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• BASIC RESEARCH IN CANADA
• UNIVERSITY FUNDING
• INTELLECTUAL CAPITAL AND MOBILITY
• THE LIFE SCIENCES AND BIOTECHNOLOGY
• REBUILDING CANADA'S RESEARCH INFRASTRUCTURE
• CRISIS IN ARCTIC RESEARCH
• CHALLENGES FOR SCIENTIFIC POLICY IN OTHER COUNTRIES
• S&T PROGRAMS AND BASIC RESEARCH IN CANADA
• STRIKING A BALANCE
• NATIONAL RESEARCH COUNCIL - BRIDGING THE GAP
• FEDERAL S&T

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WHAT THE WITNESSES SAID

BASIC RESEARCH IN CANADA

Many people have studied the connection between basic research, innovation and the creation of wealth. The Science Policy Research Unit at the University of Sussex in Britain concluded that there are six major impacts of basic research on the innovation capacity of a country. One witness, while presenting those British research findings, also made comments of his own.

The first is increasing the stock of useful knowledge. That is also our ability to access all the knowledge that we don't produce. We produce about three to four percent of the knowledge in the world. We must have access to the other 96% or 97%. Our key to that access is to produce our own. Secondly, the training of skilled graduates. That perhaps is the only return on the investment in basic research which is available and immediately visible in the short-term. When people graduate, you know they've graduated. This is a short-term visible return on the investment and these people then enhance the capacity of the highly skilled work force. Another one is creating new scientific instrumentation. This is happening all the time in our lives. Forming networks and social interaction, a very important result and let me just underline that research was an international activity long before people started talking about a global economy. Increasing the capacity for scientific and technological problem solving, a very important capability bearing on the competence of society. And creating new firms. This is the sixth impact. Thomas Brzustowski, NSERC

The Committee was told that research can contribute to increased productivity and is essential to innovation. Genomics, for example, can identify crops that grow faster or that are more resistant to pesticides, as well as breeds of fish or trees that survive better or live more easily in certain climates.

Investment in health research, including biotechnology, offers a double-bang for the buck. Firstly, we get the increased productivity in health industries; and secondly and most importantly, we decrease productivity losses, resulting from the fact that Canadian workers will be healthier. They'll be healthier through health research, because that reduces the economic burden of illness. Barry McLennan, Coalition for Biomedical and Health Research (CBHR)

There is little doubt as to the value of publicly funded research. A study conducted on behalf of the National Science Foundation in the United States reveals that 73% of the papers cited in United States patents were the result of basic science that was heavily funded by public agencies. The study concludes that publicly supported science is the driving force behind innovation and high technology industries. It further concludes that industrial dependence on public sciences is growing rapidly as innovation becomes increasingly driven by advances in scientific understanding.

In Canada we rely more than the United States on university research to meet our knowledge needs. Thus, investment in public science is even more likely to pay off for Canada. Robert Giroux, Association of Universities and Colleges of Canada

The notion of investing in research is considered to be an important shift in the way research is viewed in our society. One witness spoke favourably about a proposed piece of American legislation.

It is a bill to invest-and I underline the word invest-in the future of the United States by doubling the amount authorized for basic scientific, medical, and pre-competitive engineering research. The words are key. Thomas Brzustowski, NSERC

UNIVERSITY FUNDING

The Association of Universities and Colleges of Canada quoted a study that university research is responsible for the production of an estimated $76 billion worth of goods and services, over 10% of Canadian GDP, as well as for sustaining more than 1 million jobs in Canada. The return on the investment in research, it was argued, is very large-in fact, far greater than the returns on investment in standard capital goods or civic infrastructure. This witness felt that unfortunately, the Canadian track record is not as good as the American commitment to funding public science.

A couple of years ago, the Canadian Institute for Advanced Research did a study that tried to project what increasing spending on research and development by 1% of GDP would do over time. In 1997, witnesses mentioned that R&D spending levels in recent years were at about 1.5% to 1.7% of GDP. If Canada was to increase spending on R&D by 1% of GDP over a period of five to ten years, its R&D effort would be equivalent to the better G-7 countries. The witnesses said that this would result in a large increase in our future standard of living.

I think that kind of result is what is stimulating, because this was based on data and approaches that are happening in other countries, because Canada was compared with other countries in that study. It results in the kinds of things.... For example, I heard yesterday that a bipartisan bill is being seriously considered in the United States Congress by both a Democratic senator and a Republican senator to double the public investment in research in the United States in ten years. It's exactly that kind of thing that is important. Robert Giroux, Association of Universities and Colleges of Canada

The biotechnology sector is one of the many key areas of research where the Committee heard that university research must be strengthened.

Biotechnology is truly a science-based activity. As Dr. McLennan said, health care accounts for 87% of the R&D investment by industry. DNA-based technologies represent by far the most important technologies, especially in many of the products that are currently being developed. Within this category, the development of bio-sensors, the use of gene therapy, and bio-informatics and genomics are the areas that are seen as coming up very quickly, again from an industry perspective.

So what are some of the implications of our report? Canadian research in the life sciences over the last few decades-and it does take a long time for this work to come to the point where it can be applied-has provided the basis for much of the Canadian biotechnology activity. Canadian researchers are also recognized throughout the world as being among the best around. All you have to do is look at how quickly our post-doctoral people are soaked up in other jurisdictions.

The research base in universities must be strengthened further. Universities provide a major role, not only in R&D alliances, but in providing specific expertise that companies cannot maintain in-house. Support for the research base in our view is best provided through existing agencies: the research granting councils, the Canada Foundation for Innovation, and the planned Canadian Institutes for Health Research. Paul Hough, BIOTECanada

The issue of insufficient grants and funding for important research remains a problem.

If you have an academic, someone who writes grants, in your family, you'll know they write grants all the time to get money.

We do have ambitious goals. The goals of a Canadian scientist are as ambitious as the goals of a United States scientist, but when you're applying for money, you tend to, knowing that the funds are less, try to undercut what the actual cost of the product is. You get the grant back and it's been cut a further 30% to try to get as many grants as possible. So the actual amount of money coming from a grant, if you're successful-if you're in the top 20% of grants that actually get funded-is still a 30% or 20% cut from what you asked for.

A lot of young investigators struggle to get their first grant. For the first two or three years, they're supported by the university and get fed up because of this difficulty. It's the difficulty in actually getting started that... It's just greener on the other side, so they make the decision to go to the United States Thomas Hudson, Genome Canada Task Force

The Committee heard that the number of students in the natural sciences and engineering is increasing and the need for support for funding in research in this area is increasing correspondingly. This trend is in marked contrast with some of our major competitors.

In 1986-87 the total number of students in the natural sciences and engineering, that is in engineering, mathematics and science, in Canadian universities was 93,000, about 23.8% of the total university enrolment. In 1996-97 that number is 110,000 at 23.6% of the university enrolment.

Our university enrolments are rising, the percentage of students in the natural sciences and engineering is keeping steady and the numbers are increasing. They are increasing most rapidly in the biological sciences and agriculture, they are keeping pretty steady in mathematics and the physical sciences and they are increasing modestly in engineering.

For reasons which we are very proud of and don't quite understand, our enrolments in science.

I have been told there is a perceptible loss of interest in and support for science and technology among students in the United States, France, Germany and England. Thomas Brzustowski, NSERC

Not only is the number of students increasing, but the Committee learned that Canada was facing a challenge with the increase in the number of university professors.

Now we have a new problem, a problem for me but a good thing for the country - the increase in the number of professors coming in who are prepared to conduct university research. . .But then I look at the Canadian situation and see that the number of students in key areas is much better than the situation elsewhere. Thomas Brzustowski, NSERC

The Committee learned that the indirect cost of doing research can reach up to 40% and this situation is causing problems for universities. The CFI noted that the increased infrastructure it is helping to finance may deepen the problem of insufficient operating grants and non-capital operating costs.

We have to admit all the same that our problems persist. The indirect costs keep on causing difficult problems for universities. The indirect costs are about 40 per cent of direct costs, not counting professors' salaries. There is a big difference between our system and the American system, where direct costs are included in the grants, and this is still a problem. Thomas Brzustowski, NSERC

The special nature of university education was also discussed.

Most of us look at universities as places to prepare people, not only to think and give them experience in certain areas but also to adapt to changing circumstances. Anybody coming out with a Ph.D. in organic chemistry or in physics or any of the social sciences is going to be out of date in about four or five years, if not sooner, from the straight technical point of view. So these people have to have the skills, the abilities and the aptitude in order to change and move with their particular area of expertise. The university is not the same and shouldn't be looked upon in the same way as a community college, for instance. It has its own functions. Paul Hough, Canadian Consortium for Research

Witnesses suggested avenues for government intervention in order to help solve the challenges of commercialization.

To me the major impediments are the ability of the universities-and it is uneven, some universities have more resources than others-to be able to have the necessary capacity to identify, as I said previously, to identify the potential for a research product, and secondly being able to move that product to the marketplace. That's one major impediment, and it requires resources. It requires the right kind of people. It requires a good knowledge of the market potential. The second major impediment is the ability of the firms themselves, the private sector firms, to be able to receive that research and commercialize it themselves. That's why so many spin-off companies are in fact taking place, because that's the only solution of doing it. There is not a receptor out there that's able to do it. That's another major impediment. The question of resources in our view is that the base budgets of our institutions have got to be stronger so they can put more attention and more resources toward that end. Robert Giroux, Association of Universities and Colleges of Canada

Some witnesses were keen to point out that the social sciences could also produce research with a commercial component.

I think another impediment is that we often think of this process only in terms of the natural sciences. We don't think of it in terms of the social sciences. I'd just give you two very brief examples. One is at the Canadian Psychological Association's most recent conference we had a panel on neurological testing of all athletes - the NFL's-you may be aware of that. That's a partnership with industry that moves neuroscience through neuropsychology into the marketplace. It's very important. Another was there's a small company in southern Ontario now that does all of the training for two American states in terms of their prison staff, with tremendous downstream positives. And it's those kinds of social science-industry partnerships that can be very effective as well. John Service, Canadian Consortium for Research

The Committee heard that the social sciences and humanities are hampered in their attempts to create partnerships with industry by the current restrictions on the R&D tax credit.

I think increasingly the social sciences and the humanities also, maybe to a lesser extent, are increasingly looking at all kinds of partnerships for the humanities and social sciences. But with industry, social science is increasingly interested in doing this type of research. And one thing nothing has hindered over the years is the fact that there is no R&D credit for social sciences in the matters of research. I mean it's specifically excluded. I think this is a role that was developed in another era. Things have changed. Things are changing increasingly. So it's maybe something that this committee would want to look at eventually, but the issue of accessibility to the R&D tax credit to encourage industry to fund and partner with social science researchers. Marcel Lauzière, SSHRC

There is an increasing trend for universities to develop industry liaison offices or to find ways and means to commercialize their findings. Witnesses mentioned that because knowledge transfer is a major challenge, it is not happening evenly across the country.

It all starts with basic research, and an ability to understand the potential of the basic research to eventually be marketed. But it's more than understanding the potential. It's being able to do it, being able to know where to go, how to do it. There are a number of ways. There are patents. There are companies that are being spun off. There are arrangements that can be made with private sector firms. And there again in Canada we have a very large number of small and medium-sized enterprises who don't necessarily have in their own staffs the capacity to take that invention and develop it further. So we have weak in links in the system. Robert Giroux, Association of Universities and Colleges of Canada

Witnesses also identified problems in the capacity of the private sector to absorb the research and develop it. The Committee was told that, although Canada is still behind the United States, it is likely that Canada could considerably increase its ability to commercialize.

The Committee also heard from the Canada Foundation for Innovation and the National Research Council that another factor affecting research in Canada is a branch plant mentality.

I think in order to understand it you have to understand the structure of Canadian industry. It does have a large number of branch plant operations in which multinational enterprises are active in Canada but not investing in R&D here because they do it at their home base. That's one of the problems. Now it is true that industrial investment in R&D is increasing. It has been increasing for a number of years. That's both at the small company and the larger company-on the large company scene. I think the key is, though, that we're going to have to grow in Canada. We really want a strong industrial base and we want to have companies which invest very heavily in medium and long-term research as part of their investment. Arthur Carty, NRC

INTELLECTUAL CAPITAL AND MOBILITY

The Committee heard that critical factors necessary for attracting global biotechnology investment to Canada are establishing and maintaining a competitive regulatory environment, and having a cadre of qualified biomedical scientists available. The skill of human resources is crucial to the knowledge industries rather than the traditional capital and production costs. Witnesses said Canada must ensure that it is training an adequate number of biomedical scientists in this country and keeping them here.

To ensure that there is a cadre of qualified scientists in this country, brain drain must be turned into brain gain. Barry McLennan, CBHR

The CFI noted that stemming the brain drain would involve improving researchers' compensation, lowering tax rates and providing them with the tools to fulfil their potential.

It seems to me there are two conditions for keeping these bright talented people in the country or bringing them back to the country. The first is compensation and tax, and that does need to be looked at. The second is providing them the tools and the capacity to deliver their potential. And when I said earlier what I'm hearing from the young people is with this particular piece of equipment or with this particular facility or whatever, I'm going to be able to do my very best work and I can stay in Canada. David Strangway, CFI

The Committee also heard that Canada can and does sometimes to reverse the brain drain.

The world is a place where people are very mobile these days, and it's interesting that we are starting to see examples of good people being recruited into Canadian industry and into Canadian universities from other places in the world, even at senior levels and even from the United States, if one provides the conditions for them. For university researchers and university professors, the conditions are determined not so much by salary, not so much by marginal tax rates, but the opportunity to work with good people, in a good lab, and get the work done for which they will become famous or well known. ....

I just came from a meeting of the Canadian Institute for Advanced Research in which a number of our country's best researchers, the very best, presented research results. A number of them were immigrants from the United States. The flow is not just in one direction. Thomas Brzustowski, NSERC

Other elements that affect mobility are both the funding opportunities available to a person interested in pursuing research to complete a Master's or a PhD and the ability to study with top flight researchers. Regrettably the downturn in university funding also reduced the level of scholarship funding.

[The] SSHRC is able to finance maybe 5% or 7% of the demands for scholarship because it's budgets are narrow. . . . [I]t's a question of more funding and ability to do more because I think it's by doing more that you will increase the possibilities of innovation. Robert Giroux, Association of Universities and Colleges of Canada.

THE LIFE SCIENCES AND BIOTECHNOLOGY

Biotechnology is a strategic industry pervasive in multi-faceted components of the Canadian economy (medical, agriculture, food, forestry, and environment) generating a 20% per annum increase in sales and exports of biotechnology related products. The witnesses explained the importance of setting the stage for Canada to continue as a world leader in biotechnology.

Biotechnology is rapidly emerging as one of the most important technologies of this century and is expected to have a major impact on our daily lives for the next several decades. Canada has the potential to become a world leader in this biotechnology revolution.

Biotechnology is what is referred to as a strategic technology. It cuts across many sectors of industry, including health care and agriculture. It's interesting to note that in absolute numbers, Canada ranks second only to the United States in the number of companies using biotechnology.

The recent BIOTECanada report-and I'm sure Dr. Hough will elaborate on that report-confirms that the health sector dominates activity in all aspects of biotechnology, comprising 46% of the companies, 87% of the R&D investment, and over two-thirds of the employment in that sector. Barry McLennan, Coalition for Biomedical and Health Research

BIOTECanada is a technology use group, composed of firms and groups that rely on or produce biotechnology. Its objective is to provide a unified voice that fosters an environment responsive to the needs of the biotech industry and research community. A recent report partly sponsored by BIOTECanada showed that Canadian research in the life sciences over the last few decades has provided the basis for much of the Canadian biotechnology activity. From this study it appears that Canadian researchers are recognized throughout the world as being among the best. In addition, the report finds that the research base in universities must be further strengthened. Universities play a major role, not only in R&D alliances, but in providing specific expertise that companies cannot maintain in-house. The best way to support the research base is by increasing support for the existing agencies: the granting councils, the Canada Foundation for Innovation, and the planned Canadian Institutes for Health Research. The regulatory system in Canada has a strong impact on the biotech sector. It is extremely important that the regulatory agencies have a strong and up-to-date science base so that they may regulate effectively and efficiently.

The biotechnology sector informed the Committee of some issues facing many areas of scientific research, notably the brain drain and a good regulatory environment.

The first issue is global R&D investment. Foreign direct investment has always and will continue to play an important role in Canada's economic development. In 1996 the Conference Board of Canada report indicated that Canada's ranking in world FDI inflow to this country fell from third to eighth during the period 1988 to 1994.

Two critical factors are involved in attracting global biotechnology investment to Canada: number one, establishing and maintaining a competitive regulatory environment; and number two, having a cadre of qualified biomedical scientists available to do research in Canada. There's a change here. What is important in this sector is the availability and skill of human resources, rather than the traditional capital and production costs. This is a whole new environment.

To create a favourable environment for biotechnology in Canada, CBHR recommends: number one, that a separate agency outside the Health Protection Branch be established to undertake approval reviews for biotechnology products; and number two, that the Patent Act be revisited with respect to harmonization with the intellectual property laws of our international competitors and the introduction of patent term restoration mechanisms similar to what's employed by our competition in the European Union, the United States, and Japan.

To ensure that there's a cadre of qualified scientists in this country, we must turn brain drain into brain gain. I submit that the establishment of CIHR, as announced by the government in February, will help us accomplish this goal.

To me it's absolutely sobering to realize that the churning cost of the brain drain in this country is estimated to be $560 million a year. If we could reverse the brain drain in this country, that one item alone would pay for CIHR in its entirety per year. It's absolutely amazing.

I'm confident that the establishment of CIHR will help reverse the brain drain. But we must do more than that. We must make sure we're training an adequate number of biomedical scientists in this country and keeping them in Canada. Barry McLennan, Coalition for Biomedical and Health Research

The Committee had also heard the call for enhancing regulations in biotechnology from the National Biotechnology Advisory Committee on May 5, 1998. The Industry Committee sent a letter with its preliminary conclusions to the Minister of Industry. In this letter, the Committee noted that Canadians place a high priority on ensuring that health and safety standards are maintained in any streamlining of the regulatory system. The Committee also indicated in the letter that "many Canadians will want to keep open a debate on the impact of regulatory changes proposed by the National Biotechnology Advisory Committee. . ..[T]he Committee believes that the government should go further than the NBAC proposal to include health, safety and regulatory issues in a new Advisory Council mandate."

A further serious impediment to the development of biotechnology related products in Canada is the inability to develop a product from the bench to the market place.

There are lots of examples where people in Canada will develop research, take it to the point of commercialization, move it to the U.S. operations, and have it commercialized from that base, instead of the Canadian base. We lose, and we lose again and again. There's a reason we keep losing, and if we don't address it, you won't build the industry. So now that you sort of get a grasp that this whole industry is built on partnering, the key in the long term is to build as many companies that have that ability to take products as far into the development cycle as possible.

What we hope in the future then is that we can take those companies that are the success stories¯and they don't need a partner for their second or third products. Their second or third products can be built on their base, on their international marketing capabilities, on their ability to develop true world-class competitiveness, in which case we don't share the opportunity; in fact we own the opportunity. I know that in my organization we talk about sharing our first product. We talk about owning the balance of them.

So we have to think of our intellectual property in this country as a resource, the same way we did with forests, the same way we do with mining. The only difference is that instead of shipping out lumber, we have to ship out furniture. In our case, we have to ship out a finished product, or as close to a finished product as possible, if we're actually going to generate any real return to our country. Richard Glickman, National Biotechnology Advisory Committee

Central to this issue is the current tax structure in Canada that does not provide sufficient incentives for companies employing long-term product development strategies. Specifically, NBAC recommended a reduction in capital gains taxes and improved tax credits for R&D.

Biotechnology is the enabling technology of the last part of the century and genomics is the new vehicle for biotechnology. The Committee was told that Canada is extraordinarily well positioned to take advantage of the genomics revolution.

As a matter of fact, we are very near to the front seat right now. . . . Fortune has put us there. Good management and good planning and some resources will keep us there. I hope that in the fullness of time and in the wisdom of groups such as this, we may in fact receive the kind of backing that is appropriate. Jim Friesen, Banting and Best Department of Medical Research

Genomics is not just part of the health sector or the agriculture sector. It crosses different fields. It was suggested that Canada is not creating an environment which will sustain large cross-boundary initiatives. Fragmented funding has made it difficult to establish a series of genome centres that could perform operations such as sequencing, geno-typing and proteinomics which have a very high overhead cost. These technologies are not economic for small companies to perform in-house.

If everyone is for genomics, why isn't it happening? We think one of the barriers is the fragmentation of funding sources. If investigators at universities want to start doing genome research, they have to apply at one place for infrastructure, one place for personnel, one place for the scientists' salaries, and another place for the programs. That is a hindrance to getting big initiatives off the ground. . . Also, genomics doesn't belong just to the health sector or just to the agriculture sector. It crosses different fields. The way science funding happens in Canada, we fund just engineering or just biology or just medicine. We are not creating an environment to make big initiatives that cross boundaries. Thomas Hudson, Genome Canada Task Force

The Committee heard that additional support for genome research, which has enormous potential applications, had already been requested.

Through the memorandum to cabinet. . . we asked in the last budget for $500 million over five years. . . But we're looking at perhaps between five and 15 genome centres in Canada, which could each need $10 million in infrastructure and $5 million a year to continue. . . I would hope that, as the Industry Committee, you would recognize that it's important to create a genomics industry in Canada and that there's a tremendous growth potential. I would also hope that that awareness could be translated to government levels when talking about money. Thomas Hudson, Genome Canada Task Force

Witnesses suggested it would be beneficial to bring multinationals to Canada, specifying that some multinationals such as Novartis and Monsanto might be more attracted to come to Canada and to invest in genomic plant R&D if they have access to the genome centres to perform the expensive technical DNA sequencing operations. It was also mentioned to the Committee that there are very small core genomics companies, such as Algène. About a dozen have started in Canada or maybe more, and they also need access to genome technology centres.

The Committee was told that venture capital firms, such as GeneChem, BioCapital, CMDF and MDS, have up to $100 million to invest in genomic companies, but that most of this money is drifting to the US. According to witnesses, Canada has not created the right environment to attract investment.

REBUILDING CANADA'S RESEARCH INFRASTRUCTURE

The Committee received an update on the progress of the Canadian Foundation for Innovation (CFI). The CFI was created in 1997. The mandate of the CFI is to increase the capability of Canadian universities, colleges, hospitals and not-for-profit institutions to conduct important world-class scientific research and technology development. This mandate will provide young minds with the tools they need to grow and develop and make their own contributions to their country and to the world.

Four strategic mechanisms support the policy of the CFI:

(1) the institution innovation fund is directed toward strengthening research infrastructure;

(2) regional-national funding mechanisms designed to encourage institutions to join in regional or national consortia and to cooperate in the acquisition and development of large infrastructure;

(3) the opportunities mechanism provides infrastructure to support staff necessary for the development of researchers entering their peak years of productivity; and

(4) development of smaller universities to sustaining their vital role as innovation leaders in Canadian communities.

Thus in contrast to the granting agencies (NSERC, MRC, SSHRC) which fund people, the CFI mandate is to provide the infrastructure essential to the development of research programs and initiatives.

These investments are directed to the areas of health, engineering, science and environment.

According to the funding formula stipulated in the Act that created us, the CFI injects up to 40% of the capital costs of infrastructure projects with the other partners I mentioned providing the remaining 60%. There is no question that we are responding to an urgent and considerable need. We had earmarked $400 million for the initial competition in 1999 but when we put out our first call for proposals that went out in 1998, the demand far exceeded our projections. . . . [W]e received some 800 applications totally close to $3 billion of which the CFI's share would have been $1.2 billion in the first year alone. . . . [T]he CFI will have invested $480 million in research infrastructure, and coupled with funds from other partners this will result in a much needed infusion of $1.2 billion for capital research infrastructure in Canadian universities and research institutions. David Strangway, CFI

The Committee learned that the matching funds were from the private sector as well as the public sector.

Roughly speaking, it looks as though it's going to turn out to be 40 CFI; roughly speaking it'll be 40% from the individual provinces and roughly speaking it'll be 20% from the private sector. It's not quite as simple as I've described it and it varies in projects. But it's roughly on a 40:40:20 basis. David Strangway, CFI

The CFI funding is divided into several categories with the largest being for innovation capital research infrastructure in Canadian universities and research institutions. The other categories include funds set aside specifically to meet the needs of smaller institutions and funds dedicated to helping new research scholars establish their careers.

Basically what's happening with the small institutions is we set aside a goal of $40 million of our share and we said that you could compete for this. We then said, looking at the size and the scale of each institution, that there's an envelope that's set aside for each of the smaller institutions. They then had to submit proposals which would be against this known envelope and in some cases, they have submitted enough proposals that are good enough that they have all passed and they have in fact, used up their allocation.

New Opportunities was to assist young or new faculty members who are being brought into the system in Canada and the idea was that many of these people have a great deal of difficulty in acquiring the facilities they need to do whatever it is that they're very good at, in effect. So we have set aside a fund which was up to $40 million in the first round. We have supported 213 projects coast to coast involving 400 new scholars. David Strangway, CFI

The Committee also heard that the purpose of the Foundation is to help new innovations by funding the necessary facilities. The witness described to the Committee the type of submission that would not be approved.

Well let me give you a generic example of a kind of a project we turn down. There have been a lot of requests for buildings. Building needs are very serious on campuses. We all know that. They haven't had the funds in the past two or three decades to properly refurbish or create facilities. Let me give you a for instance. For instance, suppose we have two proposals. One says we need a new building, but the building is really to replace an old facility where the roof is leaking and there are problems with it but we're going to keep doing the same things. And suppose there is another building in which the people are coming forward, they say we need new space because we have new faculty members, we have new positions coming on stream. We've got a whole say of bringing people together to do things differently, and by the way, to do this, we need a new building. David Strangway, CFI

CRISIS IN ARCTIC RESEARCH

The Committee was informed of the crisis situation for research in the Arctic and of the importance of considering fundamental Arctic research as essential for renewable resource management in the northern communities.

The university community in Canada considers that there is a crisis in Arctic research. Peter Johnson, Canadian Polar Commission

Concerns related to the support of renewable resource management were exacerbated with the recent findings reported by the Auditor General in May 1999. The Auditor General warned of the overwhelming need for scientists in government and indicated that we are losing both young and experienced scientists.

With respect to northern science, universities are needed to train those northern scientists, and yet we're seeing a major decline in the ability of the universities to deliver those scientists.

One of the major problems is that there is a large cohort of Arctic scientists who are getting close to retirement. Within the next five to ten years we will be seeing a massive retirement of northern scientists in the universities, and universities are not making the commitment to replace in northern science fields. . ..

And a message that came through quite clearly in the last few weeks, during a consultation process I held, is that fundamental Arctic research is absolutely essential to support renewable resource management by our northern communities. Peter Johnson, Canadian Polar Commission

In addition Arctic research was seen as necessary to maintain our leadership in some areas of cold regions technology, and to ensure sustainability during the development of arctic resources. Witnesses argued that if Arctic research was an appropriate part of the Northern education system it would increase employment and entrepreneurship opportunities. The Committee was reminded that the only university in this country that has a mandate for northern studies in its charter is the University of Northern British Columbia, although about four or five other universities have fairly strong northern programs.

Another element raised relates to the importance of contributing to major world research projects. Other circum-Arctic countries and other countries with an interest in the Arctic, are making major investments in Arctic science. The United States is making major investments in logistics and science funds. Norway, for example, is heavily investing in its new Polar Environment Centre. And, with the exception of Russia, it is possible to find examples of strong Arctic research in every other circum-Arctic country and in many of the other European nations.

At the present time we are falling way behind other circum-Arctic nations in this respect. Peter Johnson, Canadian Polar Commission

To improve Arctic research, witnesses suggested: a commitment by government to Arctic science similar to that existing in the United States Arctic Research and Policy Act; to continue to upgrade Canada's support for the Polar Continental Shelf logistics organization; and to develop infrastructure and training opportunities in the North. The Committee did however hear that the situation for Arctic research was being examined and hopefully the funding situation will be rectified.

At the moment there is nothing in the granting councils that specifies northern ecosystems or anything of that sort. But the fact that we have this NSERC-SSHRC task force is a very positive sign.

We also need effective coordination of government research and monitoring. I'm glad to say the Northern Science and Technology Committee, the ADMs' committee, is becoming more and more active in this respect and is another positive sign. Peter Johnson, Canadian Polar Commission

CHALLENGES FOR SCIENTIFIC POLICY IN OTHER COUNTRIES

There are key policy issues for basic research. One American expert explained that collaboration between government and industry, for example on government-supported research in universities, had, by and large, been a tremendous benefit for both sides. However, he indicated that in key areas of software and in biotechnology, Americans are being faced with major questions about an increasingly strong intellectual property system that fences off from the public domain key results normally thought of as being basic science. In the past these results would be made universally available to maximize the chances of wide and sucessful application.

As with the question of the ability to support research universities, the question of the limits of intellectual property, particularly with public funds, is going to be a major challenge for the United States. Claude Barfield, American Enterprise Institute

Another issue that is also related to research and training is the balance between basic research and the so-called applied research and demonstration. The Committee was informed that the United States is heading for a tremendous imbalance in basic research. Part of it is legitimate in the sense that this is one of the most exciting times in contemporary history and in contemporary science for biomedical research and biotechnology, with the breakthroughs in genetics. However, part of it is illegitimate because the Americans also spend a lot of money at NIH influenced by very powerful lobbies.

If you look back at the history of science an the history of innovation, you will see one area cannot get too far out ahead of the other without creating problems. So down the road, the fact that we are not putting as much money into, let's say, physics, chemistry, geology, astronomy, or some other seemingly wholly out-of-the-way science discipline, will come back to haunt us. It's one of the problems the United States has not really faced up to yet, and must. Claude Barfield, American Enterprises Institutes

Another American expert identified policy issues concerning public sector support for basic research. In particular he recognized that pressures from lobby groups have an impact on politicians and decision-makers. As well, he explained that public support for policy elements is an important factor for decision-making in a democracy.

The obvious issue is how much one should spend in the area of basic research. . . The second issue is the quality assurance-in this country , as in many others, we rely primarily on peer review to do that, although we have not worked out all the bugs in that. (Third is the) issue of how to coordinate related areas of basic research across agencies, which are often very turf-conscious-some recent organizational innovations in this country have tried to address that, with some degree of success. (Fourth is the) issue of how well articulated , in a national sense, the federally funded basic research is with other kinds of R&D or innovation activities. (Finally is the) issue of public support-in a democracy-Is basic research supported by the public? In the United States that tends to be true. Stephen Nelson, American Association for the Advancement of Science

Britain has a variety of detailed mechanisms for creating new sources of partnership funding, with matching funds from industry and from government.

In the recent interim budget, the Chancellor has created, at the level of about £50 million, a new university challenge fund, which is particularly targeted for venture capital of relatively small amounts. It's a £50 million fund-a partnership between government, industry, and the university sector-for venture capital proposals worth less than £1 million. Due diligence and care responsibility of funds in the city mean that in Britain we have difficulty with venture capital projects of less than about £1 million, and this new project is, again, a deliberate design to try to cater for starting up on a small scale adventurous things. Robert May, Chief Scientific Adviser for the UK government

Countries such as Germany, Japan, Australia and the UK have established foresight exercises to think systematically about important developments that may lie in the future.

Britain has a foresight exercise that is defined very broadly, going right across all of health, and life sciences, through aerospace and defence, through to food and drink, retailing, transport, finance. Robert May, Chief Scientific Adviser for the UK government

The UK Chief Scientific Adviser explained that his role is to look at all government spending on R&D in science, medicine, and engineering; to ensure the strength and innovation of the British scientific process; and to translate new knowledge and trained people into business and industrial strength.

This position is designed to bridge the gap between people from academia, government, business and industry, thereby facilitating partnerships and the funding of basic and practical research. As explained the necessity for this position is even more pressing given the financial constraints currently facing government funded research in Great Britain. This position is viewed as the catalyst to ensure that alternative sources of funding are available to sustain the innovation process in Great Britain.

As well the role of chief scientist is to offer advice in the development of government policy, and to proceed in a proactive role in coordinating the multiple branches of the British Scientific Arm.

Great Britain has a new set of guidelines to be used as protocols for science advice in policy-making, and there are committees of chief scientists or their equivalents in all government departments, which meet regularly under the chairmanship of the UK chief scientific advisor to coordinate across departments.

S&T PROGRAMS AND BASIC RESEARCH IN CANADA

There were several government initiatives discussed. The Committee was told of the 1999 Budget measures to establish the Canadian Institutes for Health Research (CIHR). It is to help ensure that there is a cadre of qualified scientists in Canada. The Canadian Institutes for Health Research is an initiative to launch a virtual network of research centres. Some felt that Canada must do more.

The last two federal budgets have started Canada happily on the road to recovery, on the road to restoring an internationally competitive level of funding for biomedical, clinical, and health research. This funding must be sustained. Barry McLennan, CBHR

Technology Partnerships Canada (TPC) was partly designed to support enabling technologies, and many see biotechnology as a major area of new enabling technologies. In the last three years, TPC has supported 70 projects of which only two are in the biotechnology sector. The last budget announced enhanced funding for TPC.

The National Research Council (NRC) was described as the government's most dynamic and diverse public instrument for innovation in Canada. It was also suggested to the Committee that the NRC has a role to play in closing the innovation gap that separates new knowledge from application.

Quite simply, NRC is the government's most dynamic and diverse public instrument for innovation in Canada. Arthur Carty, NRC

American experts had some comments to make on the centres of excellence in the United States.

We have had an explosion of research universities in the United States, and it continues to go up. At some point we are going to have to begin to decide among those universities, it seems to me-and this could be highly controversial-as to whether we begin to move towards centres of excellence, because I am not sure public support will sustain the kind of willy-nilly, growing-like-Topsy support we've had in the past. Claude Barfield, American Enterprise Institute

STRIKING A BALANCE

The granting councils told the Committee it is important to consider basic research policy challenges with a goal of striking a balance in science and research activities.

The funding pyramid base relies on basic research.

These pyramids are what some would call simplistic, but they're a nice way of explaining what the research effort is. Each pyramid is, in a way, a field of inquiry. Let's say it's health, immigration, or family violence. At the extreme top of the pyramid, where there's a big dot, there's either a policy, a reorganization of services, or a product.

The idea of these pyramids is to show that the research enterprise has all kinds of aspects to it. At the bottom of the pyramid is what we call curiosity-driven research. It's research coming out of what people in universities-but it could be outside-have as key problems to address with specific methodologies, and so on. That kind of work is a high-risk investment. It doesn't always get results, and it's best done in universities.

Then the next layer up, the next tier in the pyramid, is what in our jargon we call strategic research, or long-term, pre-competitive, applied research. There are all kinds of words to indicate this.

The third layer is quite different. It's more R&D in the limited sense of the words "research and development". What it drives to is more directly focused, policy-relevant research.

Finally, at the top of the pyramid, I present a little triangle, which indicates in fact that governments have to develop the receptor capacity in order to get this knowledge to be used in policy development. Similarly, human service organizations, need to have the receptor capacity in order to capture the various research results. Marc Renaud, SSHRC

The Committee was told that the NRC would need additional resources from the next budget round in order to be a key player in community and regional innovation right-across the country and to bridge Canada's critical gap between knowledge and application.

After four years of declining A-base support for R&D at NRC it was gratifying to see a turnaround and even a modest reinvestment in our laboratories and infrastructure. While we did not get what we asked for and we are very disappointed that none of our strategic initiatives were fully funded, we look on the small raise in funding as an initial shot in the arm and a promising down payment for the future. We hope that this year's budget provides NRC the necessary resources to be a key player in community and regional innovation right-across the country and to bridge that critical gap between knowledge and application. Arthur Carty, NRC

The last budget introduced the CIHR which has an economic mission as part of its mandate. The Medical Research Council (MRC) explained that this is a very innovative approach to health research. Now the CIHR starts off with that mandate to promote economic growth and job creation by encouraging innovation as a fundamental and legitimate part of what it does. This sends a signal to researchers, to university administrators, to health professionals, and to various stakeholders in the health research enterprise, that economic objectives are a legitimate central pursuit of this new initiative, not an afterthought. However, the Committee was also told about barriers to industry-university partnerships.

It may come as a surprise to some of the members of this Committee, but there are still some who oppose efforts to promote partnerships with industry. It's surprising in this day and age, but there still is an undercurrent of resistance. And I think in starting off with this in the Charter, we will go to great lengths reducing that resistance. And this Committee, I would think, would be very helpful in keeping us on track at that core objective. Marc LePage, MRC.

Witnesses provided examples of major discoveries resulting from human sciences research that caused profound changes in people's lives. The Committee heard that there could be a higher value placed on work in the social sciences.

When we look at the work that has been accomplished in human sciences over the last few years, we realize that this work has brought about a tremendous number of discoveries, but these discoveries nevertheless tend to be forgotten. Take, for example, the economic theories of John Maynard Keynes, the impact of the existentialists' philosophy on life and our place in the world, the impact of psycho-analysis, the game theory and the various factors that contribute to one's good health. These are all areas where extremely important discoveries have been made, bringing about profound changes in our lives. But we tend to forget that these discoveries have resulted in changes and that they are based upon research in human sciences. . . The SSHRC is an organization that, like the other granting councils, finances university research in a wide range of areas. The SSHRC represents 55% of university professors of Canada and 55% of the graduate students. We're sitting basically on the gold mine of Canadian universities. Yet we have only 12% of the funds going to the granting councils at the federal level. Marc Renaud, Social Sciences and Humanities Research Council

It was suggested to the Committee that allowing social research to be eligible for the R&D tax credit could help improve the chances for partnerships to be formed.

The Committee was told that innovation is not reserved for science and technology. To have a society that fosters innovation in its widest sense, it must include the social sciences and the humanities. One proposal was to adjust tax breaks to include this widest definition of science innovation.

One thing that the social sciences and humanities have looked for, for a long time, this is an issue that has been taken up for at least ten years that I know of, is to allow for tax breaks in the cases of research in the social sciences. That's not allowed. What that would allow industry to do is to involve more researchers and research, more complex research into their research. . . . So tax breaks are just not for science and technology. Tax breaks also should include this widest definition of science innovation. Louise Robert, Humanities and Social Sciences Sciences Federation of Canada

Building effective partnerships is hampered by the lack of people with the abilities to nurture projects from their roots to success in the market. The Committee was told that it is encouraging that good programs are already in place in Canada to help manage intellectual property.

There is a need for training and education. . . There has to be a way to manage intellectual property. We are getting there but we need more of those people. Thomas Brzustowski, NSERC

NATIONAL RESEARCH COUNCIL - BRIDGING THE GAP

As Canada's foremost R&D agency, the National Research Council's (NRC) vision is to be a leader in the development of an innovative, knowledge-based economy through science and technology. The NRC is involved across the spectrum of R&D from a very basic search for knowledge, mainly in the universities, through to development research, which is mainly performed by companies. Most of the NRC's activities could be described as medium to long-term strategic research, where it works in partnership with others to fill the gap between industry and the university community. The NRC carries out relevant research that frequently has a component of basic research. This basic research component is important since an understanding of the fundamentals is always necessary. Approximately 35% of NRC activities relate to increasing the knowledge base, 55% is in the strategic research area, and 15% to 20% is allocated to pure development. In addition to research, the NRC is responsible for the highly successful Industrial Research Assistance Program (IRAP) and the Canadian Technology Network (CTN).

The Committee learned that budget reductions over the past five years have had a major impact on the NRC's ability to fulfill some of its main activities. It is currently operating with approximately $80 million less per year for R&D than in 1994. Although its ability to generate revenue has helped, the NRC confirmed that it had reached its limit without compromising the research base.

Here's the situation with regard to our budget; if you add up everything it comes to about $456 million of which we generate now about $78 million. So we've helped ourselves enormously in getting over the difficulties caused by decreasing budgets by raising our revenue but there are limits as I said to how much we can do there. Now with R&D this number here is significantly down, it's down by at least $80 million over what it was in 1994-95, our budget was not restored and that's at about $317 million this year. Arthur Carty, NRC

Although partnership research can be very productive, it is rarely in the form of basic research and over time the basic research component could be compromised. To allow basic research to reach a sustainable level, the NRC requires at a minimum an additional $75 million added to its base funding.

An increase of this magnitude in the NRC's base funding would help a great deal but the new key technologies of the future must also be developed in Canada. The NRC in its evolved role, which went from mainly basic research to providing strategic research that neither universities or industry will fund, is an ideal institution to provide the foundation for new technologies.

You're right in making the observation that the NRC has changed, and changed quite dramatically, and it's changed because there was a national need to change.

There was a time in the 1950s, 1960s and early 1970s when NRC was much like a university. The work that was going on at NRC was at least in the science area was basic research. The reason for that was that there was a need at time to build up the university's capacity to produce high quality people, and to evolve graduate programs of their own, and research programs of their own. NRC very much did that in the 1960s.

Now at this point in time the situation has changed. NRC sees itself very much at the middle of the R&D spectrum. We contribute basic research in focused areas which are of importance to Canada. We also translate that knowledge into real world applications through work and partnership with others, through strategic research, and through technology transfer. So it has changed, and it's changed dramatically. We are very much more linked I think these days both to industry, to universities, and to other government laboratories than we ever were in the past. So it's a critical time for Canada. We're investing in what I would call principally in that area where there is an innovation gap. We provide the glue that helps bridge pure research to commercialized products by strategic R&D and by technology transfer. Arthur Carty, NRC

The government has increased funding to support basic research at universities as well as for the commercialization of research. The NRC's key role of bridging the gap is essential to the long-term sustainability of the entire innovation process in Canada. The NRC mentioned several very worthwhile initiatives.

Now, last year we took a look ahead at NRC and this came up from the grassroots and has been refined into five what we call major strategic initiatives, opportunities which Canada, we believe, must be in the next century. These are things that we can't ignore. Now, I have them listed here. Genome science is one of the activities. . .We have a national fuel cell initiative, which we believe provides a key opportunity for Canada to be at the forefront and in the lead in the world in manufacture of fuel cells. We believe this is important because embedding a company like Ballard in an R&D and an infrastructure is critically important to keeping that potential here. Fuel cells are going to be big business in the next 10 years and it's essential that Canada take advantage of the current lead it has by embedding the companies in an R&D base and an infrastructure base. We believe that the next generation of devices will be opto-electronic devices for the telecommunications and information technology industry. Opto-electronics is the marriage of optics, that's light, and micro-electronics. It's the creation of a new kind of device which will maximize the ability of light to transmit information more quickly than simply electrons down an electrical wire. So opto-electronic devices will be-are certainly in use now but there will be a much greater emphasis on that, and we propose an opto-electronics prototyping facility, which will give our SMEs much better opportunity in the future to prototype.

We propose two aerospace initiatives. One an aerospace manufacturing facility in the Montreal area, and also an environmental gas turbine facility here in Ottawa to push ahead with the aerospace need for information, a scientific knowledge network Arthur Carty, NRC

The Committee was informed that the total for all five initiatives would be $300 million over a five-year period.

The Committee learned that the National Research Council is very active in regional and community innovation. It is experimenting with virtual innovation centres in Edmonton and Calgary. This important role, which involves helping bridge the critical gap between knowledge and application, could be greatly expanded across the country.

Certainly in NRC the concept of partnership and collaboration is the principle these days and that's not just in collaborative projects with industry. The collaboration extends to community and regional innovation where the focus is not on NRC imposing something on the community but actually working with the various players in the local innovation system to see how we can all come together to maximize the benefit of what we're doing. We can provide a relatively small amount of resources in many cases and with the resources that others can provide and the synergy that comes from interacting we can put together an innovation initiative which is much more effective than if we dumped a large amount of money in there willy-nilly.

So that realization, I think, is quite important and we've made it work in a number of communities. I think you all know about Saskatoon and how that's now a centre for agriculture, one of the major centres in the world for agricultural biotechnology. It's come about as a result of a community involvement in that area, the community realizing that it can grow its economy through a very specific investment with all of the partners involved.

I think we can do that right across the country. It's happening in Winnipeg. It's happening in Vancouver. We have innovation initiatives in Montreal of a different kind with our institute for biotechnology where that institute has acted as a magnet to draw companies around it, again, feeding off the resource that's there.

This is a new way of doing business and NRC is very much into it. Arthur Carty, NRC.

FEDERAL S&T

During the hearings, the Committee heard that the basic research conducted by federal departments was an important contribution to the development of centres of innovation and needs to continue. An example is the support provided by Agriculture and Agri Food Canada to the development of the bioagriculture innovation cluster in Saskatchewan.

The Committee heard from the Assistant Auditor General about the 1998 audit of federal S&T, which was the second follow-up on this subject. The importance of federal S&T, both in absolute terms and in terms of the total Canadian innovation system, was stressed.

The federal government spends almost $5.5 billion a year on science and technology, in addition to more than $1 billion in tax incentives to encourage research and development in the private sector. It accounts and is accountable for about one quarter of the country's total investment in research and development, and it is difficult to think of examples of science and technology issues in which the government is not somehow involved. The importance of the federal investment, however, comes from more than its size in absolute and relative terms. It also comes from the possibility that this large piece of the national innovation system can be managed in a coherent and collaborative way. Richard Flageole, Office of the Auditor General

The audit highlighted a number of problems that the government must address.

First, we looked at the government's efforts to set up new institutions for governing and mechanisms for managing its science and technology investment and were forced to conclude that progress could best be described as slow. Some commitments had been partially addressed, while others had been nominally completed - for example, various elements of the new management system are in place although it is not yet clear whether or how they will work together. Other commitments were still being worked on - in particular, the results of the government's review of science and technology priorities have not yet been reported to Parliament. Overall, we believed that the new system was not yet doing what it was intended to do, that is, ensuring that science and technology priorities are clear, that activities are coordinated, and that performance is reported on fully. Richard Flageole, Office of the Auditor General

The main concern was that the implementation of the federal S&T strategy is losing momentum and this could adversely affect Canada's entire innovation system.

[W]hen we weighed the evidence, we concluded that progress was mixed at best, that implementation of the Strategy was quickly losing momentum, and that the system was still not doing what it was supposed to do. Without renewed attention, there was a growing danger that the Strategy would fail, as had similar efforts in the past. And nothing has happened since then that suggests this danger has diminished.

We believe that the results of our reports to Parliament on federal science and technology management are directly relevant to the study that this committee is carrying out on sustaining Canada as an innovative society. To the extent that the federal government is not as effective a partner in national and regional innovation systems as it could be, the country's innovation performance suffers accordingly. Being a good partner in innovation is more than simply bringing money to the table. It means knowing how the overall system and the related sub-systems work, and what their strengths and weaknesses are, and it means making decisions on where and how to act for best effect. If the federal house is not yet in order, then it follows that it is probably not doing these things very well. Richard Flageole, Office of the Auditor General

The Committee was informed of some key oversight questions that it could ask of the government and agencies.

Let me therefore suggest that the committee, as it considers the important issue of the effectiveness of the national innovation system, seek answers to the following questions from the government.

First, what is the government's role in helping to build national and regional systems of innovation, and where and how will it act for best effect? Second, what measures will the government carry out to make sure that it finishes implementing its science and technology strategy, including the framework for the management of scientific personnel? Third, how will it assure Parliament that its new governance and management systems for science and technology, once they are working, achieve what they're supposed to achieve? Richard Flageole, Office of the Auditor General