Industry Committee on June 7th, 2016

[David Enns]

I think there will be differences and they will vary by region based on the nature of the region. For CanNor, because it's responsible for the north, all the operating costs will be significantly higher due to the costs of transportation, and all the complications that arise when you're trying to deliver programs in the north.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Let me go back to the Atlantic. I grant that it is not the far north, but, in terms of low population density, Atlantic Canada is the region of Canada that is next in line.

The figure for the Federal Economic Development Agency for Southern Ontario is 9.6% for management costs, which are basically the same, if not less, than the Atlantic region, where the figure is 2.8%.

I am asking you the question because I am afraid that the Atlantic region does not have enough resources. Are the people there overworked? Can they get their projects done? I am not sure if you understand what I am saying.

[Mitch Davies]

I'd just like to add some precision, which might be helpful to the member's question. In particular, when we were comparing CanNor to ACOA, for example, and with the amount of operating money that was identified in the estimates, this is specific funding that's unique to CanNor for the northern projects management office—an operating activity that looks at major resource projects in the far north of Canada. What you're seeing is a renewal of that funding program for that agency on an ongoing basis through the supplementary estimates. It's not a grants and contribution program, and that's unique to them—

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Sorry, we don't have much time.

Let's forget CanNor for the moment.

Quebec and Ontario agencies have even less money in their budgets than Atlantic Canada, but more money is contributed

to manage the budgets.

Look at the percentages. We have 9.6% in Quebec and 5.2% in Ontario, but, for Atlantic Canada, we have only 2.8% in a budget of $299 million. Is that not a cause for concern? Are the officers there not overloaded with work because they have not been given enough money with which to manage their budgets?

[David Enns]

I think I would just say that when the agency develops its proposals, it does look at what operating funding is required to deliver those programs. They do the costing and they will propose the funding that's required to deliver the program. I'm confident that they are getting the funding that they think they need to deliver the programs they are tasked with doing.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

The agencies themselves? Could it be interpreted that ACOA is more efficient than maybe Ontario or Quebec?

[Mitch Davies]

If you would allow, Mr. Chair, I think I could add a bit more precision on operating versus non-operating expenditures. For ACOA, their total budget for grants and contributions is $243 million, and they have $64 million for operations, which is 20% of the total, according to the figures I have here. I'm not sure exactly what's in front of you. You might actually be taking operating expenditures as a percentage of the increase in the supplementary estimates, but that isn't necessarily the entire overall grants and contributions budget of ACOA. They operate at similar levels of overhead as others to run the program. If you look at $1 billion as the entire budget of all the regional agencies, about $800 million is for grants and contributions and the rest is for them to operate, which is pretty much a consistent percentage, give or take, depending on their geography across Canada. Hopefully that helps.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Thank you.

[The Chair, Liberal, Dan Ruimy]

Mr. Lobb, you have five minutes.

[Ben Lobb, Conservative, Huron—Bruce, ON]

To begin, I would just like to point out my displeasure that the minister didn't appear today. Whether he's busy or not, this is a large expenditure, and there's a lot of money going to universities, so it would have been nice to hear from him. I have nothing against our guests here today at all, but it would have been nice for him to be here today to defend the amount he's spending, which is not quite $1 billion, but it's pretty close. Maybe he'll be here for the next one.

To our witnesses here today, I'm sure you're able to comment on the Investment Canada Act and the net benefit test. Recently a decision was made to allow Lowe's to purchase Rona on the basis that somehow it would be a net benefit to Canadians. I wonder if anybody here could explain to us how that is a benefit to Canadians. If you can't, I wonder if the minister, who's not here, has asked anybody in the department to review the Investment Canada Act or the net benefit test, because we know that many more cases will be coming up in the future.

[Mitch Davies]

I will take the second part of the question first, Mr. Chair.

In terms of the operation of the Investment Canada Act, I would point out that with all applications made under the Investment Canada Act, the director of investments, who is the deputy minister of our department, provides a recommendation to the minister on the factors under the act.

Just as they have been for quite some time, the factors under the act include the effect of the investment on production, the availability of goods in the marketplace, competition, and the overall level of innovation in the market. In fact, if you look at the preamble of the act, it speaks to the idea that investment is welcome or that it brings benefits because it is demonstrably a means by which an economy can bring in new knowledge and innovation and be connected to the global marketplace. In these types of transactions, obviously investors demonstrate that through their application. The minister is able, through the powers under the act, to take undertakings to that effect. These undertakings are maintained on a confidential basis between the minister and the investor, and that is the basis on which the minister demonstrates net benefit and makes a ruling.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Fair enough.

I guess what I am asking you is—and if you can't tell us, that's fine—whether the minister has asked you at any point to review this act and to review possible scenarios other than home-building supply stores, but resource or manufacturing projects, etc., to make sure that it protects Canadian-owned businesses and Canadian workers, etc. I understand that we are a country that welcomes investment and that we are happy to do that, but we are all well aware of past issues where this has come up in previous Parliaments.

I just wonder if you could tell us.

[Mitch Davies]

We take our cues from the mandate letter of the minister. It is quite transparent, as that mandate letter is on our website for all to see. The mandate the minister has is to work on approaches to grow the Canadian economy and to increase exports and jobs for the benefit of all Canadians. In doing so, he has an agenda for innovation, which is, in part included in budget 2016 and the investments made therein. There is also going to be engagement on that in the future. I think there will be a wide-ranging debate on what we can do to enhance innovation in the country. I assume there will be voices that talk about policies that favour investment and attract more investment to the country, and which discuss the benefits of that, and how to evaluate the benefits of these investments made in the country. I think all of those things will be part of those policy processes.

[Ben Lobb, Conservative, Huron—Bruce, ON]

The last question I have for you is on the large amount of money that is allocated to post-secondary institutions to either upgrade or build new facilities.

How does your department determine these projects? How do you determine value for the dollar you are going to invest, and that it actually goes to what it is supposed to go toward?

[David Enns]

I will let my colleague take that.

[Lawrence Hanson]

The post-secondary institution strategic investment fund is a budget 2016 item with $2 billion to fund capital projects at post-secondary institutions. There are clearly established objectives and criteria for the program. The main focuses are on expansion or improvement of facilities to conduct research and do commercialization, to improve industry-relevant training space, and to improve the environmental sustainability of those facilities.

The process works as follows. There was an application period, when post-secondary institutions across the country were invited to submit proposals directly to the department, with the exception of the Province of Quebec, where the proposals were sent to us via the Government of Quebec. They are examined against these various merit criteria. Over and above that, because it is a cost-shared program, we work with provinces and territories. Within the range of projects that institutions there have submitted, provinces and territories will identify their priorities, and more specifically the projects for which they are prepared to fund half the cost. We will be working jointly with provinces and territories on projects that meet our merit criteria, that meet the terms and conditions of the program, and that are in turn projects that the provinces themselves feel are important and valuable enough for them to fund 50% of the cost.

[The Chair, Liberal, Dan Ruimy]

We are going to move to Mr. Longfield.

You have five minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

I want to extend that last topic very briefly.

I got a communication from Conestoga College in my riding. It is looking at the 70-30 split between universities and colleges. Could you comment on how much of that is a provincial decision, in terms of allocation of funds toward universities versus colleges, and how much of that is a federal decision?

[Lawrence Hanson]

Within the total global budget of the program, we are committed to directing a minimum of 30% of that program funding to colleges.

[Lloyd Longfield, Liberal, Guelph, ON]

Great, thank you. That was to get a fast answer so I didn't have to do other homework. Thanks for helping with my homework.

As a committee we're in the middle of a manufacturing study right now. I wanted to ask a couple of questions relating to research and how that might help us understand investments that might help manufacturing. The National Research Council is showing a modest increase in expenditures of about 0.2% and an increase in grants and contributions of about 15.6%. It's a $50 million investment for the National Research Council versus $924,000 in expenses.

Are we able to look for efficiencies in that ratio? We're putting a lot more grant money out there, and our expenses aren't going up proportionately. Is that what we're looking at?

[Lawrence Hanson]

The bulk of the $50 million increase is for IRAP. Essentially, as I understand your question, you are asking about how this program is managed when that amount has gone up significantly but not the associated operating costs.

The answer is that this program's budget was significantly increased once before and that at that time their operational capacity was meaningfully strengthened. Because the program as it stands has been largely oversubscribed in the past, there are good projects out there to be funded without necessarily needing to increase our administrative costs. The National Research Council is very confident that it can continue to do good work with due diligence through their industrial technology advisers with an increase to the budget without significant new operating expenditures.

[Lloyd Longfield, Liberal, Guelph, ON]

That's terrific. That's exactly what I was hoping to hear because I know there is a bit of a backlog and that some clients have been looking for projects to be approved.

[The Chair, Liberal, Dan Ruimy]

You have two minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

I'm also going to share one question with Mr. Jowhari.

On that theme of investing in grants versus expenditures, maybe there's a similar answer for NSERC and SSHRC, where we're increasing grants at a much faster rate than expenditures.

[Lawrence Hanson]

To give you a sense of that, the operating costs for both SSHRC and NSERC are remarkably low. They tend to be in the 4% or under range. They operate very efficiently up to and including SSHRC's and NSERC's share of all their back office audit functions in their finance and corporate services, etc. Over the years the granting councils have worked to ensure that they can deliver their grants and contributions programming in a fairly lean manner.