Industry Committee on June 9th, 2016

[Dr. Farzad Rayegani]

It is not at all a problem with the government; it's a problem with the educational system. Our educational system is a very traditional system. I don't even call it a system.

What is a system? If you look at a systems approach, the system, which wants to keep its character, must react to the parameters when the parameters are changing. What happened is that industry changed its behaviour 20 years ago because of economic problems. When I say it changed its behaviour, I mean that industry is not any more in the business of developing skilled personnel. They said, “It is not my business. I don't have the money to develop people; I need people ready to engineer.”

What did our educational system do? Nothing. It continued to do things in the traditional way without reflecting upon what had happened to industry. Now what we are trying to do in Polytechnics Canada is to say that since industry changed its behaviour, we have to reflect that as soon as possible. When additive manufacturing comes and Martin needs something, I have to be flexible in my curriculum and emphasize that.

This is what we are trying to do, Mr. Chairman.

[The Chair, Liberal, Dan Ruimy]

Thank you. We're trying to be as flexible as we can too.

[Dr. Farzad Rayegani]

Those 30 seconds go so fast.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

We're taking advantage of our chair today.

[The Chair, Liberal, Dan Ruimy]

Yes, I don't know what's going on today.

Mr. Liepert is next.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Thank you.

Mr. Toma, I normally sit on the finance committee. To see somebody come to the table and only say “do no harm” is quite unusual, because rarely does someone come to the table and not ask for something.

How realistic is that, in the environment we live in today? We can see in Ontario, in Alberta, that clearly things are happening around climate change and carbon taxes. Without getting political—well, a little bit political—there was a promise in the last election by all three parties of a reduction of small business taxes, and that hasn't happened.

Is “do no harm” even realistic?

[Darrell Toma]

Thanks for the question.

It's one of those considerations that businesses always have in front of them, part of the risks and uncertainty that they're always facing. In an environment of financial situations in which currency is going up and down and the supply chain and energy has been shocked so much, with about $23 billion taken out of it, we don't need to have more layered on. There's policy around this issue that the chamber has put forward.

As to messages I would reinforce, I think we need to do service delivery a little differently to assist manufacturers, and I would include food processors in that; some of those are chamber members as well. There's a need to do more. The ratio of food processing in Alberta is 1:1 vis-à-vis primary production, whereas in Ontario it's 3:1 and in Quebec it's probably 3:1 as well. You have to wonder why that is. After 150 or so years in Canada, why can't we do more?

Some of this relates to regulations that prevent scale-up. For example, to go from being a provincial-level food processing plant that only sells within a province to a federally inspected plant requires a fivefold or tenfold kind of investment and is very much more complicated. There's a need to look at hybridizing or meshing federal and provincial regulations, somehow, to allow people to grow up.

That's one of the problems in the beef industry, for example. It's the same issue as in the oil industry. There's one price supplier—the U.S. is the only buyer—and so there's one price taker. That's an issue.

There is a need to better deploy, I think, information on innovation centres and so on.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

I want to pose this question to Mr. Rayegani, being from Alberta.

There was always a lot said during the time of high oil prices and a high Canadian dollar about its hurting manufacturing in central Canada. We've been in a sort of low-dollar situation for, I guess, nearly two years now. Has it been noticeable that manufacturing has benefited as a result? I certainly don't see the job situation as being that much different from what it was a few years ago.

[Dr. Farzad Rayegani]

Two things happened at the same time. One is that the dollar came down, but the other thing was the change in the behaviour of manufacturing as a whole.

We are shifting to the new paradigm of the knowledge economy. When you compare the manufacturing era of 20 years ago in Alberta and Ontario, it's a different kind of manufacturing now. When you don't have the talent, your response to the knowledge economy is not great, and this is what we see. It is why manufacturing is not coming back.

Value-added manufacturing eventually will come back, and knowledge-based economy manufacturing is coming back—we call it “advanced manufacturing”, in this case. We have to make the system respond to that.

This will happen in North America, both in the U.S.... Probably in the U.S. there is also the same problem: “Oh, manufacturing is gone!” Who cares that manufacturing is gone? All of you have a cellphone. Was it $400? What is the value-added for China to these cell phones? Can anybody tell me? The value added of these is that they're produced in China. What is the value-added? How many dollars are due to it? How many?

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Do I have a minute?

[The Chair, Liberal, Dan Ruimy]

You have one minute.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

I want to ask one quick question of all three.

We've talked a lot about small business. Let's talk about big business.

Put yourself in one of these chairs from which you have to vote on whether the government should grant Bombardier a billion-dollar grant. Is it yes or no?

[Dr. Farzad Rayegani]

If you have extra money, why not?

[Martin Petrak]

Unfortunately—I talked about this just yesterday—it's a no.

The rationale we talked about is the number of companies that could use.... If you were to fund multiple SMEs or medium-sized companies with $10 million to grow their business, there could be a huge impact that would be much larger in terms of number of jobs created and opportunities that are not exactly known when that kind of money....

That's my answer.

[Darrell Toma]

I would echo that one. I think you could look at investing the billion dollars across many SMEs and allow them growth management. That would be both rural and urban SMEs, not just urban-based ones.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Mr. Jowhari, you have five minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Everybody else gets more. Okay.

Thank you to the panellists. I'm going to do about a minute of confirming the gaps that I've heard, and then I'm going to give you each about a minute or a minute and a half to talk about the solutions, whether it's from a policy point of view, whether it's from an enabler point of view, whether it's funds or grants or incentives by the government, to be able to help close those gaps.

Let's start with the gaps that I heard. I heard that the spread of R and D is top-heavy. We heard about 97.5% versus 2.5%. We heard about the limited funds for SMEs, some on the capital side but not as much on the operational side. We heard about the skills gap, especially when it comes to extended design. We heard about the need for marketing support, especially for getting the product out. We heard about being able to get an understanding of the extended value chain. We heard about the gap in access to international markets, both in terms of understanding them and also in helping you to get there, in having access to funds to be able to play in international markets and get support for international trade.

Those are the seven gaps that I quickly highlighted. Some of you focused on the additive manufacturing industry, and we also focused a little bit on oil and gas.

In one minute, whether it's a policy enabler or an incentive, what is it that a combination of educational institutions, SMEs, and governments can do to help facilitate that? What policies would be changed? What enablers should be introduced?

And Farzad, you can talk about the immigration aspect last.

Okay, let's start with Mr. Toma.

[Darrell Toma]

If I was going to deploy the funds, we probably have enough funds in the system. Let's deploy more in the development side, the commercialization side, and deploy them more regionally through innovation centres, such as the U.S. MEP system, which has 400 centres all across the U.S. They help manufacturers to compete, whether it's in design, product development, automation, human resources, or whatever. We do not have that service delivery ability now. IRAP is very focused around small-scale grants, and sometimes their thresholds are too high for companies to actually buy in because if they're barely surviving and can't match the minimum program.

That's probably what I would recommend: a better deployment of funds.

[Martin Petrak]

I would make a very similar comment. We have a gap around the commercialization side. We can't fund companies and ideas and intellectual property at a university with $100,000. We have to look at a fail-fast, fail-cheap mentality, where you're looking at investing a half a million dollars, you get to a certain stage, and you can invest that next million dollars. What's the institution? Is it a private-public relationship? Is it VCs, venture capital firms, that are going to be funded partially by government funds as well? Are there opportunities to work together and share the risk? That's where we have to look.

On IRAP funds, I totally agree. The stacking limits could maybe be a little offset. The stacking limit could be lowered on behalf of the SME or the organization trying to commercialize that product.

[Majid Jowhari, Liberal, Richmond Hill, ON]

I want to go back to you on the IP aspect. I know a lot of businesses develop the initial IP but then cannot continue, so it gets buried. What are you recommending in opening up the IP for other businesses?

[Martin Petrak]

I think that's where there has to be a good knowledge transfer process. If it's coming out of a university, are they going to be transferring it, and at what cost? The IP policies are not consistent across the country, so depending on the jurisdiction, there could be an upfront cost or there could be a royalty after you start commercializing, so there's a problem with that. Who's going to manage that? If it's an actual failed company, what happens with that IP? That will go back to the university, potentially, at that point in time. If it's a company innovating, and it fails, then it has a choice to license and actually generate revenues.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Great. Thank you.

The last is to Mr. Rayegani. I know I have 30 seconds.

In education, you talked about a change of curriculum, but I'm going to give you 30 seconds to talk about immigration, because that's what you wanted to touch on.

[Dr. Farzad Rayegani]

I only wanted to say that I think that the Ontario provincial and Canadian federal immigration systems don't produce talent for industrial manufacturing. I don't know what the problem is. That's not my expertise, but it's clear that we are not inviting the talent through our immigration policy.

The other thing is that we have a lot of international students. After two years, what happens to them? What happens? Who has their records of what they do? Why not create an innovation hub so these international students can stay another year, and put the leaders from industry beside them and create an ecosystem, a global network, because whether they go back or stay, either is beneficial for Canada.

These are some of the immigration issues. Again, this isn't my area of expertise. I see that we are happy to bring these talents, but there is a gap, and we don't do that.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Ms. Benson, you have two minutes. Actually, I'll give you three minutes.