I'll present ideas at the back end of a situation analysis.
Alberta has about 9,400 manufacturers, about $68 billion in sales annually, and accounts for about 11% of national production. Sales growth has been down in the last couple of years, and we have a recession in the province.
There are about 100,000 people unemployed, and the energy supply chain affects a lot of the manufacturers in the province. The manufacturing sector in Alberta includes food manufacturing, beverages, tobacco products, textiles, petroleum, chemicals, coal products, computer electronics, and so on. It's quite a variety of manufacturing. It tends to be concentrated in Edmonton, Calgary, Red Deer, and in some of the smaller centres. It employs about 140,000 people, but this has gone down because of our recession in the last couple of years.
I'll go to the challenges and then to the recommendations. As I said, we have a recession. About $23 billion of annual cash spending and investment has been pulled out of the energy supply chain. That has affected a lot of businesses. Another challenge is a lack of export knowledge and export support for SMEs in the province. That's a challenge. We're also getting more competition from trade agreements.
Competitiveness and productivity are issues. Alberta has to compete with other competitors, such as Korea for steel products or China for other products, and we have many trade agreements that are being implemented.
Costs have risen in the last few years but are under rapid decline in the province right now.
There are some barriers to diversification. We need to diversify the economy more in manufacturing.
Another issue is the small scale of manufacturers in the province. We have many with fewer than 10 employees. Some of them are larger, but we have many small-scale manufacturers.
We also lack a manufacturing policy that focuses on a variety of things that need to be done. There are many unknowns that manufacturers are facing, such as climate policy. In 2017, a carbon tax will be implemented in the province. We have new competitors through trade agreements, and then technology disruptions can occur as well.
There are a couple of big issues. Oil prices are down, so cash flow is down tremendously, and about $23 billion of annual investment has been pulled out of the supply chain. That has affected many of the manufacturers in the province.
I'll go to the key themes of what we think needs to be done.
From the Alberta Chambers of Commerce, which represents about 24,000 businesses in the province, the first theme would be something called “do no harm” to the manufacturing or business base. We recommend that current manufacturers not see any increases in fees or taxes, or any new taxes or fees implemented. They are currently in a fragile state. A number of them have closed. Utilization rates are from 50% to 70%, let's say, so they're not fully utilized right now.
The second theme is support for small manufacturers. The Alberta Chambers of Commerce think that because we have a lack of sales, there is a need for more marketing to build demand for these manufacturers to hire more people, and so on. A growth management approach or a growth management strategy for helping these SME manufacturers grow will be needed, and something new, such as a voucher through the IRAP system, could help.
IRAP currently supports technology companies in the province with research, but in this time of building up sales, a growth management voucher might help to get more people employed and to build more understanding of international markets and international business and so on.
In terms of export capacity, another requirement would be to understand how to access global supply chains and how to become more competitive within a global supply chain. In domestic opportunities, another area would be looking at ways to enhance the public procurement process so that our manufacturers can access that more easily and take advantage of some of the opportunities that others are getting.
Another area would be looking at the innovation system and looking at more regional innovation centres that could help small-scale manufacturers. A good example is the American manufacturing extension partnership, MEP, offices, which total about 400 across the U.S. They're specifically put in place to help manufacturing with competitiveness, adaptation and product design, human resources, export marketing, and so on. We don't have a similar system here, and that's a deficiency.
The next one would be in the area of scale-up and building bigger manufacturers at a Canadian or North American scale. We have to develop a system. One of the ideas might be a manufacturing business network or consortia working together to access international markets or market share at a scale, scope, and speed of bidding on other contracts that they can't otherwise get. They have to become bigger to compete, as we have other companies coming in from other countries to compete. The scale of many manufacturers is too small.
The final two areas that I will talk about are under a broader policy mandate to look at accessing and improving the way intellectual property and the research from the research and development system are provided for manufacturers. Many times intellectual property is patented and not made available. We need to commercialize these technologies if we put money into their R and D system.
In Alberta, for example, $800 million a year is spent in R and D, and about $735 million of that is the research side versus the development side. Development means commercializing products, taking them to market, and so on. We need to do more on that end of it if we're going to build a strong pipeline of products.
Another final point would be the re-establishment of the accelerated capital cost allowance for the oil sands and their related supply chain so that we can get more investment back into the industry. Currently Alberta and the Fort McMurray area are not being seen as preferred locations because of the distance from markets, lack of market access through pipelines, and so on. Hence, capital has gone elsewhere.
We have a deficit in the province of about $23 or $25 billion annually, and that has hurt a lot of people in the manufacturing sector in the province.
Those would be my main points. I would be happy to discuss them as we go through.
It's a one-page diagram.
Moving on, we've established, essentially, an SME out of this incubator hub that's roughly 18,600 square feet. It's all definitely focused on medical, aerospace, energy, and industrial applications. We obviously broadened the spectrum beyond medical and aerospace because of the heavy industrial capabilities in Manitoba.
The medical industry is moving toward patient-specific devices to offer better and personalized therapies. The aerospace industry is innovating toward lighter and more fuel-efficient aircraft while developing new components with reduced and expedited supply chains. Our solutions to the clients, obviously, are focusing on innovative digital manufacturing.
Our business model is now a scalable contract manufacturing and engineering company and a solutions provider for high-value industries using additive manufacturing as a core technology.
In Manitoba is an advanced digital manufacturing centre with a significant aerospace and agriculture and a heavy-vehicle manufacturing industry. However, if Canada is determined to become globally competitive in advanced manufacturing—and I think that's what Canada does want to become known for— investing into additive manufacturing, human talent, and the entire value chain ecosystem wrapped around additive and advanced manufacturing technologies will help Canada strengthen its long-term economic and global manufacturing competitiveness. When additive manufacturing reaches approximately 5% of the total global manufacturing, it will approximate a $600-billion industry and market. Canada can become and move toward a significant market share in five to 10 years if smart investments are made now in areas that others are not investing in.
But for an SME, there are a lot of current challenges. With academic partnerships, for instance, there's definitely a lack of funding for our research partners at the universities and colleges, and they choose to end up working with larger OEMs and not SMEs, because the larger OEMs do have the funds.
There's a huge gap in human talent. We don't have the engineering curriculums across the country. We definitely do in certain areas, which Farzad will be talking about, and I think it's important that there are very specific mandates around curriculum across the country, with a focus on additive manufacturing and design. There's also a lack of these academic champions within the universities and the engineering departments.
One of the biggest issues of our spin-outs, I think, as an SME—we're asking not-for-profit organizations, etc., to spin out companies—is that the financial institutions and the crown corporations such as BDC don't really finance SMEs with short track records. Essentially, we're making it very difficult to survive that valley of death, with few venture capital investment opportunities, because VCs look for big home runs—drug molecules, etc. They show very little interest in manufacturing, in terms of a venture capital spin.
Other financial institutions similarly are not interested in the risk of that capitally intensive type of activity in manufacturing. There's a significant gap in funding start-ups and SMEs, and I'm in that same position right now with Precision ADM. There is no VC that we know of that will directly fund advanced manufacturing.
There are inconsistencies also between some of the federal and provincial funding mandates around SMEs, between both the province and the feds, because of their different KPIs, or key performance indicators. It is very difficult for incubators and not-for-profit organizations to actually navigate this.
Scaled contributions from companies based on ability to pay are also another issue. An example is the CARIC program, in which SMEs, which are very small, have to take a large chunk of the actual project and cannot actually fund most of that project themselves. There's a difficulty for small companies and start-ups to have the resources they're aware of to track and apply and qualify for a lot of these different programs. Federal programs in western Canada are good but focus on capital equipment versus HQP and HSP—highly qualified personnel and highly skilled personnel—development. They're not focusing so much on the longer-term programming.
We also notice, as an SME in advanced manufacturing and as we start the advanced digital manufacturing hub in Winnipeg, that there is an NRC factory of the future program that was announced two years ago. However, to our knowledge, SMEs have not been invited to participate in any programming, and nothing is known to date about the programming, so there appears to be a silo effect.
Across the country, little or no additive manufacturing ecosystem or supply chain support exists in Canada. There are no metal additive manufacturing machinery manufacturers in Canada. Most of our materials and capital costs require purchases to be made in U.S. currency.
Both the NRC IRAP programs and the ones from CME are great, except that they lack some of the funding that's required. Again, I believe some of our SR and ED rebate programs have been decreased over the years.
These are some of the quick recommendations.
Canada has the opportunity to become a leader in the additive manufacturing value chain in the next five to 10 years and could feasibly do this with buy-in from government, industry, and academia. A significant federal policy on additive manufacturing would increase Canada's global manufacturing footprint and competitiveness, and one should be adopted as is the case in other leading countries.
Canada should look at an investment of at least $200 million to $300 million into additive manufacturing over the next five years between government and industry, which would include such things as tax breaks, SR and ED, cash, land, academia, utilities, innovation funds, grants and loans, private-public partnerships, and incubators. Increased funding to NRC IRAP programs such as Canada Makes will help these types of programs get to the resources and to the SMEs that require these seed funding opportunities.
Create private-public venture funds to fund technologies and start-ups to share in the risk with the private sector to accelerate manufacturing innovation. China, for instance, might have up to 1,000 different brands of 3-D printers. Canada might have two.
Work in the Canadian financial and banking institutions to make it easier for early-stage SMEs with capitally intensive manufacturing programs to innovate and acquire working capital to grow, based on business plans and returns on investment.
Support the growth of SMEs and micro-companies to drive a diversified manufacturing ecosystem. Small companies are more nimble in moving to new technologies, entering partnerships, and driving economic growth. Large companies are very slow to do this and are risk-averse. We've experienced this ourselves. A hundred thousand jobs in 1,000 companies versus 100,000 jobs in 10 companies creates a dampening impact and the associated economic downturns in a given industry sector.
Leverage existing Canadian manufacturing ecosystem strengths, networks, partnerships, and previous investments, and bridge Canadian raw material extraction into high-value exports. As well, exploit innovation throughout the entire value chain. We do this in Winnipeg. We can take a raw product like titanium and implant it into a patient and then follow them. That comes from raw products we add over the entire value chain. That's something that's happening today in Winnipeg.
Develop additive manufacturing commercialization centres of excellence to develop HQPs and HSPs.
Develop a hub-and-spoke model, as we also suggested, while adopting innovative models similar to those of Israel and Germany to encourage private-public relationships and partnerships to create an environment with conditions that elevate the potential for success.
Break down the barriers and silo organizations associated with some of the universities in Canada and encourage partnerships with SMEs and not just large OEMs. Small companies are like water testers, learning the market through iterative experiences and fleshing out the applications to their highest competitiveness.
Develop a complete ecosystem of additive manufacturing companies' expertise, talent, supply chain, services, and technology development.
Create a substantial reason to get foreign investment into Canada, while also developing additive manufacturing tax-free zones to attract aviation companies like GE; medical companies like J&J; 3-D printing companies like Stratasys, EOS, and 3D Systems; and maybe potentially other oil and gas and mining companies.
The timelines are running out. Other countries are also moving very quickly, and we need to do this in the next two years. Today investors are looking for additive manufacturing companies to invest in. We need to continue to attract those foreign investments to Canada and to format some form of SME database.
Developing academic relationships and partnerships, around IP developments with SMEs, not just with large OEMs, is also important. We also want to encourage the Canadian industry-to-industry partnerships, not just industry/academic partnerships, to innovate and create IP to increase competitiveness and job creation.
We also want to look at technologies that may be too expensive for industry and create tax incentives to make this technology available in Canada so that we can learn and adopt it. Investment is for the long-term ROI. For the government, it will take about 10 years to break even, but we would have significant positive economic impacts on Canada over the next 10 years, and the global market will be worth at least north of $40 billion.
A reality check: don't be afraid of some failures. I think the government has to look at this. If we invest, there will be some failures, but don't be scared of that. Some SMEs will likely fail, but some will be blockbusters, and other companies can also enjoy the benefits of the spill-off effects of the IP.
We want to be able to critically evaluate the current federal programs and assess the KPIs—the key performance indicators—and ROIs, and adopt innovative programming models that have been successful in other forward-thinking jurisdictions. The key, however, is that the opportunity is significant to invest now in the entire value-chain manufacturing ecosystem. Canada needs to invest smart now and focus on areas where others are not.
Good afternoon. Thank you very much. Thank you, Martin, for your great recommendations. I approve of them too.
Thank you for inviting me to discuss the critical role played by Canadian leading polytechnic institutions in shaping the future of advanced manufacturing. It is my pleasure to be here as the voice of those institutions.
I have many roles in both industry and academia that are relevant to your study. Among them, I am a fellow of Engineers Canada and I also serve as the chair of additive manufacturing in the American Society of Mechanical Engineering. I am associate dean and professor of engineering technology at Sheridan College and director of Sheridan's Centre for Advanced Manufacturing and Design Technologies, or CAMDT.
CAMDT, our centre located in Brampton, Ontario, is an exemplar of Sheridan's growing role as a hub for industry, students, and faculty expertise, offering small and medium-sized businesses a technology playground to help them develop and adopt new technology alongside Sheridan researchers.
The new technology that Martin mentioned is additive manufacturing. CAMDT is turning Brampton into a huburb, a vibrant place where experts come together, ideas collide, and innovation flourishes.
CAMDT provides applied research, consulting, and skills training to local manufacturing in the critical areas of additive manufacturing, robotics, integrated energy systems, and mechatronics systems.
Sheridan, government, and local industry have collaborated for nearly a decade to position the centre to address critical skills gaps in the manufacturing sector. The centre helps produce highly qualified, skilled graduates who are able to work capably with the type of advanced technology Martin mentioned being used by manufacturers to increase productivity. CAMDT is very respected in the community, and its external partners include ABB, Siemens, Festo, and Hatch.
Industry collaboration is important to the college's ability to sustain excellence in both education and research. Our entire philosophy is rooted in the movement called CDIO—conceive, design, implement, and operate—that aims to reinvent the way that engineering is taught and practised.
CDIO has been adopted at 100 institutions worldwide, including Stanford and MIT, where it began. CDIO is rich in project-based and hands-on learning. It produces engineers who don't just study first principles in textbooks, but who are actually ready to engineer when they graduate. Like you, we recognize that today's knowledge economy requires engineering graduates who are critical thinkers and creative problem-solvers.
What truly sparks innovation and excitement in the students is the practical application of fundamental principles in the form of experimentation and hands-on experience. This is what polytechnics do best.
Today's subject is of vital concern to Sheridan, which is one of the 11 members of Polytechnics Canada. Polytechnics like Sheridan function as the R and D arm for small and medium-sized companies that cannot afford the cutting-edge equipment that's found in our workshops, studios, and labs, and who don't have in-house personnel to apply for the grants and wait for approvals and decisions. We remove these barriers and risks for the SMEs while speeding up innovation. SMEs and polytechnics need to be part of the government's thinking about advanced manufacturing, innovation clusters, networks, and incubators.
We tackle problems brought forward by industry while giving students sound experience and a skill set that cannot be taught in a traditional university classroom. As a result, we produce graduates who will make immediate and positive contributions to the workforce when they leave our institution. It is critically important that we mentor students in the process because talent—the talent that Martin mentioned—is the key input. It is people who innovate and firms that later commercialize.
A company we have helped through our robotics centre, as an example, is Hatch, an engineering company. Hatch worked with our faculty and students to design, test, and build a solution for the customer. We delivered a working prototype in six months, something that Hatch estimated would have taken twice as long to do on their own and that would have cost hundreds of thousands of dollars. In the end, all they had to purchase was a nail gun to put on the end of our robot's arm.
Our success also led to a renewed partnership with Siemens Canada, resulting in access to $22 million worth of software licences so that our students can train on the industry-leading digital manufacturing software used in the automotive, aerospace, machinery, medical devices, and shipbuilding sectors.
Through a long-term partnership with our industry partner, Cimetrix Solutions, CAMDT secured a foundational set of additive manufacturing equipment that enabled the establishment of its new Product Innovation Centre. The centre is the crucial link between large, leading corporations, including ABB and Cimetrix, and the local and regional SMEs that can use the facilities to integrate innovative technologies into their own businesses through collaboration with the Sheridan faculty and student researchers. This approach addresses industry challenges, and most importantly, it provides work-ready graduates whose skills contribute to both immediate and sustainable innovative growth.
And we're just one polytechnic institution. Places like Sheridan, Humber, and Conestoga have earned exceptionally strong track records in preparing tomorrow's knowledge workers and partnering with industry to help Canada become more globally competitive.
By uniting businesses, governments, and post-secondary institutions in this demand-driven way, we will bolster Canada's global competitiveness in advanced manufacturing. This is the model that is needed for the times.
In this new economic reality where we must value innovation and creativity more than ever before, Sheridan and polytechnics across Canada are willing and able to meet the challenge that this government has identified as crucial to ensuring Canada's place as a leader in the rapidly changing global manufacturing economy.
Thank you very much.
Thank you very much, Mr. Chair.
Thank you to our witnesses.
First of all, I'd like to speak to Mr. Toma from the Alberta Chambers of Commerce.
I'm from Red Deer, and I know that its chamber of commerce has done a lot of work in a lot of different areas. It has basic groups that are getting together and looking at agriculture, innovation, and so on. They've really put a lot into this. When you talked about some of the concerns that we have in Alberta in terms of recession, your first point was to do no harm to business growth, by making sure that there isn't any additional cost to doing business. Second was to support smaller manufacturers or capacity knowledge competitiveness. Third—and I think that's what we're interested in as far as looking to the future goes—was broadening policy mindsets so that we're able to move forward.
Just to go back to the “do no harm” part, one of the things in your presentation is making sure one recognizes where the tax burden is and the types of things that are taking place. We recognize that there's going to be a carbon tax in Alberta provincially, and we have no idea of what is going to be happening federally. There is a difference from the recession that took place in 2008, when all credit throughout the world was disrupted. Right now, there is money and there are venture dollars, but it's not going to go to places where there's uncertainty. I think that's one of the key things. Positive messaging in that regard is important.
When we look at that and we try to work our way through some of the issues that are taking place, one of the important messages to get through is about the value chain of the manufacturing that is there for Alberta's oil and gas industry.
However, there are other things that can be done, and one of the things that we had talked about a while back was abandoned well reclamation and being able to move that forward. We have people who are experts in the field and we will still be able to tap into some of the resources from the rest of Canada.
Do you have any comment that you could add to that type of a program? Do you have other thoughts that you could discuss as far as broadening the policy mindsets of provincial and federal politicians, as well as those of small and medium businesses?
Okay, good. There are some other ideas I haven't addressed.
I would concur with the other presenters on the spread of the R and D funds into the top end of the R and D spectrum versus further down the R and D spectrum of commercialization and development. That's one of the messages I hope would be understood here.
One of the other messages that wasn't mentioned but that should be there in broadening the mindset is the awareness of what programs are out there for a lot of SMEs. We have urban and rural manufacturers. Urban manufacturers in Alberta in Edmonton, Calgary, and Red Deer tend to be fairly well serviced, and they are in the pipeline of information on IRAP and BDC, and so on. However, in rural Alberta a lot of them are not aware of those kinds of programs, frankly. Awareness is one of the challenges.
Another idea that I would commend to the committee is we have to look at different ways of delivering the programs, and different tools. Maybe the tools need to be more through incubators that can deliver certain programs, and also through innovation centres. Recently we did a project in Quesnel, a new agri-food innovation centre, because since 1995 the federal government's pulled out of technology transfer in the agri-food system. It's pulled back quite a bit, and the B.C. government has as well, so the City of Quesnel was looking at how to provide innovation supports in their region. They were looking at a new, small-scale innovation centre.
This kind of strategy of using different tools to deliver programs such as small-scale, rural-based, regional innovation centres is an idea that probably would help get some wind under some of the manufacturers.
Importantly, we need to have a strategy around competitiveness. The other two presenters mentioned this. A number of trade agreements are implemented and the Canadian dollar is favourable for manufacturers, but as we implement trade agreements, that allows others to come into the marketplace. If we're not prepared, if manufacturers are not adapting to conditions and not strengthened and do not have scale and scope to respond to competition, they get hammered and go out of business.
Similarly, we need some way of broadening the succession in smaller-scale manufacturers, putting two or three of them together to work in business networks and to collaborate on jointly owning manufacturing facilities or hiring a marketing person or an accountant or someone like that. We need to look at new ways of delivering services to these small-scale people, because they won't survive otherwise.
I've worked in other countries, and it's instructive that others are doing different things and not staying the same. I think we need to re-examine some of these things. We are delivering programs and they are useful, but manufacturers who want to put their own money on the line and then borrow other money need to have other supports put in place.
Thank you very much for the question.
I'm an economist by training and I chair the Edmonton chamber's trademark and access committee. We have great people on that committee. One of the things that we pushed through this year was support for the TPP policy, because we see it as being the next growth lever for western Canada and for Canada. Notwithstanding, there will be adjustments.
When we look at CETA and other agreements, one of the messages that comes out from our business community is that they don't really understand how these agreements may apply to them. Specific to the TPP, there has not been, to our knowledge, information provided on effects, impacts, or timing and so on. I can understand that, since it's still in process, but regardless, we believe we need to be part of that and we need to understand it. One of the gaps is understanding how this trade agreement will be applied.
As for other trade agreements, I was in Chile with the Alberta college system. I took about five colleges down to Chile. We met with one of the Chilean trade commissioners down there, and the president of the Canada-Chile Chamber of Commerce. I asked them how many companies were doing business down there, and they said one Canadian company is doing a mining sort of thing. Why aren't there more? It's because we just don't understand where these opportunities are. That's one of the gaps in this area.
Conversely, then, adapting a company to be ready to go internationally relies on scale and money. To develop an international market, it takes $100,000 or $200,000 a year. If you're a small-scale manufacturer with 10 employees, you barely have money to pay your bills right now, frankly, and to adapt into these changing environments is going to be difficult. It takes some information, and it's going to take some support and some scale-up programming, I think, to get companies big enough to take on these challenges.
In Canada, just as a sidebar on the Agreement on Internal Trade, we have many barriers in Canada among provinces that restrict our company size in certain industries. That's a problem, and we've got to deal with it. It's been on the books since 1995 or so. These things prevent us from being competitive, and I think that the message of competitiveness is fundamental. Canada is a trading nation. We want to trade. We've got to be prepared, and some of these barriers are in front of us.
Everybody else gets more. Okay.
Thank you to the panellists. I'm going to do about a minute of confirming the gaps that I've heard, and then I'm going to give you each about a minute or a minute and a half to talk about the solutions, whether it's from a policy point of view, whether it's from an enabler point of view, whether it's funds or grants or incentives by the government, to be able to help close those gaps.
Let's start with the gaps that I heard. I heard that the spread of R and D is top-heavy. We heard about 97.5% versus 2.5%. We heard about the limited funds for SMEs, some on the capital side but not as much on the operational side. We heard about the skills gap, especially when it comes to extended design. We heard about the need for marketing support, especially for getting the product out. We heard about being able to get an understanding of the extended value chain. We heard about the gap in access to international markets, both in terms of understanding them and also in helping you to get there, in having access to funds to be able to play in international markets and get support for international trade.
Those are the seven gaps that I quickly highlighted. Some of you focused on the additive manufacturing industry, and we also focused a little bit on oil and gas.
In one minute, whether it's a policy enabler or an incentive, what is it that a combination of educational institutions, SMEs, and governments can do to help facilitate that? What policies would be changed? What enablers should be introduced?
And Farzad, you can talk about the immigration aspect last.
Okay, let's start with Mr. Toma.