Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 8 - Evidence - June 2, 2010
OTTAWA, Wednesday, June 2, 2010
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 4:15 p.m. to study the rise of China, India and Russia in the global economy and the implications for Canadian policy.
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: Honourable senators, the Standing Senate Committee on Foreign Affairs and International Trade is continuing our study on the rise of China, India and Russia in the global economy and the implications for Canadian foreign policy.
We have before us from the Canada Foundation for Innovation, Eliot Phillipson, President and Chief Executive Officer, and Douglas Lauriault, Vice President, External Relations and Communications.
For the record, the Canada Foundation for Innovation is an independent corporation created by the Government of Canada to fund research infrastructure. Its mandate is to strengthen the capacity of Canadian universities, colleges, research hospitals and non-profit research institutions to carry out world-class research and technology development that benefits Canadians.
Since its creation in 1997, the Canada Foundation for Innovation has committed $5.3 billion in support of 6,800 projects at 130 research institutions in 65 municipalities across Canada. That is a mouthful of achievements.
Thank you for being here with us on rather short notice. We are completing the portion of our study on India. I understand you have been advised of that. I believe there is an opening statement and then we will go to questions.
Welcome, gentlemen.
Eliot Phillipson, President and Chief Executive Officer, Canada Foundation for Innovation: Thank you, honourable senators, for the opportunity to appear before you today to provide our perspective on Canada's status in what we call the international marketplace of ideas. I do so from my vantage point as president of the Canada Foundation for Innovation.
For the record, today's presentation marks the twenty-fourth appearance of CFI before a parliamentary committee since we were created in 1997.
Senator Andreychuk asked me to be brief. Fortunately, she has given part of my introductory statement about CFI so I will be more than brief. I will indicate only that CFI was created in 1997 by the Government of Canada as an independent organization with a mandate to fund research equipment and infrastructure in Canada's public sector research institutions. The mandate of CFI extends across the entire spectrum of research, that is, the natural sciences, engineering, health, social sciences and humanities, and in that regard it is entirely unique within the Canadian science and technology landscape.
The national objectives with which CFI was charged were to increase Canada's capacity to carry out world-class scientific research and technology development; promote networks and collaboration between the academic and private sectors; support economic growth and job creation; and enhance health and environmental quality through innovation.
You have already heard that we have invested thus far $5.3 billion in 7,000 projects, and these investments have enabled the building of world-class research facilities that have attracted international partners.
For example, there is the University of Prince Edward Island's Atlantic Centre for Comparative Biomedical Research, the Laval University-based Arctic research icebreaker, the Amundsen; the Sudbury neutrino laboratory led by Carleton University and Queen's University, an international facility for particle astrophysics located a mile underground in an Inco mine; the Canadian Light Source at the University of Saskatchewan, which is Canada's national synchrotron research facility, and its largest scientific project in a generation; and the North-East Pacific Time-Series Underwater Networked Experiments, NEPTUNE, and Victoria Experimental Network Under the Sea, VENUS, projects led by University of Victoria, which are the world's first online cabled undersea observatories.
I mention these projects because facilities such as these allow researchers to respond to today's scientific challenges. In the context of your discussion, they become a critical ticket for Canada's entry into the international research community at the highest levels.
Because the CFI funds only 40 per cent of the cost of equipment and infrastructure, our investments have leveraged a total investment of over $12 billion as a result of partnerships with provincial governments and industry. The partnerships with industry, in turn, bring academic researchers into closer contact with industry scientists and entrepreneurs. That contact enhances knowledge translation, both through the exchange of ideas and information, but perhaps even more important, through the movement of highly qualified personnel from the academic sector into industry.
The impact of CFI's investments on Canada's research enterprise has been profound. In accordance with our funding agreement with the Government of Canada, the CFI recently has undergone an extensive overall performance evaluation and value-for-money audit by an independent third party, together with an assessment by a blue ribbon international review panel. Among its many conclusions, they note that CFI has been "instrumental in growing Canada's capacity for world-leading research," and that it has "demonstrated remarkable success in helping Canada attract, retain, and develop research talent."
As a result of massive investments in research during the past decade by the Government of Canada through the CFI, but also through the Canada research chairs, the three federal research funding agencies and other granting organizations, Canadian science is in considerable demand in the international marketplace of ideas. One index of this demand is the frequency with which Canadian scientists collaborate with colleagues in other scientifically advanced countries. This frequency is measured by internationally co-authored scientific articles. In this index, Canada ranks second in the world on a per capita basis, slightly behind the United Kingdom and ahead of the United States, Germany, France and Japan, the other major scientifically advanced countries.
I mention the index because this type of ranking is important. Many challenges facing humanity today are transnational in scope — think of global warming or disease pandemics — and those challenges will not be solved by any one country alone. It is important for Canada's future prosperity that we are part of the solution to those challenges and not simply importers of innovation.
Fortunately, having built now a scientific enterprise that is respected around the globe, Canada is well positioned with its international collaborators to translate its knowledge and ideas into products and services for the global marketplace. In my view, however, such collaborations in science and technology must not be left to chance, but should become an important objective of Canada's industrial and foreign policy, as much a part of the discourse as its military, political and economic alliances. In fact, in the 21st century, Canada's scientific clout has the potential to contribute as substantially to the nation's place in the world as its military and diplomatic clout did in the 20th century.
Like other alliances, scientific partnerships are forged on the basis of competitive advantages, those that each partner brings to the table. For example, in traditional manufacturing supply chains, competitive advantage depends on access to raw materials, production capabilities, labour costs, transportation facilities and the financial and regulatory environment. In contrast, global research and development value chains are based on a different set of links — access to highly qualified personnel, state-of-the-art research facilities and organizations and cutting-edge information communications technologies.
Let me give you one example, that of the joint Canada-California cancer stem cell initiative. Canada's strengths in this initiative are its renowned researchers in this field and the patient databases enabled by our health care system. California, on the other hand, is home to the largest concentration of biotechnology companies in the world. By capitalizing on these complementary advantages, the partnership will benefit both jurisdictions and has the potential to develop new treatments for cancer that will benefit people the world over.
In recruiting to Canada the highly qualified personnel who will be critical to competitiveness in the knowledge-based economy, we should capitalize not only on our world-class research infrastructure but also on our societal infrastructure — our social and cultural fabric. This fabric has been, and will continue to be, a major determinant in the decision of prospective students, scientists and entrepreneurs to choose Canada over other countries with equally prestigious educational institutions and equally advanced research facilities. In other words, in the intense global competition for the highly educated and skilled workforce that will drive the innovation economy, we should promote aggressively our democratic values, social justice, respect for diversity and openness to immigration.
One author has recently noted that the simplest measure of whether a culture is dominant is whether outsiders want to be a part of it, and whether they want their children and grandchildren to grow up in it. By this measure, ours is a dominant culture and we should take full advantage of it in building our innovation future.
A recent report from the U.K. Royal Society entitled The Scientific Century notes that
. . . no one can predict the 21st century counterparts of quantum theory, the double helix and the internet. But there is little doubt that advances in science and technology will continue to transform the way we live, create new industries and jobs, and enable us to tackle seemingly intractable social and environmental problems.
As I tried to outline, whatever these 21st century counterparts turn out to be, Canada has the capability of leading in their development. Our challenge as a nation is, first, to recognize that we have that capability and, second, to develop and implement a strategy that will allow us to exploit it successfully. In my view, that strategy must include major initiatives in foreign affairs and international trade.
The Chair: Thank you, Mr. Phillipson. You have covered a lot of ground in a short time. I have a list now of senators who wish to ask questions, starting with Senator Segal.
Senator Segal: Thank you very much for making time to join us. I appreciate your straightforward and thoughtful presentation.
My understanding is that CFI's primary purpose is to fund the capital side. Part of the difficulty for which CFI was created is that research grants given by granting bodies through peer review provide for operational costs, but not the physical requirements for items such as new laboratories or facilities for the undersea NEPTUNE proposition, et cetera.
When you rate the proposals that come forward for assessment — and I know you use a peer review panel process — have you any weighting associated with whether that facility for which funding is sought will be part of a collaborative international research proposition or domestic?
We have seen a cycle with our Russian and Chinese friends. Occasionally, depending on the pressures of the day, what strikes us as meaningful collaborative research is called spying by someone in some interior affairs department, and research budgets are cut leaving some of our collaborators in those countries in a spot of trouble. I am interested in your perspective on that situation. I am not talking about India, but my next question will deal specifically with India.
Mr. Phillipson: You are correct that CFI's mandate is to fund equipment and infrastructure, not operating costs and salaries of the scientists. In evaluating applications, a number of criteria are used. Again, you are correct; we have a rigorous, complex assessment of excellence and merit. The criteria, in broad terms, are the nature of the science — if the proposal is bad science, it goes no further; the scientist; and need for the infrastructure. Part of the assessment of the science and scientist is whether they have been successful in previous research, and in attracting operating grants from other research granting agencies.
We do not make that requirement mandatory because it may be that their first requirement is to have equipment in place. It may be premature to expect them to have the operating grant. That point is definitely reviewed.
We go beyond the science and the scientist. We look at whether the project will increase Canada's capacity for research and technology development and its impact on the training of highly qualified personnel; not only graduate students and postdoctoral fellows, but highly skilled technicians that the academic and private sectors both need. We also look at the institutional commitment. Our applicants are the institutions, and applications must be based on their strategic research priorities. Finally, we have a category to look at potential benefits to Canada — economic, social, health and environmental. We try to select applications that have potential for the largest impact.
We look at the success of researchers in attracting funding from other research funding organizations. When we looked at where funds from other funding agencies are directed, it is not surprising that funding is converging. If other agencies also use excellence as a fundamental requirement — as long as everyone's understanding of excellence is comparable — it is not surprising that the Darwinian forces of excellence attract funding, and there is more and more convergence of the funds.
Regarding your question about scientists being caught up in what you said are perceived as espionage or other activities in other countries —
Senator Segal: Perhaps a restrained research context.
Mr. Phillipson: Many of our applications and the projects we funded are international in context. Several of the ones I mentioned are required to attract international participants. To my knowledge, none of the projects in which we have been involved to date had that added challenge.
Senator Segal: When you look at third-party scientific assessments relevant to your considerations of an application, do you evaluate the scientific assessment that come from academies of science or research organizations in places like China and India on their merits as you would from any other foreign source, or do you have some way of scoring whether these institutions have the same appropriate scientific depth and analytical capacity in making their assessments as you expect from others you assess as part of your grant application process?
Mr. Phillipson: Foreign assessments from China, India, the United States or the U.K. will impact the success of scientists involved in capturing research funding in their jurisdiction. However, we undertake our own assessments. We use many international reviewers. About 40 per cent of our reviewers and experts are international because, first, some of our projects are so extensive that all the Canadian experts are involved and, second, we constantly try to ensure — and we do ensure — that projects we fund are truly world class. We can ensure they are world class by having a lot of external reviewers.
We undertake our own assessments. We do not rely on evaluations that projects or scientists may have undergone in their own jurisdiction.
Senator Segal: You may want to reflect on this question; it is not fair to ask you off the top of your head. Is there any recommendation you might want us to consider that will allow this committee to make a recommendation in this area to enhance the level of research and development activity and pure research activity between Canada and places like India, China, Russia and Brazil? Are there elements to your operating premise funding or others that, if enhanced or changed, might make building those research relationships easier than they are now, expecting the same merit issue to be fundamental and undiminished?
Mr. Phillipson: You are correct that I would want to give that question careful consideration. However, the first thought that comes to mind, whether we discuss CFI or other research funding organizations, is that our capacity to fund research taking place in other jurisdictions is limited.
We had an international fund to fund some of the projects I referred to. By and large, the funding is to support activities that occur in Canada. All projects welcome foreign scientists and involvement, but those countries must pay their own way to finance their scientists.
For example, we provide funding for the Sudbury Neutrino Observatory. If you ever have the opportunity to go there, I encourage it. At any time, there will be scientists and graduate students from 10 or 12 different countries using this Canadian-financed facility. We provide the overhead and all other operating costs in Canada, but those jurisdictions must fund their scientists to come here.
That might be an area for a country as scientifically advanced as Canada to consider, if we wish to aid and encourage high-quality scientific development in other countries. I distinguish in that regard between some countries developing their scientific capacity versus other countries with which we usually compare ourselves, the scientifically advanced countries.
The Chair: I have a long list, so please be brief.
Senator Stollery: I will not take long.
Thank you very much for coming. You are testifying here before us because we are looking into what some might call "the new world" — China, India and Russia, and other places in the future. In terms of our commercial trading past, the problem in Canada is that we have gotten into the habit of selling cheap stuff cheap. For example, we sell raw materials and so on. A lot of our export tradition has not been of high quality goods, to put it that way.
People use the words "innovation" and "quality." I think quality is important, but I guess that is part of innovation; I do not know.
There is a contradiction between your testimony and those who have said that we spend a lot of time selling cheap stuff cheap. As a merchant by training, I understand what that practice means. We have heard that is a bad road to go down; we have gone a long way down that road and that road does not take us to any good places.
The Germans are as large an exporter as the Chinese, only their goods are high-quality merchandise. You say that we are scientifically advanced, if I understand your testimony. Why is it that we are advanced but we have not been successful in using our advanced innovation in a commercial way? There are other places where they say that.
What happened here? What you say is important for Canada. Why have we not been as successful, as some witnesses have said, in making this transfer of scientific advances into our trade and commerce?
Mr. Phillipson: I appreciate that question; it is an exceedingly important issue.
Let me discuss what most people intuitively think of as high-grade science in the commercial sense. There are the high-tech industries, such as biotech, aerospace and information and communications technologies. Those three sectors in Canada are high tech, and their success depends on a generation of knowledge and ideas, and the transformation of those ideas into products and services.
However, as successful as they are, they represent only a small portion of the total Canadian economy, as you pointed out. The bigger part of the economy is based on our natural resources, regular manufacturing — not high-tech goods — and the service industries.
This area is complex and I am not an expert in it, but one of the factors has been that, historically, our natural resource industries did not add value to the products. We hope and assume that our natural resources will continue to be a major part of the economy. However, rather than simply exporting natural resources as raw material, there is no reason why we cannot add more.
That is where the innovation comes in. A more innovative approach to harvesting the natural resource, and then adding value to it before we export it represents the application of knowledge ideas. In this case, knowledge is applied not towards a new BlackBerry phone but rather to our natural resources.
Why have we not done it? I do not know. I asked the same question to the chief executive officer of a company in the natural resource sector. I asked, why is it that, historically, your sector and the comparable ones have not invested more in adding value, because that requires scientific innovation?
He said, historically, we did not have to. We could dig it, catch it, fish it and chop it. It was plentiful and cheap and there was a ready market for it. There was no incentive.
That situation has changed because other countries with natural resources are doing things in more innovative ways. Think about the forestry sector and Finland. The Canadian enterprise is much larger, yet most of the innovations have come from the Finns.
I think that situation is changing, because I think the natural resource industries understand that, in this competitive environment, innovation is important in adding value to their products. Hopefully, they will continue to move in that direction.
[Translation]
Senator Fortin-Duplessis: Thank you, Madam Chair. Mr. Phillipson, I am delighted I could hear your presentation, which was very explicit and well summed up. I appreciated a great deal.
Obviously, research needs researchers to transfer subsequently the results of science to the industry so they can be developed. Given the number of researchers who will be retiring soon, I am sure there will be a massive demand for researchers to replace them.
But I was reading recently that the Organisation for Economic Co-operation and Development indicated that Canada lags significantly behind other countries as concerns the number of Ph. Ds in areas like engineering or science, and that we do not have an adequate number of interdisciplinary programs.
What do you feel about this? What are some of the solutions you are suggesting? Should we look for these people abroad, and if so, in which countries? You mentioned that Canada could be an attractive country for scientists. Do we have enough of them to meet our needs?
Douglas Lauriault, Vice President, External Relations and Communications, Canada Foundation for Innovation: Thank you for your question, senator. CFI investments in research infrastructure have a significant impact in transforming the research and development community in Canada. This has allowed a reversal of the brain drain we experienced in the 1990s, and Canada is now a preferred country for researchers.
Our client institutions have been able to enhance in a remarkable way priority areas in their strategic research plan. Is there more that needs to be done? Of course.
Is the retirement of professors a problem? Obviously, it is.
As for us, we are doing everything we can. Up to now, we have been able to invest as much as $3.5 billion and fund more than 6,800 projects in 130 institutions throughout this country.
Brain drain is happening throughout Canada. I can give you an example of an institution where we met with a great success, and that is the University of Quebec at Chicoutimi.
We helped funding the building dedicated to research on de-icing in Chicoutimi. This is the world-leading research centre in de-icing. In Chicoutimi, we have a potential to export this Canadian knowledge in countries like China and Russia. These countries have challenges that are similar to the ice storm we had in Eastern Ontario and Western Quebec back in 1998.
The industry can also benefit very much economically from this research. We discussed about that with Hydro Quebec managers. They confirmed that since the ice storm, Hydro Quebec invested over $2 billion in infrastructure. Right now, the University of Quebec at Chicoutimi is the world leader in this area. Several applications come to mind and we could export this knowledge to prevent ice accumulation on electrical wires or pylons which could crumble under the weight of ice in China or in Russia. There could also be some applications in the aircraft industry, an industry which is very important in Quebec. Airports throughout the world must meet the challenges of a cold climate.
[English]
Honourable senators, around this table have had the pleasure of sitting in a plane that is being de-iced on the tarmac in Ottawa in minus 200C weather. The University of Quebec at Chicoutimi is the world leader in this area.
[Translation]
Senator Fortin-Duplessis: Do we train enough researchers in this country, or do we need to recruit some abroad?
Mr. Lauriault: One of the goals of the foundation is to look for the best scientists in the world and try to have them come in Canada. Do we have enough of them? In all scientific areas, experts are always too few to meet the demand. CFI's answer to that is simply that we have much work to do in this area and that we should keep on investing to attract researchers from abroad.
Senator Fortin-Duplessis: In which countries will you look for them?
Senator Nolin: Wherever they are.
Mr. Lauriault: Our market is the whole world.
Senator Fortin-Duplessis: The whole world?
Mr. Lauriault: Yes.
Senator Fortin-Duplessis: Thank you very much, Mr. Lauriault, for your answer in French.
[English]
Mr. Phillipson: We do not target countries; we target the institutions and individuals, regardless of the country.
Senator Jaffer: I found your presentations most interesting.
In our hearings, we have heard witnesses say that the provision of infrastructure is on the increase in India. India is growing from a country of many villages to a country of more cities, where they will need great infrastructure. I am interested in knowing whether Canada is preparing to provide that infrastructure? If so, what will we need to do to be a leading partner in that venture?
Mr. Phillipson: The infrastructure you referred to is needed by many countries, not only India. Look around some of our cities and you will see the same requirement. You are talking about general infrastructure for the economy whereas CFI is involved in research equipment and infrastructure. We are not directly involved in the design, provision or funding of infrastructure. Our domain is research related to producing better infrastructure. Many of our engineering projects are related to that research.
Canada can offer its knowledge of how to build better infrastructure. It might be that Canadian companies, depending on the infrastructure, will develop infrastructure and export it. At CFI, we are not looking directly at what infrastructure is required in other countries. We fund research and Canadian institutions that will develop a better infrastructure, hopefully for both the domestic and the export markets.
Senator Jaffer: This committee will prepare a report for the government and for Canadians on these issues. I understand that you are involved in the research. What can you recommend to the committee for inclusion in the report so that Canada is better prepared to be a leading partner in providing infrastructure abroad?
Mr. Phillipson: In general, countries such as India, China, and so on, have huge populations and large numbers of graduate engineers and other scientists. Canada cannot compete with them in terms of those numbers. However, Canada can offer the high quality of its scientific enterprise. That is why I referred to the index. If scientists in one country are to collaborate with those in another country, they want to do it with the best scientists in those other jurisdictions. The fact that Canada ranks highly indicates that we have something to offer with both our volume of knowledge as the sixth largest producer of knowledge in the world, in absolute terms, and our quality of knowledge, where we rank even higher.
Senator Jaffer: I was impressed when you talked about the quality that we have to offer, and the comparison that you made about the quality of what we have to offer. That is encouraging. Is it a best-kept secret that only we know or are you marketing that aspect so we can share it with people all over the world?
Mr. Phillipson: That is a good question. We do our best to market that information first within Canada. That is why we are pleased to be here. The scientific communities around the world are aware of it because they are the ones through whom these contacts will be made initially.
The other important element, which might be even more important, is that if we can attract foreign students to Canada to study, some will stay here, where they will be welcome. However, those who go back to their home countries will be familiar with Canada and its capabilities. In other words, we will have ambassadors at a scientific level in all those countries, which is extremely important. That is the kind of initiative I was trying to describe when I talked about marketing Canada as a country not only with scientific infrastructure but also with societal infrastructure that will attract students and scientists. We hope some of the students will stay, and many of them do so. Those who go home should not be viewed as a loss because they take with them a better understanding of Canada and Canadian capabilities.
Technology transfer is more than simply reading a catalogue of patents and deciding which ones might be of interest. It is as much a social process as it is a commercial transaction. The more that we can know these individuals and interact with them, the better off we will be.
Senator Di Nino: My questions are along the same line. The reason for this study is to have a better understanding of the opportunities and challenges that Canada faces not only in trade and investment opportunities but also in other relations. The study is not restricted to trade and investment but includes how we interact with these new, emerging economies. There has always been a question as to how well we are doing, what we are doing right and what we are doing wrong. We would like to have answers to those kinds of questions.
I listened to you carefully. I was not here for about three minutes because had I to deal with something else, so I hope this question was not asked. Can both of you gentlemen give us some idea as to where we have succeeded in creating opportunities in trade and investment through the great work that the foundation does? Where do we still need to go to improve the relations with Russia, China and India, specifically? Also, in general, where are we missing opportunities?
Mr. Phillipson: I understand your question. It is a difficult one to answer. It is important to keep in mind that investing in research — knowledge development — the end product, which we hope will be products for the marketplace, services and policies, is always delayed. There is always a delay, and it is a question of how long the delay is.
My own field happens to be medicine and health, and there it is well established that, from the time a basic fundamental scientific discovery is made, it takes a minimum of 12 to 15 years to develop a drug to take to market. On the other hand, in information and communications technologies, ICT, it is much shorter at probably two to three years.
Therefore, we cannot simply look at the investments in research and immediately see the outcomes in terms of products and services. That is why it is difficult to answer the question directly. It depends, in part, on how close the research is to the marketplace. If the research is basic fundamental scientific research, that outcome is a long way away. Even more importantly, at the time the research is done, most often, no one can predict what the benefits will be ultimately because that outcome often takes a number of years.
However, look at the technology in this room. I assume many of you are carrying BlackBerry phones, and all this equipment. In many cases, it can be traced back to Einstein's papers of 1908. We hope the research we fund will not take 100 years to come to the market. In fact, it has been estimated that half the gross domestic product of westernized countries can be traced back to Einstein's four papers of 1908.
On the other hand, we also fund technology development. In other words, the research is no longer an idea but there is an actual prototype and it is a matter of further developing and testing the prototype. That research is much closer to the marketplace and there are many examples. Mr. Lauriault has cited one example: Plane de-icing treatment is an application of some of the research done at Chicoutimi.
I am sorry I cannot give you a more direct answer, other than to say that history has shown that investing in knowledge development ultimately leads to economic and social benefit.
Senator Di Nino: Do I understand you correctly to say we have not been around long enough yet to be able to produce those products or services that Canada can sell to the world, or can cooperate with the world to create opportunities for investment and trade?
Mr. Phillipson: No, I did not mean that at all. Canada has invented a lot of products.
Senator Di Nino: I am talking about through your foundation.
Mr. Phillipson: Through the CFI, yes. We are 13 years old but it took a year or two to start funding and to set up the processes. We have many examples. However, the bulk of the benefits are yet to come. That is why I say it takes time.
There are social benefits but let us talk for a moment only about the economic benefits of investing in health research. I assume most people will think immediately of drugs or medical devices. In other words, people think of something for the marketplace. However, the largest economic benefit of health research is not the products, necessarily, but rather changes in practices and policies and in health care delivery. Research that changes how health care is delivered can save enormous amounts of money but there will be no patents involved and no product we can buy off the shelf.
Therefore, we should not think of economic benefits solely in terms of products that can be bought and sold.
Senator Di Nino: I think the health medical areas, particularly in the three countries we are talking about, and more particularly in India and China, will be huge for our country from the standpoint of trade and investment. That benefit is aside from the social benefit that obviously will ensue from our research, which will benefit the lives of many people.
Even in that area, the foundation's work at this point is still in progress, and we cannot identify areas where the investment the Canadian public has made in the foundation has given us a specific result.
Mr. Phillipson: We can, senator. I did not mean to imply otherwise. Let me give you one example, which is local. Some of you may have heard of the Ottawa ankle rules. It used to be that, if someone hurt their ankle and came into an emergency room, invariably their ankle was x-rayed because no one could be certain it was not fractured. If it was fractured, as opposed to sprained, the treatment might be different.
Researchers at the University of Ottawa undertook a study to determine which patients limping into an emergency room need an x-ray and which ones do not need an x-ray because the chances of a fracture are so small that they do not need to do one. The Ottawa ankle rules have been in place not only in virtually every Canadian hospital for about the last decade, but they are quoted and used throughout the world.
That application has saved enormous amounts of money because of all the x-rays that have not been done, yet there is no company they can create or product to sell which can be packaged up to sell as the Ottawa ankle rules.
Knowledge leads to tremendous economic benefits, as well as social health benefits.
Senator Finley: I hate following Senator Di Nino because he usually touches, at least, on most of the questions I have.
Senator Di Nino: I read your papers.
Senator Finley: I want to touch briefly on part of where Senator Di Nino was going. As part of the mandate or the mission statements I am sure you have, do you consider or set some kind of target for, however modest, licensing conversions; for getting a licence out there?
You do not produce the goods or the product. However, presumably, if the Canadian Foundation for Innovation held a licence on a process, product or practice, there would be a revenue stream that would presumably come to the foundation. Does such a thing exist at this point?
I am told that other countries are a bit more advanced than we are in terms of licence stream. Why is that, and is private industry, for example, a barrier to that stream?
Mr. Phillipson: Let me try to answer the question. The CFI is prohibited by our legislative mandate from holding any equity in the research that we fund. We fund the institution, and every institution has its own intellectual property and licensing policies and so on. We know that the institutions have equity if IP can be patented or licensed, as do all other partners involved in funding the research.
We are only one element. We are funding the equipment and the infrastructure. However, the equipment sitting there alone will not produce anything. It requires the input from the other funding agencies, provincial governments and industry to end up finally with the knowledge that then might be commercialized.
Senator Finley: Let me ask a question from another angle. You have invested some $5.3 billion or $5.5 billion in a period of just over 12 years with a whole variety of research institutes or whatever. How many licence conversions have been produced from that direct investment? What is your success rate so far?
I know that probably for every dollar invested in research, maybe 5 per cent produces something concrete. What has been your licensing experience, the ones you have been involved in, even if you do not receive the licence?
Mr. Phillipson: As I say, we do not participate; it is the institutions. We have some information on that area. We conducted a study a few years ago of spinoff companies created in universities in which the CFI infrastructure played an important role — not the only role, as I have pointed out. At that point, which was when CFI was about six or seven years old, 116 spinoff companies had been created from CFI-funded infrastructure through universities.
I am trying to recall the numbers, but we will send you the study. There was well over $1 billion of industry money invested in those spinoff companies. That was one attempt at a statistic to see what the economic benefits are.
As it happens, we are in the midst of undertaking a much larger study of the socio-economic benefits of our investments. That study is only starting to tool up, so I cannot give you any answers yet. We felt, having been around for 13 years and having invested for about a decade, it is appropriate now to see what information we can determine exactly along the lines of your question.
Senator Finley: If you can supply the clerk with a copy of the prior report, I would like to see it, and I eagerly look forward to the new one.
Early in your presentation, you mentioned that Canada had considerable research experience and strengths in a number of areas — probably in many, but it was a real powerhouse in some. We are working on a study of cooperative international trade development with India. I know you do not necessarily target skills by country or individual or institution. However, if you were to do that with India, what are the dovetail skills or resources that India has that might best match Canada's strengths, which, as part of our study, might help from a government policy or bilateral process? Can you tell me what those dovetails might look like?
Mr. Phillipson: I would have to study India's specific strengths in each of the areas in more detail. I do not think a satisfactory answer would be to generalize and say "health." Health is a huge field. I know there are areas where Canada and India collaborate, and can collaborate more.
The point I was trying to make earlier is exactly that; each jurisdiction should have some competitive advantage that it brings to the partnership, because that makes it a true partnership. However, I cannot give you an intelligent answer.
Senator Finley: I looked at one, for example. You stated that Canada — and I know this because I was part of the industry — has a huge research investment and knowledge in aerospace. India has probably one of the most burgeoning aerospace markets, or potentially burgeoning. Second, India produces a huge amount of engineers and a whole range of types, which are needed somewhere in the aerospace aviation infrastructure. Would that be one area, or are there examples of Canada currently operating with India through your centre?
Mr. Phillipson: It certainly would be an example. Which ones are operating at the current time, I cannot tell you. We have funded 7,000 projects, so off the top of my head, I cannot pull one out as an example.
Senator Finley: Can I ask that you supply the clerk with a list, within the bounds of whatever confidentiality you have, of programs that you have primarily with India, but also with Russia and China as a second level? I am particularly interested in India. Can you do that?
Mr. Phillipson: We will attempt to do that. Again, keep in mind that our funding is for Canadian institutions. They will form partnerships with other jurisdictions, so we may have to work through the institutions for that answer.
Senator Finley: I understand that; I was not looking for an instant answer. Next Monday will do. Seriously, thank you.
Senator Downe: My understanding is that the foundation was established to address the shortfall that was identified in the infrastructure, so we could prevent the brain drain that was in the news at the time and the concern that we could not retain key researchers and scientists in Canada. This foundation was a key component in building everything that has come after that, which has been the research chairs.
You referenced, in your opening comments, the work of the University of Prince Edward Island, where they have been successful because of your foundation and the assistance it provided. The university has been able to build a number of research chairs on that success. The veterinary school was the recipient of the new initiative of the government, which was the $10 million funding for leading world scientists.
UPI was successful in obtaining the relocation of the scientist, originally from Australia, who most recently had been at universities in California. He is relocating to Prince Edward Island, which will be a change in the winter. Having said that, I understand he is well known for his research into the prevention of disease transmitted between farmed salmon and native wild salmon.
That research being done at the university will be transferable anywhere in the world, if it is successful. I suspect we will have opportunities around the world with the funding that initially came from you. My question is how is your budget? How much money did you originally have, how much do you have left and do you receive a yearly grant?
Mr. Phillipson: We are not in the A-based budget. CFI was funded initially in 1997. It was to have been a one-time- only phenomenon; $800 million that was to be spent over five years to replenish the equipment and infrastructure that you referred to, which was no longer state of the art. In many cases, it was rusted.
Before the five years expired, the government of the day and subsequent governments have seen fit, every two to three years, to allocate another block of funding to CFI to be spent over the next few years. In last year's budget, we were awarded $600 million to fund one or more competitions beginning this year. We currently have, in terms of funds that we have not committed yet, the $600 million. We will launch a number of competitions this year and next year of various types for that $600 million.
Senator Downe: All governments deserve credit for the funding for this institution, and I am glad to see funding is continuing. I am sure you do not have this information, so can you send information on the breakdown, by province, on the total funding for the last ten years?
Mr. Phillipson: Do you mean our allocation of funding?
Senator Downe: Yes, I do.
Mr. Phillipson: We can do that quickly. We have that information in the office, and we will be happy to send it to you.
Mr. Lauriault: To build on the question you asked with regard to 1997 and the creation of the foundation, 13 years later, only this past March, as part of the funding agreement with the Government of Canada, we went through an audit and evaluation process. Part of that audit and evaluation process that was conducted by KPMG also had, as a companion piece, an international review panel that found the CFI and its practices are the world's best. CFI truly is a Canadian innovation.
When it comes to the BRIC countries that you are studying, as well as the more highly advanced scientific countries that Dr. Phillipson made mention of, a week does not go by in the office where we are not conducting scientific diplomacy. We have delegations from more than the G20 countries coming to us every week wanting to learn how the foundation model works and how it integrates all the various players inside the Canadian system to create the conditions whereby, as Dr. Phillipson said, Canada is now a leader on the world stage in many areas.
Senator Downe: You mentioned audits. Does the Auditor General audit you as well?
Mr. Lauriault: Since 2006 and the passage of the Federal Accountability Act, the Auditor General has the capacity to audit the foundation. To date, she has chosen not to audit the foundation.
The Chair: Dr. Phillipson and Mr. Lauriault, thank you for your information. You have covered broad areas of your mandate and given us specific interesting examples. The ankle one will stay with me for a while. It is helpful in the broad brush strokes of our study as we look at Canada's advantages partnering with other countries or working in other countries. You have given us the Canadian side, and we very much appreciate that.
Thank you for your time.
Mr. Phillipson: Thank you for having us.
The Chair: Honourable senators, we now have before us Mr. Panday, President and Chief Executive Officer of PanVest Capital Corporation. We are pleased you are able to join us by video conference.
For the benefit of the senators and our audience, Mr. Panday's career spreads over 30 years in a variety of senior roles in the financial services industry and public accounting with ICICI Bank Canada, HSBC Bank Canada, Bank of Montreal and PricewaterhouseCoopers.
Mr. Panday is presently President and CEO of PanVest Capital Corporation, an exempt market dealer that he fully owns. PanVest is involved actively in providing Canadian accredited investors with the ability to invest in India by way of private equity funds, co-investments and other structured financing vehicles.
In June 2009, he received the Corporate Executive of the Year Award from the Indo-Canada Chamber of Commerce, and in 2008, India Abroad chose him in its power list of 35 most influential Indo-Canadians.
We are studying the rise of China, India and Russia in the global economy and the implications for Canadian policy. If we can have your opening remarks and quickly go to questions, we would appreciate it.
Hari Panday, President and Chief Executive Officer, PanVest Capital Corporation: Thank you very much, honourable senators, good afternoon, and thank you for giving me this opportunity to attend the proceedings today. I am here to speak about India and the odd comparison with other countries.
I am mindful of the reality that there are many political and economic considerations in harnessing a sovereign relationship. My focus will be on the economic and mercantile considerations that could become the long-term foundation for a healthy and prosperous Canada-India policy framework.
Canada and India both need each other. Canada's need emanates from its desire to diversify its long-term economic integration with the U.S. and the flattening of that growth in the last decade. In addition, there is a growing sentiment surrounding the Buy American philosophy.
India's need is dominated by the opening up of its economy, a process that most people do not realize began 18 years ago, in 1992. I can safely say that I started speaking on the subject immediately after the reforms were first introduced.
It is unreasonable for us to think that we have lost time because a lot has been going on in Canada, as in India. We have reached a point where India's emergence as a global player is noticeable. India is not only a destination for Canadian goods and services but also a serious competitor to Canadian enterprises on the international scene. We have learned a lot in the last 18 years on both sides. We should not let that learning become dormant.
In reaching out to India, Canada is a direct and indirect competitor to many countries, such as the U.S., the U.K., Japan, Australia, Singapore, Brazil, Israel and many others. These countries are well anchored in India. They have experienced tangible successes in India that did not come about by chance or because of a "first-mover" advantage but because of well-thought-out design. These countries normally sell goods and services but they also encourage two-way investment flows into India. These investments are steered by sovereign wealth funds from countries such as China, Oman, Australia, Ireland, Brunei, New Zealand and our own Pension Plan Investment Board. Canada seems to be in the early stages of a serious engagement with India. Canada too has experienced successes but has not made similar headlines in the global or domestic media.
I will move now to the Indian landscape. We should examine our position with a long-term view of 20 years, to 2030. As the Great One, Wayne Gretzky, once said, "I skate to where the puck is going to be, not where it has been." According to the recent Mckinsey Report on Urban India 2030: Projections and Statistics, in 2030 India's population will be 1.47 billion. It is estimated that its gross domestic product will multiply five times. About 590 million people, or 40 per cent of the country, will live in cities, which will represent 70 per cent of India's GDP by 2030. India will have 68 cities with a population exceeding one million, as compared with 42 cities in India today and 35 cities in Europe.
About 13 cities will have a population of more than 4 million. As an example, it is estimated that Mumbai will have a population of 33 million in 2030; Delhi will have 26 million people; Calcutta will have 23 million; and Chennai, Bangalore and Pune will exceed 10 million people each. Commercial and residential spaces equivalent to the size of Chicago will need to be added every year to accommodate this growth. About 7,400 kilometres of metros and subways will need to be constructed, and the numbers keep coming in. With this backdrop, I will do my best to cover the issues before this committee.
At the macroeconomic level, we have seen that no economy can insulate itself from financial turmoil, irrespective of the degree of globalization of a country and the soundness of its domestic policies. Central banks, governments, regulators and businesses have been challenged recently to the fullest. In developing our intelligence in this area, the Bank of Canada's role will be important.
In creating a national master plan and policy framework, which are important, it is best that we understand the structural issues first. We need to determine who is doing what. The Department of Foreign Affairs and International Trade, the provinces, the cities, the Crown corporations, private and public companies and trade organizations are all engaged with India, but there does not seem to be a comprehensive information source available on their activities. Is Statistics Canada equipped to gather the relevant data for those who need quick and reliable information? We do not know, but it is important to have Statistics Canada play that role if it is not already doing so. Where do we stand today? We are reflecting a bit on the past but focusing on the future, as I mentioned earlier.
What efforts are the two governments putting in today? We should examine the matters that are important to both sides. What do we know about each other's broad economy and industries; about key opinion makers; and about other people-related matters, such as the arts, culture and philanthropy? A detailed analysis is needed along the lines of a SWOT analysis, as we call it in business, to define our strengths, weaknesses, opportunities, and threats and to provide some of the answers. Time permitting, I can cite examples later in this session.
Next, what will be the design of our information feed? As a country, how will we update our intelligence through periodic "telescoping"?
On the issues with respect to partnerships, the topics of a free-trade agreement, the tax treaty with India, and the recognition of each other's institutions continue to surface. For example, you should know that the Bombay Stock Exchange is not even a designated stock exchange in the Canadian regulations. This situation has implications on taxation and flow of investments. Our stock exchanges can provide Indian firms with the ability to access North American capital markets through Canada without having to put up with the complexity of Sarbanes-Oxley and other U.S.-related issues. This ability is a competitive advantage for Canadian investment banks, law firms and accounting firms as well as for our stock exchanges and investors. The Bombay Stock Exchange has over 8,100 listed companies. Last year, the exchange raised close to US$2 billion in the domestic market. We should get in at the stage when include the policy framework is being finalized. Many new policies are being rewritten, for example, the Mining Code; mining is our core competency in Canada, as you know. Mining delegations have been coming to Canada from India for several years, but we see only a handful of secondary firms interacting with them.
A good example to follow in this area is India's relationship with Israel. India is the second largest economic partner of Israel. In 2008, Israel and India signed a memorandum to set up an Indo-Israel legal colloquium to facilitate discussions and exchange programs between judges and jurists of the two countries. Canada can create its own unique selling proposition — USP — by encouraging investment flow, not simply the sale of goods and services. That flow is especially important if Canada wants to capitalize on the infrastructure spending program in India that will be one of the largest in the history of the world.
Canadian institutions, including some of our Crown corporations such as the Business Development Bank of Canada, BDC, and Export Development Canada, EDC, can play a significant role. My view is that when we put up the capital for such projects, suitable reciprocal advantage can flow to Canadian firms. We have existing programs and often their success comes down to the packaging. For example, we have EDC's insurance program that can be extended to the investment flows into India.
Canadians have limited ability to invest in India. They depend on select mutual funds and the American depositary receipts traded on the New York Stock Exchange. As mentioned earlier, PanVest Capital Corporation is actively spreading the gospel about investing through private equity funds.
Labour costs are lower in India but not in every level or segment of the economy. There has been an upward movement of wages. Once we factor in all the other costs, the gap is much narrower than before. The old impression of India being the call centre capital of the world has changed. They are taking on sophisticated and affordable operations, such as in the biotech and applied sciences fields. Canadian innovators can look to Indian contract research organizations for clinical and patient trials, launch their products in India and use India as their launch pad to the Far East. Similarly, there are tremendous opportunities for them in the agricultural sector as well as in the automotive sector.
I will end my opening remarks. With your permission, I am prepared to take questions and have a vibrant dialogue with everyone in Ottawa.
[Translation]
Senator Fortin-Duplessis: Thank you, Madam Chair. Mr. Panday, I have a short question for you. The economic recovery in India seems to be rather fragile. You feel just the opposite. I am drawing this conclusion because internationally, since Europe and the United States have not completely recovered from the financial crisis, one needs to be quite cautious.
The economic growth is driven more by investments than by consumer spending. What do you think the impact will be on the development of the Indian economy when will come to an end the extraordinary measures which have been launched to boost the economy at the beginning of the world crisis?
[English]
Mr. Panday: We should examine a couple of things. The Indian economy is driven largely by its domestic demand. India depends on exports only for about 20 per cent of its economy. The export sector is a small component of Indian economic activity. Eighty per cent of its gross domestic product is destined for domestic consumption.
The belief we have from reading the media regarding the United States and Europe is that the situation is opposite in India.
[Translation]
Senator Fortin-Duplessis: What could we do to enhance the links between Canadian universities, scientific and technological organizations, and research centres and their Indian counterparts?
[English]
Mr. Panday: In the areas of science, academic institutions and research, I think the institutions themselves can enter into joint-venture agreements with each other. More important is the development of a strategy regarding the application of research and commercialization.
At the end of the day, we make money by commercializing whatever innovation is available. It will be important to understand the legislation on both ends to commercialize a product. For example, in the fields of pharmaceuticals and bioscience, research done in Canada or in a joint venture with an Indian university must not stay in the labs of those institutions. The research must be commercialized in North America or other markets. Only then will we fully capitalize on the investment made.
India is hungry for foreign technology and state-of-the-art research. Nevertheless, India has its own world-class institutions in some areas. Canada has a lot to offer.
Senator Jaffer: Mr. Panday, you are well-known and respected, especially in the Toronto community. What you say to us is important.
Regarding your role as former President of the Indo-Canada Chamber of Commerce, how has the chamber helped Canadians better understand India and Indians better understand Canada?
Mr. Panday: That is a good question.
The journey for the Indo-Canada Chamber of Commerce, ICCC, has been long. Local community groups decided about 20 years ago, first and foremost, that the community had a need to establish itself in the mainstream. In our plan, we wanted the generation of the day to understand how they can create space professionally and in business. We began to recognize the successes of the community in Canada as they grew in a variety of industries and professions. We showcased these examples in the mainstream and provided a significant networking opportunity for everyone.
The reason for the success behind the ICCC is that we did not ghettoize the organization. It became a mainstream Indo-Canadian organization creating and grooming people to work on other boards. Many former presidents used the Indo-Canadian Chamber of Commerce to groom themselves while they expanded in the local economy. People have gone on to sit on the boards of many well-known organizations such as the Ontario Chamber of Commerce, the Stratford Shakespeare Festival, the Roy Thomson Halland the Royal Ontario Museum. They have also contributed a lot of wider community work.
Senator Jaffer: Our study is focused on how to increase trade between Canada and India, and to better our mutual relationship. Canada has a growing diaspora of people from India and other parts of the world of Indian origin. You are an experienced businessman. What recommendation can you make to work with the Indian diaspora to increase trade in India?
Mr. Panday: The Indian diaspora, as you know, is spread out across Canada in a variety of industries. The number of people engaged in bilateral trade with India is increasing.
People are currently involved in the information technology sector, for which India is well known. Canadian entrepreneurs have deep engagement in India in this sector. They have offices and employ hundreds of thousands of people in India to support their dealings in North America and elsewhere.
In financial services, firms like Fairfax Financial Services, which owns insurance companies, are led by Indo- Canadians. They are engaged in India in the financial services sector.
The way we should engage with the diaspora is to gather intelligence on a variety of industries. I receive requests from people every week to help them walk through the maze in a variety of areas, whether in medical sciences, health services or listing their company in Toronto. For example, an Indian company currently wants to list on the Toronto Stock Exchange. We are helping them with that process. The diaspora can assist in the area of mergers and acquisitions.
There are a variety of ways that we can engage the diaspora on both sides.
Senator Di Nino: Good afternoon, Mr. Panday. I will keep it simple. I think we agree that there are an unlimited number of opportunities for improvement in trade and investment, as well as other relations between India and Canada.
You have been at this for a long time. Will you tell us what you think we are doing right and what you think we are doing wrong?
Mr. Panday: That is a great question. You are right that opportunities are unlimited. With an opportunity like this one, I say that India is my customer and I ask what my customer needs in the next 12 months, 24 months and beyond. In a sovereign relationship mode such as we have with India, we need to use a 10-year to 20-year window, because what we do today should bear fruit for the foreseeable future.
We need to consider what India will need. We know that infrastructure is huge. Kamal Nath, the minister who visited Canada some months ago, said that they will spend about $50 billion a year in infrastructure. Health services and education are also important sectors. India does not have things such as the Canadian Securities Institute. Business schools from around the world are going to India.
What does India need that others are not providing? I reflect on what our unique selling position and our competitive advantages are. I try to marry the two. There is no question that in the foreseeable future we can capitalize in the areas of mining, automotives, health services, infrastructure and financial services. There is huge need in the legal profession, and Canada has unique expertise to offer in the areas of insolvency legislation, corporate governance, patents and intellectual property, and environmental and labour law.
We look at India as a homogeneous landscape, which it is not. The data suggests to me that our companies ought to focus on no more than half a dozen provinces in India right now where there is growth and where consumers are spending money. Disposable incomes in India are rising at a decent pace.
We must look at needs and where things are happening. We have to analyze sector by sector and region by region, and then focus our efforts in those areas. You are absolutely right that the opportunities are many. However, we must narrow them down. We should take what I call the laser-beam approach to determine what our focus should be in the next 12 or 24 months.
I do not know what the performance measuring matrix is of the people in the trade offices, et cetera, but their matrix should be structured toward certain quantifiable achievements, be it increasing the trade numbers or the number of calls they make. The matrix can include how many Canadian companies have made inroads into new areas. We have to set up systems to measure that effort as well.
I do not think that we currently have a well connected plan. A lot of dots have yet to be connected.
Senator Di Nino: Do you think that if Canadian operations do not have a long-standing presence there they are better off to have partners in India or perhaps within the diaspora, or should they go it alone?
Mr. Panday: Every transaction is different. It depends on how much muscle power a Canadian company has, and with which segment of the industry they are involved. Using the financial services sector as an example, it is no secret that, regardless of which country a company goes to, financial services are highly regulated. They need a different type of strategy to enter that sector. They may need to partner with someone on the ground that can help them. Small- and medium-sized enterprises have far more flexibility, especially in unregulated industries.
The trick is the availability of intelligence from the ground in India. That is currently a huge challenge for Canadian enterprises. It is critical that they conduct a market study in advance to understand the landscape, but not all small- and medium-sized enterprises can afford to have consulting firms at their doorstep. Government departments and trade offices should expand their reach to provide access to that information.
It is also important that we piggy-back on other firms from Canada that have been in India for many years. Some of the firms that have been there are not playing the mentorship role that they should play in their own industries. Companies like Bombardier and SNC-Lavalin need to become part of this exercise to teach other companies how to bring their subcontractors up to speed, for example, to bring business back to Canada.
Senator Segal: Mr. Panday, thank you for your generosity of time and the clarity of your presentation. We are fortunate to have the benefit of both.
I want to try a construct on you, and I want you to correct me where you think it is either unfair or incorrect. The construct is as follows: Canada has largely missed the boat so far in India. In comparison to much smaller players like the Israelis and others, we have not taken it seriously, probably because, unlike the Israelis, we felt we had other choices, while Israel needed to be more strategic about making choices for a host of reasons that we all understand. Moreover, the Indian business and government establishment, while always polite to a fault, is not impressed with Canada's performance to date. They think we have failed to step up. They are happy that there has been some constructive frame of reference on the nuclear question, but feel that it took so long for governments in Canada to come to their senses on this issue that it indicates lack of focus and interest.
On that basis, it is not only a situation where we have to act now as a country to build market share, to make strategic investments and to engage in the kind of hard work that is necessary to earn a place in India, either as an investor, as a joint venture proposition or as a direct participant. Rather, we have to be frank about how desperate our situation is and how far behind we are from some of our competitors. We have to take a complete zero-based analysis of everything that has gone on and come up with a far more focused and urgent series of measures both in the private and public sector.
If we do not, the window may close on our opportunity much sooner than we think. I am interested in your reaction to that view.
Mr. Panday: Absolutely; I am delighted you asked that question because the contents of this topic you have raised are critical.
Perhaps I can start by saying that we have not missed the boat; I do not think that is the case. Senator Segal, my personal observation is that India will provide us with opportunities for the next 50 years at this pace. The country is having a kind of growth pattern. In the last 18 or 20 years, it has shown growth rates of 6 per cent and beyond, on average.
The best thing I notice about India today is that its youth see the hope. When I meet with my colleagues in India, they are 25-year-olds with master's degrees in business administration, and they are not pessimistic about their future. Even in the second- and third-tier cities, one can find someone in the neighbourhood who was able to go to Dubai, Singapore or Thailand on a one-year or two-year contract. They come back with foreign currency in their jeans and are seen as a role model for other youngsters in those cities.
In India, they have the first-tier cities like the big five metros, such as Bombay, Calcutta, et cetera. Prosperity is also going down to the second- and third-tier cities and the villages. Micro-finance, for example, is picking up, and that helps the little farmers and the micro-enterprises. You now have women entrepreneurs.
In India, it is happening at all levels. It is up to them where they want to position themselves, but a tremendous amount of activity is happening at all levels in the economy.
I happened to be with the Chair and Chief Executive Officer of Fairfax yesterday. We both had a presentation at the Ted Rogers School of Management. His company has a joint venture in India with ICICI Bank's subsidiary, ICICI Lombard, which is the insurance, property and casualty arm of the bank. He shared that they have sold in excess of half a million policies in India to the farmers. In the old days if the floods came, the crop washed away and the farmer was devastated. Now, you have a Canadian joint venture company selling crop insurance and farmers can get started again if their crops are wiped out.
Those are little examples I can cite to reinforce my overall belief that we have not missed the boat.
In terms of the nuclear issue, there was no doubt that India felt hurt about that issue. When I was hired by ICICI Bank Ltd in India in 2003 to start their banking operation in Canada from scratch, I applied to the Minister of Finance for our order to commence business here. The biggest fear I had in 2003 was —
Senator Segal: Was that a Schedule II operation?
Mr. Panday: Yes, it was a Schedule II chartered bank operation in Canada.
There had not been any other Indian financial institutions in the country for over 25 years. The only other bank that was present in Canada was the State Bank of India, which is a sovereign institution. However, ICICI Bank Ltd is a private-sector bank in India. It is the second-largest bank from India.
When I was engaged, I did not have a place to put my briefcase. We literally started from scratch. My wife and I drove to Business Depot to buy the first fax machine for the bank. That is how we started a Schedule II bank in Canada.
As Senator Jaffer mentioned earlier, here I am. I am a living example of someone who came to Canada 35 years ago and we were engaged and took this risk of forming a Schedule II bank under that cloud of the nuclear trade embargo. My biggest fear was how I would go through all this work after quitting my job at HSBC Bank and moving over to start this institution. What would happen if the licence was declined because of the trade embargo for some reason? In the meantime, I had attracted all these people to come and work with me who believed my word when I said we will build a wonderful institution and we will create this history.
We went on to build this bank. We now have 180 people employed in Canada. The bank is a $5 billion asset-based bank. I brought the bank to $4 billion and a payroll of some $10 million a year.
We used our core competencies. We set up operations in India to provide the backup. We set up a proposition for Canadian consumers and provided the competitive environment the Canadian government wanted to create. We provided all that. However, my heart was in my throat for nine months because of the nuclear issue until we received the licence.
That was the time when I received the first impressions how people in India felt about this whole issue. It had not hit home to me until then, because to me it was no big deal; things happened in the world, we did not like it and life went on. However, people took it to heart.
Is India paying attention to that issue today? I do not think so. I think that issue is diluted and we should not overblow it. We should go from a position of strength as a country. We have a lot of strong points we can depend upon. We are well respected. We have huge pools of capital that India needs.
We need to look at our core competencies, as I mentioned earlier. We have much to offer. We have a national character that Indians admire. They believe us when we make promises because we deliver on them. I have never come across a situation where an Indian company is trying to do business with a Canadian company and the Canadian company has let them down.
The commercial realities are what they are. People enter negotiations and make their commercial arrangements. However, at the core of the issue, I think we should take a lot of pride in our value system and what we have to offer. We have to take pride that, globally, we have created that space for ourselves and we need to put that core in the forefront and push this whole nuclear issue to the back burner.
You mentioned how we build our market share. I think this question dovetails into what Senator Di Nino raised earlier. We should take maybe three or four key sectors and we should become known for them the way the Israelis have become known for the bio-sciences and information technology, IT. We should try not to do a whole lot of things in a short time span.
We need a brand. We need to become known for what we do best. We are known for providing capital, for our mining and automotive industries, and for our academic institutions. Those sectors are key. Three or four key sectors will keep us busy for the next 10 or 15 years. We can make a lot of money. Making money is not a bad word in my dictionary.
The Chair: On that point, Mr. Panday, I must say that you are optimistic about India and Canada. In a short time, you have given us, along with those 25-year-old MBAs in India, a lot to give me hope that Canada and India can work together.
Personally, I liked that you indicate there are a whole host of ways in which we can work there. I am sure the committee also liked that. It is up to us to have that optimism and the drive to make the relationship work.
This committee likely will echo some of your thoughts and sentiments as well as your "let's get on with the job" idea. You have told us we have about 50 years of work. We will see whether we can challenge the Canadian community that way.
Mr. Panday, thank you. It would have been better to have you here engaged in person but the second best turned out to be as good.
Mr. Panday: It is my pleasure. Thank you so much. If you ever need me to follow up, I would be happy to sit down with you again.
The Chair: Thank you very much. We will take you up on that offer.
(The committee adjourned.)