CANARIE on the shoulder and say, “Please don't download my government's budget cuts onto universities, colleges, and hospitals.”

[Voices]

Oh, oh!

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Just ask them to be careful about how they go about implementing the cost-sharing strategies they have to implement because of cuts to their budget.

[Gary Goodyear, Conservative, Cambridge, ON]

I appreciate the question very much, Ted.

Number one: the fact is that we consult, as I've mentioned before, with all the stakeholders we can possibly talk to. It's almost all I do. When I'm not in the House answering questions in QP, I phone presidents of universities and deans of research. We have round tables. Folks come to Ottawa, and I meet with them.

I met with the CANARIE people. I specifically asked them if they needed all this funding. We have an obligation to Canadians to be more efficient in these difficult times. The CANARIE people were very kind. They had that team spirit and were quite willing to work with the rest of Canadians who want to see a more efficient governance. They were the ones, in fact, who suggested to me that they could do with less. That's number one.

Number two: it makes perfect sense, when you have a product that people need and want, that some of them should pay for it. Not everything in life is free. I know you might want to say that it would be our universities and our students and these poor researchers; that's exactly who it is not. In fact, there are users of this incredible network who have the ability to pay something for it. it just makes sense that the Canadian taxpayers could have a bit of a break and that these users could pay a little bit more to it.

We will very carefully and softly transition—

[Ted Hsu, Liberal, Kingston and the Islands, ON]

And you'll be careful about the universities and hospitals? That's all I want to know.

[Gary Goodyear, Conservative, Cambridge, ON]

We will indeed.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

That's all I want to know, Minister.

My second question is about an announcement you made on November 13, which I think was a good announcement. It was $17 million over five years for the college and community innovation program. I note that one of the grants available under that program is the applied research tools and instruments grant.

So great: if you like money for colleges to purchase research tools and instrumentation, you'll also know that researchers are upset about the cuts to the research tools and instrumentation program of NSERC. These would be university researchers.

Last night, In fact, I talked to some engineers who do applied research. They expressed to me how upset they were. If you like the applied research tools and instruments grants for the college and community innovation program, why not provide the funds to NSERC so that it doesn't have to cut back on the main research tools and instruments program?

[Gary Goodyear, Conservative, Cambridge, ON]

Well, as you do know, this year alone we provided NSERC with an additional $15 million—$200 million in additional dollars to NSERC since 2006.

The program you're talking about—and I know that you know this, Ted—averages approximately $100,000 per institute. There are about 37 institutes that draw on that program. The federal contribution is very small. It's about 15%, which means they have other partners—multiple partners.

And as much as I guess we would all like to fund everybody all the time and forever, difficult decisions have to be made. NSERC chose this program. As I said in my opening remarks, my instructions were that we would protect basic discovery science and fellowships—in other words, people. This was an area that was offered up, and it is what it is.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

All I want to point out is that I know we have to cut certain things, but in terms of priorities, I think scientists, engineers, and other researchers have really spoken out quite loudly about their concern about the cuts to RTI.

Let me go on to my last question, Minister, and that is about the number in the supplementary estimates for NRC of roughly $61 million for refocusing the work at NRC. I understand the idea behind it, but I am concerned about the time it's taking to sort out all the programs. This concern doesn't just come from me; it comes from people I talk to. You'll know what I mean by “programs”; it's the new way the research work at NRC is being organized.

For example, as of a couple of weeks ago, in the engineering division, only two programs—and those are the two flagship programs— have reached final approval. There are four steps to approving a program. Only two of these programs have reached final approval. My concern is that there will be a lot of people in NRC waiting to see what happens. While they're waiting, their research is not part of any approved program. I think most of them really love their research and are continuing to work on what they're working on.

My question to you is this: are you at all concerned about the pace at which these programs are being set up and approved? Also, have you talked to the management at NRC about any concerns you might have? This connects a little to Mr. Stewart's question. Let me just add—

[The Chair, Conservative, David Sweet]

If you want an answer, you have to let the minister answer. We have about 20 seconds.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Okay. I'll let the minister answer.

[Gary Goodyear, Conservative, Cambridge, ON]

Thank you.

Very quickly, yes, of course I talk to the management at the NRC. We have had meetings very frequently, especially of late—

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Are you happy with the pace?

[Gary Goodyear, Conservative, Cambridge, ON]

Indeed, I wish it would go faster, but I have to respect that this is a major undertaking. This is a 100-year-old organization. It has 400 contracts around the world. It has over 4,000 scientists. It isn't something that we could or should change in haste. They are consulting with stakeholders and doing the job right the first time.

[The Chair, Conservative, David Sweet]

Thank you very much, Minister.

Now we'll go on to Mr. Braid for five minutes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Chair.

Thank you, Minister Goodyear, Mr. Dunlop, and Mr. Archibald for being here with us today.

Minister, there are a range of very important programs under the FedDev umbrella. You've touched on many of them. In my mind, one of the most successful FedDev programs has been the investing in business innovation program, or the IBI program. We're certainly seeing the very positive impact of that program in Waterloo region, where we now see the creation of an average of one start-up company every day.

In my riding of Kitchener—Waterloo, the centre of innovation in Canada, we're of course very familiar with the flagship companies like RIM and OpenText, but there are 1,000 other high tech companies in the Waterloo region.

Minister, could you speak to why IBI was established and to the impact you believe it's having?

[Gary Goodyear, Conservative, Cambridge, ON]

This is a great question, and I thank you for it.

This starts back when we were seeing the transition in the economy of southern Ontario. We decided to look at programs that would provide for better jobs and better job opportunities and really grow and diversify the economies of smaller communities in particular. We knew from our consultations and our round tables that venture capital was a serious impediment to this type of growth. That really was the genesis of this program.

This particular program was announced with the other ones, all within about four to six weeks back in the fall of 2010, again, as an initiative to show the change in FedDev's focus and that in fact we had a suite of programs that would pretty much fill most of the needs of any entrepreneur.

To date we have had about 172 applications approved under the IBI program for some $102 million, but the leveraging goes way beyond that. In fact, last night I got a note that on Dragons' Den was one of the companies from Kanata that had received a very small amount of repayable money through this program. They actually got selected by all of the dragons; they turned them down, but took one of their offers.

I have to say that all the programs working together make up that ecosystem and support the entire system, which is a collection of parts. Venture capital is one of those parts. Skilled workers make up another one of those parts. We know that there are folks in southern Ontario who have great ideas but they can't get them to the market, so we have programs that will help move a product or a process down the development line to the marketplace much sooner.

But we also know that Canada's start-ups are very strong. We are one of the leading countries in the world with start-up capacity. Again, you add those factors together and it doesn't take too long to come up with a venture capital angel investor. I don't want to speak about the national history of venture capital, but it isn't that strong and it's certainly not that old. So we are now seeing under this program not just local investors, as investors now are being attracted from around the world, and his really is what the purpose of the program is.

We won't be there forever, but this initial start and the introduction of our capacity to the United States and other investors are the results that we want to see, so we are very pleased currently, and I am pleased that the outcome will be longer lasting.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you.

You mentioned the Jenkins panel, Minister, in your opening remarks. Could you briefly touch on what, in your mind, are the most important recommendations from the Jenkins panel and how any of the recommendations are perhaps reflected or represented in the supplementary estimates (B)?

[Gary Goodyear, Conservative, Cambridge, ON]

I think the Jenkins panel—which, as you know, took one year and consulted all around the world—was a team of highly experienced and expert Canadians. They did an incredible consultation process. They came up with a number of recommendations—about six of them—and there were some sub-recommendations in the report as well.

The recommendations did in fact surround things such as venture capital. Of course, that is exactly why we have venture capital in the economic action plan. It talked about reforming and transforming the National Research Council. This is exactly why we're undertaking that process.

I think the Jenkins panel gave us an opportunity to crystallize what we had been reading in a number of other reports. Deloitte has a report out, and there's the Red Wilson report. There are other reports that I have read, from years ago, that discuss the declining innovative capacity of our nation and the trends of declining productivity that are decades old.

This report was an opportunity for us to crystallize these other researchers' conclusions and not only put together an economic action plan that really dealt with many of the recommendations from the Jenkins panel, but also start on a process whereby we can improve the innovative capacity productivity of the nation—

[The Chair, Conservative, David Sweet]

Thank you, Minister.