:
Thank you, first of all, for this opportunity to present the biotechnology sector as a Canadian sector to the committee.
I'd like to just briefly introduce myself. I've spent most of my working life in biotechnology, in one fashion or another, from an academic perspective and then as a government regulator, and then over the past 19 years now in the private sector altogether.
I run a small new start-up company here in Ottawa called Eulytica Biologics. It's just getting on its feet. I sold a previous company. I've been a director of BIOTECanada for a number of years, and up until just recently was its chairman for three years.
BIOTECanada is the national organization representing the biotechnology sector here in Canada. In that sense, it represents the interests of over 250 members that really span biotechnology as an industry from research all the way into sales. Its membership is from industry as well as public organizations.
When I talk about biotechnology, really I'm representing the Canadian industry sector that is broadly bio-based; that is to say, it carries out R and D and develops products with biology as a technology platform. That's the glue that binds the industry together. In fact, in that sense, the industry is similar in magnitude to other major industry sectors, compared to automotive, compared to aerospace, compared to information technologies.
We know you're hearing serious stories of several industries in dire circumstances in many sectors of our economy, and certainly the biotechnology industry sector is also seriously affected in the current economic times. What I would like to do is briefly give you an overview of that sector scenario and put it in the context of Canada's current and future national economy in the sense of what the contributions of the biotechnology industry do for that. And Peter will follow up, after my brief comments, with some specific details and with what BIOTECanada sees as proposals for action.
We know firsthand from our members that this financial crisis has had a profound impact on our biotechnology companies and therefore impacts on the continued innovation of biotechnology and, most importantly, on the value generation from that industry to the overall Canadian economy.
As a sector, the biotechnology industry in Canada is definitely entrepreneurial. Companies start out small on the basis of landmark innovations. This might be in health, it might be biofuels, new materials--a number of different areas--and the companies typically have gradual growth over several years, from two or three years to a decade or more, depending on what sector they're in. In particular, the health sector takes much longer to bring a product to market.
Over those years they grow, they hire, they spend their R and D money, and that R and D money will have come from capital investment or from grants. In fact, they tend to spend their R and D money back into Canada.
They might fund research and development, as I said, for more than a decade before they actually show any sales revenue. For Canada that's important, because the biotechnology industry is a new and emerging industry in Canada. So they're at that interim point.
For the most part, they use equity-based investor capital to do that. They're highly dependent on well-functioning capital markets, and, as we know, they are especially vulnerable to a market crisis. In fact, the same is true for companies in biotechnology outside of Canada, that are also actively striving towards a profitable and sustainable knowledge-based economy. That competition outside of Canada is real and in fact validates the basic value of biotechnology as a knowledge-based economy for any given country.
So what's the problem? First of all, as I said, few biotechnology companies in Canada are well-established mainstream producing companies. They're really in the middle of a development phase of products, as a generality, and they are transitioning to commercialization and product sales. That's true whether or not the biotechnology company is developing a cure for multiple sclerosis or breast cancer, or has approaches and products related to new carbon capture methods, or food safety, or biofuels. It's a broad sector in that sense.
When the credit markets seized up as they did last fall, there certainly was less capital that the equity investors wanted to put at risk.
We find that the capital that is put at risk--by VCs, for example, venture capital companies--is dedicated typically to shorter-term, lower-risk options providing earlier returns. In fact, VCs that had been investing in biotechnology are now investing in real estate. It's a very different scenario from an investment perspective.
The perspective for biotechnology is that biotech is a higher-risk investment by nature. It's high-risk, but there are also very high rewards, which comes fewer, at times. That has coloured the overall investment scenario in Canada. The current reality is that there are more emerging technology firms in Canada than ever, frankly, that are operating with less than six months of cash. That's a sobering fact that we have solidly researched through BIOTECanada. The majority of the small and emerging companies have less than one year of cash to survive.
The effect is that companies are closing product development programs at the moment and are starting to cease operations. If you look at the data over the last two months, you'll see employment in the biotechnology sector has decreased by about 8%. We think if this continues, many thousands of direct and indirect jobs are also going to be lost from the sector. What that does is threaten the promising earlier scenario of a healthy future growth of the biotechnology sector, its employment, and its value generation.
This short-term financing issue has also put the historical R and D investment in Canada at risk. Canada is a country that federally and provincially has invested well in R and D. Many innovations are generated, and they have brought breakthroughs in products that are entering our drug registries, put on our plates, put in our cars. The impact on the sector is that we have a risk scenario, and in order to keep that innovation, commercialization, and value generation going in Canada, actions need to be taken.
I'd like to leave it to Peter to provide a few points on this.
As Rainer said, I'm with BIOTECanada. I'm Peter Brenders, the president and CEO.
On behalf of our members, we wrote to ministers Clement and Flaherty in December when the crisis was starting and suggested a three-point plan that we could put in place to sustain research and development in Canada, to stimulate new investments and new financing, and to support domestic jobs--three points that broadly will serve the biotechnology interests but will also serve the broader S and T interests of this country.
The first recommendation is help companies monetize tax losses. As Dr. Engelhardt mentioned, companies spend heavily on R and D, much more than revenue. A lot of times in their early development stage, they accumulate substantial tax losses. They look forward to the day they get to claim these tax losses. But we have a challenge of getting there.
Our recommendation is to grant a loan against these tax losses; use the tax losses as collateral, in a sense. We could use BDC as an entity to be able to flow capital to companies for a short term for them to spend on R and D. You can create limits on that. We're recommending that it be limited to the early-stage R and D companies that are spending more on R and D than they get in revenues, or revenues less than $10 million. You keep it focused on those emerging companies and you can create limits in terms of the amount of a loan they can apply for. You make it a no-payment, no-interest loan for two years and then amortize it over five years. It's a way to put capital into companies and keep those jobs going; stop the layoffs in that area.
We've talked about the second area in terms of new financing and we're suggesting we implement a capital gains exemption on new direct investments into companies that are doing R and D. There's no immediate cost for the government up front, potential opportunity cost down the road when the success is there, but again it puts money into the companies and creates a competitive advantage for a science-based industry.
The third recommendation is to sustain that R and D in Canada. Keep that business case that we have for Canadian R and D. We currently have an R and D tax credit program, the SR and ED program. I'm sure you're all aware of it. There is a limitation in the refundable credits. The refundable credits are a great program, but they're limited to Canadian-controlled private corporations. They're a very small subset of our R and D jobs. It made sense when it was put in place in 1985, back before free trade and all the policy atmosphere then. It makes no sense today. It's not about the ownership status of a company, it's about the Canadian jobs. Our recommendation is simply to eliminate that restriction, that CCPC, the canadian-controlled private corporation restriction. Allow all companies investing in R and D in Canadian jobs to benefit equally under the terms of the program.
We're putting forward those recommendations with two things in mind. One is that we have an urgent problem. We can't afford to have the industry decimated by the credit crisis. Too much has been built into these operations to get them into a commercialization cycle. The second one, and I'll close with it, is that we're dealing with a global landscape. These jobs are very portable.
We put in here the Globe and Mail cartoon from last week that talks about Canadians classically as hewers of wood and drawers of water. In the world of R and D, we run the risk of just simply exporting our IP as we've exported raw natural resources in the past. Our goal is to make sure that we create an environment, that we capture that value in Canada.
We see countries like China announcing $9 billion for emerging tech this week; the U.K. creating a $1.3 billion pool for investment in emerging tech; the U.S. dedicating 3% of GDP for growth and innovation; EU committing more than $47 billion for SMEs; Taiwan creating $2.18 billion in venture capital for their biotech. It goes on and on as countries around the world are investing and it makes it incredibly attractive for our emerging technologies to simply pick up and leave. That's not the goal we want in Canada.
We'll just close with that. We think Canada has a competitive advantage. We can compete globally in this space. We just need the tools to make sure we are globally competitive.
Thank you.
:
Thank you, Mr. Chairman.
My name is Bernard Courtois and I am President of the Information Technology Association of Canada. I would be pleased to answer your questions and exchange with you in either French or English. I will make a few opening remarks and introduce to you the two colleagues who have accompanied me.
[English]
First of all, I'll say a few words about ITAC. We're the national association of Canada's information and communications technology industry, which covers information technology and telecommunications hardware, software, services, everything that makes the Internet work, Web businesses, and so on.
Our industry is a significant one. It employs about 600,000 Canadians, which in proportion is significantly larger than agriculture or forestry. We have 20% more people employed directly than the auto sector when it was at its peak. Our sector performs 38% of R and D carried out in the business sector in Canada, which is probably more than double any other sector.
In addition to our role in our own right, we have also been growing, by the way, at a higher rate than the economy for the last 10 to 15 years. Even though we went through a bubble and a crash around the turn of the millennium, the growth is steady through that. The bubble was an exaggeration upward and the crash an exaggeration downward, but generally speaking we have been a growth engine for the economy.
But we have a very unique role in that in addition to the 600,000 people employed in our industry, there are 500,000 information technology professionals working in the rest of the economy. That is just an illustration of the degree to which our industry has a unique role as an enabler in making the rest of the economy function and driving productivity. Indeed, the studies have been accumulating that productivity in a modern economy is dependent on, and really well correlated with, the degree of ICT adoption.
Our industry is very global, and it is also enabling. Because our technology is enabling work to be shifted around the globe so easily and because our companies operate that way, our industry is really in the front lines of what's happening to an economy, not just in our sector but in all sectors around the globe.
We have been affected by the recession, and different sectors are affected differently. Obviously, our customers are suffering at the present time and they're obviously not spending as much as they would in a booming economy. That's causing a recession in our industry itself. There are some layoffs, but I have to say that much of what's happening in our industry is some significant belt tightening but also some people just taking a hard look at their operations to make sure that when we dig ourselves out of the recession they're going to be stronger and more competitive.
So our situation is that we will continue to be a growth engine for the economy. Most importantly, we will be continuing to provide what is needed for the rest of the Canadian economy to be competitive in a modern environment.
Like the biotech sector, however, there is one dark side at the moment and that is the dearth of venture capital. Obviously we're going through a financial crisis, a crisis that emanates from the financial sector, so more than ever there's a shortage of venture capital. That is not a unique Canadian problem. That is a global problem. As governments around the world try to solve the problem of the banking sector and the financial sector, it is important to realize that there's a whole growth side of our economy that is dependent more on venture capital than on bank financing. This is something that really everyone is trying to address at the present time.
In Canada the problem hits on a base of venture capital that is thin and not very large to start with. So we had a challenge of venture capital already. The economic crisis of course makes it a lot worse.
Our view, therefore, about how we're going to move forward is we need to find a way of flowing money quickly in terms of venture capital to those firms. There are things that we should do in the longer term. We can try to improve this with R and D tax credits. We know that we have a very good program but we know that there are shortcomings.
When it works for a particular company, it works very well, but for a lot of companies it doesn't provide the cash flow needed. They reach up very quickly to the limitations about what size they can reach and so on, but the problem is very short term and therefore in our view we cannot address this very short-term problem with redesigned programs. To redesign a program takes a year or two. It takes a long time before money starts flowing. We have to find ways of getting money to flow quickly.
I'll move on, though, to say we're looking ahead to digging ourselves out of the recession as a country and to what we need to do to, in a way, make the best of a bad situation and capitalize on our advantages as a country and dig ourselves out in a way that will competitively differentiate us, restrengthen our competitive position and our growth position.
A couple of reports came out last week—from the Science, Technology and Innovation Council and the Council of Canadian Academies—both addressing the areas of innovation and R and D. Those reports point out the view we've held and we see around the world. That is, in Canada we're a relatively prosperous, developed economy, and therefore higher-cost. We're a small economy compared to many other countries around the world. We're not growing as fast inherently as the developing economies. But we do have the advantages of a well-educated population, high quality of life, proximity to the richest market in the world, advanced technology capability, and strong fiscal position in our country.
All that points to the fact that we are compelled to succeed in the future based on innovation. We believe that not just for our own sector, because obviously we're sort of a poster child for innovation, but we believe the entire Canadian economy should be looking at itself from that standpoint.
So when you talk to other sectors, and the people talk about how they're going to dig themselves out of this, we believe—we're having discourse inside our own industry, but we believe it should be true for those other sectors as well—that in Canada we need to start focusing, and we're a small enough country to be able to be focusing, on leadership in the use and development of technology in whatever sector we're in.
You're talking to other sectors. I can understand that oil sands is an industry that is very technologically dependent. And you can go across all kinds of sectors in our economy where we don't think of technology being a driver of their future, but it is of their competitiveness and their growth.
We believe it's important, when this committee writes its report, to pick up on the words of the Science, Technology and Innovation Council and the Council of Canadian Academies and the views of sectors like ours that see the economy worldwide, to emphasize innovation and the drive for leadership and innovation and technology in the future.
We see that as a best practice among our clients who are, even at the present time, investing to make themselves stronger as they come out of the recession. We see it in governments. Governments have an extraordinary opportunity at the present time to make themselves more efficient to do what they are saying to businesses that they should do, to invest in technology to improve their operations. In the short term, it's a win-win, because these people who we are laying off temporarily will have long-term jobs, will get soaked up by that, but the result will be, when we try to dig ourselves out of deficit, a much stronger position.
I'm just going to pass it on at this time briefly to Terry and to Hicham so they can introduce themselves and just lay a bit of a basis for which we can have our discussions with you.
Thank you.
:
Good morning, Mr. Chair and members of the committee.
Thank you very much. I really appreciate the opportunity. As Bernard said, Hicham and I are just going to make a few comments and then look forward to your questions.
I work for Cisco. We are the global leader in networking. Our vision is changing the way the world works, lives, learns, and plays. I would suggest to you that, at this juncture in time, that has become more profound than ever. As we look at what's happening around the world, the global stimulus package is, by our own estimation.... I'm part of Cisco's global advisory group, by the way. We've analyzed so far in the order of $2 trillion being set aside, so to speak, for the idea of economic stimulus.
When we look at that $2 trillion and dig into it, what we're seeing is a larger discussion that is not, if you will, about that traditional infrastructure dialogue. It is about a different message entirely, which is the notion of recovery through innovation. I think, very consistent with what you've already heard this morning as we look to recovering, it's really about how we position ourselves for the upturn, which is inevitable. As we do so, we have to appreciate that we're competing around the world with a completely different set of very well-financed constituencies and a tremendous number of focused leaders around the world who are saying that this is their opportunity to change the dynamic.
For us, as we look forward, we believe that technology is the enabling infrastructure of our time. In fact, it is so important to our future, it really is something that will have a profound impact on economic resilience and agility and also a deep and lasting impact on our society. From our perspective as a company, I believe that, writ large in the technology industry, we see a huge opportunity to be a value-added player in this discussion and to be much more collaborative.
To that point, as you've already heard from our colleagues, the idea of inter-organizational collaboration to drive innovation is something that we must embrace. What I mean by that is that the private sector, the public sector, and the not-for-profit sector must come together and look at collaboration for the purposes of innovation in a very different way. We believe that leadership has to come from you as our government.
Those are my brief comments. I will definitely look forward to questions as we go forward.
Now, over to my colleague Hicham.
:
That's exactly right. On the credit side, Canada's scientific research and experimental development or SR and ED tax credit program is by and large a good program. It's a very good program for emerging companies that are Canadian-controlled private companies, CCPCs. The reason it's very good for them is that they get a refundable credit of 35% of their expenditures: they get cash back, and that helps feed into maintaining it.
The problem with that program is that it's only CCPC companies that get it. Many companies have gone for foreign direct investment, so they lose the CCPC status. They may have gone public and have done an initial public offering, a small IPO for a couple of million dollars; they lose that credit. In exchange, when they lose it, they only get a 20% future tax credit. Well, these companies aren't paying taxes; they want to get to that stage.
So our recommendation is to change this to make that money refundable to all companies in that same stage, no matter who owns them. You only get that credit if you do the work in Canada, so it's Canadian jobs that it's focused on. It gives the incentive to do work in Canada.
That's a nice change. It will take a little longer to see that money track back into companies, but they can apply for loans against it, because they know it's going to come, and they can get an advance. That helps.
The second recommendation we had is about how to give companies.... Traditionally, as Bernard mentioned, companies don't go to banks for loans; they rely on venture capital markets. Our point is that they're sitting on a lot of tax losses, so instead of having some multinational buy them for those tax losses and the government paying for nothing, really, why don't we give them an advance, a loan against those tax losses, and hold them as collateral? That way, we'll put the money quickly into companies, today. They can keep spending it—we give them a requirement that they spend it on R and D—and it keeps them going as we get through this credit crisis and allows them to capture other R and D credits later.
This could be very quick, because the companies all have their audited statements. The CRA, the revenue agency, knows what everyone's accumulated tax losses are. You basically can figure out exactly how much of a loan a company would qualify for. There's a way you can administratively make it very quick to put some cash in. You can't get any more “shovel ready”, because those jobs are still here; we just want to keep them.
:
If I may add to that, I do agree that we have a lot of advantages in this country, and we do have leadership, in many cases. I think we tend probably to underpromise and overdeliver, as an industry and as Canadian corporations across the world. But this is a race without a finish, so if you are not advancing every day, you will end up losing; we will end up lagging.
So we see some differences in how other jurisdictions or countries are adopting technology, how they are taking risks, and how technology is driving productivity. When you look at other sectors in the U.S., for example—manufacturing, financial services, and all sectors of the economy—there is greater use of technology. So it is not a coincidence that they do have higher productivity, which drives a better and stronger economy higher.
We really do have huge potential. It is an industry that's basically brains-based. It is not a polluting industry, as such. It's our strength: it's education; it's people; it's talent. We have a huge opportunity, but we are missing, I believe, this opportunity to really be a leader.
The opportunity for us, I think, as a country is to say that we will have a policy stating that we will lead in this area. We will have a ICT strategy that is national one and that says, this sector is an important sector for us, and this is our strategy for attaining and sustaining leadership in this area. We will have a policy that says, we, as government, will be leaders in the adoption of technology to drive our own transformation, to drive our own efficiencies, to ensure that we do become effective, and that in our services to our citizens and our businesses—government to citizen, and government to business—we are leaders in innovation.
Canada was recognized as a leader in government, but are we sustaining that advantage? Are we making further investments to stay a leader?
Thank you so much for being here today. It is really interesting to hear what you have to say.
This last little bit of discussion has been particularly interesting. As governments, we have choices that we have to make, just as your members do in terms of the investments they make, which I think one of you touched on in your opening statement.
There are several focuses of this government, not only on the industries and issues that you represent, but on the overall economy as well. We've made a fairly significant investment in science and technology. We have the science and technology strategy. We have the STIC council that, I think, is a big step forward. They came out with their report, which one of you referenced. There are significant dollars flowing within the infrastructure program to university infrastructure, and also to the Canada excellence research chairs, Vanier scholarships, and programs like those.
At the same time, we have a fiscal situation in this country that is really the envy of most industrialized countries in the world. We're the only G8 country that ran a surplus in each of the last three years; every one of the other G8 countries ran deficits in every one of those three years.
There's a lot of reference made to the American situation. I'm not sure if this is still a valid number, but I think the number that I've heard for the American deficit is $1.75 trillion. If you were to equate that in Canadian terms per capita, we'd be running a $175 billion deficit this year. Obviously we are substantially lower than that; I think $34 billion is the number that we're talking about in regard to our programs here.
Those types of things have led to some long-term stability, I think, for Canada moving forward, as we move through this situation that other countries don't have. We're able to move, for example, to get our corporate tax rate down to 15%. We've been talking about trying to get the overall tax rate down to 25% across the country, putting us in a much better position in terms of Canada's long-term benefit and ability to host successful, growing companies, and all of the high-paying jobs those companies offer, which we are in a much better position to do because of the many steps we're talking about.
Maybe you could again comment a little bit on the importance of that long-term stability. We've talked about the structural versus cyclical challenges, and both of the industries you represent are what I would characterize as structurally strong. Moving forward, there will be tremendous opportunities in both industries you're talking about.
How important is that stability here in Canada? How important is a favourable tax structure, keeping the taxes down generally and creating that competitive environment? And how important to your organizations are the changes we've made to the foreign investment and competition laws?
:
Those are all elements that position Canada well to develop a strategy to improve its game, improve its position as the world digs itself out of this recession.
As you pointed out, the U.S. is going to face very serious fiscal challenges that will affect its ability to treat taxation on investment and on individuals, that affect its ability to spend in the right way to strengthen its economy.
We like the government's Advantage Canada strategy. We like the very notion of focusing on advantages. We have to look very hard at capitalizing on our advantages and aggressively pursuing them so that something fundamental is changing now in this year. It's a good time to ask, with these changed circumstances, how can we wrap together the various things we are doing?
We're investing in science and technology. We have a good capacity in technology. We're lowering our taxes on investment quite significantly, both at the federal level and the provincial level. We're now much more competitive on that. Our fiscal position is a fundamental advantage, as are the stability of our society, the attractiveness of our quality of life, the stability and quality of our legal and regulatory regime, even though we have to re-think it again. The world is changing so much. We have a lot of our regulatory regime that's based in the pre-Internet era, and that kind of thing.
What we have is a lot of very good things that we've been doing, and an extraordinary opportunity to look at that in a period of tremendous change. How do we wrap that together in a package now that reflects the future and innovation-based recovery that will really...? Let's capitalize, let's use this crisis to step ourselves up in the global situation.
We know, for example, that people say sometimes that Canada is not well known for innovation and technology. Well, we just need to dig out our BlackBerrys to know. And there are many other examples. Our reputation around the world in e-government is there. It's getting a little thin, because we have not been driving that as an explicit goal for our government. There are all kinds of things we can do now to wrap these things together in a strategy. That's why we've been raising the issue of an ICT strategy that is not so much about our industry but about capitalizing on technology and innovation to drive Canada's future success.
:
If I may, I'll just echo Bernard's comments.
On Monday this week, we launched a document, a Canadian blueprint we called Beyond Moose and Mountains. We made the name on that one because we're tired of people not seeing Canada's innovation. We're tired of not being seen in terms of the technology and the footprint that we contribute out there. We're bigger than that, and it goes beyond that. As part of the board and part of the consultation we did last year with the industry, not only do we think as Canada we can be sold as more than that, we think Canada can be a leader in the bio-based economy. Biotechnology represents probably around 6.4% of GDP in Canada today, if you think of the industries that rely on it, use it, develop it, and whatnot. It's a little over 8.5% in the U.S., but we're better than some countries, and not as good as others.
We believe if we set ourselves a goal—a big, hairy, audacious goal, if you will—Canada can be the world's leading bio-based economy. We have the science, we have the research, we have the companies, we have the biomass. What we're missing is sort of the focus to actually want it, to achieve that, that whether it's core science and tech, as a nation we're going to be out there. As an industry, we believe we can do that.
So what does it take? It is the tax rate, it's the environment. We think it's three things. It doesn't matter what sector you pick on that one, it has to be globally competitive. It is that capital market—whether it's taxation to operate, it is the environment to generate new capital, the new investments. Are we the most competitive in the world in these areas? There are things we can change. It will take us time, but if we have a goal to get there, we win.
The second area is people. Do we have the best talent? We have some good talent out there, but we see people leave. Do they come in? How do we have the most competitive environment in the world to attract and retain talent, let alone build it? Are we changing our school programs to be innovative? We talk a good game, but do we really mean it and want to change it?
The third area is the operating environment. We have good regulatory structures that we've put in place for different reasons, but are they incented to spur on innovation, or are they more road blocks? There are changes we can make if we really want an innovative society. It's not just tax; it is tax, but it's also the operating environment and the people behind that one.
We need to align it all and to always be focused on that, asking the question, does this help innovation? If the answer is no, then why are we doing it?
:
I'd like to go back to my original line of questioning.
We've heard lots of good ideas. There have been lots of good ideas put on the table throughout our entire study here, and in other areas in the broader economy, in facing some of the challenges we have. Of course there are always things governments can do better, but governments can't do everything asked of them.
We've literally had probably hundreds of billions of ideas put on the table, and with every one of them came the promise that it would bring us out of the global situation we're facing. There are a lot of asks on the EI front, for example, or conversations happening around EI, that would lead to much higher payroll taxes that successful companies, of course, would bear the burden of. If we were to implement a lot of the things that have been talked about, the potential result would be higher taxes being paid by corporations, and successful, growing corporations would bear the brunt.
My understanding of the biotech field, and probably of both industries, is that in your industry, unlike other industries, the bigger, more successful companies tend to plow a lot of the profits they make back into R and D.
I would think that the investments those types of companies make are probably among the most secure investments, in a sense. They would be the most profitable investments from the standpoint of successes that would benefit Canadians as a whole in the long term, the very types of investments we're trying to see made under our science and technology strategy under Advantage Canada.
Perhaps you could comment on that a little bit. Could you comment on the types of investments being made by the bigger, more successful, growing companies, the companies that are actually paying taxes?
Recently we had job numbers come out--net new jobs--that were kind of surprising. I think there were 36,000 net new jobs, and many of them were self-employment. I found that kind of interesting. I found it interesting that on the political side we took a little bit of heat from the opposition, who were almost making light of the self-employed component of it. But I was kind of struck thinking about what happened there.
I was thinking back to the tech crash and sort of what happened in the circumstances there. It seems to me, based on what I've heard, and you can correct me if I'm wrong, that there was a lot of focus on the crash or the bursting of the bubble, so to speak, at that time. But one of the things there wasn't as much focus on was what happened to a lot of the people who lost their jobs during that time. They went out and started new small, self-employed situations at the beginning, which have now actually turned into pretty strong companies in the IT sector.
I see in those job numbers that were recently announced maybe something similar happening, maybe on a broader level than just IT. But certainly, in both your areas, there might be a kind of component of that. We also see it happen, in a sense, when companies in the biotech field, for example, are sold, and the original founder of the company that was sold goes out and starts a brand new venture that winds up being successful as well. In all the darkness of the global economic crisis, that is to me something to grab on to. There is some opportunity there. Maybe something positive that's coming out of this is that people are taking the initiative to go out and start on their own.
There are obviously some challenges. We talked about venture capital. That's going to be a challenge for some of the folks, but we do have government programs through BDC, and not only on the venture capital side. There are also consultants who will help guide someone through the process, someone who is maybe more IT-related or more science-related but not so business-oriented, to kind of navigate through the other granting councils. We have business incubators and things like that to help people through that process.
Maybe you could speak a little bit to the potential opportunity that arises out of this, and then talk about what you see as the government's role in fostering this in balance with industry's role in fostering this.
The Mining Association of Canada is the national voice of the mining industry. We have three or four dozen full members, which are the larger mining companies that you're aware of, and around 30 or 40 associate members, which include some engineering firms, some financial firms, and some environmental firms, etc.
As you can see from the first table, it's a fairly large industry, contributing about $42 billion to Canada's GDP. These figures are for 2007, which is the most recent year available. We produce a document called Facts & Figures, which I believe you have. If you don't, we have some copies here in both French and English that contain a number of these pieces of information.
Let me touch very quickly on a couple of these points.
The industry pays around $10 billion per year in taxes and royalties to Canadian governments. It makes exploration expenditures, to which Mr. Baird, my colleague, will speak in more detail, of about $2.5 billion to $3 billion per year. The industry contributes about 19% of Canada's goods exports. It employs around 360,000 employees. There is also a significant supply network that feeds into this industry: around 3,000 companies supply goods and services to Canada's mining industry. For example, in the railroad sector, the industry accounts for about 55% of Canada's freight rail revenues. And there are a good number of mines, obviously.
Interestingly, in this sector there are strengths in every Canadian region, right from the east coast through Quebec, Ontario, Manitoba, Saskatchewan, Alberta, B.C., and northern Canada. Each region has different strengths in this industry. We can certainly talk to that in more detail.
The Toronto Stock Exchange has also carved out a very strong niche in the mining sector. Companies internationally tend to go through the Toronto Stock Exchange for their financing, both large companies and others: the TSX has also carved out a very strong position for helping smaller and medium-sized companies raise financing.
Touching quickly on some of the issues that are facing the industry, I'll talk to mineral prices and the global recession on the next slide.
It's a very important industry in terms of relationship with the aboriginal communities. It's the largest private sector employer of aboriginal Canadians. This tends to be a relationship that works very well. Our industry association, for example, about a month ago signed an MOU with the Assembly of First Nations, and we have a work plan associated with it. That's an important area. There is probably potential to do more with aboriginal Canadians in terms of future employment and future skills.
That leads to the next point. There is going to be a human resources crunch in this sector, as in many other sectors in Canada. Something like 65% of our geoscientists will be over the age of 65 over the next decade, so there is a need to fill that skill gap. Overall the sector's human resources council estimates that about 60,000 to 90,000 new workers will be needed in this sector by 2017. I think those figures are adjusted to reflect the happenings of the past half year.
Mineral reserves are an issue for this industry. Canada's proven and probable reserves of base metals and some others have gone down over the last quarter century. There's a need to reverse that and turn it back up. We can talk about that in more detail.
A number of obstacles face the global supply of minerals. There is the potential, actually, for significant price spikes over the coming years if some of these supply obstacles are not addressed. I can talk more about this in the questions and answers, but this relates to regulatory barriers, in Canada and internationally.
There is a need for infrastructure. Some of the projects being developed internationally require 600-kilometre railroads, etc., to bring them to market. To some extent, mining companies are in the infrastructure business as well, especially internationally. That introduces some challenges and some obstacles to bringing these projects on stream quickly.
I'll talk about the slide on the next page and walk you through what has happened on the mineral price scene. This table highlights six different minerals and metals, and it really tells three different stories.
It shows the strong growth in mineral prices that occurred between 2000 and 2007 right across the board. A lot of that is obviously driven by demand for infrastructure and manufacturing strength in China. That growth continued in general until halfway through 2008.
The second story this table tells is the significant price collapse that occurred from last fall to earlier in 2009. Copper prices fell by about two-thirds, zinc by two-thirds, nickel by over two-thirds, etc. Gold is in its own world to some extent and on its own trajectory. Gold prices remain very strong.
A third interesting story is that there has been a slight turn-up in the last couple of months in mineral prices, with some exceptions. In aluminum, the supply-demand balance is still not there to start turning prices up, but in other base metals prices have gone up. That leads us to have a fairly optimistic picture going forward.
In terms of the present situation, companies are adjusting to mineral prices. One of their fundamental roles is to adjust operations to reflect mineral prices. These prices are generally global prices; they're derived through international trading exchanges. Mining companies have been adjusting their supply. Some countries in particular have been managing their debt loads and trying to get them in line to ensure their future prosperity.
Natural Resources Canada has set up a desk to try somehow to tabulate the mining cutbacks that have taken place. They have found about 23 cutbacks announced in the past six months. These are companies we're familiar with. Vale Inco in Sudbury will be scaling back production this summer for a couple of months. ArcelorMittal on the north shore of Quebec will have the same kind of scale-back through the summer. A couple of the diamond mines as well will be scaling back production. It's really aimed at trying to get supply and demand back into balance.
The oil sands development has been moderating, and some could arguably view this as a positive thing. Certainly there was a very frenzied development over the past few years in that segment, and it is now coming back into more of a moderate development. I think there is a sense that costs are getting brought down, and there is a basis for future growth as well.
As I mentioned, exploration spending was about $3 billion last year. It's projected to be only about half of that this year, with pretty much a non-existent flow-through share market through the first quarter of 2009. The exploration sector has been hit quite significantly.
I'm going to leave the last slide for the question-and-answer session, so the final slide I'll talk about will be the global outlook.
As I mentioned, equipment backlogs and wait times are coming into balance. Ironically, these are some of the positives of a recession. We were in a situation a year ago in which companies were waiting up to a year or longer for items such as tires. Some of that is being brought back into balance.
Input costs are decreasing as well. There is a sense that the stimulus spending taking place in Canada, China, the United States, and elsewhere will help drive mineral and metal prices. As I mentioned, there has been a turn-up in some base metal prices in the last couple of months.
Long term we are very optimistic. The market potential in countries like China is just staggering. There are about 95 cars per 100 people in the U.S., but in China there are about two cars per 100 people. That gap will probably never be closed, but it will be narrowed. There are other, similar indicators; for example, there are 20 times more personal computers per capita in Canada than in China. These items contain many metals and minerals. Those kinds of indicators will narrow over the coming decades. It's our sense that we're in a bit of a pause now, not in a downturn. We're in a pause of a cycle that is going to continue and have very strong growth for decades to come.
The next bullet point is on China and India. It's not just going to be in base metals. These countries are moving towards more of a feed-intensive, protein-based diet, which means a need for potash. Canada is the number of one provider of that.
For nuclear power, there is a lot of investment in nuclear reactors in China and elsewhere, which means uranium. Canada is the top provider of uranium. Infrastructure and manufacturing growth will lead to more base metals demand, and as their middle class grows, it is going to lead to more demand for diamonds and gold and other items associated with middle-class growth.
As I mentioned, there is a stickiness on the supply side both in Canada and especially globally. That has the potential to contribute to significant mineral price increases in the coming years. Gold prices remain very strong. Gold companies have a lot of cash and are raising money and will probably be on a mergers and acquisitions kind of path over the coming years as well.
I'll leave the last slide. It talks about some of the remedies and asks--the ways through which government can help support the recovery. I'll leave that for the question and answer session.
Thank you very much.
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I used to be, but then they sold
him.
I'm pleased to be here representing two organizations. I manage the Canadian Association of Mining Equipment and Services for Export, which is known as CAMESE. It's an organization of 300 companies that all sell to the mining industry and are particularly looking to increase their revenues from exports. I've been doing that for about 15 years now.
At the same time, I am the president of the Prospectors and Developers Association of Canada, which is a large association of some 6,000 individuals and 1,000 corporations. In that role, of course, I'm on the board. It's a voluntary job, not my full-time job, but I'm here to represent them as well.
I would like to start by talking about exploration and then move into the mining supply part of my presentation.
The two parts of the mining industry I'm here to represent are really integral to the mining industry, extremely important to the productivity, health and safety, and environmental performance of the mining industry. And yet they're different, and they're different from each other. Hopefully in my talk I'll be able to bring that out. You have already heard about the main part of the mining industry, which is the extraction and processing part and which Paul is here to represent.
Just to give you a bit of background on the exploration, there are between 8,000 and 10,000 Canadian exploration and mining projects in the world, only about half of them in Canada. The other half are in 100 countries. Secondly, aboriginal peoples are extremely important to this industry, in Canada and also in other parts of the world, because we tend to work in remote places in exploration.
Exploration is a big giver of jobs to aboriginal people. These are jobs that occur near to their communities, and they're jobs for which, often, high levels of training and so on are not required.
Mining exploration is unique in that it needs very large tracts in order to be successful, simply because what we're doing is looking for needles in haystacks. No one can tell you where those needles are going to occur, so we need to keep large tracts of land open for mineral exploration.
Turning to the business side of it, there are 1,474 companies classified as mining and metals issuers and listed on the Toronto Stock Exchange or on the TSX Venture Exchange. Indeed, when you look at the whole Canadian mining industry as an investor, as an explorer, and as a supplier, there is no other Canadian sector that is as dominant in the world. We are out there as the face of Canada in 100 countries around the world.
The current situation in the exploration industry, of course, as Paul has explained, is that we're facing the downturn in the commodity prices, which is a cyclical feature for us. On top of that, we're facing a very heavy credit crunch, a loss of risk capital for mineral exploration. The year 2008 was a peak year, when we had something like $12 billion U.S. invested in mineral exploration in the world, and 20% of it was in Canada. That gives us about $2.5 billion, often of other people's money, which we use to look for resources in this country. Last year was a big year.
The previous peak—as I told you, it's cyclical—was in 1997, when the world spent $5 billion to explore. There's a huge rate of inflation in the industry over that ten-year period, but the amount has more than doubled. We are not finding resources fast enough for the world. The next time, when we get into the upturn, which will come.... This is the fourth downturn in my career in this industry, and one thing is sure: it's going to come back, and everybody in the industry is sure of that. We're not running scared at all. We're hurt, we're wounded, but we'll get out of this. When it comes back, as it has every time, it's going to be better, and we want to be there to take part in it.
Looking at financings, the announced flow-through financings—I'm assuming that people here are aware of the flow-through share system here in Canada—in 2007 were over $1 billion. In 2008 they dropped to three quarters of that amount, but based on the first quarter of this year, they're probably going to come in at about a quarter of a billion dollars.
These are the moneys the junior companies depend on. Junior companies, by definition, do not have revenues from production; they rely on capital markets to raise money, which they use for mineral exploration. This decline is extremely serious for juniors, who rely on the flow-through financing, when most other financial options are closed.
Here are a few challenges, as I see it, for the exploration part of the industry. There's financing, of course. They're having to pull back on projects and lay off employees, and companies are merging. There's a big problem around financing.
Secondly is, I guess I could call it, “survival”. Putting it a little more politely, you might call it “maintaining capacity”. In previous cycles like this, 50% of these companies have disappeared. That's not to say that they all went bankrupt, but many of them folded—politely bowed out, if you will—or many of them merged with other companies, and so on.
If this present situation lasts for two or three years, we'll probably have 50% fewer companies with which to do exploration in Canada, but also to maintain Canadian dominance in exploration around the world.
A third challenge is attracting new people. As Paul pointed out, this whole mining industry has a demographics problem. The demographics are probably caused by the cycles of the industry. The young people don't go into mining-oriented courses when things are down; they go in when things are up. When they come out, there are no jobs, which is precisely what's happening this summer, and I'm going to mention a couple of solutions to this.
Another challenge, of course, for Canada is that the world is globalizing. Just like any other sector, if we want to retain our dominance, we have to take certain steps.
An additional challenge is around the whole area of corporate social responsibility. Some of you may be well aware of the round tables and so on that occurred two or three years ago. I can give you more information on these, if you like. The industry is doing something about this. The Mining Association of Canada has a program called Towards Sustainable Mining, and the Prospectors and Developers Association of Canada has a newly expanded program called e3Plus. I can tell you more about what the guidelines and framework for excellence entail, if you would like.
Lastly, a challenge for the exploration industry, as I mentioned a little earlier, is to maximize the exploration land base and ensure mineral tenure and land access. What's happening in Ontario this year is really critical. The government has announced three very important changes. One is the opening up of the Mining Act for renovation, if you like, and two others have to do with aboriginals and a very big question on land use in the far north of Ontario. If these changes are not handled properly, any of the three will probably cause a continuing problem across Canada.
What can government do in the exploration sector? Geological mapping is in the government bailiwick for sure. It's geoscience, if you like, that is fundamental to the success of explorers in Canada. A couple of budgets ago, there was $100 million allowed over five years in what's called the GEM program, and this is something I would suggest to you could even be increased, or the expenditures brought forward over the five-year period.
Another thing government does is provide something called the Mineral Exploration Tax Credit, the METC. It was extended in the most recent budget for one year, but METC could be increased. METC should certainly be made permanent. It's an extremely important part of getting this kind of risk investment into Canada.
Another thing that I know the government is working on is the question of the single securities regulator for Canada. We are the only major developed country—the only developed country, I believe—that has this disparate system of securities regulators across the country, and it causes a great deal of extra expense, duplication, overlap, and lack of enforcement.
“Infrastructure”, I know, is the buzzword these days. Why not build roads to resources? Why not improve the airports and seaports and so on in the north? This will lead us to great wealth for not only northerners but all Canadians.
Governments should quash Bill C-300. Bill C-300, a private member's bill that was introduced prior to the government's response on the CSR question and prior to industry taking action on it, is an anachronism now and should be wiped off the face of legislation in Parliament today. It would risk politicizing the CSR issues without offering any kind of clear process for resolution. It would just tie the hands of Canadians around the world, and I think it should be quashed.
Further, government can support innovation. It was interesting to hear these other two sectors talking about innovation; I can go into it in much greater detail, if you would like. In mining, we have been forming over the last couple of years something called the Canadian Mining Innovation Council--
Thank you both for coming today. Again, as with all the presentations throughout this study, it's very interesting and enlightening to hear what's going on in the mining industry.
I'm struck a little bit by the uniqueness of the mining industry compared to others.
Mr. Baird, you used a phrase comparing mining to finding needles in a haystack, in a sense, and of course in Canada we're probably the largest haystack in the world. So there are real opportunities there, and in terms of competitiveness with other countries, one of the things you don't have to worry about when you're dealing with mining is having to compete on the basis of the number of minerals we have in the ground. We have them in the ground. They're going to be in the ground until we take them out. How we maximize that is the question.
It sounds as though there are some real issues moving forward with labour. I want to start by talking about labour, if I could, because we're in a unique circumstance where the global slowdown causes you or your organizations to reassess short-term plans. Some of those plans may involve layoffs of workers, workers who you're going to need again coming out of this.
The federal government has a program, a work-sharing program, that, to me, seems designed almost perfectly for your type of situation. Rather than lay off workers who are going to find jobs elsewhere—workers you'll need later—you can sort of share the burden amongst the workforce, have people working 80% of the time and EI topping up a portion of the difference, so that you can maintain people and keep the numbers of employees up. So when it comes time to ramp up the workforce again, you can do that.
Can you tell me if either of you know if the work-sharing program is being used, if your organization is doing anything to actively promote the work-sharing program for your organizations?
I'll pitch this to you, because you come from Sudbury, which is a totally integrated.... It is one of the four city-states of metal mining in the world. I'll tell you what the others are, if you like.
There's big-time mining and there's big-time mining supply. The Ontario Mining Association did a study, which came out within the last year, where they modelled a mine in Sudbury producing nickel and copper. The revenue of the mine was $270 million per year and it created 480 jobs working for the mine. It also created 1,103 jobs amongst mining suppliers in the upstream supply chain, and another 697 positions in the community around where the people who worked for the mine effectively went out and spent their money after taxes and savings and whatever.
So this mine in your community—it's not a huge mine, and all the assumptions were very conservative—actually employs 2,280 people. This is what happens when we find a new mine. We get that.
You ask what government can do. First of all, we've got to ensure that Canada remains a place where people want to invest in exploration and production in mining. That's a big question. The federal government has its hand in that and the provincial governments have their hands in that.
Second, innovation is extremely important to maintaining the productivity and the health and safety and environmental performance of the industry. As I pointed out in my introduction, the mining suppliers play a big role in that, the mining suppliers in your community.
Now, on top of that we can have the icing on top of the cake, because those suppliers in your community can also export their services and goods, which have been developed because you have this wonderful cluster in Sudbury. They can export to the rest of Canada and they can export to the rest of the world. But most of them are small and medium-sized enterprises. It's very difficult for them to tackle the Chinese market and other markets as traders. They need help, which comes from collective approaches, which this country is lacking. It's not money.
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I'll just add a couple of points to that. We've already talked briefly about the geoscience and the need to invest in that area, and we've talked briefly about innovation and the fact that we will be seeking money for the Canadian Mining Innovation Council.
I think in the general tax area the industry is fairly well positioned internationally. We've talked a bit about the flow-through share provisions, the ability to write off development expenses as a project is being brought along. There are some areas that can still be improved upon. We have an ongoing dialogue under way right now with Natural Resources Canada, and hopefully in the near future with Finance officials, to see if we can make some improvements.
These become very technical areas to do with things like the five-year rule and possible accelerated write-off of modernization of facilities, for example. It wouldn't be easy, but if the government could somehow develop a tax incentive for companies, not just in our sector, to invest in modernizing their facilities and somehow tie this to improved performance in greenhouse gas intensity or whatever, that kind of thing would obviously be well received and would help encourage more investment in modernizing facilities. There are many sectors beyond ours that would welcome that kind of movement.
In general, though, the tax situation is reasonably competitive. We have made some comments in the past about the need to improve the regulatory processes. It still takes too long in this country to wind a project through the regulatory approval process. It doesn't mean we want regulators to say, yes, go ahead, necessarily, but it means that we do want some answers and some direction more quickly than four or five years.
So there is a major project management office. It's a bit early to say whether it will be effective or not. It has some good people, but it's too early to tell whether it's going to be able to ride herd and bring some discipline to this whole process. But certainly that's one area to keep in mind.
Finally, on the infrastructure front, we have suggested three particular projects to the government, one of them in northern Quebec. We appreciate the fact that is going to be moving forward. The Quebec government has also stepped in to support that in their most recent budget. There are still projects in Nunavut and Northwest Territories that we think are worth supporting. We're still working on that. All three of these projects would help companies access areas that are felt to be quite promising, both for exploration and eventually to get products out to the marketplace. So I think there are some suggestions that we have in play on the infrastructure front.
There are a couple of other areas, but I'll stop there.
This is an important area, especially for an industry like ours where there is a lot of international trading and a lot of international investment.
One area we pay attention to, although not as high-profile an area as free trade agreements, involves FIPAs, foreign investment protection agreements. These are useful even if they're not used that much. They provide some guidance to foreign countries and they provide some comfort to companies that are investing in these countries. If there is a dispute, they will have some independent arbitrator and some independent rules through which they can regulate that dispute.
We welcome more FIPAs. Canada should have more of them. I think other countries have more of them. Other countries call them bilateral investment treaties. I know there's one in play with China that's been dragging on for a while. There was one signed with Peru, which was rolled into a free trade agreement eventually. We certainly welcome any government action on these kinds of FIPAs. If the one with China can be moved along, then that would be good as well.
There is also Export Development Canada, or EDC. I used to work there for several years; I'm quite familiar with the organization. It's an important organization. It's getting a bit more attention now and it has a bit more of a domestic mandate added to it. Its main mandate is still international in supporting foreign trade and foreign investment.
It's our sense, in talking to some of our members, that they can take on more risk. They have a very large balance sheet. They have their own treasury. They're a very healthy organization. They have the ability to take on more risk when working with companies; they're a bit too cozy.
One of our companies has criticized a bit the fact that they tend to reorganize too much, or their people tend to move around. So if you meet some people one day, a year from then it may be different people. I don't know if there's a way to bring a bit more transparency to their organization chart.
You can't access them, for example, through the gc.ca website, in terms of seeing their organization structure and which people are in which areas. You can't see which people are in which sector teams. It's a fairly simple suggestion, but it might be interesting to try to bring a bit more of that openness to EDC so people can get a sense of how they're organized and who's serving which sector.
Those would be a couple of comments. It's an important area, and the more effort that can be made towards FIPAs and the more impetus that can be given to EDC to take on more risk, those two things would be well received by our industry.
There was some discussion a little bit earlier about this corporate social responsibility strategy the government launched in March. Just for clarification, there are many facets of it, but one was the creation of a new Office of the Extractive Sector Corporate Social Responsibility Counsellor. That's a long title. It may not have been the title Mr. McKay wanted to put forward in his bill, but the role will be to assist in resolving social and environmental issues related to Canadian companies operating abroad. And, of course, there was also the establishment of a new centre of excellence as a one-stop shop for NGOs, companies, and others.
In that vein, I'm thinking about responsible mining practices. I think the world is demanding evidence and action on responsibility when it comes to the environment, and not just greenhouse gases, but other things. I'm interested in knowing what your organization is doing—probably this question is directed more toward Mr. Stothart—in the area of protecting Canada's reputation as it relates to that, both in terms of actions, obviously the most important piece, but also communicating those actions.
Recently we saw in a National Geographic article on the oil sands, a before-and-after portrayal of the land use, having to do with the oil sands. But what they didn't show in that article was the after, the reclamation of the land. As you're driving through into the area where the oil sands are developed, you drive through a place that looks totally undeveloped, a place where you would anticipate development. What you don't know is that it was already developed, reclaimed, and it looks as it looked before all the work was done. That wasn't portrayed, and I think that's important.
In addition to the action that's needed, which I want to hear about, I also want to hear about the communication plan for those actions so that we can make sure incorrect information isn't being sent around.
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Our industry and our association confronted these issues fairly head-on about five, six, seven years ago. There were a number of accidents and so on internationally that didn't reflect positively on the industry.
We introduced at that time something called Towards Sustainable Mining, and we certainly have a lot of information, which we include in our annual report, that we could provide to you on that.
The TSM initiative is a mandatory requirement for our members. They have to adhere to the principles laid out in it and they have to provide information every year against the criteria in TSM. As of last year, they also have to have independent verification of that information. That independent verification is typically done by accounting firms, engineering firms, and so on. The criteria in those areas include energy, greenhouse gas management, tailings management, and emergency preparedness. It's a living initiative. We are now developing new protocols in areas to do with mine closures and community consultation. So these are important areas, and companies have to report against those areas each year.
As I mentioned, we try to make this initiative known internationally in the dialogue we have, for example, with the ICMM, which is the global equivalent of our association. So we're trying to encourage these organizations to look at TSM and consider to what extent it could be applied globally. Over the next few months we will have to think about and have discussion with our board on the extent to which TSM should be applied to the international operations of companies.
I should say that we also have a community of interest advisory panel that provides advice on the TSM initiative. It includes representatives from aboriginal groups, environmental groups, the Sierra Club, and so on, and some mining people as well. That provides an outside check on community interests.
That's our central initiative towards sustainable mining, and we have a significant communications plan associated with it. It's never easy to get these messages out. I think there's always a preference for the more negative stories, but there's certainly a very aggressive effort on our part and on the part of our companies to make progress in these areas.
It's called Towards Sustainable Mining because we're not there. There's always room for improvement. There's always room to move towards more sustainable practices. And certainly those are the principles that are laid out in TSM.
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Mr. Lake, when you talk about regreening, you're welcome to come to Sudbury and see innovation at its finest. We went from a city that once had NASA come to our community to check out how you can drive around on the moon to having regreening.
You know, from playing in pits, one of the first things I recognized, the first time I went out west, was that not all rock was black. Growing up in a mining community, that's what we saw. That's all changing.
With that, I'm going to focus a little bit on innovation. We have mining and supply services. SAMSSA is the Sudbury Area Mining Supply and Service Association. As we like to call it, it's the Silicon Valley of the mining world. Hundreds and hundreds of great companies in Sudbury have the expertise: great companies like, off the top of my head, Herold Supply, Fuller Industrial, and Cast Resource.
And one of the concerns we have with Vale Inco and Xstrata being foreign-owned is that we've just heard recently, yes, they've hired more people, but right now we're losing some of their jobs, especially the buying power, if that's going to Brazil. How is that going to affect the mining and supply sectors in Sudbury and right across the country?
But going to that, I've mentioned before Dr. Greg Baiden from Penguin Automated Systems. He's creating technology that will not only help the oil and gas sector; he's creating technology so we can mine on the moon. There was just an article in the Ottawa Citizen—I would encourage everyone to read that—about his creating technology for remote controls using digital light. It's way beyond my comprehension, but it's great to watch.
So that's what I think is important for us to understand about mining. Innovation will only enhance it. It'll make it greener.
You talk about climate change and innovation in your report here. Companies like Vale Inco and Xstrata and the SAMSSA organizations recognize the importance of innovation, and Xstrata and Vale Inco so much so that they invested, I believe, $5 million apiece into CEMI, the Centre for Excellence in Mining Innovation, in Sudbury. The Ontario government has invested in this initiative as well, to the same tune. Unfortunately, we haven't been able to convince the federal government yet to invest in CEMI or organizations like CEMI—or I believe you have SMIC, if I have your anagram correct.