[Recorded by Electronic Apparatus]
Thursday, November 28, 1996
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[English]
The Chairman: I call this meeting to order.
This is the last hearing of the finance committee before we table our report in the House of Commons next Tuesday.
We are delighted to have with us, from the National Centre of Excellence,Mr. Pierre Bourdages, chair of sustainable forest management; George Connell, former president, University of Western Ontario; Bernie MacIssac, president of GASTOPS Limited; Harry Rogers, director, Institute of Robotics Intelligent Systems; and Claudine Simson, chair of MICRONET.
On a personal note, I'm delighted to see Harry Rogers here in Ottawa. He has been a very distinguished public servant in Canada. George Connell is an old friend of my parents from London, Ontario. They admired the work he did as the president of one of my former alma maters. I'm delighted to see the other three of you and meet you.
We look forward to your presentation, after which we'll go to questions. Thank you for coming.
Mr. Harry Rogers (Director, Institute of Robotics Intelligent Systems, National Centre of Excellence): Mr. Chairman, this is a wonderful opportunity for us to be here and we thank you for that opportunity.
Not all in this formidable group of five will be speaking. We have three speakers; the other two are here for the questions that may follow.
George Connell will lead off. George is also the head of the chair's committee that is undertaking this communication program with respect to the NCE renewal. George will be followed by Bernie MacIssac, and then Claudine Simson will finish up. We promise that our remarks will be mercifully brief.
Earlier we distributed documents to you, one of which is ``Partnerships that Work'', a yellow brochure that explains the background to the program and its evolution, and a brief to MPs that describes the issues surrounding continuation of this important discovery research program for Canada. If any of you require additional copies, I have them with me in English and French, and I'd be happy to distribute them.
I'll turn now to Dr. Connell and his remarks.
Mr. George Connell (Former President, University of Western Ontario, National Centre of Excellence): Good morning. I'm sure I speak for all of my colleagues when I say how pleased we are to be here.
I am concerned about one thing, though, and that is that deliberations in a committee room such as this can never really capture the excitement of the kind of enterprise we're involved in, and I hope we will somehow be able to find the words to make you understand that what goes on in these networks of centres of excellence is incredibly exciting.
We are in the midst of a period of extremely fruitful scientific discovery, but also a time in which the fruits of that discovery are being realized in industrial development in Canada. It is this that leads us to be so enthusiastic about this program, which we believe is one of the keys to the future of the Canadian economy.
As I'm sure many of you know, there are 14 networks. We represent four of them, but we are really speaking on behalf of all 14, and we are advocating not the continuity of any particular network, but the continuity of the program. We recognize that some individual networks will disappear from time to time, but we hope new ones will be created. We think the whole program is what is so critical and what we basically commend to you.
I would also like to make clear to you that the four of us who are chairs of the networks are here in a voluntary capacity. We have no interest in and get no personal reward from our participation. We are here because we believe that the networks are good to Canada and we want to convey our sense of confidence to you.
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The networks are institutes without walls. They are dispersed across Canada. The scientific activities are concentrated in academic centres, but there are 48 of them where there are at least some representatives of networks. More important is that the applications of research that emerge from the networks are even more widely dispersed, and we've identified at least 130 communities where there are significant impacts of the networks' programs.
We operate in many different fields. There is a concentration in the health sciences. Six of the networks are related to health. Three of them are doing leading edge research in informatics and telecommunications. We also have two in the forest science area, one in concrete technology and one in distance education. They all have specific features of great interest and importance, but we won't be going into the details of the individual networks in any depth.
Among our partners are 4,000 companies, including most of the leading Canadian companies with respect to R and D, 38 hospitals, many departments of the federal and provincial governments, agencies and a number of non-profit institutions and international organizations.
We put great emphasis on our training program for graduate and post-graduate students. Over 5,000 graduate and post-doctoral students will have participated in networks by the end of our second phase. These people are not only highly skilled researchers but they've also had their training uniquely in an environment that is focused on entrepreneurship, on creating new wealth in the Canadian community, and I believe this is going to make a great difference to our future.
I want to comment briefly on leverage. I believe the networks are a singular bargain. If I may use my own network protein engineering as an illustration, we spend approximately $4 million of NCE money in our program, but if you were to attempt to create a similar program by building from scratch, it would be impossible because there would be no way you could assemble so much talent in one place by recruiting. Even if you could do it, it would cost you at least five times as much to build the institution and all of the infrastructure that is required for such a program.
What the networks do is make use of the infrastructure that is already in place in the universities and other institutions. Furthermore, through cooperation - Bernie MacIssac will undoubtedly speak to this - there are considerable savings in capital expenditure, so it's not necessary to duplicate expensive facilities across the country.
Another remarkable thing about the networks is the degree of stimulation of investment. We've seen a great deal of growth of small and medium-sized enterprises in Canada that can be traced to the network scientific programs. Nineteen new companies have been launched in phase two, and some of them are growing rapidly in quite an impressive way.
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Some of these benefits are quite tangible in the short run. We think the long-term benefits of the networks program is probably more significant, but it is impressive how quickly some of our inventions have been mobilized and turned into business enterprises.
Let me conclude by saying that I believe the networks program is the most effective single instrument that has yet been discovered for capturing the benefits of academic research and having them take effect in industrial development.
The Chairman: Could you repeat that?
Mr. Connell: I believe the networks program is the most effective instrument that has yet been discovered for capturing the benefits of academic research and translating it into industrial activity, and it is a uniquely Canadian model. There are other countries that are quite interested in it and we may see it duplicated elsewhere, but so far it is unique to Canada and it seems particularly well adapted to our structure, our economy and our dispersed geography.
Let me now turn to my colleagues. Bernie MacIssac will be next.
Mr. Bernie MacIsaac (President, GASTOPS Limited, National Centre of Excellence): Thank you for giving me an opportunity to express my views on this matter.
I would like to speak to the importance of networking from the perspective of converting knowledge into a usable product that will eventually have an impact on the economy of the country. I believe Canada's standard of living is inextricably linked to international trade, and increasingly we are finding that international trade is less and less in resources and more in technology and the embedding of this technology in products.
I believe we have to continue to invest in knowledge. Knowledge keeps us informed and is a component of virtually everything we sell, one way or the other. I also believe the conversion of basic knowledge into products is the job of Canadian business, but the job of creating knowledge is a public responsibility and it is not something that I have seen that businesses are prepared to engage in. In that context, I think the NCEs represent an extremely important tool in the process of generating knowledge and the conversion of that knowledge into a product.
My experience in business has taught me that knowledge exists in a number of forms in the minds of those who achieve the discovery in the form of written reports, and in the form of some physical embodiment of the research. Of the three, I would submit to you that the single most important one is the fact that the research resides in the mind of the individual who created it.
It's also been my experience that time is of the essence in exploiting any form of research. There's countless useful things in libraries that have never been exploited. I'd like to introduce the concept of business as an ecosystem - you feed it know-how, products, customers and money, and you have something that will grow. You take any one of those away and the wretched thing dies, so it is important to realize that all of these pieces have to appear in a timely manner in order for it to have any kind of an impact on the economy.
If you use that as an argument, and I believe that is fundamental to the growth of the economy, then you have to form some kind of bridge between the research that goes on in the public domain and the universities, and the kind of companies that I represent. So networking then becomes not only important from the perspective of the researchers themselves, it becomes crucially important in forming the bridges that have to be built between the laboratories and business.
I would also suggest to you that networking has the second advantage, which is that of sharing opinions. While I regularly delight in debate about how we create things, I don't think we have the foggiest idea of how we actually do it. I don't think we know how the human mind works, but what we do know is that if you give a creative individual a whole bunch of observations, some of which he obtained from colleagues, he has a much better chance of creating something. The real benefit of networking is that it affords these intelligent people an opportunity to share observations, and from those observations people will create ideas. If you then form the bridge between them and industry, you have a working model for something that will contribute well to the Canadian economy.
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I'd like to add one further comment on the issue of the benefits of networking, and that is if you do build the bridge between business and research laboratories and research networks, then these business people bring a particularly different focus and a particularly different point of view to the process of research. They bring it purpose. It ceases to be an entertainment for the individuals engaged in research and becomes purposeful, because there will be an entrepreneur of some sort of other who will be sitting there saying ``I could use that. I could actually make money with that. Why don't you do this?'' I see this kind of thing going on all the time in our networks, whereas isolated research is really a form of intellectual entertainment.
There's one other item I'd like to bring to your attention, and it is that I spent ten years of my life or thereabouts doing research. I found it the loneliest existence imaginable. Sitting for three years in a laboratory doing tests on something teaches you personal resourcefulness, but it's somewhat antisocial. So when you come out of a lab after a week of that, you're liable to bite somebody.
What networking does is it puts the students, most of whom contribute to the research, in touch with people who have a different point of view. They talk regularly to their colleagues as students, as professors, but much more importantly, they talk regularly to people in business. They begin to understand why they're doing it, where it can fit in, and they emerge from the process much more ready to step into a business environment and begin to collaborate and share the results of their years of research in a productive kind of manner. Do not underestimate the contribution of the networking concept to that activity and the fact that these people emerge as essentially market-ready people, much more so than they would otherwise do.
In summary, it's my opinion that the NCE program is the best model for efficient research that I have ever seen anywhere. I think it has to be protected. It has to be continued. And if you will accept my notion of an ecosystem, it is an important element of the ecosystem that we call the Canadian economy. Finally, for what it's worth, I've gotten to know some extraordinary people in the process of networking, and I have personally benefited a great deal from it.
I thank you.
The Chairman: Thank you, Mr. MacIssac. Ms Simson.
Ms Claudine Simson (Chair of MICRONET; National Centre of Excellence): What I would like to talk to you about is another aspect of the NCEs, which is the importance of training highly qualified personnel for Canada and how the NCEs meet this objective.
I believe that Canadian industry more than ever needs a highly qualified labour force to acquire and retain leadership in today's economy, which is highly competitive on a global scale. The NCEs, in my opinion, provide an essential tool for youth training. In particular, they provide industry-relevant training and education to graduates, post-graduates and researchers in this country.
In particular, we are also focusing on the sectors that have the highest potential to create wealth generation in this country, namely the health and biotechnology, information technology, natural resources, infrastructure and human resources sectors. And as George Connell said before, by the end of our phase two, which is 1998, the NCEs will have trained over 5,000 post-graduate students in this country.
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The NCEs represent a principal source of talent for Canadian companies and institutions - i.e., the private and the public sector. It is an exemplary model on a national scale to meet the critical skills shortages in Canada. In particular, we have three NCEs: the Canadian Institute for Telecommunication Research, the Institute for Robotics and Intelligent Systems, and the Microelectronics Network, which are providing advanced training to young post-graduate researchers in the fields of information technology and robotics, and those are the fields in which Canada is suffering a significant shortage of skilled human resources.
As an example, I would like to talk about Ottawa alone, which we refer to as Silicon Valley North. Just in Ottawa, we have a chronic shortage of personnel with the right skills to fill over 2,000 jobs in the information technology sector, and the NCEs are helping us to provide the industry-oriented education and training that is needed for tomorrow's workforce. The NCEs contribute significantly to reverse the so-called brain drain to the south that you have probably all heard about.
In the NCEs we are creating internship positions for very bright and talented researchers to keep them in this country, so they have an incentive to continue their research in this country in partnership with the industry. As a result, those very talented young people will remain in Canada and will be readily available either for the partners in the industry or even more importantly to create their own businesses in Canada as entrepreneurs and create the wealth and the jobs we require.
So in a nutshell, I think we should be proud, as Canadians, to have a truly national network of research that is providing us with a wonderful tool to train tomorrow's workforce with the right skills for wealth generation and job creation in this country.
Thank you.
[Translation]
The Chairman: Thank you. Are there any questions? Mr. Bélisle, please.
Mr. Bélisle (La Prairie): I would like to thank the witnesses for coming to speak to us this morning. In your brief, you talk about a timely decision. You tell us that, if the government terminated the program or took its time coming to a decision, that could risk causing the premature departure of the researchers currently associated with the program.
I know that researchers are highly mobile and highly educated, very well trained people who, in many instances, have no trouble getting hired elsewhere. Could you give us more information on that? Is all that related to the mobility of this highly trained scientific labour force? I would like to hear your reaction on that. Would this be one of the major risks of a tardy decision by the government?
The Chairman: Ms Simson.
Ms Simson: Could you repeat the last part of your question?
Mr. Bélisle: You say that a government delay in reaching a decision could risk causing the premature departure of the researchers currently associated with the program. Could you give us more information on that? Have there been any cases in the past where the government has taken a certain amount of time to react, which could have resulted in the loss of scientific personnel associated with your networks?
Ms Simson: Research in Canada is very important and we must keep talented researchers. There aren't enough funds or synergy between the programs and equipment to focus research on the important, high tech fields; talented researchers are going to leave and go to more renowned universities or industries.
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If the government deployed its financial resources in the universities and institutions by creating the kind of network we are talking about today in order to create an environment in Canada superior to any environment...
The NCE is unique in the world. I am continually talking with people in the international community, in Europe, in South America and in the United States. The NCE model is perceived as something unique, that certain countries that I could name, in particular France and Switzerland, want to copy. This gives them an incubation environment for research that will create synergies, not only in a particular field such as information technology, but also between fields, between the various sectors.
At this moment, you have, in the NCEs in Canada, fundamental interactions between biotechnology and information technology. This is giving young researchers in this country much broader horizons than previously, which will help them stay here. But if the infrastructure is not there to create this environment, they're going to leave.
Mr. Bélisle: Would you risk losing them to other Canadian groups or seeing them leave for the United States? Is that the danger?
Ms Simson: Are there other Canadians?
Mr. Bélisle: Do you risk losing these researchers to other groups in Canada or do you risk losing them to U.S. groups? That's the question I am asking you.
Ms Simson: When I talk about losing researchers, I'm talking about a loss for the country.
Mr. Bélisle: For Canada.
Ms Simson: If researchers go from one university to another or from one industry to another, that's all right. I'm talking instead about directly leaving the country for Europe or the United States.
Mr. Bélisle: You also told us that the program has had great success in its present form, but that we should set up other networks directly related to the country's economic needs. You mentioned the export markets. Have you conducted studies on that? Do you have information to back up the claim that we should look at setting up groups such as yours which would focus on export markets? Do you have information on that? Are there studies on that?
Ms Simson: On a special network for export markets?
Mr. Bélisle: Yes, because you talk about it in your brief.
Ms Simson: That's fundamental because, if you compare the Canadian market with the market of the international community, you will see that the income you can generate in Canada is relatively small, in any industry. So we have to strive to earn revenue that is generated in other countries, but that comes back to Canada. I'm talking in particular about the Asia-Pacific region, which is very important.
So try to focus energies so as to gain a key position, a unique position in the international community with products and services that can meet the competition. This is fundamental, as is the kind of networking we are talking about at this time. The various sectors with which we are concerned create an energy and synergy amongst themselves, which ultimately will create more energy for international competition.
Mr. Bélisle: You also told us that the long-term commitment of the public sector, that is to say the Canadian government, in securing financing on a continuing basis, is a precondition to encouraging the private sector to invest as well as in research.
Sums of money have been handed over to you in recent years. Do you have an idea of the multiplier effect in the private sector of funds that have been invested by the federal government? When the federal government invests one dollar, does that result in an investment of two, three, five or 10 dollars in research by the private sector or, ultimately, each time the federal government invests one dollar, does the private sector invest only 75 cents or 50 cents? Do you have an idea of the multiplier effect?
Ms Simson: I could even go further. I believe that one research dollar given by the government is multiplied by the industry by a factor of about five from a research point of view. Then you have other funding by industry to deploy that research in products and services. At that stage, industry funding is perhaps 50 times greater than the dollar that the government contributed.
So you have a research ratio of one to 10, but a deployment and commercialization ratio of one to 50.
Mr. Bélisle: Thank you, Madam.
The Chairman: Thank you, Mr. Bélisle.
.1005
[English]
Mr. Rogers, please, then Mr. Connell.
Mr. Rogers: I had two comments on these two matters.
As regards the second, on investment, on page 8 of your book, the yellow book I referred to, there are some statistics that would highlight that already the program has generated $232 million of outside investment that has to do with the commercialization of the technologies that have to this date been identified. That is in relation to our total expenditure in phase two of $200 million and an expenditure over the two phases to date of $440 million. These are very early days, in terms of the sort of research these networks do. And to have the example already of $232 million of private sector investment generated I think is a very substantial return, given that the early phase, phase one, was really a launch period for many of the networks and they really didn't start to produce significant outputs until halfway through or after the first two years.
If I could, I'd make a short addition on your first question, sir, about timing. One of the reasons we are urging the government to renew or examine renewal of this at this time is in order to be sure that there is advance notice and planning time before the present phase expires on March 31, 1998, so that we do not lose the continuation of those that will continue or the establishment of new centres and be sure the cycle matches the inclusion of graduate students and new highly qualified personnel who will join or continue in those networks. A severance of that kind, or the lack of continuity, would create very much the risk of departures, to which Madam Simson referred.
The Chairman: Mr. Connell, please.
Mr. Connell: If I may, Mr. Chairman, with respect to the payback or returns on investment, there is a report, an evaluation, conducted by the NCE. The report was prepared by the ARA group. It hasn't been made available to us, but it may well be available to you. I understand it is a very positive assessment. I'm happy to refer you to it.
Secondly, there is work conducted under the auspices of the Canadian Institute for Advanced Research, CIAR, their working paper 79. I don't have a copy with me. These are economic simulations done by Professor Helpman of Israel. He has discovered through his simulations that the opportunity for return on investment in R and D in Canada is quite unique, greater than in any other G-7 country. I have in front of me a letter from Professor Safarian of the University of Toronto commenting on Helpman's study. He has concluded that a single increase in R and D expenditure of just 0.5% of GDP over current levels, which is about 1.4% of GDP, would increase Canadian GDP by about 17% by the year 2075. That's a long time down the road, but there would be steady increments over that period.
I believe, on the basis of the kind of case we've put before you, that investment in the NCEs would be probably the quickest and most certain way of ensuring those returns. I'll leave a copy of this letter with you, if I may.
On the matter of choice of areas of research, I think the genius of the networks program is that it isn't necessary for anyone in Ottawa to try to make judgments about what would be the best choices, because this is a competitive program. If the program invites submissions from collections of researchers across the country, you can be assured there would be many very imaginative approaches come forward.
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In the case of my own network, the protein engineering one, the consortium was put together by Michael Smith, Nobel laureate, with I think wonderful judgment. He assembled about 60 of our best scientists in the protein engineering group, but then they had to go out and find their industrial partners - that is, people who would believe that the research program they were envisaging would work to the benefit of Canadian industry. They then had to put their proposal before the NCE review process and prove that it was competitive with the very best. I think that is the way of ensuring that the NCE networks are conceived and targeted in ways that will be most beneficial to Canadian economic development.
The Chairman: Mr. Grubel, please.
Mr. Grubel (Capilano - Howe Sound): Thank you, Mr. Peterson.
Welcome, ladies and gentlemen.
As a researcher myself, I have spent many years behind computers like you have, or when we were still writing with pencils, emerging ready to bite off heads, never quite knowing what goes on.
I'm also very much in support of all the good causes you have espoused, from networking, to more training, to more education, to a synergy among different fields, to investment in R and D - I think that case is strong. But you're surely not just lobbyists for those causes; you're lobbyists for NCE.
I would now like to put on my hat as a skeptic, as a scholar who encounters these new ideas all the time, and ask questions I'm trained to as an economist. Maybe you can help me. Maybe all my concerns are wrong.
To set the stage, let me just give you my experience. When I was interested as part of my research in the brain drain in the 1970s, published in Science magazine and so on, I encountered lots of initiatives to assemble and input bibliographical information on research going on, and it typically came from government. I was on many such mailing lists, was asked to put in my current research and so on, and I got back news of what else was happening.
Now all of these efforts have died - have died an unheroic death - because as it turns out they were not very useful. You know yourselves that before this network was established, some very efficient networks existed in the world. They were not just in Canada. There were two networks meeting once a year at the Royal Society, right? We have telephones, we have faxes, we have our journal, and we go to international congresses, we have wonderful networks.
Similarly, we do have training programs, we have education programs, we have at the local level.... I've gone through many efforts trying to get together with other social scientists and natural scientists; they all fizzle out sooner or later. We have lots of investment in R and D, right?
If you look at your partnership you can see that in fact the money you have spent has really been taken away from other programs for research networking, etc. What you have done is add$12 million or $14 million of extra administrative costs.
So my question to you is, and maybe you have answers to this - the claim that Mr. Rogers has made that there were x hundred million dollars of new business and so many new products patented, and all that - would that not have taken place anyway?
What is the net gain from the $14 million administrative effort that you have undertaken, using money that would have gone towards all these things anyway? You can't claim the growth as the return on the $12 million of extra expenditures on administration for this. Because there already were networks, there already was all this training, there already was interaction between university researchers who wanted to get rich by going to their neighbouring industry and saying I have something, if we get together we can get rich. We have that at Simon Fraser University all the time. We had our own research centre well before you came into the act.
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So relieve my skepticism and tell me that you've done your homework. What is the net return on the $12 million that were the extra administrative expenditures you put into spending money that was being spent anyway on exactly the same causes you are spending now? What is the net return to that, rather than the gross return and the gross expenditure? Do I make myself clear?
The Chairman: Herb, you've got it all wrong. If we hadn't established this program we wouldn't have been able to take credit as a government for its incredible success.
Mr. Grubel: I think it was there well before you got elected.
The Chairman: Mr. MacIssac.
Mr. MacIssac: At the risk of shooting some sacred cows, I'm going to take you on on this one.
Mr. Grubel: This is a wonderful opportunity.
Mr. MacIssac: One of the observations I have made about the kind of research you come from and the kind of environment you come from and the kind of environment I come from is the freedom - and I would submit misuse of that freedom, in many cases - on the part of academic researchers. There is no mandate in Canada for a researcher to be relevant or in any way to engage his mind in something that will contribute directly to the country. Since I started my business I have searched the ends of this country looking for people knowledgeable in particular areas, and on two occasions I was told to go to hell, that they weren't interested in doing that kind of thing.
Other countries engage university researchers at about 60% salary, and demand that the rest of that salary is made up through contract research with industry. Canada does not do that. The consequence of that, in my opinion, is an isolation of the academic community, who frequently do whatever they want, to no great purpose. What the NCE program has done is create a new environment that insists those same people come to the table and at least propose to do something that has some possibility of contributing the economy.
Having beat up on the academics, I'd like to now turn my attention to business. Business investment in research in this country stinks. Business looks for government handouts on an ongoing basis in this country, and the last thing they want to do is spend their own money. What this program has done, more so than any program I have ever studied, is insist that government researchers and/or university researchers move a little bit out of their isolation, and that business move a little bit out of its isolation, which is to simply exploit. I don't believe you can point to the NCE at this point in its history and look for proof. First of all you've violated the scientific principle, in that you have not set up another experiment running along side us and you therefore have no basis for making a comparison.
Mr. Grubel: That's the political science talking.
Mr. MacIssac: It doesn't matter.
Mr. Grubel: We don't have that luxury. Nevertheless, it's ironic that in my own environment - especially in economics - I make a lot of enemies by saying you guys are playing games and should be talking about the real world rather than building your fancy mathematical models that aren't going anywhere. So I'm on your side, but my question remains.
We have also had people here from the science establishment who said one of the most important things is we have to make a contribution to the world stock of knowledge, which is basic research, which by its very definition has no immediate application. Tell that to Mr. Einstein; tell this to all the people who have made the breakthroughs. It did not come from somebody from a factory, from a firm, saying here is a promising application. I don't have to share with you the power of basic research, which is not being subsidized by anyone. That's what government should be doing - subsidizing basic research, not applied research and development.
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My question, and you have answered it, is that what we have seen here is gross returns, not net returns. There is no proof of the rate of return for the Government of Canada to put more money into this effort.
Ms Simson: I believe I can answer some of your questions.
Basically, the fundamental point you're raising is what is the difference between individual research or individual university and industry partnerships and this network.
Mr. Grubel: I don't believe that's correct, Madam. That's not what I asked. You misunderstood my question.
Ms Simson: Okay. So the question is what is the value of the network itself?
Mr. Grubel: No. The question is what is the merit of a bureaucratized, centralized network versus a spontaneous, voluntary network that exists throughout the world among specialist researchers?
Ms Simson: Okay. I can give you two examples of how the network has provided financial benefits to the domain of research. The important one, which is all across the networks, is the fact that the universities and industry get together. The major factor inherent to research before was the duplication of research among universities in Canada. By putting general thrusts and that network together, you're avoiding the duplication of research and resources. As you know, universities are working on their own thing. By putting them all together, they can complement the others' work on the topic of research that potentially will benefit the industry. The administration costs you referred to can be tremendously offset by the avoidance of that duplication of research.
The second benefit you get through these networks is that you have the industry partners of the same sector working together. I can personally talk about that. You have all of these industry partners, some of whom are competitors, working on precompetitive research, providing synergistic input to the university research program. Together they can point the university in a direction that is beneficial to all of the industries in that sector.
You now have this community in the sectors the NCEs are addressing, where the industry partners together kind of gauge what the other guy is going to do. If you pitch in money, I'll pitch in money. So you have industry people collaborating and pitching in money for research in the country. The network provides that.
Mr. Grubel: Ms Simson, I hear everything you say, but you are not addressing my point.
Michael Smith and all the people working in his field were buddy-buddy for the last 30 years. They know each other very well. They know every detail, except for some competitive secrets on what they're doing. And sometimes duplication is good for competition. That's why they're doing it - because they have different ways of looking at the same problem.
You are not convincing me with your arguments that the informal networks are not at least as good as and in many ways better than centrally operated, remote efforts to try to get people to do something they were not doing spontaneously.
To influence your thinking for next time you come here, have somebody, maybe an economist, make the distinction between gross and net. When you say you have taken money and it has gone somewhere, where did it come from? When you take money and give it to those purposes that you have described, and you've taken it from some other scientific activity, then it is not a net gain.
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I've made my point and I would like to rest here. Thank you for your attention.
The Chairman: Mr. Bourdages.
Mr. Pierre Bourdages (Chair, Sustainable Forest Management, National Centre of Excellence): I would also like to challenge Mr. Grubel.
In 30 years of business, on several occasions I've been so frustrated with university research that I walked away from it. There are two main reasons. They may be specific to my own experience, but I think they're also generalized. Because of the context and the type of structure within which university researchers work, they must publish or perish. That's the name of the game in that particular environment.
Second, the university researchers I've worked with have tended to complete their research with a question rather than an answer. It makes it a lot easier to fund the next phase of a research project. In itself that is not negative because it forces us to push the frontiers of science forward, but from an industrial private sector point of view it doesn't give me any answers.
The centres of excellence are forcing researchers in universities not only to share information and after-the-fact results to build on each other's research, but to cooperate on the activities and the project itself: definition, scientific protocol, accumulating data, analysing the data, debating the value of that data and concluding and getting those researchers from the University of Alberta and Laval University working on the same subject, on the same project, and accumulating data at both ends of the country and bringing it together and sharing that data.
Second, the networks also go knocking on industry's door and ask whether there is information they need or questions that are unanswered, and whether they are willing to put money into this project. Industry has said they will put money into a project if they can sit down together and find an answer to a question they have. Those university researchers, together with industry, are coming up with answers that are moving science and technology forward in Canada.
Mr. Grubel: Prove it to the skeptics like me that the $16 million or whatever extra you spent has brought enough extra benefit. They have done it in the past, they will continue to do it, and they will do it without this. Was it worth while spending that? That's the only issue. I'm totally on your side in everything you say.
The Chairman: Mr. Rogers wants to respond and Mr. Duhamel has a point of clarification. We have a vote in about four minutes.
Mr. Duhamel, you have just a little point of clarification. After that we could break and come back.
Mr. Duhamel (St. Boniface): Mr. Chairman, would it be possible to consider that for a future discussion - the whole notion of our expenditures versus other countries and what the outputs are? I think people would be interested and it might shed additional light on this rather interesting debate.
I have a tendency to be extremely sympathetic and believe in this synergy, but perhaps it's something we could raise. It would make an interesting research project.
The Chairman: Thanks.
Briefly, Mr. Rogers.
Mr. Rogers: I think Mr. Grubel is looking for incrementalism. I'll give you two facts. First, $232 million of external funding would not have occurred without this, period. There's no other institutional or investment framework for research in this country that would have generated it. That's number one.
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Number two, it's a well-known fact that in isolated research, about two out of 100 research endeavours are commercialized. The hit rate in this program so far is 130 products out of some300 projects carried out across these 14 networks. That's an incredible return rate, even at this early date, when compared to the comparable number, which would have been six products out of300 with the traditional isolated research.
The Chairman: That's not bad. Mr. Rogers should get the contract.
Mr. Grubel: That's the kind of information I think you should provide, and I think you should have a skeptical economist check them out.
Mr. Duhamel: It's like having an agnostic talk about God.
Mr. Grubel: And I'm not looking for a contract.
The Chairman: I apologize to our presenters. Would it be okay if we just ran off and voted and came back? Would you mind waiting?
A witness: Not at all.
The Chairman: Thank you very much.
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The Chairman: Could we turn now, please, to questions from Ms Whelan?
Ms Whelan (Essex - Windsor): Thank you very much, Mr. Chairman.
Early on in the presentation there was some discussion about the brain drain and there was also talk about 2,000 jobs in Ottawa that aren't being filled. I hope someone can explain to me how we're bringing that gap closer to filling those jobs in Ottawa and at the same time stopping the brain drain that's going on. Could someone expand on that?
What you do is very important. Research and development are extremely important in Canada, especially basic research. I'm a bit concerned that we know where those jobs are and yet we're still not managing to direct students to those jobs.
Ms Simson: What I was referring to is the fact that there are 2,000 jobs that require specific skills, and there are not enough graduates from Canadian universities to fill those jobs right now. There is a kind of disconnection between the educational system the way it stands right now and the quantity of graduates in the right fields with the right skills to get those jobs.
Ms Whelan: I understand that, but we've heard testimony that we're losing to the United States and other countries the graduates who could fill those jobs. Is it because the jobs in Canada aren't challenging enough?
Mr. Bourdages: Researchers are generally motivated by intellectual curiosity. They're driven by pushing the knowledge. If the funding for research in general across Canada is not renewed, the danger is the insecurity for those researchers. When the project runs out and there's no program and no money, that insecurity will be such that they will look elsewhere for a fertile ground where they can move that knowledge forward.
Unfortunately those we do lose are the very good ones, those who have international stature, an international reputation, and are mobile. They can go anywhere in the world - Europe, the U.S., etc. Those are the ones we lose. We seldom lose the very young ones straight out of university, because they don't have that stature. We lose the high-power, high-calibre researchers, because they have that mobility and they're known.
A voice: And they generate a lot of grants.
Mr. Bourdages: Yes, they generate a lot of grants. Those are the ones we lose, unfortunately.
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So it's important that the funding for the NCEs be renewed so the researchers can look ahead, the program will be renewed, the money will be there and I can initiate some projects - three-year projects or five-year projects - with some sense of security that I can pursue them and bring them to fruition.
The Chairman: Mr. MacIssac.
Mr. MacIssac: I would add to that.
Two aspects of the brain drain are extremely disturbing to anyone who is interested in living in Canada. One of them is the drain of the researchers themselves to other parts of the world because they are interested primarily in exploration of knowledge and the creation of knowledge. But equally disturbing is the brain drain of the graduates who go out into industry and discover that they're pretty good at creating companies and creating business. They are lured away.
The networks offer some hope for creating the kinds of bridges that have to exist between the research community and the business community to ensure that the level of activity in the research as well as the level of activity in business continues to be high enough to make it attractive for these people to stay here.
I'd like to add one final observation here, and this is directed at us as a nation, I suppose. I really would like you to take this seriously. We're the only nation on earth, I believe, that does no propaganda whatsoever to try to encourage Canadians to be Canadians.
If you visit the Far East on Malaysia Airlines or Singapore Airlines, you will be treated to a magazine the back six pages of which will be full of what's going on in Malaysia, how the economy is growing, what an exciting place it is to be and what an exciting place it is to do business. Look at the back six pages of Air Canada's En Route magazine by comparison and you'll see the difference: typically you will find six pages of advertisements of Japanese and Taiwanese products.
We do nothing to encourage Canadians to be Canadians and stay Canadians. We need to do more of that.
Ms Whelan: I agree. What you do as centres of excellence is very important, as is research. I don't think we blow our own horn enough, especially in the area of medical research.
I've heard over and over again from people I've talked to at different research places, especially in Ontario, that our medical research is better than the United States' because we don't exclude classes. All Canadians have access to our health care system, as it presently stands, and because of that, our research is actually of a better quality. I don't think we do a good enough job of telling the rest of the world that.
The Chairman: Mr. Rogers.
Mr. Rogers: I have a quick comment on the specifics of high-tech jobs in Ottawa and what the problem is in filling that gap.
In the Institute for Robotics and Intelligent Systems, a small portion of our program deals with student work terms. These are graduate students who come and work in industry.
Certain kinds of information technology skills are more prevalent in western Canada than in eastern Canada. The example I give you is a type of activity called data mining.
Some firms in the Ottawa high-tech area are developing products and evolving their products in this area. They can't find graduates locally, so we have been successful in bringing students from western Canada down on work terms - those students seeking more diversified experience than they can find around Regina or Calgary - for a period of their internship. So those students may in fact end up working in Ottawa.
That fertilization is something the centres do that, generally speaking, no other mechanism I know of can do as efficiently.
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The Chairman: Thank you, Ms Whelan.
Mr. St. Denis, before you start, I was going to suggest that since we're just next door, we'll go until the bells stop.
We'll have to run again, we have another vote. I'm sorry. I don't know whether you can stay or not. Feel free to go if you can't. If any of you could stay for one more vote, it will be about a maximum of fifteen minutes after the bells stop. Then we will come back. We're in your hands.
Mr. St. Denis.
Mr. St. Denis (Algoma): Thank you, Mr. Chairman.
Thank you for being here.
One of the issues that came up at one of our round tables - sorry, I can't remember who raised it, but I think it might have been somebody involved with university research - was the issue of connectivity, the connection between academic researchers, industry researchers, students, and how, in general, in the country we don't have this connectivity.
It strikes me that these networks may in fact be the seeds that can influence the issue or promote an expansion of connectivity in general within the R and D community within the country, because if I understand what you're doing, you are connected. You are starting with a sector and building a network that indeed does exactly that.
I wonder if a couple of you could talk about how you're connected. Is it the Internet? Is it the telephone? Is it conferences? How do you maximize the opportunities provided in the network for sharing and, shall we say, bouncing off each other? What's the expression when you use another person's idea to add to your own ideas?
I think the lessons we can learn from these networks can have an influence on the whole connectiveness of R and D in the country.
Mr. Connell: Perhaps I could describe briefly what happens in PENCE, the Protein Engineering Network of Centres of Excellence. I think the key to the connections in PENCE is an annual three-day festival that brings everyone together; that is, all the scientists, all the graduate students, post-doctoral fellows, everyone who wants to come from industrial partners, and sometimes visitors too. It's a very important occasion for personal connections. Every student who comes puts on a poster session and has an opportunity to talk about it with Michael Smith orMichel Chrétien, or anyone who's attending.
I think those personal connections carry over and then for the rest of the year it's of course a fair bit of travel, but certainly e-mail is becoming tremendously important and all the other media.
PENCE operates mainly in four academic centres, which are based in Vancouver, Edmonton, Toronto and Montreal, with satellites elsewhere. Within each centre there will be a weekly symposium that brings people together from many different departments and institutions, very often with a visiting speaker who is often a scientist from one of our other parts of the network.
A supplementary thing we started last year, but I'm sure will continue, is that we held an information day for industry. We picked what we thought were our eight most promising ideas, some with some patent protection already in place, others not. We put on presentations for invited members of, in this case, the bio-pharmaceutical industry. It was very successful. If I had been an investor, I would have, on the spot, signed up for almost any one of them. They were so impressive and so appealing. There has been quite a lot of pay-off from that session already. I think that will be an annual event.
The Chairman: Thank you.
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Mr. St. Denis: As a member of the public, are there elements of the network information sharing that would allow me to find an address on the Internet to see what's going on?
Mr. Connell: Yes, PENCE has a home page, and I think most of the networks have their own home pages now.
Mr. St. Denis: So even high school students doing science projects can find out what's going on in say the area of aquaculture. If there was an aquaculture program, I could find out.
Mr. Connell: That's right, although we do deal with confidential information. Every member of the network has to sign a confidentiality agreement, but we also have occasions when we talk about things that are non-confidential, of course.
Mr. St. Denis: Okay, thank you.
The Chairman: Ms Chamberlain.
Mrs. Chamberlain (Guelph - Wellington): First of all, I'd just like to say that I do really support your initiative. I think that it is the way of visionary thinking, quite frankly, so I would hope that we'd be looking seriously at continuing funding.
Can you tell me one of your greatest success stories?
A voice: That's a loaded question.
Ms Simson: I can talk about one for the network I'm representing, which is the Microelectronics Network. We have quite successful new enterprises that have been created through scientists working in joint projects between industry and the universities. We have five new high-tech companies that have been created in the last two years because members from industry and from the university combined their brains to create them. It was very nice to see that happening. It was not only on the industry side, it was both of them together, which was very nice.
Mrs. Chamberlain: Good. Thank you.
The Chairman: Ms Brushett.
Mrs. Brushett (Cumberland - Colchester): Thank you, Mr. Chairman.
I've really enjoyed your comments this morning. I'm serving as co-chair on the Prime Minister's task force on the commercialization of science research, which is going to look at getting more patents through the commercial stages and into commercial application through development and so on, in order to create jobs in Canada.
One of the things you mentioned here was the contact between one person and another, the isolation that comes from research. Canadians have made it clear to us that we must have that body contact in discussing research and in working out problems.
One of the key questions that has come up repeatedly - and you mention it with your ecosystem, with the linkage - is how to get that entrepreneur in there. What techniques are you really using? There was a response given to Herb Grubel earlier on on the value of this. As opposed to the hit-and-miss method of previous times, there is a more organized, systematic way to bring industry in. We're getting industry as that new financial partner, but it has been almost negligent in the past in terms of committing money to research.
So how do we draw more entrepreneurs in here? There seems to be plenty of capital out there, plenty of great research, but a lot of it gets stalled with patents and so on. How do we link it and move it more quickly through the system without being encumbered with patents and ownership of intellectual property and linkages?
Mr. MacIssac: Can I begin to try to answer that? I think most of the NCEs - certainly the one I represent - force it. Quite simply, if you want to participate in research involving an NCE, you have to find yourself some industrial partners.
The network I represent also has another arm to it, called PRECARN. It's an association of Canadian companies, and exactly the same thing is true there. If you wish to put forward a proposition for doing some research that is now closer to commercialization, find yourself an industrial partner and find yourself some university people who are part of the network, and make damn good and sure that what you're doing is not replication of what someone else is doing.
I regard the incentives for doing it.... In fact, I say this regularly at our meetings. I regard this industrial association together with the NCE as equivalent to a venture capitalist who has gone slightly soft in the head. They're prepared to put money on the table -
Mrs. Brushett: This is patient capital that you're talking about at this time, in order to get it through the development.
Mr. MacIssac: That's right. But it also means that there is an enormous economic incentive for a company to step forward and to obtain a place at the table in this effort, because the only way he - or whoever it is - is going to eventually draw that technology into his company and make it part of his business is by making sure that either he has access to the kinds of minds I talked about earlier or they join his firm. Quite candidly, the NCE program forces it.
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Mrs. Brushett: So probably that scientist then becomes an employee of that firm. Is that an out-spin as well?
Mr. MacIssac: The first and most fundamental product of the NCE is a steady flow of highly trained graduates who have been used to the process of collaborative research and who want to go out into these companies.
Here's my first move. I asked this question: do I get the report or do I get the man? It's better to get the man, because not only do you have the knowledge, you have an extremely adaptive individual who then can recognize opportunities based on his experience that apply to my company.
So this bridge that is beginning to be built between the academic community and the industrial community is absolutely fundamental.
Mrs. Brushett: I agree. It's just that the universities that aren't connected are now having the problem of how to connect their scientists to the entrepreneurs. There is venture capital, lots of it. It may be a little bit slack on the patience side, but there's plenty of venture capital. But how do you connect?
Mr. MacIssac: I would submit to you to be very careful in assuming that venture capital is interested in any of the kinds of things we're talking about today. They're interested in the two-year payback, and that's sometimes very difficult to achieve.
Mrs. Brushett: Just to make a point of clarification, the Canadian Medical Discoveries Fund, for example, is now out visiting universities to see where they might make investments. There are those who are doing it.
Mr. MacIssac: Okay.
The Chairman: Thanks, Mrs. Brushett.
Mr. Bourdages: One of the challenges of the NCE is to get the university researchers out of the universities and into the real world. Our NCE, as well as most of them, I think, has clear rules and guidelines such that cooperative projects are funded while isolated projects are not. Say you have an industrial partner. The more partners there are, the higher the probability of getting funding.
Mrs. Brushett: Say I'm a scientist at an NCE. Is it my responsibility as a scientist with a desire to do this research to go out and knock on doors to find the industrial partner?
Mr. Bourdages: It can be done that way.
In our case, we have a research planning committee. Universities, governments and industries sit on it. That committee chooses the projects. So if the researcher can submit a project to the research planning committee with his partners, he'll then find an industrial partner through that process. Or he can go knock on doors. A lot of them do.
Mrs. Brushett: Does a lot of this research go to American companies?
Mr. Bourdages: Very little.
Mrs. Brushett: I did some questioning on Tuesday with one of our centres. It does leave, because again, we don't have ownership. Government may have funded the research, but it may cross the border because we have no one in Canada who's interested.
The Chairman: Would you mind, Mrs. Brushett? I don't know when the guillotine is going to fall on us, but I suspect we should not keep our guests any longer. We should wind up.
While we continue these discussions and questions on behalf of members from all parties, I'd like to thank you for a wonderful presentation and for the remarkable work you're doing.
Mrs. Brushett, please continue.
Mrs. Brushett: On the point of the ownership, I guess it's a real government dilemma in funding research and with who has ownership patents and so on. Yet we don't always exploit it, for lack of a better word, in Canadian jobs. What is the answer here?
Mr. Rogers: There is a Canada benefits clause in the guidelines put out by NSERC for the NCE program, which does stress exploitation in Canada. However, they too recognize that if there is not a receptor capacity, providing there has been a demonstrable and diligent effort to find a Canadian partner, then under certain circumstances you can cooperate with foreign developers. But as I said, that's proscribed as well to try to ensure there's a residual benefit to Canada.
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Mr. MacIssac: I have a comment and suggestion on that. Geographically, Canada is 200 miles wide and 4,000 miles long, tucked along the American border. You can't deny that most of our markets are in the United States. You can't deny the fact that most of our linkages are north-south.
I regularly deal with this. My response to any American partner is that if they put up some money, I'll put up some money. As long as the Canadian company has an opportunity to exploit the results, I have universally found that the flow of technology and money is equally to the north as it is to the south.
So I don't think Canada should isolate itself that way. I think that if we do it right, we will benefit enormously from the fact that we have this linkage.
Mrs. Brushett: We'd just like to get a few more jobs out of it.
Mr. MacIssac: I understand, but I think you will if you do it that way.
Mrs. Brushett: Thank you.
The Chairman: Thanks, Mrs. Brushett.
Again to our witnesses, congratulations. Thank you very much.
The meeting is adjourned.