Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology
Issue 3 - Evidence - Meeting of January 30, 2008
OTTAWA, Wednesday, January 30, 2008
The Standing Senate Committee on Social Affairs, Science and Technology met this day at 4 p.m. to examine issue relating to the federal government's new Science and Technology (S&T) Strategy — Mobilizing Science and Technology to Canada's Advantage.
Senator Art Eggleton (Chair) in the chair.
[Translation]
The Chair: Good afternoon and welcome to this meeting of the Standing Committee on Social Affairs, Science and Technology. The committee is meeting for the first time today to examine issues relating to the federal government's Science and Technology Strategy.
[English]
Science, research and development underpin Canada's position in the knowledge economy, where strength depends on capacity to innovate and to stay ahead of the technological curve.
Over the past decade, federal government policies have aimed to foster world-class research programs in universities and research institutes and to encourage industrial investment in research and development. The 2007 strategy document, entitled Mobilizing Science and Technology to Canada's Advantage, reiterates these goals.
This afternoon, we have two panels of witnesses. Our first panel will run from now until approximately 5:00. We have asked each panellist to take about five minutes, or as close to five minutes as possible, for an opening statement, following which we will open it up for questions and dialogue with my Senate colleagues.
The first panel includes Robert Best, Vice-President, National Affairs Branch, the Association of Universities and Colleges of Canada — AUCC is the acronym. AUCC represents 91 Canadian universities and degree-granting colleges.
Mr. Peter Brenders, who I saw not too long ago in the MARS facility in Toronto, is president and CEO of BIOTECanada. BIOTECanada is an industry-funded organization representing biotechnology companies in the health, agriculture and industrial sectors.
Gentlemen, the floor is yours. Who would like to start?
[Translation]
Robert Best, Vice-President, National Affairs Branch, Association of Universities and Colleges of Canada: Thank you for the opportunity to be here today, Mr. Chairman.
Canadians' standard of living depends increasingly on our competitiveness in the global knowledge economy. To maintain and enhance the standard of living Canadians currently enjoy, we must secure our position among the world leaders in research. In a brief to the Ministers of Industry and Finance submitted last February, AUCC called for a strategy that would ensure the conditions for excellence in university research, develop new research talent and promote enhanced collaboration and linkages among universities, government and the private sector. The federal Science and Technology Strategy, released last May, with its call for more partnerships and its commitment to maintaining Canada's G7 leadership in public research and development performance, is generally very consistent with the themes and recommendations in AUCC's submission.
Mr. Chair, universities account for more than one-third of the national research effort in Canada — a higher proportion than in all other G7 countries. University research is more geographically dispersed than private sector and government research in Canada, and consequently plays a critical role in the economic and social development of all regions of the country. Universities educate the highly qualified researchers who are increasingly in demand across the economy; and the university sector is the only sector that performs research for all other sectors.
University research is a Canadian success story as a result of investments over the past decade by successive federal and provincial governments and by universities themselves. These have included investments in each of the four foundational elements of university research: the production of new ideas; the development, attraction and retention of highly qualified research talent; the acquisition and operation of cutting edge research infrastructure; and the provision of essential institutional support for the research effort.
[English]
However, Canada's gains over the past 10 years remain fragile. Our G7 competitors and newly emerging competitors like Russia, China and India are investing heavily in research to attract high-paying jobs, research talent and investment. Significantly, the federal Science and Technology Strategy — S&T strategy — reinforces the importance of balanced investments in all four foundational elements of university research. As well, the strategy emphasizes developing private-sector research and commercialization capacity and identifying research areas where Canada can be a world leader, while also acknowledging the need for broad strength in basic research. Again, a balanced approach to implementing the private, public and targeted/non-targeted dimensions of the strategy will be important. So too will be increasing research partnerships among the university, private, government and not-for- profit sectors.
Ultimately, the success of the strategy will depend on people, talented individuals with the research skills so in demand in the knowledge economy. As an immediate priority, Canada must recruit more domestic students into graduate programs and attract more top international graduate students.
Over the next decade, we expect the knowledge economy to create significantly more jobs for advanced degree holders, and retirements will generate large-scale replacement demand.
Finally, Mr. Chair, a few words on the importance of the least visible and least understood of the four foundational elements of university research — the institutional or so-called indirect costs of research. Investment in the direct costs of research through the federal research granting agencies is crucial, and these investments will need to increase significantly to maintain our G7 leadership in public research investment over time and to provide vital opportunities for students to develop research skills. At the same time, universities must meet real costs to create the conditions for research excellence. These are the institutional costs of supporting research. They include operating and maintaining research facilities, managing the research process, from preparation of proposals to accountability in reporting, complying with regulatory and safety requirements, and managing intellectual property and promoting knowledge transfer. The federal indirect costs program currently pays a portion of these institutional support costs. It is important that these costs be fully covered at internationally competitive levels for all Canadian universities in order to derive the full value of other federal investments in university research.
Canadians expect and deserve to see the benefits of these public investments. In October 2008, AUCC will release the second edition of Momentum, our periodic public report on the impacts of university research in Canada, one of our many ongoing efforts to communicate to decision makers and the general public the contribution of university research to Canada's economic and social well-being.
Thank you for the invitation to appear here today.
The Chair: Thank you very much, Mr. Best.
Peter Brenders, President and Chief Executive Officer, BIOTECanada: Thank you to the committee for the opportunity to appear before you today.
When the government announced its S&T Strategy last spring, we offered our congratulations to the government for their forward-looking initiative. The linkage created between research, commercialization, regulatory capacity and skills development are integral to the ability of Canadian technology-based companies to grow and compete.
The need to align our economic fortunes with an integrated policy ecosystem that recognizes emerging technologies and forges strong recognition of the value of all research — public and private — has never been more pressing than today.
``Biotech now comprises one third of the entire global economy.'' This is a quote from Dr. Gurinder Shahi from the University of Southern California. Initially, it caught us a bit off guard. When we sat down and examined the evaluation, we understood how true it is.
Thanks to biotechnology and the research behind it, Canadian society has access to innovative products, new treatments and drug therapies; plants that can grow in arid soil, or contain extra nutrients; limitless and environmentally friendly sources of energy; trees that grow faster and are resistant to pests; microorganisms designed to eat and process toxic materials contaminating brownfield sites; and plastics and textiles from corn or soybeans offering innovative solutions for the manufacturing sector.
Biotechnology is a driving force in modernizing our traditional industries and allowing them to grow their ability to be globally competitive.
Canada is regarded as one of the early innovators in leading biotechnology research and capacity. Our knowledge infrastructure resulting from the public investments made over the past 12 years has never been stronger. The creation and funding of internationally recognized institutions like the CIHR, CFI and Genome Canada has placed Canada at the forefront of innovative research capacity building.
Research-intensive capacity building is not just a public exercise in biotechnology either. Investments by Canadian biotech companies represent more than 12 per cent of the total Canadian business expenditures on research and development, approximately $1.7 billion in 2005. The majority of this was done by firms with less than 50 employees spending 100 per cent of their budget on research and development.
The nature of who we are as an industry is research intensive, globally connected and offering huge potential to Canada's economic fortunes today and for the long term. However, we cannot afford to be complacent about our ability to compete and win attention. Every country in the world is racing to catch up and exceed what we have built. Nations who a few short years ago were deemed as developing economies have launched into capturing the potential of biotech. Let me give you a couple of examples.
China has 200 government programs comparable to those of the CIHR and Genome Canada, employing 20,000 researchers. Malaysia has created a tax-incentive program offering 100 per cent tax exemption for 10 years. South Korea launched a $60-billion U.S. investment into its R&D infrastructure.
Now comes the hard part. How do we capitalize on our competitive characteristics and truly integrate them into our economic fundamentals? In our just-released response to the S&T Strategy, we identified a couple of areas for action that must be built upon in the near future — areas such as securing funding, using funds effectively, creating a sound operational environment and getting the right people.
Let us look first at securing funding. Our recently released Canadian Life Sciences Industry Forecast, which we did in cooperation with PricewaterhouseCoopers, highlights that more than 40 per cent of Canada's companies are looking to secure more than $20 million in our next round of funding. Our capital markets are too small and too risk-averse to provide this assistance directly. We need the tools to allow that money, that foreign direct investment, to come here or to get Canadians to invest into the life sciences industry. We need to modernize things like the Scientific Research and Experimental Development — SR&ED — tax credit program to reflect the 21st century dynamic of discovery.
The second area is using the funds effectively. Leveraging successful funding into long-term development potential in Canada, we can look to create opportunities such as a bio-credit initiative that would incentivize companies and operations grown and maintained here to foster global partnerships, to re-establish operations here and place Canada at the forefront of a true bio-based economy.
Let us give our companies the incentives to re-engineer and adapt and develop in Canada as opposed to develop those technologies that will get built elsewhere in the world.
The third area is to create a sound operating environment. It is important that we synchronize our regulatory processes within Canada and internationally to lessen the burden that stifles innovation and entrepreneurship in this country. Regulation is paramount to safety. Nobody takes issue with that, but creating a system of regulatory performance that is structured by previous practice versus the best practice of a competitive market does not create the environment for new technologies to grow and thrive. We need to align our interdepartmental regulatory considerations in a more efficient and effective manner. It is paramount to our ability to realize the potential of innovative research.
We suggest creation of a national uniform policy instrument, via legislation if necessary, to encourage and create consistent clarity of IP ownership from government-funded projects — for example, the U.S. Bayh-Dole Act, which was credited with laying the foundation for the U.S. biotech sector's dramatic commercial success.
The last area is getting the right people. As we heard from Mr. Best, having the right people is paramount. In our BIOTECanada-PricewaterhouseCoopers report I just referred to — Canadian Life Sciences Industry Forecast 2007 — respondents identified attracting and retaining key employees as one of the two most challenging issues their organization would face in the next two years, second only to the first issue we spoke about in terms of raising capital.
We must help professors and scientists learn more about commercialization and entrepreneurship, and business leaders should become more familiar with the work being conducted in the research institutions throughout this country.
Our Canadian government needs to signal to the world that it means business when it states that it wants to make our economy more globally competitive. Let us align our incentives with our objectives and diversify and grow our economy to truly capitalize on our homegrown know-how.
The Chair: Thank you to both of you.
One of the things you said, Mr. Brenders — and it was also talked about in Mr. Best's presentation, namely, getting the right people or helping to ensure that we get the people we need in our industry coming through our educational institutions — is that we must help professors and scientists learn more about commercialization, entrepreneurship, and that business leaders should become more familiar with work being conducted and research institutions throughout the country.
The two of you talked a lot about this, have you? Have you got answers to this? Are you already into a plan? Can you tell us what you will do about this?
Mr. Brenders: We do not have the plan; it would be great if we did. That is the opportunity, the challenge in front of us. Until we start to align our objectives, from working with the research community, to see the potential and the opportunities, to commercialize that research, to working with the business community, to create the companies, our company executives need to understand, in terms of the breadth of the research, how they can use that, how we can leverage the fundamentals that we have built. Twelve years of huge infrastructure is a great opportunity. We have to ensure that we can turn that into products at the end of the day that we can sell globally.
Mr. Best: The key is people. We have learned a lot over the last decade about commercialization, knowledge transfer. There was a time when we talked about knowledge transfer as if it were something independent of people or that commercialization was a process that happened. We have come to understand much more than we did, that it is fundamentally about people.
The other language we hear is ``receptor capacity'' in business. Receptor capacity is people. It is crucial to provide opportunities for graduate students and for recent graduates to have opportunities to gain practical experience in the private sector. Internships and co-op placements can be very important. They learn about business, but at the same time, businesses can learn about what an advanced degree holder, an educated person, can bring to their operation. This can be very important in small and medium-sized enterprises. We have not done a great deal over the years.
Some universities have developed co-op arrangements and have been in the business for a long time, but systematically, as a matter of policy, we have not done a lot to encourage it. There is a new industrial internships program, and the federal granting agencies do have some programs in place and have had for some time. We need more of that kind of opportunity for people to move between sectors, especially young people, to carry the knowledge with them. They benefit, but so too does the private sector.
The Chair: I have a supplementary on that. The government strategy is committed to the Canada Graduate Scholarships, CGS, with an additional 1,000 scholarships. How do you see that helping out in this regard? Is that a good move?
Mr. Best: The Canada Graduate Scholarships was an important initiative of the former government. This government in the last budget created additional Canada Graduate Scholarships, and we would very much like to see even further investment in the Canada Graduate Scholarships.
As I said in my presentation, we will face major demand across the economy for advanced degree holders. It is a combination of significant retirement phenomenon among advanced degree holders currently across the economy over the next decade. There will be huge replacement demand for advanced degree holders.
Also, there is every reason to think that demand will grow simply because businesses, the public sector as well as the not-for-profit sector, will have greater need for advanced degree holders. We need to encourage people now to pursue advanced degrees because it takes a long time, especially to get a PhD.
We need to provide the incentives at this stage. The Canada Graduate Scholarships is an important piece in that puzzle in order to encourage more people to pursue graduate studies.
The Chair: How do you, Mr. Brenders, see that as an advantage to the industry?
Mr. Brenders: Mr. Best is correct. We will face greater demand. The companies will need expertise at the global level. Every country in the world is ramping up their education programs to produce these graduates, and there are quality graduates from around the world.
Our companies that are looking to hire people will search within Canada, but they will often do global searches, and they bring in expertise to run their programs from around the world. It will be competitive. The challenge is how to create those opportunities for Canadians and how to grow that ability and capability around things like tying it into business schools. CIHR had a program to tie their science graduates into the business schools, to provide support in that area — in other words, build that business commercialization expertise or interest in addition to the science, which will be vitally important.
The Chair: I have one final question. The minister is appearing tomorrow. Normally, when we do these kinds of things, we have the minister appear first, but we have asked him to appear last. Therefore, we are looking at this input as part of what we will include in our dialogue with the minister.
If there were a couple of high priorities in this area that you wanted us to raise with the minister, what would they be?
Mr. Brenders: The questions we would ask the minister directly were included in our response to the S&T Strategy.
What are we doing? How do we align our incentives in order to get the capital into Canada to make these companies grow and succeed? Frankly, we think a lot of Canadian companies that have built up out of Canadian technology will succeed. The question will be, as they get that money, will they stay in Canada? What is our opportunity for that? Too many good companies are leaving because we are weak on the business case to stay here. We are talking about things like improving the R&D tax credit system and building the business case to align the incentive. This was a program set up in 1985. It needs to be modernized. Can we look at ways to increase the efficiency and use of that capital here? What are we doing in terms of aligning the operating and regulatory environment? Why do we make it more difficult in Canada than we would in our competitor areas? I have examples of Canadian companies that have developed technologies that they want to introduce, but Canada is one of their most difficult markets for introduction and so they go global. How do we build on that area?
Mr. Best: I would want to hear from the minister, given that the S&T Strategy, as I indicated, is a comprehensive and multi-year strategy touching on many of the issues that we consider vitally important, as I said in my remarks. Implementation over time in a balanced way will be very important. It would be interesting to probe with the minister how, over time, the government would ensure the necessary balance between, for example, investments in basic research in a broad range of disciplines and on a broad base of strengths versus targeting.
In our own submission, we argued that, yes, we should find broad areas where we can be globally excellent and invest but, at the same time, we must, in a balanced way, nurture a broad base of research strength that we have already built and we need to continue.
We also need an appropriate balance between maintaining our strong public-sector research base, including universities, and, on the other hand, building our private-sector base. How will we do that over time?
It would be interesting to probe with the minister how the government over time will ensure a balanced approach to implementing the strategy.
Senator Keon: Extending on what you have both stated, it seems to me that the challenge confronting government, academia and industry in Canada is absolutely monumental. You alluded to Asia, Western Europe and America in your remarks.
You look at the combination of resources in government, academia and the universities. For example, just go south of here, and there is a huge amount of venture capital available in California and a huge amount of endowment funds available in Massachusetts. These little fix-its we are talking about will not get us there. We need ongoing and intensive dialogue between academia, industry and government if we are to get anywhere with this one.
I serve on some of the venture capital funds in our country, to try to keep some of our companies alive. The problem is that, compared to what is available down South, the CEO of these little companies just has to pick up the phone and call south.
How will we ever meet this challenge? My own thinking — and I will throw it out there because I would like you to explore it — is that we need intensive, and I mean intensive, ongoing dialogue between government, academia and industry.
In reality, the Canadian government is putting a lot of money into research and post-secondary education, but the private sector fundamentally is not there. They cannot be there, I guess, because they have not got it at this stage of their development. Compared to Western Europe, Japan and America, they are just not there.
Would you both give forth on how you see us trying to find a way out of this monumental conundrum?
Mr. Brenders: I agree that the challenge is huge. The time to sit back and say everything is okay is not now. Some of the trends and opportunities we are starting to see is information that CIBC released yesterday with respect to the jobs; we have less in one sector, but we are seeing more in the knowledge area.
In biotech, we believe part of the solution will be these high-value jobs. We think Canada can globally compete. Part of the question and the frustration that I have is whether we are serious as a country about this. Do we really want to compete? Do we have a goal to get ahead?
I see a $60-billion South Korea strategy or a $50-billion Brazil strategy to lead in biotechnology. Where is Canada's strategy? As an industry, along with the research, academic community and the government, I think we can define that. We can mark our place in the world and take leadership. We have huge natural resources that are our feedstock for a whole bio-based economy. We have great research and infrastructure that we have built.
Capital is a challenge for us. We have a lot of capital in our classic resources industry but not so much in the life sciences. A lot of Canadians expect to benefit from life sciences and the developments of biotechnology. In the same breath, they do not invest. How do we stimulate that? Part of the solution will be setting ourselves a goal or a demand that we want to own this space and lead in this area and then define the steps that it will take for us to get there.
How do we stimulate? As a person who sits on some venture capital funds, I want to know what the business case is to invest here to stimulate new development. What would it take for our refining industry to re-engineer their process to deal with renewable-based feed stock rather than petroleum-based feed stock, be it cellulosic based, bio-oil, crude or whatever? We can do that if we want to. The research community is one voice on the side, but if we stimulate a need, we will pull research demands out. Give me a better way to create pharmaceuticals from trees.
Mr. Best: I agree that the challenge is monumental. I mentioned the degree of competition from both established OECD countries and the new competitors, and it is daunting. I do not want to be Pollyannaish about it, but we are much better placed than we were 10 years ago. I was at the Association of Universities and Colleges of Canada 10 years ago, and we were very worried about the possibility of this country becoming a research backwater, and we are not that. I think we have several strengths. One is a very strong public-sector research base. The S&T strategy acknowledges that, but many competitor countries are investing heavily in their public-sector research base as well.
We have a highly educated population and a high proportion with advanced degrees, but certainly compared to the U.S. we are well behind in proportion of PhDs, for example. If we do not move quickly on that, we will really be behind the eight ball because of the time it takes to produce a PhD. To some extent over the last decade, we have relied heavily on immigration for PhDs, and we will not be able to count on that same level of immigration, given the rise of China and India and the intense international competition for talented advanced degree holders. We will have to produce more of our own.
We will also have to attract more top graduate students from abroad to come to this country. Some will stay and some will go home. If they go home, that will enhance our diplomatic, economic and research ties abroad. If they stay here, so much the better — we need them. However, we do have a highly educated population as a starting point.
I agree on the need for intense ongoing dialogue. We have more of that than we had 10 years ago. There is much more intersectoral cooperation between universities and the private sector and indeed with researchers in the public sector than there was 10 years ago.
The three solitudes of 10 years ago are beginning to break down, and I have seen a sea change in attitude. University leadership is very actively pursuing linkages and partnerships with the other sector, for example.
Senator Keon: Mr. Best, do you think that if an all-out effort were made to provide a knowledge translation centre in every major university, similar to the MaRS — Medical and Related Sciences — one in Toronto, you would have Mr. Brenders in your office once a week?
Mr. Best: I do not know whether Mr. Brenders would be in my office, but I think there is room for more of those kinds of initiatives. There were some announced in the last budget. We should not lose sight of the fact that the universities themselves have been building their knowledge-translation capacity significantly. While there is always more they can do, we have come a long way. In part, I would build on some of what is in the universities now. They have become more sophisticated in many institutions in dealing with the private sector, but there may be room for more of those kinds of initiatives.
Mr. Brenders: The MaRS centre is a terrific initiative. The challenge will be to have a sizeable footprint to show that we are material, and Canada can be. On tech transfer, we will need some standardization. The complaint I hear, whether from a VC or a company, is that regardless of what university they go to they have all new standard agreements to deal with as well as dealing with who owns the IP, what the percentage back is, and whether it is owned by the university or the innovator. Then, there are expectations on that because every innovation is a $100-million idea. We need to standardize and create clarity in terms of who owns it and how it will go forward, such that, when a company does tech transfer, the innovators and the receptors know what the rules are and they can work together quickly. Let us get over that and focus on the idea of commercializing the technology. That would go a long way.
Senator Callbeck: Thank you both for being here today and for your presentations.
Mr. Best, you talked about the research at universities and the great strides that we have made in the past 10 years. You spoke also about direct and indirect costs. In Atlantic Canada, I hear much about indirect costs — which, as I understand, are roughly 40 per cent of the direct. Universities are getting about 25 per cent, so there is a gap of 15 per cent.
I know that your organizations have requested 40 per cent from the government. I think the total now spent now is $315 million and you have $15 million more.
Mr. Best: I think the total is at $315 million, with the latest injection.
Senator Callbeck: So the 40 per cent would run at $500 million-plus.
Mr. Best: Yes.
What are the implications for the universities if they do not get this 40 per cent for indirect costs?
Mr. Best: If we look to our competitors to the south, where there is a different system, U.S. universities are getting, on average, over 50 per cent; that is, the indirect costs reimbursement average more than 50 per cent of the direct costs.
You are correct. We calculate things a bit differently here, but it is generally in the neighbourhood of 25 per cent here. That is quite a gap. That means that if the universities are going to host a growing research effort, as they have been doing, they have to cover out of their operating budgets the costs that are not covered directly by government. The sources of funding for the operating budgets are, for the most part, provincial operating funding and tuition fees.
It is a real stress on the institutions. Remember that these are real costs that universities incur. These involve increasing regulatory requirements and the entire cost of supporting the research endeavour in the institution. It places the institutions at a real competitive disadvantage vis-à-vis their peers in other countries.
Senator Callbeck: As you say, it is a real disadvantage for our universities not to be getting the full indirect costs.
Mr. Brenders, you spoke about four areas of action. One was modernizing the SR&ED tax credit program. Will you explain exactly what you want? How much more would it cost the government to implement what you want?
Mr. Brenders: We are looking for two things. The Scientific Research and Experimental Development tax credit program was implemented in 1985, before free trade. Two restrictions were set on components of that. We are most interested in the refundable component, where a company that is spending heavily on R&D gets a refundable credit. The limit on expenditures was set at $2 million in 1985 and it has not changed since. We would like to see that updated to reflect the cost of research and development today, in line with the objectives and the spirit of the tax credit, which would be to about $10 million.
The second component is that the refundable credits are limited to Canadian-controlled private corporations. It is called a CCPC restriction.
We have a problem with that. Our argument is that origin of country, ownership of company is not the material point. The point is that we want the work done in Canada. We want foreign companies to do more research in Canada, to establish research centres and do work.
It is ironic that our companies struggle to get capital. They look for foreign direct investment and, as soon as they get it, they may lose that 50 per cent ownership and have a 51 ownership out of Boston and lose the refundable credit. When they lose that refundable credit, they are lessening the business case to stay in Canada. Right now, if you keep the operations in Canada, you get the refundable credit back. We would like to see that changed. Eliminate the CCPC restriction. Keep the same capital thresholds on that. It makes sense to stimulate the right type of jobs.
With respect to costs for the government, there would be an initial cash outlay, but even the government's own models show that every dollar you spend on research and development generates at least $1.10, conservatively, and other estimates that we and the University of Manitoba and University of Toronto have done show it more around $1.40 to $1.60. For every dollar you spend, you should be getting $1.60 back.
The cost of the program would be about $200 million, and then it should be generating a net positive benefit back. You have to figure that the companies that get the refundable credit spend it. They spend 100 per cent of their money on research and development, so the additional advantage is that not only will they spend the money back in, they have a greater opportunity to get to milestone so they will achieve success that will make the company worth more, or they may be able to start a program that is just sitting on the shelf. Often companies might be commercialized or licensed in some technologies from the universities, and they only have money to take one program forward, so the other is sitting on the shelf doing nothing. If you get more money and bring up 35 percent refundable credit on $10 million, that is $3.5 million, and that takes another program further along. We see exponential benefits coming back from that.
Senator Callbeck: You say that if you spend a dollar, you get $1.60 back. Over what period of time would that be?
Mr. Brenders: It would be over the next year. It is expended that quickly. The burn for a company on this is they will be spending $10 million a year or more on average, so that will come back as taxable income too, but that money is going back into the salaries and wages of the researchers or back to the research communities. A lot of that money is spent in universities and our research institutions and the suppliers that feed into that area, so it automatically goes right back into the economy.
Senator Cordy: Mr. Brenders, I should like to go back to your comments about using funds effectively. I think we would all agree that is important because of the limited funds we have in Canada. You talked about a bio-credit initiative. You said the advantage to a bio-credit initiative is that it would provide incentives and foster partnerships. How exactly does it work? I think what you mean is that when you get funding, it would continue and build upon itself, but I was not clear on that. Perhaps you could clarify that.
Mr. Brenders: This is a suggestion that has come out of the industrial biotechnology sector working on developing bio-products or renewable fuels or bio-plastics. The concept behind that is that many of our traditional industries, whether forestry, auto or whatever, are using traditional processes. They can re-engineer or retool their plants to incorporate bio-based products, like Woodbridge Foam Corporation that makes car seats out of soybean oil, but they have to revamp your process. If DuPont or Dow are re-engineering their refining to take bio-based feed stock, that is a large capital cost. Can they get an additional capital cost credit, a bio-credit, for that? Reduce the barrier to re-engineer and retool to introduce new technologies from these new industries.
When you see the technology going, companies will retool, but the question is whether they will do it in Canada or in a country that has no corporate taxes. Will they set up industries elsewhere? We already have the infrastructure and the jobs and experienced labour there. How do we help them keep those plants modernized? How do we breathe new life into a forestry community that has been making pulp and paper and can now convert that biomass into bio-crude or chemicals for plastics? How do you help them re-engineer? It is a capital cost. They are willing to invest, maybe using a bio-credit, which is a piece of legislation we have seen in the U.S. so not totally original on our part. If you can allow for them to lessen that risk cost to re-engineer early, it keeps our jobs here and allows us to be at the forefront of new technology. Once they start to do that, they will start to look for more technology, and they will be talking to the research community to come up with other areas and talking to our engineers, so we are starting to build an industry at the forefront instead of playing catch-up.
Senator Cordy: I wish to go back to the comments about business leaders and science and technology leaders working closely with academia. You said, Mr. Best, that this has improved, but there seems to be this gap. Having been in the education system, each level blames the previous level. High school blames junior high and elementary, universities blame high schools, and the business and science world blames universities. I am not sure if we can actually stop that.
You talked about the United States having a more highly educated population in terms of PhDs, and yet I have read information from the OECD that Canada has a better school system than the United States. Is there a reason for that? Is there a reason there are more PhDs in the United States? I am assuming you are talking science and technology. Is it because there are the job opportunities in the United States that we do not have in Canada, or are there other reasons for that?
Mr. Best: There are a variety of explanations for it. I do not claim to have the answer. Certainly the private sector does appear in the U.S. to value advanced degrees more than our private sector does. I noticed in the S&T strategy some data suggesting that the U.S. labour market does pay more of a premium for advanced degree holders than does the Canadian economy. That suggests that perhaps there is a greater value placed on them. It may reflect the fact that there is a larger and more robust private-sector research effort in the U.S. that requires people with advanced degrees to do the work.
However, the U.S. has about one third more PhDs relative to population than we do, and twice as many degree holders with a master's degree, although that figure can be misleading as some professions in the U.S. require master's degrees that we do not have here, but there is a substantial gap at both the master's and Ph D. levels relative to population.
Senator Cordy: Does industry work with academia to ensure that an individual who graduates with a degree has the skill set required to move into the field?
Mr. Brenders: In terms of the education programs? I think it varies by companies. Some companies are more involved than others in terms of sitting on the advisory boards of the colleges and universities on the various programs, whether a biotech program or otherwise. That varies by company and the interest of the individual person to fit into that.
You see in industry writ large an interest to build Canada's capabilities, whether from early-stage technologies to later-stage high-end researchers. Companies need that expertise, and it is great if you can build from it locally as opposed to having to import from overseas or out of country. As a company, you have limited cash and capital, so you cannot spend a lot of time looking around for folks. You have to find them quickly so you can keep your programs moving forward.
Senator Cordy: Do we currently have enough students in the educational system to fill the needs in the biotech industry?
Mr. Brenders: It depends on the program and the location. Some regions are tougher than others. That may not be unique to biotech.
Senator Cordy: It is one thing to educate them, but are we retaining them in Canada? The lure of the dollar is not as great as it once was in the United States, given the strength of the Canadian dollar, but how do we retain them?
Mr. Brenders: We have some advantages on that. Look at the research out of McMaster on stem cells. They had global choices on that. Financial was part of it, and the university and the sector stepped up to be able to meet that one, but he wants to raise a family here. We do have a good quality of life, but what else is there to support it? If you look at it from a company point of view, one of the questions I hear from executives is about the lifespan of a CEO, which could only be for two to three years, due to mergers, for example, or whatever reasons. If they are moving up to run a company here, they want to know there are other opportunities as well, that we are building a cluster and are serious about opportunities down the road.
Senator Munson: You both sound so worried. You do sound very worried, and I would like to, in layperson terms, come to terms with what you are trying to tell us and the minister.
It seems to me it comes down to regulation, those barriers that Mr. Brenders talked about, and money.
Mr. Best, on these indirect costs of universities, are you expecting the government to pay 100 per cent of them?
Mr. Best: We expect that when government funds the direct costs of research that it will also cover the indirect costs of that research, so, in that sense, 100 per cent of the indirect costs on the research the government funds.
Similarly, when the private sector funds or the not-for-profit sector, ideally, it is covering the full indirect costs as well. If not, the universities have to cover it out of their operating budgets.
Senator Munson: Mr. Brenders, you raised as many questions as we are asking questions. In your answers, you had more questions to us, and I would like to get down to the nitty-gritty, namely, what you are saying to us about these barriers, these regulations. I can think of a company in Halifax whose business is omega-3s. Trying to sell omega oils in this country for a while was difficult through Health Canada. There are regulations because we are a safe country, but this company sells all over the world, but they had to go through hoops and whistles to get through the barriers.
Are we overregulated in this country? Are there too many barriers? Is there not enough interaction among universities, government and business?
Mr. Brenders: The short answer to the first question is yes. There is too much. We have gone overboard.
Our industry needs regulation — sound, science-based regulation — and we need to establish that certainty and comfort level that what we are introducing is safe. We do not need regulations for regulations' sake.
The example you talked about in terms of companies that cannot launch in Canada, the company with the omega-3s is a global company, yet they cannot sell domestically, which does not send a good message to the world. That is not the only one; there are many others like that. Yes, we need to be smart in regulation.
The other point is we need to be smart in stimulating investment in this country, whether domestically by getting our institutional money and the average Canadian to invest, but also to allow for foreign direct investment to come here and know it is a good market.
Senator Munson: What do you want to see in budget?
Mr. Brenders: We want to see the R&D tax credits modernized. We laud the government for what it has done previously, starting with the previous government and finishing with this one in terms of tax treaty recognition of limited liability companies. That will bring in a lot of capital. R&D is a big one that we need to ask for. In terms of modernizing the regulatory framework, let us eliminate things that we do not need, that are not in line.
Senator Trenholme Counsell: I like the line that reads, ``University research is a Canadian success story,'' and I want to focus my question and comments on that.
Listening to everything and realizing that we are a small country, although large in land, it seems to me that as a country we should focus on university research. That is where we address so many aspects of the issue, not only producing the post-graduate degree holders that we need and supporting our universities, but also getting the end results.
If we do that, then we have to create links between industries and universities, so government is helped in supporting our post-secondary institutions because the industry is also supporting them, whether it is heart, biotech, engineering or space research. I read many things from the University of Toronto in their various publications, and the research there is phenomenal, and it is also phenomenal in many of our Atlantic Canadian universities. I think of the heart and other research at the University of Moncton.
You have already said, Mr. Best, that a higher proportion of research in Canada than in all other G7 countries is done in universities; it is one third. That is not to say that any company or any industry should not do it its own research and should not be supported through tax credits and the kind of measures you are recognizing. However, should we make that our number one line and approach in Canada so that we achieve the results and move forward in a prosperous, promising way, not only for research and for Canada but also especially for our young people?
Mr. Best: Certainly, our university research effort is a strength. We have built on that strong base over the last decade, so far be it from me to suggest we should not continue to build on that base. We should.
However, as Senator Keon said, we do need to build our private-sector research capacity. Our private sector does not do, compared to other G7 countries, a lot of research, but it does a higher proportion of its research in universities than happens in most other G7 countries.
The universities do provide a platform for private-sector research. There is already quite a bit by way of linkages happening. We need to do more of that. I do not think it is an either-or. We need to build our private-sector research capacity and commercialization capacity but not at the expense of the strength we have already built in university research. We need to do both.
Mr. Brenders: One point on that: We have to be careful not to paint with a broad brush in terms of private-sector research. It depends on the sector. Our statistics are misleading, especially looking at the knowledge industry that is biotechnology. It is punching well above its weight in terms of percentage of research. Twelve per cent of total research in Canada is done by only 500 small companies. There is a lot of high-level private-sector research. Certain industries may be less research intensive that make up a big part of Canada's GDP, and that skews our overall average.
[Translation]
Senator Pépin: Unfortunately, since we are only entitled to one question, I would like to put the following one to you: In a highly competitive global environment in which players are not always playing fair, do you feel that intellectual property, as it relates to Canadian research, is well protected? Do you feel the federal government is properly doing its job in this area?
[English]
Mr. Brenders: The short answer is that Canadian IP is well protected. The opportunity is there. The problem that we have in Canada is the challenge to raise enough money to finish the commercialization job. Our IP that we created within our universities that we have spun out to companies has run out of a source of capital to be able to finish it to a finished product, and that is where we are looking for more incentives to bring more money in to keep that IP getting further along the line and keeping that company in Canada.
Senator Cochrane: I also, like Senator Munson, believe that it comes down to money; I am hearing that, with regard to students, especially undergraduates. They are the biggest income source for universities. An undergraduate does not give much thought to research and development. If money is a concern, this is probably one of the difficulties.
Could we encourage universities to invest more money into the graduate and the doctorate degrees? Have you heard of anything like that with universities? There is more emphasis on the undergrads, because that is where the universities get more money, and less emphasis on postgraduate and doctorate degrees.
Mr. Best: To correct one impression, the largest single source of income, operating funding for universities, in general, still is governments, although it is a much smaller proportion than it used to be. Tuition revenues have become a larger proportion than they were. You are quite right that undergraduates, because of their sheer numbers, bear the largest portion of the tuition revenue burden.
If I understood your question, as I said in my remarks, we absolutely have to invest in producing more master's and doctoral degree holders in this country. We have seen record growth in undergraduate enrolment for a decade and we are producing very large numbers of undergraduate students. That provides an excellent pool from whom we need to draw more people into graduate programs and provide the incentives for them to go into graduate programs.
At the undergraduate level, one comment I would make is that we need to look for more ways to provide research opportunities for undergraduates. The federal research granting councils do have some programs in this regard. Often in smaller institutions there may be more opportunities for undergraduates to engage in research with faculty members. While I talked about the importance of scholarships and economic incentives for people to pursue graduate education, it is also very important that more undergraduates who are talented have the opportunity for some involvement and exposure to research, to determine whether they want to pursue research careers.
Senator Cochrane: Are the universities doing that?
Mr. Best: The universities are doing some of that. We have called over the years for a targeted federal initiative in this sense through the federal granting agencies. The granting agencies are doing some of that now, but there is room for more. It is costly to provide those kinds of research opportunities. Some undergraduates do participate in research projects that are unfunded research — that is, they are not funded by the federal councils — but it is a fairly small proportion.
The Chair: Thank you very much to both of you for being here. I hope you will develop a plan and have a dialogue between the two of you, because it is an important segment, as is government, of course, as well.
We will now ask the next panel to take their seats.
Honourable senators, there are three people on this panel. We have an extended time period to go to 6:30. However, I have heard from several of you that that will be difficult at this point because of other commitments that may have been made. We will try to get as close to completion by six o'clock as possible, but I will need your cooperation to do that.
We have before us Ms. Suzanne Fortier, President of NSERC, the Natural Sciences and Engineering Research Council. NSERC is one of three federal granting councils. It supports 23,000 graduate students and post-doctoral fellows through scholarships and fellowships, and 11,000 academic researchers through research grants.
Mr. Eliot Phillipson is President of the Canada Foundation for Innovation. CFI came about in 1997 to fund research infrastructure in universities and hospitals.
Mr. Pierre Chartrand is Acting President of Canadian Institutes of Health Research, a federal granting council also responsible for health research. It was created in 2000 as a successor to the Medical Research Council. It supports over 11,000 researchers and trainees across Canada.
Thank you for attending here. If you could take five minutes for your opening statements, we will then proceed from there to dialogue and questions.
Suzanne Fortier, President, Natural Sciences and Engineering Research Council: First, I would like to thank you for inviting me to meet with you today. I am honoured to have this opportunity to talk to you about NSERC and its role in the implementation of the S&T Strategy.
[Translation]
NSERC manages nearly $1 billion in grants and scholarships programs for research and advanced training in post- secondary institutions.
NSERC's vision is to make Canada a country of discoverers and innovators for the benefit of all Canadians.
We invest in people, discovery and innovation with the aim of advancing prosperity and quality of life in Canada by supporting the creation and transfer of knowledge in the natural sciences and engineering (NSE) and by ensuring that people are trained to discover, develop and use that knowledge.
[English]
As was already mentioned, NSERC invests in people by supporting 25,000 — the number is rising — undergraduate and graduate students and post-doctoral fellows every year. These highly skilled people form the human capital necessary for Canada to compete, and for Canada's economic growth.
NSERC promotes discovery by funding more than 11,000 research professors at Canadian universities and colleges. Their discoveries not only advance knowledge but also form the foundation of technological development by businesses as well as quality-of-life improvements.
Finally, NSERC helps make innovation happen by encouraging 1,400 Canadian companies to invest in academic research and training. Last year, Canadian firms invested more than $75 million in public-private research partnerships supported by NSERC. These partnerships strengthen companies' ability to adopt and adapt discoveries and new technologies leading to commercial products and mobilize university researchers to address the needs of industry.
You will hear more tomorrow about partnerships with the industry in addition to these from Jean-Claude Gavrel, who will come here to talk about programs under the Networks of Centres of Excellence Secretariat.
[Translation]
NSERC's program structure and management priorities are perfectly aligned with the S&T Strategy's goals of creating a people advantage, a knowledge advantage and an entrepreneurial advantage for Canada.
[English]
Since the strategy was released in May, NSERC has embraced its vision and worked proactively to carry out its agenda. The strategy's four principles have been internalized into NSERC's planning and decision-making functions. The four principles are also solidly embedded in NSERC's way of doing business.
This includes a competitive, peer-reviewed evaluation system to ensure world-class levels of excellence and value for money; a blend of targeted and broad-based programs to ensure that priority research topics are addressed; a broad spectrum of science from discovery to applied research and commercialization as well as a suite of collaborative research programs that foster partnerships between industry and universities; and finally, appropriate and effective controls that are proven and recognized to ensure accountability.
[Translation]
NSERC, with the Canadian Institutes of Health Research and the Social Sciences and Humanities Research Council, has been assigned an important role in Mobilizing Science and Technology to Canada's Advantage. We are committed to achieving the Strategy's goals and meeting its commitments.
[English]
In the last eight months or so, we have focused our efforts and investments on four goals: First, mobilizing the science and engineering research community to focus on the priority areas of energy and natural resources, the environment, health, and information and communications technology. For example, we are accelerating our support to outstanding researchers in the priority areas who have or are on the verge of making a breakthrough discovery that will have a significant impact on the world stage. We are also devoting more resources to strategic public-private partnerships that support projects and networks of researchers working together to solve problems in these areas.
Second, we are extending international research linkages and making Canada a destination of choice for students and researchers. We are facilitating linkages between Canadian research networks with international initiatives, allowing Canada to be connected at a global level. We are also creating opportunities to attract the best foreign graduate students and post-doctoral fellows working in the priority areas to come to Canada for their training.
A third goal is advancing research in emerging technologies in areas of Canadian strength. For example, we are funding new researchers and enhancing training opportunities and international linkages in key technology areas such as nanotechnology and quantum computing.
Finally, our fourth goal is to translate knowledge and technology into practical applications to improve the wealth, wellness and well-being of Canadians through integration. As was mentioned previously, it is well recognized that the best way to flow ideas and knowledge from universities to industry and to ensure that these are turned into a competitive advantage in the marketplace is through people. We have many programs that are helping put young people in the industrial setting. We applaud the initiative in the strategy to create a new industrial R&D internship program.
[Translation]
We have also worked closely with our sister agencies to maximize the impact of Canada's investment in S&T. We have worked diligently and moved swiftly to implement the new programs introduced in the Strategy. Many of these new programs involve partnerships with research agencies. Again, Mr. Gravel will provide you more details tomorrow.
It is important to point out that the new programs and additional funding have been enthusiastically received by the research community. Canada has an extremely vibrant capacity for public-sector research, which offers a strong potential to boost private-sector R&D through leveraged funding in partnership programs with universities.
[English]
Finally, I would like to add that Budget 2007 put in place instruments and investments that have allowed rapid implementation of the strategy. This has served as a powerful tool to help us mobilize the research community towards advancing the goals of the strategy.
We welcome the commitment made by the government in the S&T Strategy to maintain Canada's G7 leadership in public-sector R&D performance and to continue to support excellence in research and the development of talent.
[Translation]
Eliot Phillipson, President and Chief Executive Officer, Canada Foundation for Innovation: Mr. Chairman, I would first like to thank you for the opportunity to address the Standing Senate Committee on Social Affairs, Science and Technology.
[English]
I have been asked to provide the views of the Canadian Foundation for Innovation, CFI, regarding the impact of the Science and Technology Strategy on research performed in the public sector. I am pleased to do so, but I will limit my comments to the public, non-government sector, in accordance with the mandate of CFI.
As we all know, Canada's prosperity in the 21st century knowledge economy will depend increasingly on our ability to innovate, that is, to generate new knowledge and ideas from which are derived new products, services and policies that create economic wealth, enhance social foundations, sustain the environment and improve our quality of life. These concepts are central to the Government of Canada's Science and Technology Strategy, entitled Mobilizing Science and Technology to Canada's Advantage.
The Canada Foundation for Innovation is a key player in the S&T Strategy. CFI was created in 1997 as an independent corporation by the Budget Implementation Act, with a mandate to invest in research infrastructure in Canadian universities, colleges, research hospitals and non-profit research institutions, and thereby strengthen their capacity to carry out world-class research and technology development that benefits Canadians.
The CFI funds up to 40 per cent of a project's infrastructure costs. The institutions then leverage this funding to attract the remaining funding from partners in the public, private, and non-profit sectors. Since its creation, and including the two most recent budgets, the CFI has been entrusted with an investment of $4.24 billion by the Government of Canada. By 2010, it is estimated that the total capital investment by the CFI, the research institutions and their other funding partners will exceed $11 billion.
CFI's investments in equipment and infrastructure complement those made in people and in the direct and indirect costs of research by the three federal research funding agencies: the Canada Research Chairs Program, Genome Canada, and other federal programs. Together, these investments have had a profound transformative impact on Canada's research and development enterprise.
However, the global S&T landscape continues to evolve rapidly and international competition has become evermore intense. The S&T Strategy is therefore very timely in providing an articulation of the federal government's priorities and policies in promoting S&T in Canada and its clear commitment to sustain and promote Canada's competitiveness through investments in higher education R&D.
In addition to creating knowledge, people and entrepreneurial advantages for Canada through specific policies, the S&T Strategy also identifies four core principles that will guide all government S&T initiatives: First, promoting world- class excellence through an environment of healthy competition to ensure that funding supports the best ideas; second, focusing on strategic priorities that reflect Canadian strengths; third, encouraging partnerships between academia, industry and government to accelerate the pace of discovery, innovation and commercialization; and fourth, enhancing accountability in demonstrating to Canadians the benefits of investments in science and technology.
These four core principles provide a useful framework for analysis of the potential impact of the S&T Strategy on research performed in the higher-education sector. The impacts include both benefits and risks of which only a few will be highlighted in this review.
First, promoting excellence. Promoting and supporting excellence is a fundamental requirement for success in a highly competitive global environment. In today's economy, being good is not good enough. The term ``excellence'' means that research dollars are invested in institutions, groups and individuals whose work has been evaluated as being of the highest quality, using international benchmarks. The challenge will be to ensure that the most rigorous, appropriate and transparent criteria of excellence are used as a basis for the investment of resources, a process that requires the type of specialized expertise that exists in the tri-council funding agencies and the CFI. In fact, CFI's current competition for $520 million is a demonstration of excellence in action; that is, the identification of innovative and transformative projects that will lead to advantages for Canadians.
Second, focusing on priorities. Focusing resources in areas of Canadian strength and opportunity, as outlined in the S&T Strategy, will enhance Canada's global competitiveness, particularly as other advanced economies undertake a similar process. Therefore, such an approach is to be commended and will help to ensure that resources are used to build on Canadian strengths. However, by their nature, strategic priorities are most easily defined in the domains of applied research and technology development. There is therefore a risk that a strategic approach that is too restrictive and narrow in scope could overlook support for basic discovery research, which history has demonstrated time and time again is the foundation of the most innovative ideas and technologies. It will therefore be important to ensure significant involvement of the Canadian academic research community in defining research priorities.
Third, partnerships to accelerate innovation. The evolving, worldwide S&T landscape clearly requires newer and closer working relationships between academia, industry and government in order to facilitate knowledge translation, technology development, innovation and commercialization. The S&T Strategy includes several new initiatives that will foster such relationships, including the Centres of Excellence for Commercialization and Research program — CECR — and the College and Community Innovation program — CCI — to mention just two. However, there is a risk that too great an emphasis on immediate payoffs of academic research will excessively skew the research enterprise to narrow industry needs, to the detriment of basic discovery research and to the detriment of disciplines such as the social sciences and humanities, which are critical to the type of creativity, communication, moral and ethical reasoning and business and management skills required for successful entrepreneurship. Thus, it will be important to ensure that the drive for short-term gains does not undermine the long-term capacity of universities for research across all disciplines.
Finally, accountability in demonstrating the benefits of research. The S&T Strategy appropriately challenges the research community to demonstrate and communicate the results of public investments in R&D and the benefits of such investments to Canadians. The principle of accountability for the use of public funds is welcomed by the academic community. It is important, however, that government not adopt a time horizon that is too short for the demonstration of benefits, many of which will take years to materialize. In this respect, investing in research is analogous to investing in childhood education. The economic and social benefits may become evident only years later, and often cannot be predicted in advance.
In summary, from the viewpoint of the Canadian Foundation for Innovation, the Science and Technology Strategy is a welcomed document that will have a positive impact on research and development performed in Canada's research institutions. The strategy builds on the strong research foundation that has been established in the last 10 years, and it will ensure that Canada continues to innovate and to prosper by focusing on its advantages.
The Chair: Thank you very much. Finally, Mr. Chartrand.
Pierre Chartrand, Acting President, Canadian Institutes of Health Research: Honourable senators, as my colleagues, I am grateful for the opportunity to appear before you to talk about science and technology policy in the context of health research. I also want to take this opportunity to acknowledge the visionary scientific leadership of Senator Wilbert Keon. Senator Keon has received many deserved awards during his distinguished career, not the least of which is CIHR's Distinguished Leadership Award in 2007.
CIHR is Canada's health research agency. Our mission is to create new scientific knowledge and to translate that knowledge into improved health outcomes, a stronger health care system, and economic and social benefits for Canadians. Composed of 13 virtual institutes headed by leading Canadian researchers, CIHR provides leadership and support to more than 100,000 health researchers and trainees across Canada.
[Translation]
If there is one message I would leave with you today, it is that Canada's strength is in health research. We have built a system of health research and institutional excellence in our country that we need to grow and protect. Let me mention just three leading-edge outcomes from CIHR-funded research.
Dr. Steven Scherer and his team of researchers at Sick Kid's Hospital in Toronto recently identified a genetic mutation for autism, opening the potential to test infants for this condition.
Dr. Stephen Moses of the University of Manitoba was recognized by Time magazine for the top medical breakthrough of the year in 2007 for his work on effective ways of reducing the incidence of HIV among young men in Africa.
Last, Neuromed Pharmaceuticals Ltd. of British Columbia, founded by CIHR-funded researcher Dr. Terry Snutch from UBC, signed an R&D collaboration and licensing agreement with Merck & Co. Inc. worth up to US$475 million. The deal, the biggest licensing deal in Canadian history, will allow clinical trials and commercialization of a drug targeted for chronic pain sufferers.
[English]
The Government of Canada's Science and Technology Strategy sets very important directions for CIHR and for our health research partners. I would like to offer four observations about the strategy.
The strategy sets out four principles, as mentioned by my colleagues, to guide science and technology investments. In short form, they are excellence, partnerships, priorities and accountability. Let me emphasize the principle of excellence. Through our highly respected peer-review system, CIHR only funds research proposals that meet internationally defined standards of excellence. I would also like to add a few words on partnerships. This concept has always been central to how CIHR does its business and I have placed personal emphasis on this as acting president. Our partners, provincial and territorial governments, the not-for-profit sector and the private sector not only provide additional resources but, even more important, ensure the translation of knowledge to real-world applications. In 2007-08, CIHR secured approximately $175 million in additional resources through partnerships.
Second, we are actively implementing the strategy with our federal funding agency colleagues. As mentioned, as part of the strategy, the Government of Canada has entrusted CIHR, SSHRC — Social Sciences and Humanities Research Council and of Canada — NSERC and CFI to manage Canada's envelope of support for higher education R&D in a comprehensive way. With my colleagues from these agencies, we have vigorously set out to do just that by implementing an extensive action plan.
To give you a flavour of what we are doing together, we are collaborating on the delivery of our programs, such as providing a single-window approach to student support, as well as harmonizing policies and administrative processes to facilitate access to our programs to the research community.
[Translation]
Third, we are demonstrating results. As Canadian Nobel laureate and health researcher Dr. Michael Smith so aptly pointed out, in research things can just as often go wrong as right, but when they go right, there is nothing more exciting. There is no doubt that S&T investments have paid huge dividends for our country. However, we can do a better job at explaining those results to Canadians. With my funding agency colleagues, we are developing for the first time a standardized set of indicators to show more clearly the social and economic impacts of our S&T investments.
Fourth, we cannot stand still. The researchers I have talked with share the Prime Minister's vision for Canada as a world leader in science and technology and a key source of entrepreneurial innovation and creativity.
In the era of the global knowledge economy, our success will depend on our ability to continually nurture young researchers, generate new knowledge, and translate that knowledge into national advantage. In no area of science is this truer than in health research, where the pace of scientific advance is striking.
The government recognized this scientific dynamism when it identified health and life sciences and technologies as an area of Canadian strength and national advantage. As documented by the Council of Canadian Academies, advances in such areas as clinical research, neurosciences, cancer research, circulatory and respiratory health and others, and the commercialization of that knowledge by Canada's leading-edge life sciences sector, are providing tremendous promise for Canada. Like the Neuromed example I shared, the commercialization potential of health research is huge.
[English]
In conclusion, through its investments in CIHR, the government is building a Canadian science and technology culture for the future. We will continue to emphasize the importance of supporting excellence in research and discovery, but also give new impetus to our mandate to accelerate the translation of research findings into benefits for Canadians.
The Chair: In the interests of time, I will go directly to my colleagues, starting with Senator Keon.
Senator Keon: Also in the interests of time, I will be brief because I took a lot of the committee's time with the last witnesses. I am not sure what I can talk to you three about that I have not talked about already in my life.
I want to acknowledge what a tremendous job has been done by your collective agencies, particularly over the last decade. It is amazing what has been accomplished — how you have worked together and tried to work with industry. I have said many times that the science platform in Canada is at a level that we could not have anticipated. It is at a much higher level than we could have anticipated a decade ago, so you should be very proud of that.
Having said that, I will raise only one point that I raised with the previous speakers — that is, the intimidating situation with the wealth and venture capital of our competitors internationally. As all three of you know, I have lived through that with my own company that spun out of my own research. I live through it now as I work with some of the venture capital firms in Canada.
How do we change the Canadian psyche to understand that they must endow our universities, that they must invest big time, even if they are not involved in research? The companies that are turning a profit, whether they be oil or fertilizer or whatever, have an obligation to put back into the system, to our universities, and to partner with you people and to work with government.
Our overall government funding is quite good compared to the rest of the world. Where we have a problem is with the huge venture capital that exists outside our borders.
I want all three of you to comment on how you think that could be approached. I know all of you have worked like beavers to get industrial partners for all the money you pass out; but how do you think government and academia can come together to educate the Canadian public that they must support our post-secondary education and research in a way they have not dreamed about?
Ms. Fortier: I will come back to our vision at NSERC, which is to help make Canada a country of discoverers and innovators. We chose those words carefully, acknowledging that they were ambitious.
We did so because, as was mentioned before, although we are a large country in terms of population, we are a small country compared to many of our competitors. For us, it is essential that we not waste any talent at all. Investing in talent in this country is one of the most important things that we need to do.
I think that is something we try also to communicate to the general public. It is important for Canada to set high goals in terms of investing in its talented people. It is important for individuals to set high goals also, striving to reach their highest potential because we need all the talent we have here.
Through some of the things we have tried to do in our organization, we are trying to connect these people better. We have many programs that put young people in industry. We think that is very important. We have programs that put young people in their first degree at university in a research lab. That is transformative. That is their first taste at research. That triggers the excitement for research and encourages young people to consider graduate studies. That is something we can do.
What is very important — I will end with this because my colleagues will add to that — is that we all have a role to play. As granting agencies, we have a role to play. The universities have a role to play. The industries have a role to play. We have to identify what is our role and do the best we can in it and in the important contributions we can make.
Mr. Phillipson: Before I attempt to answer the question, it needs to be clarified. You made the statement — and it is a true statement — that private-sector investment in R&D is low, particularly compared to government investment in R&D in Canada, which is the highest among the G7 nations. However, it needs to be looked at by sector, which is what one of your previous witnesses was saying a few minutes ago. If we look sector by sector, you will probably agree that biotech, aerospace and information communication technology — the high-tech sectors — do invest heavily in their own research and in university research.
On the other hand, our industries that are based largely on our natural resources historically did not invest heavily in research. I think many of them are changing — certainly, oil and gas — but traditionally they did not, largely because they did not have to.
When we look at the reasons, it is important that we break it down by sector because they may vary considerably from one sector to another. Having said that, in addition to what the private-sector comments will tell you about changes in tax credits and government regulations and IP — all of those issues — what we are seeing is the need for a new arrangement, new types of partnerships between academia and industry.
Think about the large and extremely successful laboratories; for example, Bell Labs, Xerox and IBM, several of which won Nobel prizes. They have closed and co-located onto university campuses because they understand that, ultimately, knowledge translation and commercialization is a social process. People have to interact with one another. They have found it to their benefit to find new arrangements. Part of the answer is that we need to facilitate new types of partnerships between academia and industry. Those are beginning, and we have good examples in Canada, but they are recent and few in number.
Mr. Chartrand: There is not much I can add. Research is important, but we also need to stress the importance of research training. Certainly in health, there is a direct link between the intensity of the training in research and the quality of health care.
It needs to be made widely known that it is not only a question of generating new knowledge, but also it is a question of generating the people that have the skills to deliver on this knowledge. In terms of the private sector, one of the most important factors is the availability of highly qualified personnel. For the large part, the type of personnel needed is people who have been trained in all areas of research. That makes a difference in their capacity to be prosperous. Hence, we need to make a strong case for the importance of training people in research. It is the foundation of research in Canada; we depend on the trainees to deliver on the research. That is my point.
Senator Trenholme Counsell: I was delighted to see Mr. Phillipson say that it is as difficult to get people to put money into research as it is into childhood education.
I know and admire the work of the Canadian Institutes of Health Research, and I applaud the wonderful approaches and innovative ways you have undertaken this research. It is so embracing. It brings together communities, universities, researchers and citizens in meaningful ways over a broad spectrum.
Mr. Chartrand, is your budget decreased this year compared to other years?
I will stay on the money subject. Looking at the Natural Sciences and Engineering Research Council and comparing it with the Canada Foundation for Innovation, you are both mainly providing money to universities, non-profit institutions, hospitals, et cetera. I think that is correct and that is what I was talking about with the previous speakers.
I would like you to clarify this and comment on it: It seems that the Natural Sciences and Engineering Research Council receives $1 billion, and I wondered if that was $1 billion a year. In comparison, the Canada Foundation for Innovation, I believe, receives about $4 billion. Again, I wondered if that was $4 billion a year.
If this is true, it would seem that a disproportionate amount of money is given to equipment and infrastructure versus grants and scholarships. I do not know whether that is a fair observation. I may be totally off base.
The other thing in this connection is whether there is confusion and overlap between the money that is going to the Canadian Foundation for Innovation. Then we have the Canada Research Chairs. I am wondering about how that all ties together. For instance, how does the Canada Research Chairs tie in with the Natural Sciences and Engineering Research Council? Is there a good continuum? Are there strong links and collaboration and communication?
The Chair: That is a lot of questions.
Ms. Fortier: At NSERC, our budget is roughly $1 billion a year. Part of that includes money that flows through NSERC out of our partnership programs, which includes the Canada Research Chairs, the Networks of Centres of Excellence, the newly formed Centres of Excellence for Commercialization and Research. All that money makes its way into the budgets of CIHR, SSHRC and our budget. That is how to look at this.
I will add one thing: The reason we like the budget to look like this is that some of these monies are in those areas targeted areas, which for us for us means that that is where the money has to be spent. At the end of the day, what is important is what happens with the money.
[Translation]
Ultimately, this funding helps the natural sciences and engineering research community to carry out research projects and to train students. Therefore, what is important is not whether funding comes from one particular program, but rather what level of funding is provided to our researchers. That figures totals approximately $1 billion annually.
[English]
Mr. Phillipson: I only wish the CFI budget was $4 billion per year. The $4.24 billion I cited is since CFI was created since 1997. Unlike the three granting councils, we are not obliged to spend it on an annual basis. The nature of these infrastructure projects is such that many are large and cannot be done on the basis of an annual cycle.
Therefore, the $4.24 billion is now 10.5 years; it is not allocated in equal instalments but it works out to roughly $400 million a year. Our mandate is clear — namely, to fund research equipment and infrastructure. However, as you have heard, we work closely with our colleagues.
The question you raised is the best example — the Canada Research Chairs program. Every successful Canada Research Chair can apply simultaneously to CFI through their institution for a grant to fund their equipment and infrastructure. Therefore, the very successful recruitment of new researchers and new faculty to Canadian universities in the past 10 years has been due to the total investment; however, one of the most successful programs has been the combination of the Canada Research Chairs and CFI. The Canada Research Chairs provide the salary and operating funds and CFI provides the infrastructure, the start-up package, to get the labs going.
Mr. Chartrand: The CIHR budget is in the order of $920 million and is divided in the same way as would be the case for NSERC. The most important part of it is what we call the capture-the-excellence-strategy budget — that is, that we are supporting the best ideas from the brightest minds, so it is coming from the research community.
Roughly 30 per cent is for targeted initiatives, to address specific health problems that have been identified both as being very important as well as having a potential for impact — meaning that we can do something about it. These would be related to things like obesity, autism, AIDS, cardiovascular diseases, cancer, et cetera, where we have special targeted programs.
We also benefit from the investments that are made through programs like the Networks of Centres of Excellence, NCE, and the Canada Research Chairs, as well as the Canada Graduate Scholarships, CGS, which is an important program for all granting agencies.
Senator Trenholme Counsell: I had asked whether your funding from the federal government was maintained or was less.
Mr. Chartrand: It was augmented in the last budget in the open category, as well as the Canada Graduate Scholarship and these new programs, such as Centres of Excellence for Commercialization and Research, CECR.
Senator Cordy: There are some excellent examples of innovation in Canada and excellent work being done in research. Perhaps our fault as Canadians is that we do not advertise them enough. Often, people are surprised when they learn that it was a Canadian who developed the BlackBerry, for example. This happens in many fields, including health care. Perhaps that is what we are not doing right.
Ms. Fortier, you talked about some of the priorities that NSERC has focused on over the past eight months in respect of mobilizing science and technology. You talked about extending international research linkages and making Canada a destination of choice for students and researchers. That is an admirable goal but it has its challenges.
I was in Malaysia where I spoke with the high commissioner about that because I am involved with post-secondary education in Nova Scotia. He talked about the challenges of getting Asian students to Canada because the Australians are very quick in their response time. A student who applies to Canada and to Australia gets a response from Australia or New Zealand almost immediately, whereas in Canada there seems to be a lot of red tape. I spoke to a president of an undergraduate university in Nova Scotia and she made the same comment — the challenges of red tape in Canada for bringing in students.
How will you take on this challenge? Certainly, more than simply dealing with the Minister of Industry, it involves working with the Department of Citizenship and Immigration.
Ms. Fortier: You are right in saying that it is important to tackle this aspect, and we have made progress. In my previous work, I was at a university as a VP academic so I know we have made some progress in facilitating the entry to Canada of talented people from outside and in offering them opportunities after graduation to work in Canada for at least one or two years. We have taken important steps, but we need to do more to attract students and to keep them here after graduation should they choose to stay in Canada rather than return to their home country.
Senator Cordy: How will you do that?
Ms. Fortier: This work tends to be done for the most part by the universities. We do not get involved in the recruitment of students or in offering places for students. This work tends to be done by the AUCC and by the universities. When I was at Queen's University, I worked on that with my colleagues from other universities and with the government.
Senator Cordy: You said that NSERC is focusing on this.
Ms. Fortier: Let me make a clarification. The new program that we are initiating is to recruit graduate students. With graduate students the challenges are different than with undergraduate students. They are more naturally inclined to look elsewhere and they are looking for the best place to do research in their discipline. We are trying to better highlight and feature those places in Canada that have enormous possibilities and could be magnets for international students. We are focusing on those areas at the top of the league worldwide to attract those students.
[Translation]
Senator Pépin: I would like to thank our three witnesses for meeting with us this evening.
Ms. Fortier, in Budget 2007, NSERC was awarded an additional $37 million for research into energy, the environment and information technologies. How was this funding allocated to take into account the Strategy's priorities? When other fields such as chemistry and astronomy are deemed lower priority areas, are funding levels reduced?
Ms. Fortier: NSERC already has a place a series of programs to promote research partnerships in strategic areas. Seven such areas have been identified, including the environment, energy and communications. We already had a tool with which to target research with this new funding. And that is what we did.
In addition, we have worked to mobilize our research community to ensure that people with wide-ranging experience would participate in these programs. I feel that we have achieved a tremendous amount of success because we have organized the biggest competitive process to date in our three strategic areas, whereas in the past, we focussed on seven strategic areas. We have succeeded in attracting even more researchers.
I am sometimes asked who would be qualified to do environmental research. In the area of natural sciences and engineering, that type of research could be done by individuals working in the field of environmental sciences, chemistry, geology, mathematics, information technology, civil engineering or chemical engineering. In other words, knowledgeable individuals with backgrounds in a range of disciplines are needed to address this problem.
We realized that we also needed knowledgeable people with experience in other areas, such as economics, sociology and health sciences. We opened the competition up to all Canadian researchers. That was a first. We were proud to throw open this competitive process. If we truly want to resolve these major problems, we need to be able to mobilize people from all disciplines where skilled individuals are in demand. That is what we did.
[English]
Senator Cook: We have heard a great deal about excellence and about dollars. I should like to bring a balance to this discussion and talk about the student who struggles and does not have monetary resources at their disposal. Your funding is for four years, and the top figure is $75,000 for research in a particular discipline. In that four years, that student copes with a master's program and/or a PhD. Personally, I do not think it is reasonable for a student trying to live, maybe married, and then, at the end of four years, drop back to a grant of $15,000 as a graduate student to continue. What evidence do you have that those bright students or some of them drop the PhD and opt for a master's degree in order to go out and find a well-paying job?
I speak from experience because two in my family did exactly that.
Have you given any thought to the four-year time frame with funding and then that drop to $15,000 for the next year and a half, which would be the max for their program, and be the excellent person we wish them to be?
Ms. Fortier: You are raising a very important problem that preoccupies us.
In the previous panel, you talked about why we do not have as many PhDs and master's degrees in Canada. The main reason we hear for that is in Canada we do not pay these people as well as the U.S. does. We have compared the level of our scholarships, and the Canadian Graduate Scholarships program fares well against international competitors. However, the rest of our scholarships, I would say, do not.
As you know, once the time for a student's scholarship has expired, the student will continue to be funded through his or her professor's grants. In fact, 30 per cent of our professors' grants will go to the support of students. However, you are absolutely right that the level is not high enough.
Although we do not have a perfect solution, we have tried to augment with other opportunities — for example, opportunities for students to have an internship in the industry as part of their student training. We will need to continuously attend to this area. If we want to have the talented and trained people that this country needs, we will have to continue to invest in them. There is much temptation, particularly in parts of our country where a job is easily obtained these days, to quit the program and get a job.
Senator Cook: It is doubly difficult for women because most people get married in their twenties and start a family. As bright as that person is, it is out of reach. The pressure-cooker time frame preoccupies me. We have one child in Halifax in a graduate program. We begged the other one to go to Yale. She said, ``I am tired of being poor.'' That is the reality for many of our young people.
Ms. Fortier: A long-time top priority for us at NSERC has been investing in people, particularly in the next generation. This is something we really need to do.
Senator Callbeck: Mr. Chartrand, today I spoke in the Senate on arthritis. Before speaking, I did considerable research. As we all know, the number of Canadians with arthritis is increasing dramatically. It is currently 4 million, and they tell us that in 2026 there will be 6 million Canadians with arthritis, an increase of 50 per cent. That affects our productivity, our health costs, the quality of life of people with arthritis, their family members, friends and so on.
It seems to me that this is an area in which we need much more research. I know that there is some promising research being done, and I spoke about that in the Senate today. However, I was surprised that CIHR contributed only $2.4 million to research in arthritis in 2006-07.
I know there has been a problem with keeping arthritis statistics up to date, but that will change because the Public Health Agency of Canada now has the money to update them. Am I right in thinking that that is a small amount of money? If it is, why is the amount so small? Are you not getting the requests for the dollars?
Mr. Chartrand: Our numbers show that CIHR has invested $103 million in arthritis research in the last seven years. Last year alone, we invested $17.4 million in research on arthritis.
As you know, we have an institute that is dedicated to muscular and skeletal diseases. That institute in itself has specific programs on arthritis. We also have many open programs to which people can apply for research money for arthritis. Actually, I believe arthritis research is an area of excellence in Canada. We are supporting it at that level because we get applications from the research community that are judged by peers to be excellent.
Senator Callbeck: I will have to go back and check, because the information I was given is that $2.4 million was spent.
Mr. Chartrand: There may be confusion. There is also the Arthritis Research Society, which is not CIHR. It is a not- for-profit charitable organization that funds research in arthritis; it has been in partnership with CIHR on many programs, and their level of investment is lower.
Senator Callbeck: I was told that they contribute $6 million to research, which money they raise themselves.
Mr. Chartrand: I do not know the number.
Mr. Phillipson: I do not have the figure, but there is an important point to be made. Regardless of what the specific figure is that CIHR or NSERC targets to arthritis, the answer to many of the problems with arthritis will come from fields that are not identified as arthritis research, which is true for cancer, heart disease and diabetes as well.
If we look back in history, many of the most important advances in any particular field came from disciplines — usually, basic science disciplines — that at the time had no obvious application. This is in no way meant to undermine the importance of your question, but I think you should take comfort from the fact that, in addition to whatever the figure is — and that I do not know — there is another huge amount of investment in research that ultimately, I am confident, will be applied to the field of arthritis.
Ms. Fortier: This area has been identified as an area of priority in the past. In the Networks of Centres of Excellence program, we partner through the Canadian Arthritis Network, so the health researcher might be working with biomechanical engineers in addressing this problem.
You make a good point; it is very difficult to get a figure. Numbers have to be pulled from various places. We should consider it our homework to make it easier for people like yourself and other Canadians to know how much money is invested in particular areas of research, areas such as arthritis.
[Translation]
Senator Pépin: Mr. Chartrand, many Centres of excellence for Commercialization and Research are health related, for example, the Brain Research Center in British Columbia and the Montreal Neurological Institute. Was CIHR consulted as to which health research centres should receive funding as commercialization centres?
Are you involved in the competition being coordinated by the Networks of Centres of Excellence to select additional centres?
Mr. Chartrand: We have not been directly consulted in this particular instance. However, as far as the second part of the program is concerned, namely the open competitive process, once again, the three councils are participating in establishing a peer review system based on excellence. We are fully involved in the selection process.
Senator Pépin: Thank you very much for joining us.
[English]
The Chair: Let me finish off with the question I opened with the last panel on. You, and many organizations, have praised and indicated support for this new strategy of the government. However, there is a lot of detail to be worked out. I have certainly heard in your presentations today some anxiety about some of the direction and what might get left behind: Let us not forget basic research while we are expanding to get the industries involved, et cetera.
Minister Prentice is coming tomorrow. What are the one or two things that you think are most important for him to address or that you would like to see him address tomorrow in terms of moving forward with this policy? It looks good on paper, but the details that are coming will be vitally important.
Ms. Fortier: It all starts with people. We have the talent in Canada and the ability to attract talent from elsewhere to this country. We need to equip these people with the tools they need to contribute at the highest level. Expect nothing less than excellence from these people.
We need to take some risk in letting these discoverers and innovators explore new areas that might create new frontiers in research but also for our Canadian industry. We need to continue to build the new culture that I am sensing is now present in our universities with the new generations of a much more open environment and much more open flow of knowledge and ideas and technologies between industry and the private sector.
Finally, we need to get on with the job. We are in a global race. We have no time to waste. Let us get in the race and get on with the job. We will never have the magic recipe; no one has the magic recipe. We can learn from other countries, but what works in Ireland may never work in Canada — because we are different. We need to get on with the job. At times, we will take some risks. I am confident, given the talent I see and the level of prosperity that this country enjoys, that we can succeed in that race. However, we need to get on with it with a lot of energy and commitment.
Mr. Phillipson: Thank you for your question. I would preface the question that I would put to the minister by saying, as I already have, that the S&T Strategy is commendable. However, investing in science and technology, and specifically in research and development, is not a 100-yard dash; rather, it is a marathon. It is not a one-time only event. Having made a good start with the S&T Strategy, which articulates this government's vision of how it will pursue science and technology, the obvious question is this: What are the longer-term plans and commitments?
Again, I come back to my analogy in education. No government would say, ``We invested in education and educating a group of children last year, so now we will move on to something else.'' It is a continuing investment. It is the same with science and technology, research and development. The question would be: In my view, it is an excellent start, but what are the plans for the longer term?
Mr. Chartrand: I would add two things. One is that, in terms of benefits, the benefits are much broader, certainly in health research, than just commercialization. If you extend the good health of individuals, then you can extend their productivity. That has a huge impact on the economy. Keeping people out of the hospitals, keeping the cost of health care lower, is also of great benefit to Canada.
The other point I wish to make is that, as Ms. Fortier has mentioned, research is all about researchers. What makes it excellent is their passion. We cannot dictate passion. It has to come from them.
The Chair: That is a good closing remark. Thank you very much, all of you. It has been a good run. We continue our hearings tomorrow at 10:45 with another panel. At 11:45, the Honourable Jim Prentice, Minister of Energy, will be here to close out the session on the science and technology policy.
The committee adjourned.