Thanks to the committee members for your hard work. I'm pleased to be here today.
I will introduce you to my deputy minister John Knubley, who has been in office since September.
Congratulations.
Also here are Marta Morgan, associate deputy minister, and Madam Susan Bincoletto who, as you just said, Mr. Chair, is the CFO.
They're all making their first appearance with me in their official capacities.
I will ask the committee members to join me in welcoming them in their new roles.
Some hon. members: Hear, hear!
Hon. Christian Paradis: I last appeared before this committee in March, in the context of tabling main estimates, and today I'd like to take this opportunity to update you on several fronts.
I wish to provide a brief overview of current economic challenges and key elements of our government's response to date, and then update you on three departmental policy priorities going forward: one, strengthening manufacturing; two, boosting business innovation; and, three, supporting the digital economy.
[Translation]
As I indicated the last time, as the Minister of Industry, I am responsible for a large number of different policies and programs designed to strengthen the competitiveness of Canadian businesses. In reality, we are working hard to fulfil our mandate in the context of a fragile recovery of the world economy. Businesses throughout Canada are still facing numerous challenges.
Our government understands these challenges. That is why we have taken action to promote long-term, strong and lasting economic growth and to promote the creation of value-added, high-quality jobs for Canadians across the country. When the recession hit, we made a weighty decision to implement our Economic Action Plan so as to support the Canadian economy.
[English]
Our government provided vital support to businesses and workers across the country when they have needed it most. This targeted stimulus plan worked: since July 2009, employment has increased by almost 822,000 jobs. This means more than 390,000 additional jobs now than there were before the recession. More than 98% of all jobs created since July 2009 have been in full-time positions, more than 75% are in the private sector, and about two-thirds are in high-wage industries.
Our economic output is well above pre-recession levels, and Canada has been ranked the first among the G-7 in tax competitiveness. Now that the economy is recovering, we are continuing to take action in key areas to strengthen Canada's economy and ensure long-term prosperity.
To support business, we introduced a hiring credit to help companies recruit employees and we are keeping taxes low and reducing red tape.
To foster an innovative economy, in the economic action plan for 2012 we committed $1.1 billion over five years to directly support research and development and make $500 million available to address gaps in venture capital. That will support the most innovative of Canada's firms and help them grow and create jobs.
To advance the Canadian marketplace, our government has cut import tariffs on manufacturing equipment and has been driving an ambitious trade agenda.
To strengthen our infrastructure, we committed $14.8 billion in stimulus. We recently announced the conclusion of an agreement between Canada and the State of Michigan towards building a new publicly owned bridge crossing between Windsor and Detroit.
Furthermore, our debt-to-GDP ratio is the lowest in the G-7 and we have kept our Triple-A credit rating. We have a clear plan to return to a balanced budget.
This progress has not gone unnoticed. Both the IMF and OECD project that Canada's economy will be among the leaders in the industrialized world over the next two years, and Forbes magazine named Canada the best country in the world in which to do business.
[Translation]
Within my portfolio, I emphasize support for the creation of jobs and for growth. During the summer, I took part in a series of roundtables with business leaders. Their point of view is that the solidity of the main economic indicators in Canada make it an excellent place to do business. The messages they sent me were clear: they want our government to seek above all to create an environment of international scope for our businesses and enable them to prosper more easily throughout the country. We share this concern and we are committed to creating the conditions that will enable businesses to invest so that the private sector can prosper and create jobs.
[English]
One of the key priorities within my portfolio is to promote greater private sector investment in the manufacturing sector. As you know, the manufacturing industry is very important to Canada's economy. It employs more than 1.75 million people, with 60,000 in research and development. It is the top sector for foreign direct investment and accounts for more than 63% of our exports. Almost half of our country's R and D that is performed by business in Canada is done by the manufacturing sector.
But this sector is changing and is facing global challenges. The economic slowdown, the competition from low-cost countries, and the accelerated pace of technological advancements are adding to the pressures of Canadian manufacturers.
In the face of so much change, our companies must be at the forefront of technological improvement and adopt new processes to become more productive and competitive. In this context, innovation is critical. Research and development is crucial. Developing new markets is imperative. Training workers in the skills they need is essential.
[Translation]
The recent improvements made in the Industrial and Regional Benefits Policy will guarantee that government defence procurement will generate some very valuable activities for Canadian industry. Measures such as these will also help Canadian businesses to be more productive, so that they be competitive within the world economy.
The aerospace industry is another element in the manufacturing sector that is important for our country. We are a world leader in the production of goods and services responsive to aerospace and space activities. This major segment of the Canadian economy generates $41.2 billion in revenue and provides Canadians with close to 162,000 highly qualified jobs, whether direct, indirect or induced.
The world markets for the aerospace and space industries are marked by very strong competition and are focused on the development of innovative technologies. To maintain their status as a leader internationally, Canadian businesses must continue to invest heavily in R&D. Canada’s aerospace industries have responded to this challenge by every year investing more than $1.5 billion in R&D in order to create state-of-the-art next-generation technologies.
Canadian businesses working in these industries are therefore among the most innovative in the country. In light of the importance of their sector for the economic future of our country, in February I launched the Review of Aerospace and Space Programs and Policies, for which the Hon. David Emerson is responsible.
This review aims to produce concrete and neutral recommendations on the financial plan about the way in which federal policies and programs can maximize the competitiveness of the aerospace and space industries. Mr. Emerson has worked in close cooperation with the Aerospace Industries Association of Canada in order to study the key issues. For example, innovation and access to markets and their development, skills development, procurement and development of the supplier network were among the topics discussed. Mr. Emerson is giving a press conference — it may be over by now — about this, in connection with the launch of the report.
[English]
Mr. Emerson's review also touches on issues related to the space sector. Canada has a long history of leadership in space, and this will continue. I recently announced that Canada intends to renew its commitment to be a continuing partner in the International Space Station. I am particularly proud that Chris Hadfield will become the first Canadian commander of the ISS during his mission, which is scheduled to begin in December of this year.
I look forward, as I said, to receiving Mr. Emerson's report today.
The manufacturing sectors also demonstrate the importance of innovation to the competitiveness of our businesses. That's why, since coming to office, our government has made science and technology a priority. We introduced this strategy in 2007, and it recognizes that innovation is driven by collaboration between researchers and entrepreneurs, and by commercialization of new technologies.
Since 2006, our government has invested nearly $8 billion to support S and T. These investments have made a difference. We have been able to support new world-class policies and programs, and we are working more closely with the private sector.
As you are aware, Canada must continue to work to improve in terms of business innovation performance. Business innovation is increasingly vital to maintaining both Canada's global competitive advantage and high standard of living. Despite the high level of federal support for business R and D, Canada continues to lag behind other countries in a number of areas: business R and D spending, commercialization of new products and services, and productivity growth. It was for this reason that we called for an expert panel for a review of federal support to research and development.
Through our budget 2012, the government has acted on many elements of the R and D review panel's advice by increasing support for high-growth companies, research collaborations, innovation procurement opportunities, and support to grow venture financing. Indeed, the budget is providing $1.1 billion for direct research and development support.
[Translation]
I would also like to talk to you about the digital economy.
Late last month, I had the pleasure of speaking to the members of the International Institute of Communications. As I said then, a vigorous digital economy is essential to our future prosperity. We understand the importance of the information and communications technologies, in which investments in R & D are the largest in the private sector. This sector supplies over 500,000 high-quality, well-paid jobs in Canada. ICTs are an essential element in our future. To become more productive and competitive, businesses in all sectors of the economy need ICTs. This is why we have taken measures to foster greater use of ICTs by investing $80 million over three years to implement the Digital Technology Adoption Pilot Program, designed to help small- and medium-sized businesses to adopt these technologies. It is estimated that this program should help over 600 businesses.
[English]
Similarly, through the Business Development Bank of Canada, we are providing support to businesses seeking to acquire digital technologies. We have taken a number of steps to increase consumer and business confidence in the online marketplace by modernizing the Copyright Act and passing anti-spam legislation.
As you will recall, earlier this year, we announced details for the auction of spectrum for the next generation of wireless networks that will help sustain competition and robust investment. After that announcement, another round of consultation was launched on the auction format and conditions of licence. The views we heard are being analyzed, and decisions will be announced early in the new year. We believe, with these efforts currently under way, that Canada has the potential to be a global leader in the creation, adoption, and use of digital technology.
In conclusion, Chair, I believe these initiatives will help strengthen the competitiveness of the Canadian economy. Taken together, they support our government's goal of generating jobs and growth for all Canadians.
Thank you very much for your time today.
Mr. Chair, members of the committee, thank you for this invitation. I would like to point out that I am accompanied by the President of the Atlantic Canada Opportunities Agency, Paul LeBlanc.
It is clear to us that ACOA plays a pivotal role in fostering a strong regional economy in Atlantic Canada in many ways: helping entrepreneurs to improve their business skills and productivity, supporting innovation and its commercialization, which we believe are the spearheads of economic progress, promoting the development and adoption of new technologies and processes, and helping to increase access to international markets.
In summary, to achieve these objectives, ACOA has three main programs: the Business Development Program (BOP), which provides repayable contributions to start up, expand or modernize small- and medium-sized enterprises; the Innovative Communities Fund, which allows us to make investments that lead to long-term employment and economic capacity in rural communities; and finally ACOA's third core program, the Atlantic Innovation Fund (AIF), a catalyst for private-public partnerships that drive research and development and its commercialization. Through this fund, ACOA has spawned numerous patents and licensing arrangements and attracted highly qualified researchers and scientists.
[English]
With these three programs that are financed through robust and predictable budgets, ACOA obtained very positive results in 2011-12.
I'm especially proud of the results from our Atlantic shipbuilding action plan, which was launched by ACOA to help communities and small to medium-sized businesses in all four Atlantic provinces benefit from our $33-billion shipbuilding strategy. This unprecedented investment will create jobs, foster innovation, and help build a world-class industry in both rural and urban communities in Atlantic Canada.
To date, over 1,000 small and medium-sized enterprises from rural and urban communities in Atlantic Canada have participated in one or another of our activities, benefiting from information and advice and making the business contacts they need to tap into this and other supply chains in the future.
Another tangible result of our Atlantic shipbuilding action plan is that SMEs have already started to take advantage of ACOA programs to obtain the certifications, equipment, and technology they need to ready themselves.
Over the past year, ACOA has also been very active in international trade. Last year alone, ACOA helped 200 small and medium-sized enterprises explore and diversify into growing international markets such as India, China, Brazil, and the Caribbean.
[Translation]
We continue to target lucrative markets in the United States, with excellent results. For example, a $140,000 investment by ACOA allowed a delegation of Atlantic companies to attend the International Boston Seafood Show, resulting in immediate sales of $5.5 million, with anticipated sales over the next year expected to reach over $8.7 million.
We have implemented a method for measuring the impact of the investments we make in such initiatives. The results show that we are really getting good value for the taxpayers’ investment in these initiatives.
Energy is another sector that holds great promise for Atlantic Canada, and the Muskrat Falls development in Newfoundland and Labrador is a prime example of such an opportunity.
[English]
Last September, I joined my colleague, Minister , at the national energy ministers conference in Charlottetown to announce the results of significant research undertaken through the Atlantic energy gateway. The research identified significant potential benefits from this collaboration among provinces, utilities, and stakeholders in Atlantic Canada, including the real potential for our businesses to develop renewable energy technologies.
I also accompanied a delegation from Canada to Dublin last October for the international conference on ocean energy. The delegation comprised some 22 companies and organizations, primarily from Atlantic Canada. Also, there I had the pleasure of announcing that Halifax will be hosting the next international conference on ocean energy in 2014. This is more evidence that Atlantic Canada and Canada are recognized as leaders in the ocean energy industry.
Some of the most exciting research and development in this field is being done right now in Nova Scotia. Few people over there realize the potential—even people within our own country don't—of the Bay of Fundy, which pushes over 160 billion tonnes of water on every tide. That is more than all of the freshwater rivers and streams in the world combined, and this within seven hours, so the possibilities for developers and researchers are exciting, as is the potential for the development of renewable power for generations to come.
As you may know, Atlantic Canada is also home to the Fundy Ocean Research Centre for Energy, located in Parrsboro, Nova Scotia. This centre is a leading-edge research and demonstration facility dedicated to tidal energy technology. Research into tidal energy is also being undertaken on the campuses of two Atlantic universities, namely, Acadia and Dalhousie.
[Translation]
Although I am satisfied with the progress of the past year, I am also aware that these exciting opportunities bring their own challenges. One of these challenges is the skilled labour shortage. If we are to take advantage of opportunities before us, we must ensure our businesses have the skilled workers they need to grow, to compete and to prosper. We need to make sure that our own citizens, especially our young people, have the programs and training they need to get those jobs.
Our government will continue to work closely with the four Atlantic Provinces, our universities and community colleges, industry clusters and our other partners to meet this challenge. There is no doubt in my mind that Atlantic Canada has everything it takes to address the challenges of today and tomorrow. And our government will continue to be there to help the region realize its full potential.
Thank you, Mr. Chair, I am going to conclude my remarks here and of course try to answer any questions from the committee members.
:
Thank you very much, Chair.
Good morning, ladies, gentlemen, and colleagues. I want to thank all of you for this great opportunity to be here this morning. It is indeed an opportunity to speak to you, exchange various ideas, and answer some questions from the committee members.
As you know, my honourable colleague, Minister , has touched on how this government has supported Canada's capacity in science, technology, and innovation to build a knowledge-based, globally competitive economy. I would like to expand a little on his remarks. Given that my portfolio also includes the Federal Economic Development Agency for Southern Ontario, I will address some of its programs, in addition to speaking about our government's overall efforts on the science and tech file.
Since we introduced our science and strategy in 2007, we have worked to leverage the benefits of S and T and innovation. We have strengthened federal support for advanced research in numerous ways through the three granting councils. We have also introduced the Vanier Canada graduate scholarships, the Banting postdoctoral fellowships, and the Canada Excellence Research Chairs program in order to attract and retain world-leading research talent.
These organizations and programs, along with others like the Canada Foundation for Innovation—or CFI—and Genome Canada, have received significant federal investments to support their research mandates. Indeed, this year alone, we announced an additional $500 million over five years to CFI through the economic action plan 2012.
We also preserved and protected funding for the federal granting councils' core programs aimed at supporting basic research and for student scholarship programs. According to the Organization for Economic Cooperation and Development, the OECD, Canada continues to lead the G-7 in higher-education expenditures on research and development expressed as a percentage of our GDP.
Beyond the dollar figure, though, we know these investments are paying off. In fact, last month, the Council of Canadian Academies—or CCA—published a report on the state of Canadian S and T. They came to the conclusion that Canada's research domain is healthy and growing, internationally competitive, and well respected among the world's leading scientists. It included this key finding: among authors of the world's top-cited scientific papers, Canada's research enterprise was ranked fourth overall, behind only the United States, the United Kingdom, and Germany.
Canada is clearly punching well above its weight in its production of scientific papers overall and those referenced by global researchers. This speaks not only to Canada's productivity in science, but also to our reliability as a source of sound knowledge. Discovery-driven basic research remains essential to our government's approach, but we also believe in the transformative potential of science in the marketplace and the need to improve business expenditures on research and development.
Last year's Jenkins panel report—which you're all familiar with—on federal support for R and D in the private sector outlined challenges and made a number of recommendations. Our government is acting on several of them through measures already announced in this year's economic action plan.
For example, we are doubling the size of one of our most successful initiatives, the industrial research assistance program—or IRAP—to significantly enhance support for R and D performed by small and medium-sized companies. We also announced $67 million to help the NRC in its efforts to refocus on industry-relevant research.
Our government remains committed to making investments in basic science as well. We are also working to promote innovation and the commercialization of ideas. One does not have to come at the expense of the other. We know that Canada can become an international leader in both basic and applied research.
As the minster responsible for the Federal Economic Development Agency for Southern Ontario—or FedDev—I can tell you about the initiatives that are having a very positive effect throughout that region as well.
Ontario's economy continues to improve, as is shown by pre-recession employment and GDP levels. To date, FedDev Ontario has directly committed nearly $1.1 billion through core program funding, as well as through other government programs in the region. However, there is still work to be done. Ontario's private sector research and development levels are lower than in many other advanced economies, and commercialization output is not where it needs to be, which is consistent with national trends.
Now, we know the key to innovation and economic growth lies in creating partnerships. They involve small and medium-sized businesses and post-secondary institutions that have vast resources in terms of research capacity, equipment, and talent, so we developed the applied research and commercialization initiative, where we have devoted significant effort to establishing partnerships between post-secondary institutions and the private sector.
The research and testing capacity that 24 participating colleges and universities offer is now helping more than 540 businesses across southern Ontario to develop new products and expand existing market opportunities. This is an enormous success.
We are also addressing challenges that small businesses face in southern Ontario in regard to access to risk capital for new ventures. Through our investing in business innovation initiative, $117.9 million has been leveraged in private sector investments to help start-up businesses in their critical early stages. The number of angel and venture capital investors in the region as a result of this program has risen from 250 to 650. This is another enormous success.
In fact, I'd like to give you an example. With a contribution of approximately $755,000 through this initiative, Wave Accounting Incorporated, a Toronto company that developed online accounting software for small businesses, was able to leverage $1.5 million more from angel investment. It created 46 new jobs, more than four times what we thought they would do. Further, the company has raised an additional $17 million since our first round of funding. It has more than 250,000 small business clients around the world now and is projected to continue strong growth going forward.
Through our prosperity initiative, we are making strategic investments to develop economic growth areas for southern Ontario. These include high-speed computing, advanced material manufacturing, digital media, food processing, and green construction, among others. Through some of our funded projects, post-secondary institutions—again—are working with small businesses to bring to market innovative products and processes that will help put southern Ontario on the map as a place for business in these high-growth sectors.
For example, we recently invested $20 million in the University of Toronto to form a collaborative research innovation platform. This has now brought together a consortium of seven other universities and a lead industrial partner, namely, IBM Canada. The investment is helping develop a high-speed, high-performance cloud computing infrastructure. This will assist researchers and businesses to develop products and services that require the ability to analyze large amounts of data, often referred to by the scientific community as “big data”.
I can tell you that we now have the most powerful computer in the country working in this project. In so doing, this group will address some of the world's most complex problems in fields such as resource management and urban infrastructure, all the way through to and including neurological disorders.
Colleagues, we have committed almost $207 million in 44 projects through this one fund alone, the prosperity initiative, and we have leveraged more than double that amount as a result. It's a total of $577 million, in fact. Investments such as this will have long-lasting results for the economy of the region.
To address the need for improved business productivity and competitiveness, we have collaborated with regional stakeholders, such as the Canadian Manufacturers & Exporters. This has leveraged $95 million, while helping more than 800 manufacturers all over southern Ontario. According to the CME, our support will contribute to the creation of 5,000 new jobs.
FedDev Ontario also delivers some national infrastructure and community-based economic development programs through programs such as Community Futures. We work with partners to ensure that rural communities have access to economic development opportunities.
We are very proud of the progress we have made through direct investments in the Southern Ontario Advantage initiatives. As of August, those initiatives had leveraged $963 million.
As a resident of Cambridge, born and raised in southern Ontario, I know that southern Ontario has incredible people in its communities. I'm lucky enough to see this first-hand through the many visits, round tables, and ongoing discussions with stakeholders that I undertake as a member of Parliament and Minister of State. This enables me to see the potential of this region and the impact of FedDev's work going forward.
Mr. Chair, I'd like to close my comments now and give committee members the opportunity to ask me any questions they may have with respect to the supplementary (B)s.
Thank you.
:
I think that's a great question, in this sense. FedDev was created for two reasons: one, because the nation was about to face a very significant economic downturn, not of our doing but coming to us from beyond our shores; and two, Ontario has some unique issues to deal with, such as the automotive industry and those types of things.
In the beginning at FedDev, we obviously had to stimulate the economy as quickly as possible. We chose the route of partnering with people who had experience on the ground: folks like the Canadian Manufacturers & Exporters, the Business Development Bank of Canada, and IRAP, to give you examples.
We looked at areas where we could move money into the economy. I will admit that, in the beginning, creating a job was necessary. We saw applications come in for rebuilding arenas and these sorts of short-term jobs—paving, infrastructure in terms of curbs—and we would approve those jobs. As the economy started to change, we also changed. We did not stagnate. It was vitally important that we remain nimble and quickly adapt to the changing economy.
Around that time, we started to look at.... I'll give you an example. If we were going to pave something, it would be an airport runway, meaning that this would not be just two weeks of paving jobs and stimulation in the economy, but that there was some future economic benefit because the runway would now be longer and could potentially handle larger aircraft.
Our thinking changed as well in moving forward around the advantages for Ontario. That means assistance in terms of venture capital for folks who are starting up, and assistance for businesses in entering some of these new export markets that we've opened up with these new trade agreements.
We would work with scientists, getting their products into the marketplace more quickly. We would work with putting students and recent graduates into businesses, so they had a job close to what they were trained to do. That would be a great advantage to the businesses, as we've mentioned, that are weak on research and development.
Those are the kinds of programs we now have. They are better-quality, longer-lasting jobs, completely aligned with the needs of the economy and with some very forward-thinking projects like the water consortium and this cloud computing project with the University of Toronto that I mentioned. Those are the areas that we believe are the high-technical, high-knowledge types of jobs that we want and need for Ontario, but with peripheral and transferable benefits across the nation.
:
This is a great question, and I thank you for it.
This starts back when we were seeing the transition in the economy of southern Ontario. We decided to look at programs that would provide for better jobs and better job opportunities and really grow and diversify the economies of smaller communities in particular. We knew from our consultations and our round tables that venture capital was a serious impediment to this type of growth. That really was the genesis of this program.
This particular program was announced with the other ones, all within about four to six weeks back in the fall of 2010, again, as an initiative to show the change in FedDev's focus and that in fact we had a suite of programs that would pretty much fill most of the needs of any entrepreneur.
To date we have had about 172 applications approved under the IBI program for some $102 million, but the leveraging goes way beyond that. In fact, last night I got a note that on Dragons' Den was one of the companies from Kanata that had received a very small amount of repayable money through this program. They actually got selected by all of the dragons; they turned them down, but took one of their offers.
I have to say that all the programs working together make up that ecosystem and support the entire system, which is a collection of parts. Venture capital is one of those parts. Skilled workers make up another one of those parts. We know that there are folks in southern Ontario who have great ideas but they can't get them to the market, so we have programs that will help move a product or a process down the development line to the marketplace much sooner.
But we also know that Canada's start-ups are very strong. We are one of the leading countries in the world with start-up capacity. Again, you add those factors together and it doesn't take too long to come up with a venture capital angel investor. I don't want to speak about the national history of venture capital, but it isn't that strong and it's certainly not that old. So we are now seeing under this program not just local investors, as investors now are being attracted from around the world, and his really is what the purpose of the program is.
We won't be there forever, but this initial start and the introduction of our capacity to the United States and other investors are the results that we want to see, so we are very pleased currently, and I am pleased that the outcome will be longer lasting.