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Results: 1 - 15 of 22
Marta Morgan
View Marta Morgan Profile
Marta Morgan
2013-02-28 15:39
Thank you, Mr. Chair and committee members, for allowing me to provide you with a brief overview of Industry Canada’s response to chapter 6 of the Auditor General’s 2012 fall report.
Accompanying me is Mitch Davies, who is the associate assistant deputy minister of the science and innovation sector at Industry Canada.
As you know, Canada is among the leading aerospace nations in the world. Our aerospace manufacturing industry is the fifth largest in the OECD in terms of revenues. This industry generates $22 billion in annual revenues, employs a workforce of almost 70,000, and exports 80% of its output. Canada has the world's third largest commercial aircraft manufacturer and a wide range of global leaders in helicopters, landing gear, simulators, engines, aero structures, and maintenance, repair, and overhaul services.
A sustained effort over decades has contributed to Canada's success in building an internationally competitive aerospace industry. Fiscal, monetary and tax policies have established a supportive business environment. Programs provide complementary incentives to invest in research and development in order to foster economic growth and competitiveness.
No one feels the benefits more than the Canadians directly employed, often with high-skilled and high-paying jobs in everything from design to manufacturing, marketing and servicing. Employees earn 37% more in the aerospace sector than the average for all industries, and 23% more than those working in other manufacturing sectors.
As you know, our future prosperity depends on innovation. Business investments in research and development are central to our ability to introduce new and improved products, services, and production processes. Moving up the value chain is the key to succeeding in a global knowledge-based economy.
That's why the government’s science and technology strategy, which was released in 2007, focuses on using the levers available to government to encourage more private sector innovation. It's in this context that the federal government has supported the aerospace and defence sector since 1959, starting with the defence industry productivity program, then through technology partnerships Canada, and now with the strategic aerospace and defence initiative, SADI.
Many companies have benefited from SADI and its predecessor programs over the years—large companies like CAE and Pratt and Whitney Canada; medium-sized companies like Ultra Electronics Canada and GasTOPS; and small companies like NGrain and Integran.
Many countries have research and development programs to encourage innovation in the aerospace and defence sector. Like Canada, they have renewed their programs as a result of their success in supporting the competitiveness of a sector that generates significant employment, technical, environmental and other benefits to their nations.
The department is pleased that the Auditor General concluded that Industry Canada is managing its aerospace programs in a sound manner. Detailed due diligence is completed before signing contribution agreements; new projects meet eligibility criteria; claims are carefully reviewed before issuing payments; appropriate steps are taken to obtain repayments; and sufficient information is collected to determine progress against objectives.
The Auditor General’s report also made recommendations in areas where the department can improve. We fully agree with the findings and are committed to continual improvement in the following areas: We are ensuring that monitoring and reporting requirements are fully met and documented. We are continuing our best practice of including objectives and anticipated benefits in contribution agreements. We will evaluate Industry Canada’s transfer payment programs in keeping with our multi-year plan.
We have put more information on our website on SADI results and accomplishments, and will continue this practice.
We have documented our approach to monitoring and reporting on SADI projects commensurate with their risk and size.
We are implementing a plan to document that our policies, procedures and processes meet the Treasury Board policy on transfer payments.
We have amended our claims service standard to include all claims.
To sum up, I would reiterate that Industry Canada’s transfer payment programs are designed to support the strength and growth of the aerospace and defence sector. Industry Canada was pleased that the Auditor General concluded that its transfer payment programs are well managed, and we welcome the recommendations that will contribute to further administrative improvement to these important programs.
Thank you, Mr. Chair and committee members. We'd be pleased to respond to your questions.
View Daryl Kramp Profile
CPC (ON)
Thank you very much. I think it's important to put some meat on that bone for us so we actually have a measuring stick by which we're able to check progress in the future as to whether or not you're following through with that.
Maybe I'll ask a second question. Canada traditionally has been pretty good in R and D. We fall off a little in incubation, and then for commercialization we've been notoriously not as effective as we should be as a nation.
Of course, now with this particular industry, you really have the whole ball of wax here. It's important to me that we have some indication of whether or not we are getting bang for the buck. In other words, if we spend $1 million, are we getting back $1 million in return? Are we leveraging other sources of funding? Are we able to maximize our investment? Can you give us some kind of indication as to leveraging of funds versus the spending that is going out?
Marta Morgan
View Marta Morgan Profile
Marta Morgan
2013-02-28 16:02
Yes. Thank you for that question.
When we look at the SADI program, we look at whether we're getting bang for our buck on three fronts vis-à-vis the broad objectives of the program, which are innovation, collaboration, and competitiveness.
With respect to innovation, there are two measures, really. Are the companies conducting the R and D and completing the R and D projects that are the subject of their contribution agreements? To date we have 28 projects under the program, of which 20 have completed some or all of the R and D. We've also leveraged, for every dollar of SADI funding, $2 from other sources into those projects. So we are leveraging contributions from the private sector and others into those projects.
We've encouraged collaboration, because we believe collaboration is a key to encouraging commercialization and closer links between research institutes and the private sector and universities. Twenty-three of our 28 projects currently involve collaborations with universities and colleges.
The third is competitiveness and the impact of these R and D projects on the competitiveness of the companies. That takes longer to determine, because it needs for the R and D to be complete and for that R and D to be then commercialized, either as part of the production process or the products.
What we're seeing now, five years into the program, is that about half of the projects are commercializing or putting this technology into place.
Mitch Davies
View Mitch Davies Profile
Mitch Davies
2013-02-28 16:37
It would be implicit. For example, a company could receive its contribution and be expected over the 15-year repayment period to repay 155% of their total. It turns out to be a nominal repayment to our portfolio, and it more or less equates to about a 3% interest rate. What you see right there is the incentive value in the program, because the cost of capital for most of these firms would be 12% to 15%. It's very high, and R and D is very risky. That funding is being provided through our program at around 3%. It's a low cost loan essentially.
View John Williamson Profile
CPC (NB)
Thank you.
My time is running out. I want to return to Mr. Davies.
Mr. Davies, you talked about repayments that could in theory total 155% if you look at the interest, but the reality is that past programs never came anywhere near that. Otherwise, repayments would have been much higher and much, much closer to the amounts that were disbursed.
My problem is that we're falling into the trap that existed for the last two programs. You're not being transparent with taxpayers. I want to know how the department is going to respond to this report and the concerns that the assistant auditor general has that you're not meeting those requirements and that we don't end up with another program like TPC and DIPP, which were sold to taxpayers as value for money. At the end of the day, we saw that the forecasts weren't there, and the moneys were never recouped by the government and therefore the taxpayers.
Mitch Davies
View Mitch Davies Profile
Mitch Davies
2013-02-28 16:48
Mr. Chair, I think that when the government in 2007 introduced SADI the expectations established were that we would raise the bar in respect particularly of transparency around the program. I think that's the thread of some of the recommendations that we've agreed to in this AG report. It's to improve our efforts in that and we're going to undertake that.
In terms of repayment and specifically to your point, our repayment track record on SADI is going to be on the website. It's there now. Obviously, many of the entries are blank because the companies are not in a position where they owe us money. But at that point in time in the next fiscal year when first payments come due on our first round of contracts, any Canadian who wishes to know will be able to check that website and determine whether we're actually collecting those moneys. Over time, you'll have a cumulative story as to whether the goal to have a nominal repayment of the funds that have been issued under the program is being achieved.
Quite frankly, that's what we're interested in—the program, the administration of it, and the way we manage the portfolio—and certainly we'll provide that information for Canadians and parliamentarians to judge the progress against it.
View François Lapointe Profile
NDP (QC)
We understand that perspective and we do not want the public treasury to be dilapidated because of a type of dogma. I would like to see a more objective study that could provide us with the following information. If we were to extend loans over a three-year period, for instance, how many people would complete their apprenticeship in a specialized trade, and what would the impact be on certain industries, such as processing industries? What could industries produce thanks to those human resources? Are we talking about hundreds of millions, or billions of dollars? Are we sure those are not the figures we would see if we were to invest over three or four years in people who want to acquire skills?
Greg Meredith
View Greg Meredith Profile
Greg Meredith
2011-11-15 16:03
The difficulty with subsidy programs is understanding how they will be most effective.
The government has already put several programs in place. If I may, I will continue in English in order to give a more detailed answer.
We have several programs in place right now to deal with that capital problem. It's a serious one for intergenerational transfer largely because the value of farms has gone up, which means there are barriers to entry for new farmers and the debt structure they end up taking on can be a significant barrier to profitable returns. We have the Canadian Agricultural Loans Act, CALA, which provides young and beginning farmers with capital to invest in a farm. That's an innovation by this government in the last two and a half years to allow young farmers who don't have an experienced track record to have access to capital. One of the problems we heard about during the construction of Growing Forward I was that in the absence of a 10-year history of successful farming, banks were reluctant to invest in young farmers. So we try to deal with it in some measure that way.
There are several tax advantages the government gives farmers for intergenerational transfer. There's the, I believe, $750,000 exemption for capital gains, which can be used twice if there's a husband-and-wife operation. There are other intergenerational transfer benefits that allow deferral of taxes for a young farmer paying off a parent for his capital investment.
Irrespective of those changes, young farmers are still telling us there are issues, and we have to do more work to determine how to address them.
View Ben Lobb Profile
CPC (ON)
View Ben Lobb Profile
2011-11-15 16:23
Okay.
I'll move along to the advance payment program. A couple of years ago, of course, beef and pork were huge appliers for the advance payment program. Some of them asked for $400,000. The payments have been pushed out more than one time.
I wonder if you could remind the committee of when the big percentage of dollars are due. Does the department have a projection as to how many or what percentage will actually be able to be repaid? Or do they need to be extended again?
Greg Meredith
View Greg Meredith Profile
Greg Meredith
2011-11-15 16:24
The issue there was that the cattle and hog sector was hurting badly. The government put through changes to the agriculture marketing products act, which allowed us to extend what we called loans for special economic hardship, which these subsectors were in, no question. The minister has given them a couple of stays of default. If I'm correct, the cattle industry will start paying back in March 2012 and the hog industry will start in March 2013.
I don't know that we have a hard figure about what percentage will be able to repay. It's true, though, that both of those sectors are doing much better than they were during the sort of dip, the trough, when we had to extend those initial loans under the APP.
So if we have a specific forecast, I'd have to get back to the committee to let you know.
View Ray Boughen Profile
CPC (SK)
View Ray Boughen Profile
2011-10-27 12:16
Thank you, Mr. Chair.
Let me add my voice to my colleagues' in welcoming you here and thanking you for taking time to spend part of your day with us.
When we look over what happens with some of the treaties, and how they are devised and put together, some of the questions that come to mind are things like how much debt the first nations will accumulate through the B.C. treaty process, the loan-handling process. We know there are costs involved here. What are those costs like? Can you share with us what the costs are and how the money is spent?
Patrick Borbey
View Patrick Borbey Profile
Patrick Borbey
2011-10-27 12:16
Thank you.
Yes, through the special circumstances in the B.C. treaty process, the BC Treaty Commission makes the decisions, on an annual basis, on the amount of loans that are to be issued to each of the first nations. The federal government is responsible for those loans, but the BCTC is delegated or empowered to do that.
So it is an issue that's of concern in terms of the growth and size of the loans, and whether this information is always as transparent as it should be for first nation members who may not realize what kind of obligations they may be accumulating for future years.
The loans, as you probably know, are paid off at the signing of a treaty against the capital transfer. We're quite concerned when the capital transfer-to-loan ratio starts getting a little bit high to make sure that, at the end of the day, there is going to be some significant net benefit--funds out of the treaty that can be invested by the first nation in economic development, for example. In some cases, I think we're reaching a fairly high level, and we're monitoring that very closely. In a lot of cases, it's fairly low. It's still manageable, although that doesn't mean that it's not a concern.
One of the things the federal government has done is suspend the accumulation of interest for the loans up until 2014, so that there's not an added burden on the first nations while we continue negotiations. We've taken some measures there and the department is absorbing the loss in terms of the forgone interest.
In regard to the implications of the impacts, it's an issue that we're going to need to look at very closely. We are also going to need to renew our authorities in this area within the next couple of years. So we'll be coming to the government with advice on how this should be handled in the future. That's certainly a big issue and, if there are some specific questions related to the B.C. process, I can ask Mr. Barkwell to add to that, if you need more.
View Ray Boughen Profile
CPC (SK)
View Ray Boughen Profile
2011-10-27 12:19
I'm just wondering what the dollars are spent on. There seems to have been a large number of dollars spent, and I'm wondering on what.
Patrick Borbey
View Patrick Borbey Profile
Patrick Borbey
2011-10-27 12:19
The accumulated loans total right now for the B.C. treaty process is $424 million. That's across all the first nations. That's the current situation.
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