STANDING COMMITTEE ON INDUSTRY, SCIENCE AND TECHNOLOGY

COMITÉ PERMANENT DE L'INDUSTRIE, DES SCIENCES ET DE LA TECHNOLOGIE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, May 10, 2001

• 0903

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order. Pursuant to the order of reference of the House dated February 27, 2001, we will consider main estimates for the fiscal year ending March 31, 2002—votes 1, 5, L10, L15, 20, 25, 30, 35, 40, 45, 50, 55, 60, 65, 70, 75, 80, 85, 90, 95, 100, 105, 110, 115, 120, and 125, under Industry Canada, and part III, report on plans and priorities.

We're very pleased this morning to have with us the Honourable Gilbert Normand, the Secretary of State for Science, Research and Development.

Minister, we would like to have your opening statement and then we'll move to questions.

[Translation]

Hon. Gilbert Normand (Secretary of State (Science, Research and Development), Lib.): Thank you, Madam Chair. With your permission, I will speak in French. Maybe that will be easier for everyone.

First of all, it is an honour for me to be here for the second time in so few weeks. It shows the importance your committee attaches to science and research development. This is currently and indisputably a very major factor in Canada's development. It also shows the importance the current government attaches to this.

I do not want to repeat everything I said at our last meeting. I would just like to remind you of all the efforts the government has made in recent years to improve research in all fields, across Canada, and with whatever partners could be found. Universities, government sectoral research centres, industry, everyone has pitched in to develop the research to prepare us for globalization, the new knowledge-based economy and international competition in all fields.

• 0905

I am going to recap our activities.

The Canada Foundation for Innovation was established and received very significant funding. In recent years, the Foundation has been funded to the tune of some $3.1 billion.

Granting councils have also been supported. For example, the Social Sciences and Humanities Research Council received additional funding last year. The Natural Sciences and Engineering Research Council has an annual budget of nearly $600 million. The National Research Council also has a budget of similar proportions.

You also know that the government has undertaken to double research funding over the next 10 years.

We have also created Genome Canada, with $300 million in funding. The people at Genome Canada have managed to increase that funding by finding provincial and private-sector partners. They now have nearly $720 million to spend on genetic research.

We have created 2,000 university research chairs, which will be established over the next five years.

The government has thus lived up to its responsibilities, invested a great deal of public money in research and found partners. The government wants to attract even more private sector, industry investment in research.

I will not go through the whole list of Canadian innovations, but I might mention among other things the Canadarm, which made the headlines in recent weeks. The computer system malfunctioned. It was not our arm that malfunctioned, but NASA's computer system. In a number of fields, including astronomy, the government of Canada is currently working closely with other countries.

I am tempted to stop there and take questions. I gave you a lot of examples last time, and I think that what you want to know now is how all this money is spent, who spends it and how.

I am going to stop there for now. I may have more to say when it comes to the questions.

The Chair: Thank you, Minister.

[English]

Mr. Rajotte, do you have any questions?

Mr. James Rajotte (Edmonton Southwest, CA): Yes, thank you, Madam Chair.

Mr. Secretary of State, the one big question I have is with regard to deciding where you're going to allocate funds. How do you decide between, for instance, the Canada Foundation for Innovation and the National Research Council? Because one of the concerns I hear from a lot of researchers is that the CFI gets a lot of attention and a lot of investment because it seems to be a very... They describe it as a “sexy” initiative, one that attracts a lot of attention. At the same time, increasing funding for the NRC and the other granting councils over time seems to be less of a priority for the government.

I'm wondering if you could just comment on that, on how the government determines how much money to put into CFI versus NRC, NSERC, and the Social Sciences and Humanities Research Council.

[Translation]

Mr. Gilbert Normand: First of all, with respect to the allocation of funds, we have no say in that. In the case of the Canada Foundation for Innovation, all of those decisions are made by a panel of experts; the research proposals come mainly from universities and hospitals. It is primarily an infrastructure program. Proposals are selected by a panel of experts, and we have absolutely no say in that.

• 0910

Now, how do we decide how much we are going to give one granting council or another? Those decisions are made by Cabinet, after consulting the various councils. We find out what their needs and requests are, and we decide on that basis whether or not to increase their funding.

In the case of the Canada Foundation for Innovation, the $750 million it was given last fall was for the next 10 years, because the Foundation operates with its capital and capital revenue. The money is not spent immediately; it will be spent over the next 10 years, in addition to the funding the Foundation already had. Barring the unexpected, there will probably be no significant new funding for the Foundation, at least for the time being. Instead, that funding will go to the other councils.

[English]

Mr. James Rajotte: I realize that once the CFI gets the money the funding is not then controlled by the government, but one thing I want to understand, and I think what other committee members want to know, is how a government decides, for instance, this amount of money for CFI—$750 million—versus this amount of money to increase the base funding for NRC over time. That is what I'm trying to understand. I'm wondering if you can provide some insight into how the funding priorities are set, even at the cabinet decision-making level.

[Translation]

Mr. Gilbert Normand: In the case of the Canada Foundation for Innovation, it was a Cabinet decision in January, after the Minister of Finance announced that there was a surplus. Since the Foundation is not funded on an annual basis, that lump sum will enable the Foundation to operate for the next 10 years, as I just said.

Unlike other councils that receive annual funding, the Foundation does not need annual funding or to be budgeted for every year.

[English]

Mr. James Rajotte: One of the things I think this points to is that the former Auditor General, in two of his last reports, pointed out that we really need an overall funding fiscal framework for science and technology to really assist parliamentarians to determine that taxpayer funds are being well spent. Have those concerns of the Auditor General been addressed, and if so in what way?

[Translation]

Mr. Gilbert Normand: A distinction must be drawn between granting councils and the research that is done in each department. Each sectoral research centre, whether it is Agriculture, Fisheries, Natural Resources or Environment, is responsible for research in its sector and department.

However, when it comes to granting councils, the government decided there would be councils run by boards of directors and executives, in order to prevent politics from influencing the selection of proposals and so that scientists would continue making those decisions. This way of doing things provides sure-fire protection against political interference in the selection of proposals, but on the other hand, it reduces our control to some extent. To date, we can say that the proposals that have been selected by the various councils... Those proposals are always subsequently analyzed to see whether they deserve funding, whether they are designed based on the selection criteria and whether they are making progress both in terms of timing and results. There are monitoring mechanisms put in place by the various councils and Genome Canada to ensure that the money goes to the right places and is well spent.

[English]

Mr. James Rajotte: The government obviously has fiscal limitations. There are always opportunity costs and choices to make with regard to funding certain projects over others—for instance, putting a certain amount of base funding for the CFI versus the NRC, or funding a neutron facility or a long-range plan for astronomy. There are tough choices to make at the very top level, and I'm trying to understand how those choices are made at the very base level there.

• 0915

[Translation]

Mr. Gilbert Normand: As I just said, the decisions are made by ministers, upon consultation. If, tomorrow morning, we had to respond to all of the requests we currently have on the table, we would be talking $16 billion. We definitely cannot satisfy all of those requests. As you were saying earlier, astronomy wants its share, as do other types of research. We did the synchrotron and neutron radiation. I could give you several examples. There are many requests on the table, and we try to give priority to that which meets our needs as a society and as a government.

The Chair: Thank you, Mr. Rajotte.

[English]

Madam Jennings, please.

[Translation]

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Madam Chair. Thank you, Minister.

I found the presentation very interesting. I would like to begin by saying that I am very pleased that our government strongly supports the whole research industry in Canada and is increasing funding to granting councils. One thing I am very concerned about is productivity and economic development. We know that these may be very closely linked. We also know that productivity is often linked to new discoveries, products or processes resulting from research that is often subsidized by government and done by companies or university researchers. I am thinking, for example, of the 2,000 chairs that have just been created.

When you look at the process, you see that there is in fact a continuum. A person who has been trained and who wishes to become a researcher in a particular field that is perhaps industry- related, designs a research proposal, applies for grants, receives those grants and goes ahead with research on a new technique or product. Eventually, that person may indeed come up with a new process or discover a new product. Occasionally, depending on the field, there may be a certification, permit or licence requirement before the process or product can be commercially marketed.

We also know that the power to certify products may belong to a completely different department than the one that funded the research, etc.

All of this is apparently interdependent and requires co-operation. We know there are occasional problems with our certification process, which for certain fields comes under the Pest Management Regulatory Agency. In the United States, the certification process for the same products takes six months on average, whereas it takes 18 months here.

When you want to market a product, you know that the same product is already on the market or will be in six months in the United States, whereas in Canada, it takes three times longer. Or sometimes, the products are already on the market elsewhere, and the certification process is very cumbersome.

How much co-ordination is there between your department and Health Canada to try to solve this problem? Because that is truly an impediment to economic development and the marketing of certain products and processes. What good does it do for government to invest heavily in quality research, in keeping our researchers in Canada and in attracting researchers here from other countries, if, when it comes to marketing, there is a blockage? We even have trouble attracting investors for companies.

• 0920

Mr. Gilbert Normand: I think you are raising an issue that has more to do with the Department of Health. I am not currently in a position to answer on behalf of the Department of Health. You have the power to make recommendations along those lines.

As for the co-ordination you referred to, with all of our current and future funding commitments, that is certainly a problem area that we are aware of. We are looking at that closely. I can tell you, for example, that at the Department of Revenue, Minister Cauchon has called for some reform, as a matter of fact, to implement some tax benefits for research.

We are also talking amongst ourselves, but I cannot speak to the problem of delay at the Department of Health. However, I must say that the minister responsible for science recently created the position of chief scientist, which should improve relations among the various departments and offices even, so that this co-ordination is even better.

Ms. Marlene Jennings: I understand that the Department of Health is not your area, your portfolio. I fully understand that, but we still live in the real world.

You see the Minister of Health at every Cabinet meeting. If, in your area, you discover an obstacle that does not come under your authority, is there any co-ordination along the lines of what you described with the Minister of Revenue? The Minister of Revenue has nothing to do with Industry. Economic development does have something to do with Industry, but not the Department of Revenue. So that part of Minister Cauchon's portfolio has nothing to do with Industry. And yet you said that the two of you had been talking and that the minister, on the basis of the facts that were presented, following your discussions and so on, had set up a system with a view to improving the implementation of tax credit incentives. So I am wondering whether there is the same kind of co-ordination.

Mr. Gilbert Normand: Absolutely. I have often discussed that with Mr. Rock, the Minister of Health, because, as you say, companies occasionally complain about certification. So yes, the two of us have held discussions. As a matter of fact, I think he is setting up a mechanism to improve the situation. But as I said, it is not for me to describe it. Yes, we do talk to each other.

There is another point you raised at the beginning of your question to which I should respond. As far as I recall, in the last budget, we also allocated $100 million, I believe, for marketing. We have already begun to implement research marketing with the universities. It was not in the last budget, but the one before. This has been in place for a year, in order to promote the marketing of research discoveries, especially on university campuses.

Ms. Marlene Jennings: Thank you very much.

[English]

The Chair: Thank you, Madam Jennings.

Mr. Thompson, do you have any questions?

Mr. Greg Thompson (New Brunswick Southwest, PC): Yes, thank you, Madam Chair.

I have a question with regard to the $700 million Atlantic Investment Partnership fund the Prime Minister announced last June. I believe over $100 million of that was earmarked for the National Research Council, so $600 million or thereabouts would be left. I'm just wondering how that money has been accessed, where it's going, and how much of it has been spent.

[Translation]

Mr. Gilbert Normand: I think you are talking about two things. There was an announcement of $750 million for the Canada Foundation for Innovation. That money, as I explained earlier—I think you were not yet here—comes from surpluses. It was a Cabinet decision to invest that money in the Foundation. But you have to understand the procedure. The Canada Foundation for Innovation manages a fund. So the $750 million will fund the Foundation's activities for the next 10 years.

[English]

APECA is not my bailiwick.

• 0925

The Chair: Our second witness will be Minister Thibault, so...

Mr. Greg Thompson: For clarification, Madam Chairman, I thought with the technology sector this would be the appropriate minister, but I'm prepared to put that question to Mr. Thibault.

Thank you.

The Chair: Mr. Lastewka.

Mr. Walt Lastewka (St. Catharines, Lib.): Madam Chair, thank you.

Mr. Minister, the transfer of technology from government labs and from universities has always been a topical item at this committee, knowing full well, as witness after witness has said, that we don't have enough expertise in this area and we're continually developing it in Canada. Could you explain to the committee your priority in improving the transfer of technology from university and government labs?

[Translation]

Mr. Gilbert Normand: First of all, I think we need to distinguish between universities and government labs because each government lab follows the policies of its department. I will give you an example I am familiar with: Agriculture Canada labs. Agriculture Canada and the Department of Industry have a special transfer of technology program; in addition, Agriculture Canada has a 38-million-dollar annual cost-sharing research program, with the department matching private sector funding dollar for dollar. This program includes an intellectual property agreement. So each department operates differently with respect to research and policy.

Insofar as universities are concerned, we definitely do want to make an effort to work with universities on marketing products and then transferring technology. This has given rise to substantial ideological debate on campuses, but we believe it is absolutely necessary for universities to make some profit by marketing some of their research and through agreements they may have with their partners.

The various programs we have, as you know... take, for example, the case of the Foundation. The federal government contributes 40%, the provincial government, 40%, and the universities come up with the remaining 20%. That remaining 20% may come from their own funds or from a private partner. In the latter case, the universities have agreements with those partners.

[English]

Mr. Walt Lastewka: I'll give you an example of what I was getting at. In terms of transfer offices of technology from the university into the marketplace, the University of Alberta in Edmonton has probably one of the best. Some of the people who are there now came from the University of British Columbia. The last time I was there, I think 35 people were working with the university to make sure that technology was being transferred into the marketplace as best as possible, with feedback from the marketplace back to the university. If you visit other universities, you'll see they are not as effective.

Previous ministers have talked about the importance of improving our leadership in the transfer offices across the country. Is your department doing anything to assist in that?

[Translation]

Mr. Gilbert Normand: I would say so. I would say we are somewhat in the early stages of improving marketing. You are quite right about the University of Alberta in Edmonton. Just last week, I met with the very people from Laval University who do marketing at that university. In the last year, they have created six spinoff industries in the wake of a discovery at Laval University. It is a process that is getting underway at a number of universities, that we support and fund too.

[English]

Mr. Walt Lastewka: When you talked about the government labs doing their own research and so forth, it was my understanding that a group of assistant deputy ministers meets to cover off all the government labs and make sure that we're using best practices and best models and best transfers. Is that process continuing?

• 0930

[Translation]

Mr. Gilbert Normand: Yes. The Council of Science and Technology Advisors brings together representatives from every department. It makes recommendations. The process is continually underway, and we receive recommendations every year.

[English]

Mr. Walt Lastewka: As Secretary of State for science and technology, do you receive reports from that group, and do you take action on them? What is your interaction?

[Translation]

Mr. Gilbert Normand: Yes. A report is produced and released every year. The latest report is available, by the way. We can send you copies if you like.

[English]

Mr. Walt Lastewka: Thank you.

The Chair: Thank you, Mr. Lastewka.

[Translation]

Mr. Sauvageau, do you have any questions?

Mr. Benoît Sauvageau (Repentigny, BQ): Yes.

First of all, Mr. Normand, I am sorry I was late. My party had a little communication and management problem this morning. I am not going to discuss hovercrafts with you this morning; we will talk about that some other time.

I would like to ask you a simple question, one that was suggested to me by my colleague. Your report refers to knowledge infrastructure. Apparently, there are problems with the establishment of knowledge infrastructure in small universities in every province. I know that in your speech, you referred to Brock University, in Ontario. Just because I had never heard of it does not automatically mean that it is a small university, but it may serve as an example. Do you intend to pay particular attention to these small universities?

Mr. Gilbert Normand: First, take the chairs, for example. Chairs have been set aside both for small and large universities. Another example is the announcement I made last week in Montreal. It was about three major environmental research projects, each involving seven or eight different universities, may of them small; the research deals mainly with pesticide-free agriculture, climate change and temperature change in space. Several researchers from small universities will be involved with large universities. You have to realize that small universities may not have the human resources required to undertake, supervise or manage several large research projects, but I must tell you that they are very often—I cannot give you a specific percentage—involved with larger universities. There are many partnerships between large and small universities.

In Quebec, which is of particular interest to you, the University of Montreal, for example, has partnership agreements with Rouyn-Noranda on pain research, with Chicoutimi on de-icing research and with other universities, such as Rimouski. There are partnerships. Universities can no longer work in isolation, and even large universities often have to involve small universities in certain specific areas.

Mr. Benoît Sauvageau: Thank you very much.

[English]

The Chair: Thank you.

Mr. Alcock.

Mr. Reg Alcock (Winnipeg South, Lib.): Thank you, Minister. I have just a couple of quick questions about the functioning of some of the granting councils.

It's my understanding that for NSERC and SSHRC and the new health networks, people who are appointed by the government to the boards of those organizations do not receive any remuneration. They receive expenses for attending meetings, but they're not paid to be on those boards. Is that true?

[Translation]

Mr. Gilbert Normand: They are not paid to be on the board. The only paid members are the members of the Canada Foundation for Innovation. Excuse me, the chair of each board is paid, but not the members.

• 0935

[English]

Mr. Reg Alcock: Right. Their members would be sitting there as a public service, basically. It's an honour to be appointed, they do very good work, and they give their time for the benefit of the country. The presidents, who are paid—these are full-time jobs—are paid on a scale, if I recall from reading the chart, that is equivalent to other senior positions in government. They would be tied to the executive classifications, right?

A voice: Yes.

Mr. Reg Alcock: Why then are the members of the board of the Canadian Foundation for Innovation paid?

[Translation]

Mr. Gilbert Normand: I do not know. The foundation is completely independent and beyond our control. It was set up that way to ensure its independence. I cannot explain why they are paid while the others are not.

[English]

Mr. Reg Alcock: So we gave public money to them to do good works for the public, and they chose to spend some of that on salaries for themselves. Would that be a fair characterization of what occurred there?

[Translation]

Mr. Gilbert Normand: We do have some information. I do not know if we have the exact amount, but I am told the members' salaries are approximately $15,000 per year. These people often have to work at home. It is not really a salary... The chair gets a salary in accordance with government standards, but the members, according to my information, get about $15,000 per year. We will check that and send you the exact amount.

[English]

Mr. Reg Alcock: I would be interested to know the specific amounts, and any amounts that they are paid for attendance at meetings. It seems odd to me that some people who serve on these boards do it as a community service and others get paid. There's an inconsistency in policy there.

As to the president of the Canadian Foundation for Innovation, the full-time person, can you assure me that this salary is tied to the same salary grade as the others in the other councils?

It's not. Okay. Can you provide me with the information on the salary scale for the president?

Ms. Marie Tobin (Director General, Innovation Policy Branch, Industry and Science Policy Sector, Industry Canada): This is third-party information under access to information, and we're not allowed to have it. This is the private sector. It isn't...

Mr. Reg Alcock: If I understand this correctly, we give them a bunch of public money at arm's length, sending them off to do good works the way that the other councils are charged with doing, but we exercise no control and have no accounting relationships with them. So they can spend that money, as they see fit, on themselves.

Is there not a discontinuity here?

[Translation]

Mr. Gilbert Normand: Certain sums are provided, and I think that all the grants given out by the organization are public. We will check into the salaries that people pay themselves. I do not have that information at the moment. You ask whether the president's salary scale is the same as that of people in similar positions in the councils? I cannot answer that. The same goes for Genome Canada.

[English]

Mr. Reg Alcock: Ah! Would they then be subject to freedom of information? Could I, for example, initiate a freedom of information request to get that information?

[Translation]

Mr. Gilbert Normand: No. They are considered as part of the private sector. The organizations that manage these funds are completely independent. I do not know whether you could get that under the Access to Information Act, but we can ask them that.

A voice: They have annual reports.

[English]

Mr. Reg Alcock: Are you telling me the board members for Genome Canada are also paid?

[Translation]

Mr. Gilbert Normand: The people at Genome Canada operate in the same way as the Foundation, but I do not know whether the members of the board of Genome Canada are paid. I can check into that, but I do know that barely one month ago, there were only five people on the permanent staff of Genome Canada. I do not know whether they have increased their staff, but there were only five of them.

[English]

Mr. Reg Alcock: These are senior people, and they should be well paid. They're doing very important work. I'd just be interested to know about those who volunteer for the board, and I'd be interested to know what accountability there is for the expenditure of large amounts of public money.

• 0940

I do understand that you may not have that responsibility, and I'll pursue that in terms of access to information.

There's another thing I wanted to ask you. In the allocation of research supports, you have broad responsibility for that, I understand, and I would say that the government has done a lot of very good work in making more resources available to universities. When it comes to the allocation of the research chairs, I was told that the reason they were not allocated on any kind of proportional basis was that you wanted to have a competition, that they should be awarded for reasons of merit and excellence.

That is a principle I would certainly support, but when I enquired into that, I found that it was feared that if you were to give universities an entitlement, it would, in a sense, dull their competitive edge. They would not compete as hard because they would know they were going to get this number of chairs.

Would that be a fair characterization of the policy?

[Translation]

Mr. Gilbert Normand: No. So far, everything depends on the expertise and scientific merit. I can give you the example of the latest entitlement provided by Genome Canada. Quebec received more than Ontario and Newfoundland received nothing, but Newfoundland did not present any projects. There are no amounts set aside for the various geographic regions. The same is true in the case of the Canadian Foundation for Innovation and the other councils.

[English]

The Chair: Last question.

Mr. Reg Alcock: All right.

I would both agree with and support that policy. I think universities throughout the country should be required to compete, and I think it does force a certain discipline. That said, what I don't understand is why, when we gave universities in the chairs program, particularly the five largest universities, an entitlement, we did we not just force them to compete in the same way that we want the scientific community across the country to compete. Why would we have allocated the research chairs? Why didn't we just put them in a pot and let everybody compete for them?

[Translation]

Mr. Gilbert Normand: You were speaking mainly about the chairs. This is what happens. In some areas of activity, we absolutely require a critical mass in order to attract foreign researchers. The large universities are in a much better position to do that. There is also the whole issue of salaries and technical support. There are the famous indirect costs or overhead, about which we have not spoken, but which we may discuss shortly. There is no doubt that the large universities are in a much better position to attract well-known scientists from abroad.

[English]

The Chair: Thank you, Mr. Alcock.

Mr. Reg Alcock: Can I come in on another round, perhaps?

The Chair: If we have time.

Mr. Reg Alcock: Good.

The Chair: Mr. Rajotte.

Mr. James Rajotte: Thank you, Madam Chair.

I want to follow up on the Canada Research Chairs Program specifically, but one of the things that strikes me as I go through the estimates is the plethora of ways that Industry Canada does fund research and development. I wonder if you can comment on whether we can simplify the manner in which we do fund research and development.

Just using an example from your speech, you talk about the Canada Research Chairs Program supporting university professors, but then you also talk about NSERC supporting university professors.

Can you comment generally on whether we are layering the ways in which we support research and development in Canada? Are there too many ways in which we are funding research and development, and can we simplify this at all?

[Translation]

Mr. Gilbert Normand: I think the organizations we have are meeting research requirements at the moment. They each have their own vocation. The Canadian Foundation for Innovation is involved with infrastructures in particular. The NSERC is involved mainly with instrumentation and research support as such. The Social Sciences and Humanities Research Council works in a different area, one that is often been forgotten. That is why its budget was increased last year. There are also the Institutes of Health Research.

Each council has its own area of expertise. Of course, there is also Genome Canada, which often works in co-operation with the others, because genetics covers all areas of activity, from forestry, to agriculture, the fishery and human research. Each council has its own niche, and this is quite well respected.

• 0945

[English]

Mr. James Rajotte: But specifically in terms of the Canada Research Chairs Program, what's the justification for having that particular program in and of itself and not just funding through such granting councils as NSERC?

[Translation]

Mr. Gilbert Normand: The Chairs Program is run by the three councils. Members of the three granting councils, the Canadian Foundation for Innovation, the NSCRC and the SSHRC manage the Chairs Program. Mr. Marc Renaud is the president.

[English]

Mr. James Rajotte: So when you mentioned in your speech, on page 3, funding university professors through NSERC, that's through the Canada Research Chairs Program, is that correct?

[Translation]

Mr. Gilbert Normand: No. NSERC is funded separately, but the chairs are supervised by the members of the three councils.

[English]

Mr. James Rajotte: The Canada Research Chairs Program is creating 2,000 new research chairs across the country, and then NSERC is funding over 8,700 university professors. Now, I guess what I'm getting at is, do we need the research chairs or can we just use the existing granting councils in order to fund the professors?

[Translation]

Mr. Gilbert Normand: When grants are provided—yesterday $346 million in grants was announced from NSERC—there is no doubt that a portion of the money can be used to support the chairs that were awarded. However, the money for the chairs is there mainly to pay the salaries of the researchers and their support staff. We have senior and junior chairs, but this money is used mainly to pay the salaries of the researchers, while the grants provided by NSERC are used mainly to pay for the instruments required in order to do the research.

[English]

Mr. James Rajotte: One of the things the researchers tell me is that in fact we should be combining funding for the research chairs and the support staff and also the infrastructure. It should be combined. You should not separate one from the other.

One researcher at the U of A told me that, because of the infrastructure they have to kick in to complement it, if they get another research chair they're going to go broke.

Mr. Reg Alcock: But that's U of A.

Mr. James Rajotte: That's U of A, which is a very well-off institution.

The Chair: Mr. Normand.

[Translation]

Mr. Gilbert Normand: The method we are using at the moment seems to be working well, at least for now. There is no doubt that as we provide funding, we are going to have to change some of the political or bureaucratic coordination procedures, if we want to be able to track developments and continue investing such massive amounts of money. The infrastructures we have at the moment are revealing their limitations.

[English]

The Chair: Thank you, Mr. Rajotte.

Mr. Bélanger, please

[Translation]

Mr. Mauril Bélanger (Ottawa—Vanier, Lib.): Good morning, Minister.

Am I correct to say that we now have five granting councils?

Mr. Gilbert Normand: Well, there are three of them.

Mr. Mauril Bélanger: So, Genome Canada and the Canadian Foundation for Innovation are not granting councils.

Mr. Gilbert Normand: No, they are not considered granting councils.

Mr. Mauril Bélanger: What are they, then?

Mr. Gilbert Normand: They are private or semi-public bodies.

Mr. Mauril Bélanger: But they operate strictly on public funds.

Mr. Gilbert Normand: Yes.

Mr. Mauril Bélanger: They operate on individual projects, but the councils themselves operate using public funds.

Mr. Gilbert Normand: To be clearer, I would say that the two bodies were created using public funds, but their mandate is to find partners that will bring in...

Mr. Mauril Bélanger: I understand. In the case of specific projects, they have support from the private or semi-public sector, but their operations are funded strictly with public money.

Mr. Gilbert Normand: Let me take the example of Genome Canada, which was created one year ago. The people at Genome Canada have managed to find partners, so that the $300 million we provided will be used to fund $720 million in research.

Mr. Mauril Bélanger: That was not my question. I want to move to a different area. How much money does the government of Canada spend annually on research and development?

• 0950

Mr. Gilbert Normand: It spends around $3.3 billion.

Mr. Mauril Bélanger: Do you have an approximate idea of what percentage goes outside of government, and what percentage is spent within government, that is by the departments?

Ms. Marie Tobin: The money is spent more outside of government than inside government. But the percentage is almost fifty-fifty.

Mr. Mauril Bélanger: It has become fifty-fifty.

Ms. Marie Tobin: It is not quite there.

Mr. Mauril Bélanger: If I understand correctly, there is a trend emerging. Would I be correct to say that there is a tendency to increase the amount spent outside government, that is to the granting councils, and so on, and to reduce the amount that is spent inside government?

Mr. Gilbert Normand: We do not want to reduce, in percentage terms, the initial amounts provided by the government, but we do want to attract more from the outside.

Mr. Mauril Bélanger: Yes, I see. But following program review, was there a reduction in total expenditure within the government?

Mr. Gilbert Normand: Well, perhaps before 1997.

Mr. Mauril Bélanger: All right. At the same time, was there a corresponding reduction in our statutory and regulatory responsibilities performed by laboratories and government research centres in the area of health and public safety at Health Canada, the Canadian Food Inspection Agency, Fisheries and Oceans or Environment Canada? Do you see what I mean?

Mr. Gilbert Normand: Yes.

Mr. Mauril Bélanger: If there has been a reduction in the resources earmarked for the performance of these responsibilities, has there been a corresponding reduction in the responsibilities themselves? Have we asked our officials to do more with less?

Mr. Gilbert Normand: Let us take the example of the Canadian Food Inspection Agency. As you know, it is now an agency; formally, it was part of the department. This agency must report to the Minister of Agriculture, but must also manage and finance its own activities with the amounts it is given. It is therefore required to make a profit.

Mr. Mauril Bélanger: Right. Do you know whether a study has been done by Treasury Board on the physical state of the government of Canada's laboratories and research equipment?

Mr. Gilbert Normand: Go ahead, Ms. Tobin.

Ms. Marie Tobin: A specific study may have been done, but for two years now, all the departments and agencies with a scientific focus have had a special integrity program.

Mr. Mauril Bélanger: In English it was called Rust-Out, wasn't it?

Ms. Marie Tobin: I thought it was Program Integrity.

Mr. Mauril Bélanger: Program Integrity. Fine.

Ms. Marie Tobin: Each year they submit their requests on the basis of certain infrastructure criteria, that is, what should be done in order to comply with other standards. Each year, Treasury Board earmarks money for this purpose.

Mr. Mauril Bélanger: Could you share with the committee the conclusions of this overview of the state of our laboratories and research equipment?

Mr. Gilbert Normand: Yes, if we can manage to get the information, but...

Ms. Marie Tobin: Ask Treasury Board.

Mr. Gilbert Normand: That is right. We can ask Treasury Board.

Mr. Mauril Bélanger: I would like to ask this of the government representative who is before me.

Mr. Gilbert Normand: Yes. We will ask for the information available at the moment on this.

Mr. Mauril Bélanger: Thank you. I have one final comment, Madam Chair, and Minister. I must confess that I have a great fear. I have no objection to this being done, but I fear that in trying to make up for the abandonment of university, hospital and health research centres by the provinces—we have invested a great deal of money in this area and I have no problem with that—but in doing only that, I fear we are undermining the government of Canada's ability to carry out its statutory and regulatory responsibilities.

What I mean is that our laboratories need as comprehensive an updating as laboratories in universities and hospitals, but this is not being done. If we do not change course, we are going to cause ourselves huge problems in this area.

• 0955

Even though it is more attractive politically to go outside, as a government, we cannot neglect our statutory and regulatory responsibilities. We must maintain a scientific capacity within government.

Mr. Gilbert Normand: If I understand your comment correctly, you are saying that the shoemaker's children are always the worst shod.

Mr. Mauril Bélanger: And that is the model we should not be following.

Mr. Gilbert Normand: Look, Industry Canada is still using Windows 95.

[English]

The Chair: Ms. Torsney.

Ms. Paddy Torsney (Burlington, Lib.): Minister, we have all these various pockets of money that see to their very important functions in funding research across the country. But are you confident, for some of the really big expenditures that can be part of huge international initiatives, that we really have the right system in place for getting those groups to work together to fund these big initiatives?

I'm thinking particularly of the astronomy initiative. Everywhere they go, it's “Well, if that group will give, then this group will give, and if this group will give, then that group will give”. A lot of these people spend so much time running after precious dollars that it seems almost inefficient.

[Translation]

Mr. Gilbert Normand: Astronomy is a special subject. Canada has proven itself in the field of astronomy, and it is an important partner in a number of projects at the moment, including the Gemini project and the space telescope project. There is the Long-Range Program on the drawing board at the moment that will involve expenditures of some $16 million. The request is on the table along with that for some facilities relating to neutrons, optics, proteins and proteinomics.

As I said, all these people make their requests and, at this time, I think the requests total some $16 billion. So, clearly we will have to make some choices and find some partners—yes, this must be done—in foreign countries or within certain foundations.

Personally, I have made some representations with an English foundation called Wellcome Trust, a company that Genome Canada visited as well. At the moment, Genome Canada is about to enter into an agreement with this company. I have also made some representations with other countries. We also do this in certain sectors of activity, because by itself, Canada will never be able to support all this research in all these areas.

As regards international exchanges, the Canadian Foundation for Innovation received a budget of $200 million, specifically to set up this type of exchange program between universities or researchers.

Ms. Paddy Torsney: Yes, but that was not my question. I was saying that from time to time there are some projects that are on a larger scale than others. For that reason, we need a different system in order to support the project. The timetable in other parts of the world may be different from ours.

[English]

Are you confident that you have a system in place that allows you to fund, and to deal appropriately with, these bigger proposals?

[Translation]

Mr. Gilbert Normand: That is very difficult to say. When people submit a project—you were thinking particularly of an astronomy project—obviously, they are going to lobby for their project. This is a very important and very interesting project, at least I find it interesting.

They will meet with the people involved in finance, in industry, members of Parliament, officials and so on, to try to convince them, so that all the decision-makers are on the same wavelength.

The choice is made by a group of individuals, not by a single person. The procedure is somewhat like government programs, such as Technology Partnership Canada. We receive many applications from companies in various areas of activity, and we have to make choices on the basis of the government's current priorities. I think astronomy has always been well served by the government. Canada has been involved in this area for a number of years, and we will have to wait for the next budget to see what will happen with the various projects.

• 1000

[English]

Ms. Paddy Torsney: Thank you for the information, but perhaps that's really my point, that sometimes there are international timetables that can't wait for the next budget, and we need perhaps a different system both because of the timing and the commitment being ten years, which is beyond our budget projections. The international players need to know whether we are or are not going to be there.

So there is, I would suggest to you, some need to have either a side structure or a different structure for some of the very big projects—bigger than NSERC, bigger than SSHRC, bigger than NRC—because there is a huge international opportunity we can piggyback on, and across cabinet you need to have an additional structure or another structure to invest in these kinds of big initiatives.

[Translation]

Mr. Gilbert Normand: I have made a note of your suggestion. I worked at the municipal level. We could make a decision in a few days, in less than a week. At the provincial level it takes a month, and at the federal level, it takes a year.

[English]

Ms. Paddy Torsney: Thank you.

The Chair: Thank you very much, Ms. Torsney.

Minister, we want to thank you very much for appearing this morning. We appreciate the time you've taken to meet with us, and we appreciate your frankness in answering our questions. We look forward to some return answers that we were unable to get earlier today—

Mr. Reg Alcock: Let's bring him back.

The Chair: Well, I'm sure you'll be back sometime soon, and we appreciate that.

• 1005

We're very pleased to have, as our second witness today, the Honourable Robert Thibault, Minister of State for the Atlantic Canada Opportunities Agency.

Minister, you have an opening statement, which I'm sure is not too long.

Hon. Robert Thibault (Minister of State (Atlantic Canada Opportunities Agency)): Oh, it's a long statement.

The Chair: Just so you know, I'll cut you off if it's any longer than ten minutes. We'd like to hear your opening statement, and we have lots of questions for you.

Mr. Robert Thibault: Did you say twenty minutes? No, I'm going to keep it short. My voice is going because I have a cold.

I look forward to discussing the Atlantic Canada Opportunities Agency and all aspects of economic development in Atlantic Canada—our efforts, results, plans, and priorities with respect to economic development. ACOA works with Atlantic Canadians to create jobs and raise earned income, and has played and continues to play a very important, relevant, and successful role in the life of the region.

[Translation]

The Agency continues to improve and adapt its programs and services to meet the changing demands of today's economy. There can be very little doubt that in order to prosper in the long run, Atlantic Canada must move forward into the global, knowledge-based economy.

ACOA continues to support the growth of the Atlantic economy by focussing on entrepreneurship and business skills development; on access to capital and information for business; on trade, tourism and investment; on innovation and technology; and on community economic development.

[English]

It is worth noting, by the way, that fully 92% of ACOA's clients are small and medium-sized businesses, each of which employs, on average, fewer than 100 individuals. Our focus on small and medium-sized business is deliberate. They create most of the new jobs in the region.

After more than a dozen years in operation, I think it's safe to say that ACOA is working, and working exceedingly well. Consider that every $1 that ACOA invests results in a $5 increase in the Atlantic gross domestic product, or that the $3.2 billion ACOA has invested since 1987 has generated tax revenue of $3.8 billion from agency-assisted firms.

[Translation]

According to Statistics Canada data, the five-year survival rate of ACOA-assisted start-ups is two and one-half times higher than that of all new businesses in Atlantic Canada. Also, over the past five years, ACOA has invested in 4,300 commercial projects, helping create and maintain 61,000 jobs in the region.

Finally, according to Statistics Canada data, the Atlantic unemployment rate is 2.8% lower as a result of ACOA programming. And our strategic approach has also proven effective: ACOA has made significant headway in the areas of export readiness, innovation and technology, youth and entrepreneurship education, tourism and business information.

[English]

In the past year alone, ACOA has helped more than 80 small Atlantic firms begin to export and has provided another 300 companies with export readiness training. Since 1992, exports from Atlantic companies have increased by 256%, from $6.7 billion a year to $17.2 billion.

Since 1997, ACOA has provided more than 1,700 low-interest loans to young entrepreneurs, who in turn have helped create nearly 2,300 new jobs in the region.

More than 250 students, from entry level to grade 12, now learn about entrepreneurship and business values thanks to teaching materials produced with assistance from ACOA.

[Translation]

The ACOA-administered Canada Business Service Centres, or CBSCs as they are known, provide one-stop access to business information for Atlantic businesses. During the 1999-2000 fiscal year alone, CBSCs in the region helped more than 246,000 clients, and enjoyed an 87% satisfaction rate for the service they provided.

• 1010

Finally, I would like to mention that ACOA is on the verge of launching a very powerful new development tool: the five-year, $700 million Atlantic Investment Partnership, a key feature of which is the $300 million Atlantic Innovation Fund. It is a balanced mix of strategic investments and initiatives that will strengthen the capacity of Atlantic Canadians to innovate and compete in the global, knowledge-based economy.

[English]

The AIP will infuse ACOA's existing activities with renewed strength and fresh resources. Its focus is on helping to close the region's skills, innovations, and productivity gap with other parts of Canada and with the world. Its method is by way of partnerships, partnerships with other levels of government, communities, businesses, universities, colleges, and research institutes.

This kind of collaboration will be important because the Atlantic Investment Partnership is not a short-term fix. It is an investment by the Government of Canada, intended to help create the climate for long-term sustainable growth, and to be successful it will require cooperation, commitment, and investment by all of those key stakeholders.

As you can see, ACOA continues to be relevant, active, and useful in the lives of Atlantic Canadians. Our investments are truly at work helping to build regional economic capacity today and for the future.

Merci. Thank you.

The Chair: Thank you, Minister.

We will now begin with questions.

Mr. Rajotte, please.

Mr. James Rajotte: Thank you, Madam Chair.

First of all, good morning, Mr. Minister. Thank you for coming.

You talked about some of the harshest critics out of ACOA sometimes coming from Atlantic Canada itself. One of those critics is the Atlantic Institute for Market Studies. They have a philosophical problem with ACOA. They argue that ACOA, which takes scarce tax dollars and disburses those dollars in terms of regional development, actually suppresses growth in Atlantic Canada. I just want you to address that from a philosophical point of view.

Mr. Robert Thibault: I certainly would argue with the premise. There are different programs we administer, but the principal one, for me, in economic development would be our business development program. What we do there is supply interest-free loans, unsecured, to businesses as just part of their entire financing package. So we don't participate, or very rarely—I could almost say never—with any institutions or businesses that are growing or starting up that don't have other commercial lenders on board. We assist in getting them to leverage the money so that they can participate.

It's a lot more difficult in Atlantic Canada than it may be in other areas for start-up or expansion of businesses because of the lack of commercial venture capital. There isn't as much as you might find in other areas. There isn't that synergy that's created by having a lot of people in the same industry, or similar industries, where you can have specialized lending institutions or venture capitalists performing in one industry and looking for investments like you might find in IT sectors and other parts of the country or other parts of the world.

Therefore, I think our investments, which are a small part of the entire package, leverage a lot of activity and assist people in getting to the next step or getting off the blocks in business development or business growth.

Mr. James Rajotte: And you talk about that on page 3 of your comments, when you say:

ACOA is working, and working exceedingly well: Consider that every dollar ACOA invests results in a $5 increase in Atlantic GDP; or that the $3.2 billion ACOA invested since 1987 has generated tax revenues of $3.9 billion...

You're saying here that there is a link between the amount invested and the tax revenue, and it's always in the positive, then?

Mr. Robert Thibault: Yes. I don't know if the link would remain true if we invested $100 billion, but we've been able to use our funds strategically.

Mr. James Rajotte: That was my second question.

Mr. Robert Thibault: Well, I'd certainly like to try.

Voices: Oh, oh!

Mr. Robert Thibault: We've been able to use our funds strategically and have had a lot of success with the businesses that we do participate with and assist. If you look at that revenue to the federal treasury, it is very interesting, but you also have to consider the impact it has on local government, on provincial governments, and on the economy in general in terms of spin-offs. I think it's very significant.

• 1015

Mr. James Rajotte: If you did increase by $10 billion, do you think you would actually turn out, say, $15 billion in net return to the provincial treasuries and the federal treasury?

Mr. Robert Thibault: It's always a struggle for ACOA to try to meet the demand. There are more demands than there are funds available, so we try to do the best we can.

Certainly, more resources might be helpful, but generally we've been able to do very good work with the funds we have. Now we're going into new avenues and into other areas that hopefully will be even more successful.

Mr. James Rajotte: As my last question, I have a couple of articles here. One from the New Brunswick Telegraph Journal—and you can correct me if these quotes are not right—says you would consider your work done if you could one day make your own job obsolete. In another article in the Moncton Times-Transcript, it says you would want these programs to continue because they are so successful. To me, they seem to be somewhat contradictory, and I'm just wondering if ACOA should continue, and for how long? Do you think that if it truly succeeds over time, ACOA should not exist in, say, twenty years? Is that the ideal?

Mr. Robert Thibault: I think that would be a safe comment, and I don't think the two articles you quoted do contradict one another. I think it would be my job. My job would be successful if ACOA as it exists now didn't need to exist in the future because we've had economic success.

Secondly, we're not there yet, so I'm not prepared to close up shop. I think we still have a lot of work to do, and there still is significant need for the services that are provided by agencies like ours.

On the other side, if we are successful and we continue to grow as we're growing, and if we continue to have the successes and the AIP goes in the direction that we're predicting, we'll bring the Atlantic economy to a level whereby the Atlantic provinces can participate in other national programs available in other parts of the country but for which our research institutions or industries might not be quite ready, such as the technologies partnership program, the Canadian Foundation for Innovation, and other programs. They're available everywhere, but industries in other parts of the country are more equipped to benefit from them.

Mr. James Rajotte: So ACOA is really bringing Atlantic Canada to a level comparable to other regions in the country. Do we need Western Economic Diversification then?

Mr. Robert Thibault: I'll let Mr. Alcock handle that, and I'll leave that to the minister responsible for western economic development. He understands his economy much better. We're working in Atlantic Canada to benefit from the opportunities that are there, to meet the challenges so that we can maximize the potential of the economy in Atlantic Canada.

Will we ever catch up to Ontario? I hope Ontario keeps growing also, that we grow, that we always have some healthy differences in the country, but that we all continue to grow. I think what's important is that we maximize our opportunity, and that we do the best we can for the economy and for the provinces in Atlantic Canada.

The Chair: Thank you very much, Mr. Rajotte.

Mr. Savoy, please.

Mr. Andy Savoy (Tobique—Mactaquac, Lib.): Thank you very much.

Welcome, Mr. Minister. I'd like to talk about two issues.

Number one is regional development. The RDA groups in New Brunswick, Nova Scotia, P.E.I., and Newfoundland have gone through some recent changes, and I understand a proposal is in the works with regard to that, specifically with regard to New Brunswick and the new CEDAs. Could you fill us in on what those changes are and what the mandates or the new goals of those organizations are?

Mr. Robert Thibault: I'm hoping to have discussions with Economic Development, Tourism and Culture New Brunswick and their premier within the next seven days to discuss this matter specifically.

It's my understanding that they're looking at changing the geographic boundaries of their regional development authorities, and are looking at their make-up and perhaps their effectiveness. That's probably to make sure they're doing the best they can with the resources they have, and I think we share in that.

I think it's time to re-evaluate. With the regional development authorities all across Atlantic Canada, we operate a little differently in all provinces, and that's fair. I think we have to do what works best in each area.

• 1020

The RDAs are an excellent method of bringing the community, in the form of local government or local economic development agencies, commissions, or institutions on the ground, to work together with the provincial organizations and federal ones—ACOA in our case, Industry Canada, and other levels—to make sure we're all working from the same list of priorities, we're comparing our priorities, and we're not duplicating effort. I think it's a good way for all of us to have a reality check and to make sure we're focused on where we have opportunities, where there are significant challenges, and that we're all understanding them the same way.

Mr. Andy Savoy: The second area is that of value-added technologies and the transfer of technologies to the private sector. In our area, we have a very strong forestry and agriculture sector, and we have probably what I would say is the pre-eminent value-added company in the world in food processing, McCain Foods. Every time I see a load of logs cross the border, I cringe. Where most people see a load of logs, I see furniture and I see various value-added products.

Does ACOA have any specific initiatives regarding value-added as far as field officers are concerned, or in terms of policies and programs that may be more geared toward value-added and basically geared toward the value-added sector or group?

Mr. Robert Thibault: One of the great strategies in our economic development policy is to try to do value-added secondary manufacturing, the development of new products and new technologies, the use of new technologies in existing production, and all those elements. What we try to work with is the private sector, the research institutes, and the marketing organizations. We try to work with them to get that synergy going by getting everybody around and providing what assistance we can, some stimulus to try to get it going.

In value-added, one area in which we've been quite successful is in value-added forestry in New Brunswick. We still have a long way to go, but we have one client there who is exporting high-grade architectural mouldings all over North America. He's above a hundred employees now. He was a new start. He has been in business for, I think, seven or eight years now, but he was a start-up business and has been very successful.

We try to do as many trade missions as we can. In the last three years, we've done some to the Boston area, to New England. Shortly, we're heading down to Atlanta. Some of the businesses on board are in value-added forestry production.

The other thing we'll be able to do with the Atlantic Innovation Fund is work with the private sector and the research institutes to maximize the potential of our forest resource. I know some of the institutions, again in partnership with the private sector, are preparing some proposals to put forward that I think are very interesting. They'll have to be analysed, like all others, and we'll have an independent advisory board that will be looking at all of those, but I think the fact they're coming out is significant.

I've heard some people suggest we could increase our fibre production by 20% and maintain sustainability just by using satellite monitoring systems that are under development and implementation in other parts of the world now. That would be very good in Atlantic Canada, so there's a lot of potential.

We work where we can be most effective, and we seldom take the lead on a file, but we provide the advice, the expertise, and the stimulus to assist.

Mr. Andy Savoy: Regarding the Atlantic Investment Fund, there's a section in that called the strategic community investment fund. I know parameters of the program are actually coming forth soon, but could you shed some light on how small businesses, in rural areas specifically, can certainly promote economic development with those dollars?

Mr. Robert Thibault: What we're hoping to achieve is assisting the more rural parts of Atlantic Canada with economic development by working with the non-profit sector or the support sectors of economic development, working with them in creating the infrastructure necessary for economic development. This will be a very flexible program, depending on the opportunities, challenges, or needs that there could be in communities where they might lack a bit of infrastructure that would assist in attracting or accommodating industry, or in assisting existing industries to grow or expand.

If you look at all of the fund, the $700-million five-year initiative for Atlantic Canada, the National Research Council investments—which are to the order of $110 million—will mostly be in the urban areas. A lot of the innovations funding will be carried out in the urban area. So as much as we can, we're going to try to focus the community economic development portion of it in the rural areas, to balance things out and give them a hand up.

• 1025

If you look at Atlantic Canada, while we continue to lag economically, and we might not be growing as fast as the rest of the country—but many of our urban areas are doing quite well. The oil and gas developments are giving a lot of potential to areas like Halifax and St. John's, and there are hopes for many other centres around Atlantic Canada.

I think it's important that we focus these resources on other areas that might not have benefited from our growth in the last ten years, or the growth we're foreseeing in our urban areas.

The Chair: Thank you very much, Mr. Savoy.

Mr. Thompson, please.

Mr. Greg Thompson: Thank you, Madam Chair.

It's nice to have the minister with us, and I do thank him for coming. First of all, Madam Chair, just for the record, I want to say that ACOA has done a lot of good work in Atlantic Canada, particularly in southwestern New Brunswick, the area I represent. There are many examples from the aquaculture industry, which was funded heavily through ACOA in its early stages. It's now a $200-million industry. Food processing and manufacturing have benefited as well. So there are many successes in southern New Brunswick, which I think is a tribute to ACOA.

As you know, I was part of the government that established ACOA. Obviously it did have its start-up problems. One of the things I was always concerned about, in those early days, was the operating expenditures of the department. From the current estimates, I see now that the department's operating expenses this year are going to be in the order of $60 million, out of a budget of $277 million.

If I'm correct, that seems totally disproportionate to me. It seems we've bureaucratized ACOA beyond what we'd consider acceptable, if you measure ACOA against any other institution doing the same kinds of work. That's a little disturbing, Minister. I'm wondering why there's that huge administrative and operating expense out of a budget of $277 million.

Mr. Robert Thibault: ACOA is more than program delivery. It also does regional benefits work and works with other government departments to make sure the needs of Atlantic Canada are considered in all areas. That requires a lot of coordination work and a lot of work done on research, education, entrepreneurship training, as well as in areas other than pure loans or our business development or site granting programs.

Mr. Greg Thompson: I accept that you do interface with many departments and levels of government, Minister, but many of those costs are absorbed by those departments as well. For example, Industry Canada. You work hand in glove with that department, but it covers many of those expenditures.

How many people do you have on the payroll at ACOA who are specifically funded by ACOA? The Enterprise Cape Breton Corporation, for example, which is an arm of ACOA—are those staff considered part of your payroll? How does that corporation fit into these operating expenses, or does it operate on its own basis?

Mr. Robert Thibault: I'll ask my officials to give you the details.

Mr. Michael Horgan (President, Atlantic Canada Opportunities Agency): Within ACOA, I guess our staff is a little over 500.

But the Enterprise Cape Breton Corporation is not an arm of ACOA; it's a separate crown corporation. It has a staff of around 50. We have a very close relationship with ECBC—in fact, in my position I'm actually also its chairman—but it is a separate corporation.

Enterprise Cape Breton delivers ACOA's programs in Cape Breton through a memorandum of understanding, but as a crown corporation it has its own separate appropriation through Parliament. An independent board of directors operates the corporation.

• 1030

Mr. Greg Thompson: I'm also concerned about the outright grants. In the early days of ACOA, I believe the government of the day got into a lot of trouble because of some outright grants to corporations. In some cases, you could question whether the corporations truly needed those grants. Sometimes a business would find itself at a very strong disadvantage compared to a competing business across the street, because one business was funded and the other wasn't—simply because one was smart enough to apply and the other business wasn't.

I know you've moved away from grants and now you're into loans for the most part. But I see in the estimates that you can, if you wish, still provide outright grants. What proportion of your budget is strictly grants, or giving away money?

Mr. Robert Thibault: Grants are not made to the commercial sector in any way. We do administer programs such as fisheries restructuring and adjustment measures, the base closure program, and other government programs. As well, the federal-provincial agreements on economic development do, in some instances, make grants to the not-for-profit sector.

Mr. Greg Thompson: Those grant moneys do not come out of your $277 million budget this year?

Mr. Robert Thibault: Not out of the business development program side of it. There are no grants to businesses. There are only repayable contributions.

Mr. Greg Thompson: In other words, you're telling me that of the $277 million that will be appropriated to the agency this year, not a nickel will go out in grant money?

Mr. Robert Thibault: Not in the business development program. Some of the appropriations funds would be for the fisheries restructuring and adjustment measures, for Canada-Nova Scotia and Canada-New Brunswick, and for those grants. Perhaps Peter can tell you.

Mr. Peter Estey (Vice-President, Finances, Corporate Services, Atlantic Canada Opportunities Agency): The specific answer to your question, sir, is less than one-third of 1%. In other words, in fiscal years 2001 and 2002, the agency will give out less than $1 million in grants.

Mr. Greg Thompson: Okay, that's the answer I was looking for. Thank you.

The Chair: Mr. Alcock, please.

Mr. Reg Alcock: Thank you.

It's a pleasure to have the opportunity to talk to ACOA, because we also have an agency in the west, and it's interesting to note some significant differences between the two agencies. At times, we in the west have looked at the Atlantic provinces and their economy with some smugness, because they were obviously struggling. But in fact, if you get into the data, Atlantic Canada has done quite well in terms of its share of national wealth. That share has gone up slightly over the last two decades, whereas Quebec's, Manitoba's, and Saskatchewan's shares have gone down substantially.

There is always this debate about whether these agencies are effective. As I look at the year-to-year transits, I have to think that since the arrival of ACOA, there is a steady, fairly positive growth in the Atlantic region's share of national wealth.

One of the things I note about ACOA is that you seem to have a planning capacity that takes into account a broader strategic objective—and not just the regional demand, because there's always a demand for business assistance in small economies where it's hard to access capital. I'm interested in how you go about creating that.

Mr. Robert Thibault: One thing we do very well is coordination and consultation with the communities, universities, research institutes, provincial governments, and local governments. I was just discussing the RDAs, the regional development authorities, which have been a very positive development. I used to be in municipal government, and I find the RDAs very interesting vehicles. We can take municipal resources that are effective in economic development and match them with provincial and federal resources. That way, we can get all the people who work in the same field around the table regularly, to compare notes and make sure we're working in the same direction. We can also know what the regional development authority in the neighbouring community is doing, so that we can work with them, combine forces with them, and achieve a synergy—get a lot more effect for the same money. We can get all the knowledge that may be out there—all the information provided by ACOA's research divisions, or by the RDA studies, or by the provincial economic development agencies or departments. Everything comes into play in the same area.

• 1035

I believe it's a lot easier to do long-term planning and gain a strategic perspective that way, because most people are well aware of the territory, of what exists out there, and what the opportunities and challenges are. It's easier to find partners to do positive things.

Mr. Reg Alcock: And is that part of ACOA's annual planning process?

Mr. Robert Thibault: In Nova Scotia's case—my officials will correct me if it's different in the other provinces—the regional development authorities always produce an annual report that presents their plans and priorities to ACOA, as well as to the provincial government and municipalities that are their partners. That report shows what the priorities are there.

On ACOA's part, the planning and adjustments are ongoing and continual. There's always an annual plan, but the analysis continues on a day-to-day basis. So if any opportunities or challenges arise, we're aware of them and we're in a position to react.

Mr. Reg Alcock: Thank you very much.

The Chair: Thank you very much, Mr. Alcock.

Mr. Thompson.

Mr. Greg Thompson: Madam Chair, as the fifth party, I'm having a great opportunity today, because there are so few members on the opposition side for a change.

Mr. Minister, in any department there are always concerns about abuse of the system. I know that early this spring there were approximately 14 cases under investigation by the RCMP that concerned fraud by some who had obviously tapped into ACOA resources.

I want to ask specifically, what has been the outcome of those cases? Have any of them been pursued? Are any before the courts?

Mr. Robert Thibault: You understand, Mr. Thompson, that I can't comment on specifics. But I think it's important to recognize that although the RCMP is investigating ACOA clients, in none of those 14 cases is ACOA itself—or any of its agents or employees—under investigation.

Mr. Greg Thompson: I want to make it perfectly clear that I understand that and accept that.

Mr. Robert Thibault: I'm working from memory here, but I believe that in seven of those cases, the questionable practices were brought to the RCMP's attention by us, through ACOA's audit procedures. In some other cases, it was a third party that brought them to the attention of the RCMP—it may have been a creditor or someone who had loaned money to one of those clients and saw the questionable practices. Others were discovered purely through RCMP investigation. But I think it's important to note that the matters don't relate to ACOA directly.

Mr. Greg Thompson: I understand that.

Is it true that most of the loans ACOA provides are unsecured?

Mr. Robert Thibault: Yes.

Mr. Greg Thompson: That is somewhat troubling. How many of those loans have gone into default, and how much money from the estimates have you set aside for such defaults?

Mr. Robert Thibault: We're currently experiencing a 90% success rate, which means a 10% default rate on outstanding loans. Because these loans are unsecured and would be considered “high risk” by any commercial lender, I believe that's a very good success rate.

But even of those loans that are in default, we will recover some of them—and we continue to try to recover a lot of them, or all of them. Some could have forecast their repayments to start in September, and come October, repayment hasn't yet started.

Mr. Greg Thompson: Thank you, Mr. Minister. That's acceptable. I'm trying to cram a lot into a short time here, and I appreciate the chair's generosity.

Another question that concerns me, although you could say this is petty and unnecessary whining... Yesterday a member of Parliament, Mr. Wappel—you know about this, it was the top story—wouldn't support one of his constituents because that person didn't vote for him. I know you can't control individual members of Parliament. But one of the aspects of ACOA I have experienced talks about empowering members of Parliament. I hope you can do this, because most MPs—regardless of their political stripe—work with your agency, with their provincial governments, and through their municipalities. You know that well, having been there. But when it comes to announcements, they conveniently and consistently leave out of the platform, in any kind of announcement, individual members of Parliament, unless you happen to be on the government side.

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I know all is fair in love and war and politics, but the truth is many members of Parliament invest a lot of time in working with their municipalities, with the provinces, as you well know. And given what we're seeing playing out in the media today in Canada and this sort of distasteful sense of politicizing access and so on and so forth, which I believe none of us in this room would agree with, can the department take steps to ensure that when these announcements are made, individual members of Parliament are recognized for their efforts on behalf of their constituents?

Mr. Robert Thibault: I think I understand your frustrations because we often have the same ones working with municipal and provincial governments. Most of the time we fund 70% of programs we're doing jointly with them, and sometimes they announce it without our presence and it does frustrate us.

I certainly would consider trying to find a way whereby we could accommodate everybody. It seems to make sense to me.

Mr. Greg Thompson: I appreciate that. We can leave it at that and we'll see what happens in the next announcement.

It is my understanding that ACOA—

Am I finished, Madam Chairman?

The Chair: Shortly. You may have another question. I have other people who want to ask questions.

Mr. Greg Thompson: Go ahead, Madam Chair. I don't want to hold up the other members. We'll maybe have some time later.

The Chair: Mr. Savoy.

Mr. Andy Savoy: Mr. Thompson brings up a very good point on that issue specifically. I think we might want to look at speaking with our provinces in Atlantic Canada in the same fashion, because we see that very frequently.

Mr. Greg Thompson: For the record, I agree with the member.

Mr. Andy Savoy: Maybe scheduling the announcements is something else we can look at both provincially and federally.

As you know, my riding is very rural and has a strong presence in agriculture, forestry, metalworking, and a variety of sectors. Being a rural riding, there are some issues around access with regard to economic development agencies and ACOA. Aside from the strategic community investment fund, what other areas are you looking at in terms of rural initiatives, rural service? How do you ensure that small rural businesses receive the same level of service that, say, those in the centres receive?

Mr. Robert Thibault: What should be understood I think, or is not known well enough, is that most of our activities, and most of the business development loans and most of the work that's carried out by ACOA, are in the rural parts of Atlantic Canada, in the smaller towns in the rural areas. As I was mentioning earlier, the urban areas tend to do very well. We do end up doing some investments in those areas when the opportunity is there and when the need is there, but the vast majority of the investments we're involved in with business under the business development program are in the more rural areas of the Atlantic provinces.

Mr. Andy Savoy: Secondly, also in my riding there is an issue or a fact, a situation, with seasonal industries, specifically forestry and agriculture. What's ACOA's policy on this, or is there a specific strategy with regard to seasonal industries, seasonal employment?

Mr. Robert Thibault: We have to have a look at some of our practices to see if we can improve work in that area. The strategic priorities are always in value-added, being able to do more with the primary resources we have now in terms of new markets, new ways of manufacturing, new technologies, and value-added secondary manufacturing, so that we can go to the next level, and, rather than just being harvesters or producers and shippers, become manufacturers.

The private sector has had great success in certain areas in Atlantic Canada. The McCain family would be a great example of this, where they've taken potatoes and now all sorts of food products...and the amount of jobs they create.

I think there are a lot more opportunities out there. We're always ready to work with them. We work with industry groups.

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Export is an area we're putting a lot of renewed emphasis on, and we're working with the Atlantic provinces to take those industries, those companies, that are already export ready and bring them into the market and help them export, help them do the follow-up, help them do the training and get the expertise they need to be successful in the export market. Then hopefully we can help to bring them to the next level. New England has been our target for the last three years. This year we're taking a lot of companies that have had success in New England and we're bringing them down to the southeast United States, which is the fastest growing market in the U.S.

When you look at what that market means to Canada, in that market alone we export more product than to our second biggest national trading partner, which would be Japan. So the potential is huge.

We are traditionally very good traders, but we have to bring it to the next level and try to get more people exporting, give them the expertise, make them export ready. Then it gives them a much wider range of final products they can make with their primary resources as they have more markets. Rather than just sending fish to the Fulton Fish Market, hopefully they can sell Coquilles St. Jacques in Atlanta.

Mr. Andy Savoy: Thank you very much, Mr. Minister.

The Chair: Thank you, Mr. Savoy.

Mr. Thompson.

Mr. Greg Thompson: Thank you again, Madam Chairman, for your generosity. This is again unexpected. I'm going to have to come back more often to your committee.

The Chair: Don't get your hopes up.

Mr. Greg Thompson: Mr. Minister, I know there's no direct relationship, although I suppose that economists could argue there would be... But I do know that one of the raging topics in Atlantic Canada now is the equalization formula and the cap the federal government has put on it. There seems to be a little bit of disagreement within the federal cabinet on whether the cap should be removed or not. Obviously you know what the positions of the premiers are, and I guess none of us are going to argue with their individual positions. I have read some of your comments on that.

But for the record, I'd like you to tell us what your position on the equalization formula is, Mr. Minister. I'm going to tie this into ACOA once you finish your comment, if I may.

Mr. Robert Thibault: Of course, I don't speak for cabinet on this matter—the Prime Minister and Minister of Finance do—but as a Nova Scotian and as an Atlantic Canadian, I'm always willing to reopen the equalization formula and rewrite it in a way that's of better benefit to Atlantic Canada. But that has certain elements of risk. If you look at the current time...a huge part of our provincial budget is coming from equalization transfers. I don't know exactly what the figure is in New Brunswick, but—

Mr. Greg Thompson: It's the single biggest item, the single biggest infusion of revenues from the federal government.

Mr. Robert Thibault: So if we go to the table and we open it up, maybe Alberta and Ontario will want to pay more into the system and assist us and maybe they won't. We have risks of winning; we have risks of losing. So that's a risk.

I believe in 2005 it comes up for renegotiation and for re-discussion and consultation.

In terms of raising the cap, again I have no problem with raising the cap, and that would assist the Atlantic provinces, but very little in relation to the cost to the federal treasury. We put in—and I'm working from memory again—I believe $1.7 billion more this year, and most of that went to one province in the order of $1.5 billion. Manitoba, Saskatchewan, and Atlantic Canada distributed the rest and so ended up with very little.

To be able to do initiatives such as the $700 million initiative we're doing now, to have the funds for infrastructure programs... We have interesting challenges in Atlantic Canada, such as the St. John's harbour clean-up, the Halifax harbour clean-up, or Corner Brook... We need some assistance on highway development, highway upgrading. It requires some funds from the treasury. If they move all their funds to equalization, I don't think it's the answer for Atlantic Canada.

Mr. Greg Thompson: But I don't want you to be able to fool us into thinking that the transfers are basically a designated tax within the have provinces, which obviously it is not. We all contribute to general revenues, and the transfer payment is coming out of general revenues, not out of a specific fund based on the very complex formula. But I do want to quote something you said earlier in the spring.

The Chair: Last question, please.

Mr. Greg Thompson: I'll conclude, Madam Chairman.

• 1050

You were talking about Nova Scotia particularly, they carry too much debt, and talking about the obstacles to removing the cap, but at the same time, it says “Mr. Thibault said there's a need to look at other programs”, without designating what those other programs would be, to help Atlantic Canada “over the hump and allow the economy to grow to its full potential.” So what did you have in mind when you were talking about other programs in addition to equalization to help Atlantic Canada?

Mr. Robert Thibault: I'm in discussion now with members of caucus. I hope to have discussions with the provincial governments, with the premiers. We're looking at having an Atlantic Canadian conference to deal with economic development matters, a brainstorming session, trying to organize that within the next seven or eight months, to find out exactly how we could have a strategic impact with federal programs that would assist Atlantic Canada beyond what we're doing now. If we can find that program, if we can find those elements, I'll be very happy to approach cabinet and try to get those resources for Atlantic Canada. I think we've got a better chance of assisting Atlantic Canada that way than we do by going the route of equalization.

Mr. Greg Thompson: When you say caucus, I'm hoping you might extend it beyond your caucus to others that are involved in representing Atlantic Canadians.

Mr. Robert Thibault: You're absolutely right, we should broaden the discussions and get the ideas out from everywhere. I'll be waiting to have a discussion with the Atlantic members from your party at any time.

The Chair: Thank you very much, Mr. Thompson.

Lastly, Mr. Lastewka, please.

Mr. Walt Lastewka: Thank you, Madam Chair.

First, I want to compliment the ACOA people for all their hard work. I've had an opportunity to work with all three of the executives from time to time, and I think the fact that you've been focused and very strategic in helping small business has been good. The evidence is there with more and more small businesses starting and growing, and I know you've done a lot of work on entrepreneurship training. I wonder if you or the executive could share with us their work on the entrepreneurship training programs.

Mr. Robert Thibault: I will open it up. I want to tell you a nice little story.

I went to Moncton to speak—we have a group called SEED. We work through the schools with young entrepreneurs. Actually, they're school-aged people and we hope to instil in them an understanding of entrepreneurship, that it is a way of life, that it is a potential career, and the importance it has in our economy. They might have that in the back of their minds later. I met a young man who they told me a year before was in a youth detention centre. The counsellors recognized that he had a low self-esteem problem, looked for a method to work on his self-esteem, introduced him to the SEED program, and he worked there. I spoke to the guy. He told me he's in grade 11 now, doing well at school, and his dream, his goal now is to open and run his own small business after he goes to university. I don't know if he'll ever achieve that, but it's a far more positive dream than robbing a bank or running a bookie business on the street corner.

So I think we should work with people of all ages on entrepreneurship and also give them the knowledge, the skills, and the ability to bring their ideas to a business level, small business, to export level. Often it's intimidating for people. They might be very good craftsmen, they might be very good managers of people, but going to the next level, to the bureaucracy, to the export documentation, to the customs brokers, all those elements can be quite intimidating. So I think with a little bit of money assistance from ACOA we've been able to do quite a bit.

Mr. Walt Lastewka: Paul, do you have anything?

Mr. Paul LeBlanc (Vice-President, Policy and Programs, Atlantic Canada Opportunities Agency): We realized long ago that there was an obvious deficiency in commercial investment moneys for small business start-up and early-term growth. That's very important, and a lot of people knew about that, knew ACOA did that. We knew in the model that wasn't enough. You had to address awareness about business entrepreneurship. You had to address attitudes. There's a cultural, attitudinal, values issue that had to be worked on for the medium and longer term, and you had to help instil greater skills about business.

• 1055

That in essence has been our entrepreneurship development model, and it's actually taken shape in a lot of ways. The minister talked about 250,000 young people in Atlantic schools who have entrepreneurship as part of their public school system curriculum—there was almost none seven or eight years ago. That's one of the results. There are youth entrepreneurship drop-in centres that help early adolescents get acquainted with the values of business and learned skills, entrepreneurship strategies tailored to the needs of women, women-based networks to help women entrepreneurs and augment their businesses in a helpful climate, where there's exchange of information, etc.

The model has also included helping television programming, broadcast all over Atlantic Canada, that featured young and not-so-young Atlantic entrepreneurs, to try to cast entrepreneurship as a credible, laudable career choice. And we've seen differences. We've been tracking the attitudes of high school and university level people about small business in Atlantic Canada, and we've seen their desire to take business as a career opportunity steadily increase in the region, we know in part as a result of these strategies.

Mr. Walt Lastewka: In addition to your youth initiatives, the women and business conferences have probably been some of the best I've seen across the country. I think the more we do that type of training, not blocking anybody from going into business, the better. We've talked about people who've been in detention, the youth, the women in business—this has been a success.

I want to bring up a possible irritant, though. As we get into more and more businesses and the Atlantic area gets its fair share of the 145,000 new businesses that are established every year, the question becomes, how is ACOA watching or monitoring to make sure, because there is an ACOA, for example, in Atlantic provinces and there's no development fund in southern Ontario, that we're not just moving jobs?

Mr. Robert Thibault: A great majority of those businesses we've been assisting are with Maritimers who are starting up or expanding. We've had some success lately in attracting call centres. But very few of those were moving from one area to the other; they were expanding their activity. They were in the United States or they were in central Canada. They needed more facilities and they've come in.

We just did one in Yarmouth, Register.com, with 300 jobs, in every rural part of the province. Register.com was operating out of New York City, had a huge problem with workforce, turnover was too fast, they couldn't pay enough to make the people pay the transit fees and all that to get to Manhattan to work out of a call centre there, the rent was too high... They've come to Yarmouth and they're very happy with the workforce.

All the employers I've talked to have made some investments in Atlantic Canada. At Tesma, which I was just speaking with in North Sydney, they did an expansion to over 1,000 employees. Everywhere you hear the same thing. It's the workforce that makes it work when they discover it—very loyal, low turnover rate, hard-working.

The community college system we have and have been working very hard with provincial governments to develop and to make as pertinent as possible is doing excellent work in servicing the businesses that want to expand or want to come in.

Mr. Walt Lastewka: But my concern is that we don't get ourselves into a position where we're using federal tax dollars just to move jobs or to help the business grow.

Mr. Robert Thibault: We can't do that. You can't even have competition between the provinces or in others. We have people who are expanding, and the great majority are people from the Maritimes who we're trying to bring to the next level, helping them increase their business, or new start-ups.

I'd just like to add, if I could, one word on women in business. We do participate in funding the Mount Saint Vincent Centre for Women in Business. Its executive director is Daurene Lewis, who was the first black female mayor in Canada and is certainly used to breaking new ground.

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Women entrepreneurs are probably more successful by their percentage. A lot, if the not the majority, of new businesses are started by women entrepreneurs.

Mr. Walt Lastewka: Let me conclude by saying congratulations to ACOA and their team for staying focused, which I think is very important.

The Chair: Thank you very much, Mr. Lastewka.

We want to thank the minister for being here today. We have to move out of here because there's another committee waiting to move in. We do appreciate your time very much. We look forward to meeting with you again in the future.

The meeting is adjourned.