Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 34 - Evidence - Meeting of April 30, 2013


OTTAWA, Tuesday, April 30, 2013

The Standing Senate Committee on Agriculture and Forestry met this day, at 6:13 p.m., to examine and report on research and innovation efforts in the agricultural sector (topic: commercializing research).

Senator Percy Mockler (Chair) in the chair.

[English]

The Chair: Welcome to this meeting of the Standing Senate Committee on Agriculture and Forestry.

[Translation]

My name is Percy Mockler and I am the chair of the Senate Standing Committee on Agriculture and Forestry. I will now ask honorable senators to introduce themselves.

[English]

Senator Callbeck: Catherine Callbeck from Prince Edward Island.

Senator Merchant: Pana Merchant, Saskatchewan.

[Translation]

Senator Tardif: Claudette Tardif from Alberta.

[English]

Senator Frum: Linda Frum, Ontario

Senator Buth: JoAnne Buth, Manitoba.

Senator Duffy: Mike Duffy, Prince Edward Island.

Senator Eaton: Nicki Eaton, Ontario.

[Translation]

Senator Maltais: Ghislain Maltais, from Quebec.

Senator Rivard: Michel Rivard, The Laurentides, Quebec.

[English]

The Chair: Mr. Francis, thank you accepting our invitation to share with us your opinions, comments and recommendations as the Standing Senate Committee on Agriculture and Forestry goes forward with its examination of research and development efforts in the development of new markets domestically and internationally, in enhancing agricultural sustainability, and in the context of traceability and improving diversity in agriculture for the future.

As you are from BioAlliance Inc. from Prince Edward Island, I have no doubt that you will share some very important information.

Please proceed with your presentation, which will be followed by questions from senators.

Rory Francis, Executive Director, PEI BioAlliance Inc.: Thank you very much and good evening to everyone. It is a great pleasure to be here to participate in the important conversation that you have been having for the last several months. It is a privilege for us to provide some insight from our perspective in Canada's smallest province on the kinds of mechanisms we have found to be effective in translating research to commercialization and opening new markets.

My comments will be as much about the intangibles as the tangibles — and I will explain what that means as we proceed — in terms of a system of innovation that can move new technology to the marketplace. As we know, much technology and research has been developed that is relevant to the agriculture/agri-food sector in this country and in the world. The very great challenge is how to successfully move those technologies to the marketplace and turn that knowledge into economic impact and economic opportunity.

The systematic nature of how to bring parties together to advance that research and that knowledge to the marketplace is a big challenge anywhere in the world. We have learned some things about how to get beyond some of those barriers that I believe are worth consideration.

I am wearing at least three related hats in my presentation this evening, and perhaps a bit of a fourth one.

My paying job is Executive Director of the Prince Edward Island BioAlliance, which is a private-sector-led not-for- profit that has, over the last eight years, coordinated a partnership of businesses, research, academic institutions and government agencies in our province to develop the bioscience sector. It is a new sector and a new part of the economy of our province, and one that is growing. I will say more about that momentarily.

The second hat I wear is as founder and board member of the Prince Edward Island AgriAlliance, which is a three- year-old organization similar in structure and governance to the BioAlliance in terms of being a private-sector-led partnership of producers, processors, research organizations and government partners. It is a collaboration of private- public partnership focused on the renewal of the agricultural and agri-food sector in our province.

The third hat I wear is that of President of the Eastern Canadian Oilseeds Development Alliance, which is a child, if you will, of AgriAlliance. We founded the Eastern Canadian Oilseeds Development Alliance in 2010 as a partnership of canola and soybean producers from Ontario east. As well, we have processors, exporters and researchers focused on those particular crops and their advancement in Eastern Canada.

I am also a board member of the Canadian Agri-Food Policy Institute based in Ottawa, whose work as a catalyst for dialogue and change in the agri-food sector has been important and has influenced my understanding of some of the challenges we have across Canada in this sector. I understand that CAPI presented to you about one year ago. Our president, David McInnes, made a presentation at that time. I will mention one of the projects that I think is illustrative of some of the things that I will talk about this evening.

I will give you a quick profile of both the agri-food sector and the bioscience sector, which sectors are related in our province. In fact, the relationship is what we consider a strategic advantage for us in terms of developing those sectors.

The agri-food sector is the grandfather of the Prince Edward Island economy. It has been around for over 150 years, ever since anyone could move stumps and plant potatoes, or anything else that might grow. It continues to be the province's largest industry with over $400 million in farm cash receipts and another $3 million from value-added food processing. We have about 400 companies working in that area. It is responsible for about 10 per cent of the province's GDP, which is second only to Saskatchewan in importance relative to overall GDP of any province in the country. About 7,000 people work in the sector, about half of those in primary production and half in processing.

As is the case across Canada and the U.S., there are challenges in terms of competitiveness of some of the sectors in P.E.I. There are some emerging and exciting new opportunities. Because it is the most important industry, we must obviously pay a lot of attention to it in terms of growth, development and impact on the economy. Of course, as many of you are aware, the potato is still number one in terms of value in the agri-food sector.

The bioscience sector is much younger, of course, only about 10 years old. It was about 2005 when we established the BioAlliance as a coordinating mechanism. There were about 12 companies at that time that could be called "bioscience related." We now have 38 companies in the province with about $100 million in sales. About 1,000 people work in the sector and about $68 million is invested in R&D each year. The focus is on bioactive compounds derived from terrestrial and marine sources, including agricultural sources, so plant-based sources of bioactive compounds that can be used in various health applications that can range from functional ingredients in foods all the way through to pharmaceutical ingredients. That is the focus area. You can see the connection already between the biosector, our market focuses and the agricultural sector in the province.

The kind of products produced by companies in the sector would include cosmetic ingredients, feed ingredients, natural health products, personal care products, vaccines, pharmaceutical ingredients, diagnostics and so on. As I mentioned, the convergence of technologies and market opportunities in the bioscience and agriculture sector is a strategic opportunity. The development of technologies in bioscience is creating a market opportunity that reaches back along the supply chain to the primary producer in a number of areas that allow for new market opportunities at the primary production area, new jobs in processing and access to markets that our growers, for example, would never have heard of five years ago.

At the board tables of AgriAlliance or BioAlliance, the conversation is similar in the sense that it is all about how to create the right conditions and the right set of partnerships along supply chains that can grow the economic contribution of each of these sectors to the province's economy. The endgame is about successful companies, job creation and investment in R&D because that is such an important stimulus to the ability to create new products for new markets. It is about successful businesses and reaching from research to farm to other value chain partners and to the consumer.

We have a health product continuum, from food to pharmaceuticals, when you look at the combined efforts of these two areas of market focus.

In Prince Edward Island, we have established what we would consider an innovation system within our biosector and, more recently, in the agri-food sector that we would suggest has brought together the key ingredients of an ecosystem for successful technology commercialization. That is what I was saying off the top. How do you bring the right components together to allow for a technology to be successfully commercialized and to achieve the economic impact that we are all looking for?

The elements of that ecosystem, then, we would refer to as a cluster model. That is not our term; it is a Michael Porter term. The components are fairly well understood. You need to have a relevant and accessible science platform; skilled human resources; access to the appropriate kind of capital, depending on the stage of development of the company; affordable facilities and infrastructure. You need to be able to incubate small- and medium-sized enterprises and to bring them along with the right mentoring services, and you need to have the support of public policy and programs.

It is a bit like making soup; just because you have the ingredients does not necessarily mean the soup will taste right. It is a very dynamic process. You have the opportunity to taste that soup, add a little of this, add a little of that, taste again. It is an ongoing process because it is a dynamic exercise.

In that soup, what we have found is that it is really important to have what a gentleman by the name of Richard Bendis calls an "innovation intermediary," a catalyst that brings the partnership together, understands what that partnership needs to look like and creates a nucleus within that cluster, whether it is agri-food or bioscience. With the right business environment, with that right facilitation of the partnership within the cluster, you can achieve the kind of transfer of technology from research bench through companies through commercial enterprises to the marketplace. You can attract companies because you have an environment — an ecosystem — that is attractive. People can see that companies are successful in our backyard. They are making money, hiring people and getting to the marketplace. You can attract investment. With that kind of coordinated mechanism for companies in the agri-food sector, supply chains that are well connected and relationships that work, companies want to be there. Investors would prefer to invest in that kind of an organized cluster rather than where companies are sitting on their own without the kind of support and network that they probably need to survive.

It is also really important in terms of attracting and retaining brain power because these are all brain-power businesses.

What we have found in terms of establishing these kinds of facilitating structures, like BioAlliance, AgriAlliance and ECODA, is that it has to be a private sector-led process. It has to be outside the political process because, obviously, the risk is that, every four years, if it is owned by one government, the next government might decide this is not the best idea. This is not a sprint; this is a marathon. You need to have consistency and consistent leadership in terms of the focus and direction of the development of that sector. You need to be able to build value-chain relationships and to move new technologies along the supply chain. Supply chains need innovation at all points along the path if they are going to be successful because that is what other countries and companies are doing, so we have to be better than that in terms of our ability to move technologies along and through supply chains. That is a challenge sometimes because we often have producers and processors that will compete on price. They will have disagreements over fair pricing for products and so on, and that is commerce.

However, we must have that understanding that, yes, we will have that conversation about price. In the meantime, we had better be collaborating on innovation and how we can trust that we will work together on innovation and on moving technology into our systems at primary production, processing and so on, in order to achieve competitiveness in the marketplace. Otherwise, no one will be able to pay the bills, anyway.

We also find that we can provide, through the use of these facilitating structures like BioAlliance, system navigation for companies. It is kind of a complicated world. There are many government and other agencies that have important tools in their toolbox, but companies do not necessarily know which ones are right ones, at the right time. Some navigation can be useful in sorting that out.

Also, we need to have some tough love. For business plans that really will not work, someone has to be able to say, "This is not going to work" and to reduce the risk to public and private funds early on. Fail early and fail cheap if it is not going to be a successful venture.

The other aspect of what we are trying to do is more on the communications and branding side of things, and that is to create some excitement about what this is all about. In the biosector, creating excitement is not all that difficult. It is an exciting new industry. It is fresh and people can relate to the new opportunities.

The agri-food sector frustrates me quite often. It is very difficult to get people excited. I think it is because it is an older industry and because everyone has seen this movie before. They will kick the tires a little longer before they believe that there is something new that is worth pursuing. It is hard to get people excited, and that is not good for the industry because that means it is tougher to attract the next generation if they are not seeing excitement and feeling that this is a place to invest their careers and livelihood. That is a real concern.

I mentioned the Eastern Canadian Oilseeds Development Alliance, and I have a couple of last thoughts here. Again, as a facilitating structure to bring supply-chain partners together to allow research and innovation to permeate the supply chain, this entity, which involves seven Canadian universities and five Agriculture Canada research centres in Eastern Canada, is focused on developing the canola and the soybean industries, particularly the identity-preserved, non-GM food-grade soybean sector, with Japanese markets primarily, for soy milk, tofu, miso and very specialized applications of food-grade soybeans.

The amount of research going on through this ECODA initiative, funded 75 per cent by Agriculture Canada, is quite dramatic. A number of new initiatives are coming out of that research program. We have managed two of these now and hope to manage a third one under Growing Forward 2. That is the value of the facilitating structure, the ECODA entity, which is a small piece of infrastructure that brings together producer groups, processors, exporters and the researchers. That is the magic of this whole entreprise. If you do not get that alignment, then things do not happen. It is difficult for any individual group to begin that conversation and create that alignment because there is always a sense of self-interest on the part of one of the groups, so you need an independent arbitrator and facilitator in the conversation.

In conclusion, I would say we have an abundance of opportunity. The real challenge is how to align interests in order to achieve success in bringing those partnerships together. We must be able to drive innovation through supply and value chains for existing markets to stay competitive and to establish new international export markets. That requires effective relationships along with supply chains. Those are the intangibles, the human relations. Human nature is sometimes our biggest challenge in bringing together these kinds of initiatives. It often requires an effective innovation intermediary and that comes down to building trust, alignment and a shared interest to achieve economic success.

I will stop there, Mr. Chair.

The Chair: Thank you for sharing your thoughts with us. Since you are from Prince Edward Island, I will ask the Honourable Senator Callbeck to start.

Senator Callbeck: Welcome, Mr. Francis, it is always great to have Islanders as witnesses and to hear people from Prince Edward Island talk about what is going on in the province.

As you said, you wear a lot of hats and you have been a real driving force in these areas in the province. I want to ask you about the bioscience cluster. It would be interesting for members of the committee to know who the partners are here, how many are involved as well as their roles in the development and research.

Mr. Francis: Thank you, senator.

We have now 38 companies that are in the PEI cluster, which is a rather dramatic increase over the last 8 or 10 years. We tend to exceed people's expectations in terms of Prince Edward Island not exactly being a place where it is expected that there should be a bioscience cluster. It is a rural, somewhat backwater part of Canada, some would say, and we need to continuously bring people to Prince Edward Island to show them that is not the case. The quality of the infrastructure we have established, the science platform, the companies and what they are doing is really world-class.

The companies are obviously key. Our largest three companies, to mention a few, include BioVectra, a homegrown company that Dr. Regis Duffy established 40 years ago. It has been responsible for another large company called Sekisui, which is a spin out of BioVectra now owned by a Japanese firm expanding in Prince Edward Island. Novartis is a large multinational company that has their fish health research and development assets in Victoria, P.E.I., and their vaccine manufacturing for aquaculture facilities in Charlottetown. That is a business with 115 employees. BioVectra has 200 employees. These would be sustainable companies for our part of the world. Other companies from there go down in size to individuals in the lab doing proof of concept and starting their journey, if you will.

Other partners that are really important on the science side include the National Research Council, which was the Institute for Nutrisciences and Health. With some changes in the NRC's strategy, the institute names have disappeared, but the importance of the NRC to our cluster cannot be underestimated. They built the technology platform there and the new area is called aquatic and crop resource development, which is fitting for what we are doing for our cluster's focus. The University of Prince Edward Island, especially the Atlantic Veterinary College and science faculty, have changed dramatically in terms of focus on R&D of that institute over the past decade.

Agriculture and Agri-food Canada's research infrastructure in P.E.I. as well as Holland College, Canada's Smartest Kitchen and their Technology Access Centre are very important in terms of the culinary side of food and food product design in particular. The BioFoodTech Centre is a provincial Crown corporation. The funding agencies include the Atlantic Canada Opportunities Agency and Innovation PEI, a provincial Crown corporation. The NRC's IRAP program is very important program for small businesses in particular, and the National Science and Engineering Research Council to name a few. We have regional partners as well. As a small jurisdiction, we have a network that we reach out to the world in terms of accessing technology and brain power as required.

Those are some of the important partners and the important aspect is that we really work. I have taken the liberty of providing two documents. The first is the strategic plan that BioAlliance launched in September and that is a single plan that all the partners buy into and support. We have a board of directors which represents that partnership of businesses, research organizations and government agencies, and that is unique. The DNA of that organization is about the strategy and everyone leaving their hat by the door with the belief that if we can grow the cluster, it is good for the universities, federal and provincial governments, business and our communities. It is that kind of attitude that permeates the strategy and allows us to make things happen. We do not have different groups on different ends of the rope pulling in opposite directions and going nowhere. We have everyone in the same boat rowing together and that is really our job.

Senator Callbeck: Could you give us an example of how you have spotted a new market opportunity and the steps you have taken to take advantage of that opportunity?

Mr. Francis: I think we look primarily at companies that are spotting new market opportunities. It really needs to be commercially led. It is our production capacity in P.E.I. and the agri-food sector that needs a market outlet or that there is a market for it. We need an intermediary between production capacity and the marketplace that can really add the value and achieve market success. The primary producers do not often go to the market directly; they need partners. Sometimes they do not accept that, but that is the truth of the matter.

We have become good at identifying which companies are a good fit. I mentioned a couple that we have attracted to Prince Edward Island in the ag-bio side of things — Technology Crops International, which built a $10 million refinery in Kensington. It is an oilseed refinery and the crops that are being contracted to growers to produce are crops like crambe, which is an oilseed crop; borage; calendula; meadowfoam; and high erucic acid rapeseed, which are crops that our growers would not have heard of five years ago. The acreage is still modest — in the thousands of acres and not the hundreds of thousands of acres — but the value added of those crops and the opportunity to put cash crops in rotation with potatoes is what is important in terms of overall sustainability of farming operations, value in the years where you are not growing potatoes. Technology Crops is a company based in Winston-Salem, North Carolina, and their only refinery in the world is in Prince Edward Island. They are bringing oilseeds from other parts of North America and Europe to Kensington, Prince Edward Island, to do the refining. The products are cosmetic ingredients, specialized industrial oils, nutraceuticals and pharmaceutical ingredients, which are high value products. It is a great example. The partnership around the establishment of that company in P.E.I. establishing infrastructure was extensive. The degree of cooperation and coordination around that was really quite special in how it came together.

Sevita International would be another example. Sevita's head office is about an hour straight south of here in Winchester, Ontario. The CEO is David Hendrick. This is a company that has spent about 14 years developing the non-GM, identity-preserved, food-grade soybean business in Japan. One would think that is just another soybean. They did an amount of work on breeding and genomics to bring the right traits to those beans, because for the manufacturers in Japan, it is like making fine wine when you are making miso and tofu. To the Japanese, you are making fine wine. There is that degree of specificity on what kinds of traits are required. Some of the research programs supporting gaining competitive advantage in Japan through this company and the growers who are supplying have really been doing the science to understand the phytochemical fingerprint of the soybeans that meet the requirements of specific manufacturers in Japan. It is like making a cabernet sauvignon. The degree to which they are going into the molecular biology of the seed in order to make sure that you have an advantage in the marketplace and therefore growers have a market is fascinating. Those are a couple of examples.

Senator Buth: Thank you for being here this evening. Where do you find the risk takers?

Mr. Francis: Well, you do have to look. Entrepreneurs are an interesting group. We are at the point where they are coming to us. If you can establish credibility as a location where entrepreneurs have a better chance of success because of the business environment, they will find you. I think it is relationships. You know through your networks and contacts what early-stage companies have some really interesting technologies. You need to have a very strong network of contacts, and then have some good brain power working with you that can assess whether those companies and technologies have a chance of being successful in the marketplace.

Senator Buth: Do the companies bring the ideas and you support them with the R&D? You used the example of Sevita. Who looked for those compounds?

Mr. Francis: That is the company's knowledge of the marketplace. In that case, it is their knowledge. Just to take it a little further, once they are part of our cluster, we do a number of things. We hold bio-partnering events, networking sessions and so on so that companies and researchers are bumping into each other a lot and establishing relationships that can provide companies who understand the market with new ideas for new product offerings. For example, it is definitely worth looking at the application of some of the co-products from soy production and the processing of soy — oil, for example, in the aquaculture business. Sevita may not know everything they need to know about the aquaculture business, so part of our role is connecting people who really know about the ingredient side of developing aquaculture feeds with Sevita, who really know their soybeans, and allowing them to determine whether or not they see a new opportunity there and whether there is a business case for pursuing some research in that area.

Senator Buth: That is interesting, because when we have been talking to witnesses, what we have heard most often, or what I have heard, is that here is the bench, and the researcher comes up with something, and they are looking for a partner over here, and what often happens is things hit the valley of death in between. What I hear you saying is no, it is like this; it is the soup.

Mr. Francis: It is absolutely not linear. It is a soup. I think it is about bumping people into each other. We do have the situation where the researchers are sitting here, and the businesses are sitting here, and there is actually a cultural divide. It is not just an institutional divide but a cultural divide. We need to facilitate conversations that can bring those folks together.

There is an organization called Springboard Atlantic, which represents the transfer offices of 18 universities in the region, along with NSERC and ourselves and others that use connector events to try in particular focused areas to bring the companies and researchers into the same room for a day. We have them spend five minutes pitching what they do, their focus, their issues on the business and the science side. It is what they do and what they have and where they think they may have something to offer in terms of solutions. Ninety per cent of that will go nowhere, but 10 per cent might, and you only need 10 per cent to make it worthwhile. It is the intangibles. It is the relationships and creating opportunities and getting people out of their silos and out of their academic settings and into a relationship with the businesses, which is not something all universities like to do. Frankly, there are some barriers there. We try to find the win-win situations.

Senator Buth: You made the comment that you look for really good business cases. Are you sourcing capital for the projects and the funds?

Mr. Francis: No. We might facilitate, but the companies have to source their own capital. We do not invest like Ag- West Bio invests in Saskatoon. We do not invest, but we would connect companies to capital, depending on the stage of development. We do spend time, particularly with the early-stage companies, on their business plans and whether or not we really think they have something worthwhile. We bring in some experienced folks who have been in the investment community to do essentially SWOT analysis of their business plans and tell them sometimes what they do not want to hear. They have some real challenges if they want to get to market with that kind of approach, or they are missing some things, or they need to shore up their regulatory strategy or improve their market assessment, or perhaps they have not thought it through or perhaps they have the wrong CEO. Some tough love at an early stage is important to ensure that those companies are able to progress. Some of them will not, but that is business as well.

The Chair: There is a supplementary question before we go to Senator Tardif.

Senator Merchant: Thank you. I wonder what the role of government is. When you are talking about these connections, whether it is local, provincial or federal government, what role do they play?

Mr. Francis: They play a very important role, for sure. However, it is not necessarily a lead role. The role is everything from the programs, particularly for early-stage companies, and we are talking about the company side of things, to access to capital. Generally, the investment community, angel investors, venture capital and so on will not finance early-stage technology.

IRAP has been a very important tool in the tool box in terms of moving a technology's proof of concept of new technologies, and that program has been expanded by the federal government. It is a very important piece of the infrastructure.

Atlantic Canada Opportunities Agency has a couple of very important programs. The first is the business development program, which is a loan program, and second, the Atlantic Innovation Fund, which is a very enlightened piece of public policy that has been around for 10 years now. It is a conditional loan program, but it de-risks the process of moving technologies from proof of concept early stage closer to the marketplace. Access to the capital at an early stage is an important role. It is not big money, but it is taxpayers' money, so it has to be managed appropriately. It is enough to allow the company to prove whether or not they really have a business opportunity there and progress on that.

In our case, the provincial government can really fill the gaps. Perhaps because we are a small jurisdiction, we do this very well. In a coordinated way, if your company is bringing a particular business proposition forward, we will actually have all of those federal, provincial, National Research Council, Agriculture Canada representatives in the room, listening, understanding the business proposition, the business plan of the company, and then responding with a customized approach to the extent that it is possible — sometimes these programs are pretty much square-edged boxes, so you have to get in the box — and trying to customize to ensure the focus is not on the program but on the business plan and how we collectively see the way forward for working with that company.

Part of our role is to facilitate getting those partners together in a way that no one is going outside of their mandate; everyone probably has a better chance of exercising their mandate because you are part of this collective effort, and it is a de-risking for both public funds and for the company.

That is how we coordinate some of those government players. Everyone has seen the value of doing that. In large jurisdictions, frankly, maybe the egos are bigger. The organizations are a little more siloed, so the entrepreneur has to basically knock on every door and try to put it together themselves. I think customization takes a lot of the stress out of trying to get companies to move forward.

Senator Merchant: With the tighter budgets, the economies, how does that affect you? Are you constantly growing?

Mr. Francis: It is always an issue. There is always probably more demand than supply of resources. My personal view is that there is always more money than good ideas. If it is a good idea and a good business case, the money is there.

Senator Tardif: Thank you for your excellent presentation. I am most impressed by the work you do and the results you have achieved. Is there another organization that offers a similar platform in the agricultural or biosciences sector anywhere else in Canada?

Mr. Francis: Certainly when we set up the BioAlliance, I stole a lot of ideas from Ag-West Bio, because they broke the ice in the 1980s and early 1990s with the model they had put together as a cluster model. Saskatchewan and Prince Edward Island always seem to have a lot in common.

Senator Tardif: Those smaller provinces maybe, smaller populations.

Mr. Francis: I think it is the rural base with our feet on the ground; I do not know. Whether it is health care, economic development or agriculture, we always have similar approaches. That was certainly one location.

Bioenterprise, which is an organization based in Guelph, Ontario, is also playing a similar role and has a good approach of working with early-stage companies and establishing supply chains that are very effective. The people in that organization, Gord Surgeoner and others, are really good at working with the producer, processor, supply chains, and helping them to be successful.

There is a group around Laval University in Quebec that is in the nutrisciences and health area, a very good group of people, well-connected to the industry, and facilitating the economy in that area.

The bigger one on the pharmaceutical side of things is MaRS, in Toronto. It plays a similar role in the drug development world in particular. There are a few other examples in the country. They all have their own idiosyncrasies.

Senator Tardif: Who carries most of the burden of the initial research and investment in your industry?

Mr. Francis: The federal government, in terms of initial investment in research. I do not think it is different in many countries of the world. The market does not pay for that early-stage research. You have to have that foundation in place through our investment in public infrastructure, the university community in particular, and how those are funded through NSERC, SSHRC, CIHR and other organizations. It is certainly federally driven and funded, and the province certainly plays a role in that as well.

Senator Tardif: Does your platform help attract more industry funding for R&D?

Mr. Francis: Absolutely, and more business investment in R&D as well. We know this has been a conversation with the Jenkins report a couple of years ago, looking at Canada in the sense that our productivity levels are below where they should be because businesses are not investing sufficiently in R&D. We get into a whole conversation about under what circumstances that is true or not. There is certainly some truth in that. We have seen a significant increase. I cannot quote the numbers off the top of my head, but it has increased from 2002 to 2010, which is the last year Statistics Canada numbers are available. The private sector and business investment in R&D in Prince Edward Island is something like three or four times what it was. This is a substantial increase, and that is the direction we need to keep going in. We need to see the private sector investing in R&D.

Our other metric in terms of success of the cluster is not only whether we are seeing government funds invested — federal, provincial and otherwise — but whether we are seeing private sector and risk capital coming into our companies. For us, that is a very important yardstick of success. It cannot be simply government investment; it has to be private sector as well.

Senator Tardif: You are absolutely right. That has often been a criticism of the industry, that they are not investing enough in R&D and that Canada is substantially down as compared to other countries, such as the U.S.

What is the effect of your platform on the research priorities of university or other research centres, for example, in Prince Edward Island?

Mr. Francis: Certainly to speak for UPEI, the previous president, Wade MacLauchlan, and current president, President Alaa, have been very responsive. They have been board members of the BioAlliance since its inception. This is about walking the talk — new research chairs and investment in facilities that respond to some of the priorities we have set out in the kinds of strategy documents I have circulated here tonight.

That is really important. People are at the board table. If you have a conversation about priorities and where you want to invest in the science platform and nothing happens, you have a bit of a problem. However, that has not been the case. We have had the good fortune of leadership at the university level, at Holland College. Brian McMillan and the college established a bioscience technology program there a number of years ago as a two-year program, with intake every second year. There is now an intake every year. The program has grown. High-quality graduates are snapped up by the businesses because they are excellent employees. The responsiveness of our partners has definitely been a big part of our success to this point.

The National Research Council has also been a really important player. There is a big change going on now within the NRC nationally. The good news is that our institute, as a newer NRC centre, was designed around working with the private sector. Those folks get up in the morning thinking about working with private enterprise. That is not necessarily the case across Canada in some of the more academic centres. We have been fortunate in terms of the culture of the group in Charlottetown. They are certainly now part of a national program, but we think that provides us access to a bigger network of expertise and provides the companies access to a bigger network.

[Translation]

Senator Rivard: Our committee is looking at research, development and innovation in order to find new market opportunities, strengthen sustainable development and increase food security and diversity.

We heard recently that the beef industry was about to ask the federal government permission to irradiate meat. We know it is already done for potatoes, onions and spices.

Should we allow them to do so without any scientific research on this subject, as we export more beef than we eat, and as we have to stay competitive on these markets? What is your opinion on that?

[English]

Mr. Francis: I will not pretend to be an expert in food safety or irradiation, and I would only be giving an opinion based on probably less knowledge than you have about the matter. I would proceed cautiously with voicing my opinion on that.

As I understand it, irradiation has not been a matter of science; it has primarily been a matter of public perception. Public perception has a lot to do with whether people make the purchase in the market or not, so it is an important aspect of food safety and those considerations.

Certainly there are concerns as a response to issues related to E. coli and improving food safety. I am sure the regulatory agencies that are involved will do an admirable job of sorting through the safety side of the technology. It would probably be up to Canadians to vote with their wallets eventually on whether this is something Canada wants to pursue.

[Translation]

Senator Rivard: Yes, it is to eradicate E. coli epidemics. It is the reason why the beef industry wants permission to irradiate meat. I appreciate you don't have a personal opinion on that, but I think that this will push prices higher.

On the other hand, if they can prevent E. coli epidemics, this is a good thing. But dont't you think it might raise concerns on international markets? We are presently negotiating a free trade agreement with the European Community, we are negotiating with Japan, and the higher the prices, the least competitive we get.

[English]

Senator Eaton: Thank you, Mr. Francis. I read the material you provided. You are talking about inadequate technology transfer for implementation of best practices. Could you elaborate on that?

Mr. Francis: In particular, I think that reference was to the producer level and being able to move the results of research. Agriculture Canada research has dominated the research landscape in Canada for a number of years through their research institutes. My criticism personally —

Senator Eaton: I do not take it as a criticism. I think it is probably happens all across Canada.

Mr. Francis: It has been a criticism of mine. I have been criticizing Agriculture Canada quite openly. The movement to the farm of knowledge that scientists are developing is not good enough. We are not getting the impact on the farm of some high-quality research.

We have a couple of initiatives in our province as we speak to try to address that. As an example, we have a new model of technology transfer — probably not new in the world, but new to us. It comes down to the producer paying for technology transfer. A network of growers has bought into an agronomic service. This is a private sector initiative and the agronomist who is running the program is taking the knowledge that he or she feels is relevant to economic impact on the farm, demonstrating it at the commercial level, measuring the results on the farm at the end of the year and providing that information back to the grower so that the grower knows whether that practice is worth executing.

Senator Eaton: Is it like a consultant who goes to the farm and advises on what should be changed in order to increase production levels?

Mr. Francis: It is more than just advice. The farmers want to see where the work was done. If they try to do it themselves, when it gets busy in the harvest season they may forget which was the research plot and the produce will go in with everything else. It is managed, on-farm application of the research in a way that the farmers can see the economic benefit. It is measuring the economics that will determine whether the farmer adopts the practice. Farmers do not change their practices easily. If you do not have some good evidence that they can observe, they will go back to what their fathers did. Therefore, the innovation does not take and we wonder why we did not make progress in terms of production levels, quality or whatever the issue is.

Senator Eaton: You have spoken about innovation and all the things you are doing. In this study we have found that brand has become a very important issue in terms of safety, reliability and quality of product. That is important with regard to free trade agreements. We are concluding one with the EU and we are going after the TPP and certainly Asia. We have ongoing trade with the United States.

If the potato is synonymous with P.E.I., are you doing certain things to brand P.E.I. potatoes as more delicious than potatoes from New Brunswick? It is a competitive world.

Mr. Francis: Prince Edward Island has had a brand, both as a place and as a potato, for many years. On the eastern seaboard, Prince Edward Island potatoes are still recognized as a quality product. The brand is important. I have always felt that we have underachieved in terms of using that brand.

Senator Eaton: When I think of P.E.I., I think of Anne of Green Gables, which I grew up with. Why can your potato not be a brand?

Mr. Francis: That is difficult to do these days, and I will tell you why. There are a few stories we can talk about. We have a huge consolidation of the retail marketplace in Canada. We have only a few big retailers, and private labeling has become the name of the game for them to compete among each other and internationally, so they do not necessarily want to have a location label. They would prefer to have their own brands — and we know them all — on their packaging. As a strategy, the retailers have not supported labeling local brands, if you will.

That has changed somewhat in the last few years as concerns have arisen about where food comes from due to issues about the quality of beef and so on. The worm is turning somewhat back to having confidence about where food comes from as having brands that represent places become more important again. We may be seeing a bit of a turning point on that aspect.

We established an initiative in 1997 called the Prince Edward Island Food Trust, which was all about the brand. It established higher quality standards, consistent sizing and unique presentation in the marketplace. That was about trying to establish, at some higher level, the P.E.I. brand product.

Senator Eaton: We heard from some very interesting women from Quebec, last week, talking about sourcing food, being able to trace the origin of food. I would think that that would be a huge advantage for some place like Prince Edward Island.

Mr. Francis: Yes. I do not think we know how to be expensive, so branding to gain margin is not something that comes naturally. It is a cultural bias. We have the opportunity to brand beyond potatoes in Prince Edward Island. We certainly have mussels branded well internationally, but, as for the branding of Prince Edward Island beef, you have to have the processing piece in your backyard or you cannot do that. Obviously, you will lose the brand control. The quality of the product is absolutely outstanding, but the branding effort has not happened yet.

Senator Eaton: Thank you.

Senator Duffy: Mr. Francis, like the other senators, I am delighted to see you here. You have been an innovator for over 30 years in P.E.I. You started as a young man, and you have built an impressive resumé, helping us to build a better province.

Picking up on one of the questions Senator Tardif asked earlier, we hear a lot in the news these days about skills shortage. I know that you, the university and Holland College are working closely together. Are we seeing a bias in terms of young people going into diagnostic chemicals and these higher tech jobs? Is it mostly young women? I am a little worried that, in our region of the country, the dropout rate of boys in high school is astronomically high. These are great jobs for people who stick with it.

Mr. Francis: That can be a complicated question. You are right; the evidence shows that we have issues with dropout rates, particularly among males. Most of them are now in Fort McMurray. As they grow up, they are working in high paying jobs in northern Saskatchewan or northern Alberta.

Senator Duffy: Have the high schools and colleges gotten onto this enough to give you the people that you need?

Mr. Francis: No. We probably have a paragraph in our strategy document that would suggest that — and this is not only a P.E.I. issue — the quality of K to 12 must improve. In Atlantic Canada, our literacy and numeracy rates are a problem, so we have to address that challenge. We are losing in terms of —

Senator Duffy: Our future.

Mr. Francis: Our future, in terms of the potential of individuals who are not reaching their potential in the school system, whether it is in technical training or academic training afterwards. It is a loss to the system and a loss to our workforce. As we know, in Atlantic Canada, we are not attracting the immigrant population that will be necessary to fill some of our workforce needs as the demographics are working against us.

Senator Duffy: Getting back to Cousin Regis, all islanders are so delighted and proud of what Dr. Regis Duffy has done over the last forty years. With regard to DNA testing, this committee is currently interested in the whole question of food safety and traceability, from farm to fork. It seems to me that one of the testing or tracing methods might be DNA, and, of course, Dr. Duffy's initial products related to testing in a kit that was quite innovative and became very successful. Do you happen to know, through your work, whether there is anyone looking at that whole DNA sector? That would, again, fit in with traceability of products.

Mr. Francis: A company called the Centre for Aquaculture Technologies, which is in my home community of Fortune Bridge, Prince Edward Island, has expertise in that area and other areas related to fish breeding, in particular. As for the genotyping of food products, they have all the skills required to do that kind of tracing. For example, in the fish business, it is a white fish. Is it haddock, halibut or cod? Sometimes you cannot tell on the shelf, but genotyping can certainly give you the answer. That is one company I am familiar with that can do that kind of work.

Senator Duffy: I want to hand off to my colleague. I want to thank you for coming. The picture you paint is one of a bright future. We often hear in rural Canada — and perhaps even more so in rural P.E.I. — that there is no future for rural Canada. There is a lot happening that somehow gets overlooked, and I congratulate you for your leadership and innovation in helping make that happen.

Senator Callbeck: Thank you. Looking at the brochure that you presented us with on the bioscience cluster development, on page 9, there are some very ambitious targets. For example, employment, within three years, will be 100 per cent higher, and private sector revenue will be 100 per cent higher in three years. This started in 2012, so we are not even at the halfway mark. Are we pretty much in line to make these targets?

Mr. Francis: Well, I can take them one by one. In terms of employment targets, I would say we are not in line; we are underperforming there so far. We have had good growth even through the downturn. Our larger companies have expanded quite extensively. We are probably 30 per cent of the way. We are not 50 per cent of the way.

With respect to private sector revenue growth of $200 million, we are probably on track on that front.

Senator Callbeck: Is that right?

Mr. Francis: The numbers are very good. There is considerable expansion. With R&D expenditures, we have the 2010 data now. We are at $70 million. Reaching 100 will take continued growth on the business side of things because the R&D side of things is certainly business-driven. It is going to be a challenge there, but that is what these numbers are for, to challenge us, to drive our strategy and to keep us moving forward.

Senator Callbeck: You spoke about the importance of agriculture to Prince Edward Island as more than 10 per cent of the GDP. I believe it employs over 7,000 people. What is your greatest concern about the agri-food industry in Prince Edward Island and in Canada?

Mr. Francis: In Prince Edward Island, my biggest concern is that the next generation of brain power will not choose agriculture and agri-food as their career. How do we transition what are now large and profitable operations worth $3 million or $4 million? How does that transition? How does that succession planning allow for continuation of those farm enterprises? It is a challenging business, so you need smart people. You need to be able to attract the brain power of the future into the industry. That is a real energy we need.

Senator Callbeck: Thank you very much for coming. It is great to hear that these things are going on in Prince Edward Island. Congratulations on your accomplishments.

Mr. Francis: They are many people's accomplishments, but thank you.

The Chair: Senator Callbeck, thank you very much.

Mr. Francis, thank you for sharing your thoughts with us.

(The committee adjourned.)