[Recorded by Electronic Apparatus]
Thursday, November 21, 1996
.1006 
[English]
The Chairman: Pursuant to Standing Order 108(2), the committee will resume its review of science and technology and the innovation gap in Canada.
I'd like to welcome the witnesses.
This morning, for the members, we have a very unusual set-up. I'm looking forward to trying this. We're going to use technology ourselves, and not just talk about it. We'll have witnesses from British Columbia participating via teleconferencing. They will join us at approximately 11 a.m. When I receive word they're about to set it up technically, we'll take a short break to allow the technicians to do their work without us having to sit there and stare at them. Then we'll get back to work right after that.
We have with us today two people, in person, who will start the round table. We've been doing round tables now for the last month. We've tried to ask the witnesses to make an opening presentation of ten minutes. This is a ballpark figure. We then open it up to the members to get involved.
We found this to be a topic in which the members of this committee have taken a great deal of interest. If you haven't covered all your points at first, don't feel you won't have a chance, because the members are truly engaged in this.
We set aside three hours for the room. We normally go anywhere from two to three hours, depending on the number of witnesses we have and so forth, so that really does vary. We'll give everybody a chance to ask their questions.
Thank you very much for setting aside your professional time and bringing to the table your expertise and interest in this subject. We're all amateurs on this side, so we welcome some professional input to help us through this study.
I'm going to ask Dr. Claudine Simson, assistant vice-president of global external research and intellectual property from Nortel, to start the discussion.
Welcome, Dr. Simson. Could you say a little bit about how you fit into the company and what you do, and then start into your presentation?
Dr. Claudine Simson (Assistant Vice-President, Global External Research and Intellectual Property, Nortel): First, I will introduce myself. I work for Nortel. I've been with Nortel for the past 17 years.
My function with Nortel is very interesting. I'm involved in all the global external research programs for the company, involving universities and government laboratories and working with strategic alliance partners and JVs.
Also I'm driving the intellectual property assets of the company in trying to increase the assets for innovation and for market and strategic advantage in the company. Again, this is a global function, but my headquarters are in Ottawa, Canada. I have staff all around the globe, but the large majority are here in Ottawa.
I would like to start by talking a little about Nortel to give you a perspective of what it is. I must also say before I start into this that I'll also speak French.
.1010
[Translation]
Good morning, ladies and gentlemen. I will be happy to answer your questions either in French or in English, whichever you prefer.
[English]
We are a large company, as you probably all know, with 65,000 employees all around the globe. Our total sales last year - I'm not allowed to predict the sales this year yet - were almost $11 billion U.S., and an important factor is that exactly 61% of those sales were in North America, the rest being in international markets.
We have 26 principal subsidiaries all around the globe. We have over 30 R and D facilities, and we also have over 30 manufacturing plants. We are represented in approximately 100 countries.
I would like to give you some perspective on what we are doing in Canada, which is our main point of interest here. We have a large employee population in Canada, with a total of 22,000 employees. We spend a large proportion of our research and development budget here in Canada. A total of $1.2 billion of R and D is spent by Nortel in this country, which represents 20% of all industrial R and D in the country and 80% of all R and D in the telecommunications sector in Canada.
We also work with a lot of suppliers and contractors in this country and we provide jobs. We spend up to $1.5 billion on those Canadian contractors each year, which is another dimension of the contribution of Nortel to the country.
As you know, the headquarters of the R and D for Nortel is here in the Ottawa valley. Many of our former employees created a lot of the high-tech companies operating today. Over 55 high-tech companies have actually been created by people who emerged from Nortel or Bell Northern Research, the R and D arm we used to have.
Nortel hires over 20% of all electrical engineering and computer science graduates in this country. It is a very large proportion for the universities.
I would like to give you an idea of how Nortel contributes to the employment and the revenue stream in Canada. I would like to point to the pie chart on the right-hand side. It gives you a perspective of how the revenues are spent. As I said before, 61% is in North America, with 11% of our sales revenue coming from Canada, 50% from the U.S., and 39% from international sources. That gives you the perspective that sales and revenues are only 11% for Canada, and shows the importance of the international market to the success of the company.
On the left-hand side you can see in the top pie chart that although 11% of our revenue comes from Canada, 52% of our R and D employment is done in Canada. That means the majority of the R and D is done here in Canada. Of R and D employment, 33% is in the U.S. and 15% is international. Not only is the R and D population largely employed in Canada, but also manufacturing, clerical, management, and any business areas. We have about 29% in Canada, 35% in the U.S., and 36% international.
So that gives you a perspective on how much we count on Canada to drive our R and D population and how many jobs we're actually creating in Canada, especially in the R and D areas, where we provide new opportunities and new innovation potential in Canada.
In the next line I would like to give you an idea of how the company is proceeding within its leadership position and with respect to innovation. This gives you an idea of the strategies and processes we put in place to deal with the whole innovation process.
We are addressing, on the left-hand side, services, products, devices and technology, and all the vertical columns give you the strategies we currently have.
.1015
Starting on the right-hand side, we have copyright strategy, which addresses the long-term needs of the company. When I say long term I mean over four years - five to ten years. We are looking here at new technologies. If you look at the bottom of the chart, it gives the whole innovation process. We build copyright strategies where we are fostering an environment where we drive concepts and inventions in the company.
The middle columns give you an idea of the network strategies for the medium term of two to four years. Here we are trying to address new business opportunities. This is the true innovation, and innovation is actually the implementation of an invention into a product or a service. We do that and we have strategies to do that for services and products for the company.
The last column on the left-hand side addresses the product strategy for a shorter term - one to three years. We are really addressing the deployment on new products. This is the successful commercialization of the innovations we put in place in our products and services.
The next chart will give you an idea how technology is managed for leadership and innovation. This is the whole cycle of the company's involvement. As I said before, the large majority of this research and development is done in Canada.
The various stages of product development we have in place will look at both research and development and involve basic research, which is really research in the fundamental technologies that we believe will give us leadership in the future.
Applied research is to maintain the strong centres of expertise in the relevant technologies we believe will be applied in product and services. Then we start to put in place what we call lead projects. That means we put a multi-disciplinary program in place in order to validate the technology choices we're making and the value generated in our product. Then we pick up lead applications, where we have the first productized implementation of that technology and then we have the development and evolution.
In the stage of research we have a very heavy investment in university programs. The next chart is going to tell you about the kinds of programs we have, and again, the large majority is done in Canada.
We have been involved in university and education programs for 12 years. We have a variety of programs, but we have a very strong arm to address this fountain of research and development cycle for the company. So what I call my partners in that are universities, institutes, government laboratories, research consortia, networks of centres of excellence, which is a big one we're very heavily involved in, and industry forums. We are working with all these, the heavy investments being primarily in universities and of course the network centres of excellence, which you've probably heard about, which is a big program in the country and I believe is extremely valuable, networking all the universities together with industry partners.
We have instituted a large variety of programs to match our needs and those of our research partners. In contracted research we have a very firm deliverable that's really complementary to our own R and D programs. We also have research grants and usually those are partnerships with other industries or partnership with the government, with NSERC in particular.
We are very big in the next one, which is creating new faculties in the universities in disciplines we believe are required in order to get to the technologies we want. We also establish a lot of chairs, and the large majority of those chairs are with NSERC.
Curriculum development is also an important one. We have sabbaticals or extended visits in our laboratories for professors and faculty staff. We have large programs for co-op students. We have more than 750 co-op students in Canada per year. We have post-graduate internships for students doing masters or PhDs in our laboratories with close supervision from professors from universities and our staff.
The last initiative is to advise the school system. If you want to tackle the whole education system you have to see what's happening in the schools. Of course there are also equipment donations that allow the student to work on the most up-to-date equipment and validate their research.
.1020
We're involved in a large majority of the countries. Over 50% of our research is done in Canada.
What I would like to do now, after this perspective on Nortel, is to give you some suggestions and points to consider in order to close the innovation gap in Canada. I have six points in my chart.
The first one is to promote and support university and industry partnerships. There are two aspects to this. There is the aspect of the partnerships needed to create the right technologies for the country so we have successful innovations and successful businesses emerging from those partnerships.
The second aspect that is so important is to try to help the universities to shape the curriculum to provide the skills that are required in the country to have highly skilled labour industry is going to be able to utilize. Work hand in hand between the university and industry is absolutely critical to that.
The next aspect for high-tech companies is to have government support incentives that are performance based. In particular, what I'm referring to is the R and D tax credits. Large companies spend a lot on R and D, creating jobs. We would like the government to continue to support these R and D tax credits, again based on the R and D performance of the companies. We're not talking about subsidies here.
The third one I alluded to before. I think we have to attach a lot of importance to the success of exports in international markets, to reduce this export deficit. It's very important, of course, for companies such as Nortel. A large proportion of our sales are exports. We would like the government to continue initiatives such as Team Canada. It has been very successful, very important. It's opening the country to the international community and collaboration between the private sector and public sector and the international community. It's positioning Canada as a leader in the industrial age.
The fourth point is basic research, ``basic research'' meaning infrastructure in basic research for the country, not necessarily increasing funding in basic research. I'm referring to supporting basic research in areas and disciplines that will be winning ones for the country in the future. Pick out the disciplines and the technology areas, such as information technology or life sciences, which are going to give a better return on investment than any other areas, for instance. Pick out those disciplines and focus basic research on them. Create a very strong infrastructure in the country for those major disciplines.
The fifth point is intellectual property rights flexibility. It's important when we do research and if we have basic infrastructure research in a country. Industries are interested in intellectual property rights when they use all that research in their products, so the government has to show some flexibility with intellectual property, dealing, for instance, with exclusivity of rights, which could be demanded by some companies to have them commercialize their products.
The last one is recognition for innovators. Support and promote science and technology. Have people from government and parliamentary people aware of science and technology and innovation, promoting, pushing initiatives that will promote that in the country, in the education system, in the young people, putting systems in place such as awards for people, for industries which are very innovative, like the government awards, for instance, in the arts. Something like that for industrial innovations would be very good. That will foster a creative environment in the country where we can influence especially young people in becoming entrepreneurial and innovative and getting into science and technology.
The Chairman: Thank you very much.
We'll go to Peter next and come back for the questions. Your six points at the end really helped the committee to focus on what the questions will be.
We'll now turn to Peter Eddison, who is from Fulcrum Technologies Inc. Mr. Eddison.
Mr. Peter Eddison (Vice-President, Strategy and Business Development, Fulcrum Technologies Inc.): Thank you very much.
I will give a very brief summary of Fulcrum as an example in the presentation, but I would like to start out by pointing out that we're a company that's almost exactly 1% of Nortel's size. If in our wildest dreams we could succeed in the way Nortel has succeeded, it would be an amazing success story for us. So if you think of the charts and the numbers that Dr. Simson used and divide by 100, you almost have an idea of Fulcrum.
.1025
We're a company that was founded here in Ottawa in 1983. I was one of the founders of the company. I'm currently responsible for strategy and business development, and therefore have a wide variety of roles. As you can imagine, in a company of our size a lot of people do many different kinds of things.
I welcome the opportunity to be here today and thank you very much for inviting me.
I will start with a slide. Obviously, I just want to make my point of view clear. I think we agreed that the future of industry in the information age is clearly centred on technology and innovation. Again, echoing a previous presentation, we have a very small domestic market, so in a sense it's not good enough for Canada to be as good as everyone else; we must have more than our share of innovative businesses to be successful. If we have the share of businesses proportional to our market, that is in fact not sufficient.
It's because - and I'll show the Fulcrum example on the next chart, but it's identical to the Nortel one - that business is in fact going to be worldwide and must be worldwide.
We want to try to get the innovation centred in Canada. It is the key headquarters functions like R and D, corporate marketing, and strategy and business development that are the future of innovation. We have to recognize that we want to centre that in Canada. We cannot possibly hope to centre the sales of our companies here in Canada.
Very quickly, the next chart is a Fulcrum example. I think the ratios are probably close to identical to those for Nortel, divided by 100.
I've learned my lesson: I leave the scale out on my diagrams when I'm going to be against people like Nortel.
Some hon. members: Oh, oh!
Mr. Eddison: But if you look at revenue, for example, our revenues are about $70 million. We operate in offices in nine different countries. We sell into 40 different countries through partners. Less than 10% of our revenue comes from Canada. But if you look at our employment, over two-thirds of our employment is in Canada, and almost completely 100% of our technical employment is in Canada. That's R and D and worldwide customer services. Nearly all our Canadian employees are in fact technically based, since our revenue people and salespeople tend to be foreign nationals hired outside the country.
Again, the chart has the same shape as Nortel's. It's just enormously smaller in size. But this demonstrates the point of the leverage of innovation in Canada. No amount of procurement by the federal government can possibly change this small chart very much. We just have to face that fact. In reality, if we can focus the innovative activities here, we'll sell very successfully worldwide.
Interestingly, I probably have the same six points to raise as were raised by Dr. Simson. I just have them on several different charts. I want to start out by pointing out one thing that I think we all know, but that I think is worth repeating. And certainly, companies like ours are at the stage where this is very evident to us: high technology is intrinsically very risky. If we approach it by asking what kind of support programs we can have and try to measure their payback with the methods that we may use for other enterprises, we'll be disappointed. Most enterprises will fail. That's the nature of high technology. When you win, you can win big.
And the other issue is that high technology is risky all along the road. I can imagine it's still risky for Nortel, but I certainly can tell you it has been risky for Fulcrum at each of the stages of its growth so far. It's risky at the very early stage, when companies are wrestling with the idea of whether this thing is actually inventable at all and whether it can be made to function. It's risky at the mid-stage of growth, when we ask if it is ``commercializationable'', whatever the noun is from that. Can we turn this into a product that people will buy? And it's risky at the growth stage, which is where Fulcrum is now. Is it ``globalizable''? Can we sell this worldwide? We must do so to be successful.
High technology is risky in different ways at each of these stages, and as I said, I'm sure that beyond Fulcrum it continues to be risky in ways that I can't imagine. For example, intellectual property rights are not usually a serious issue for companies our size, whereas they are for larger companies.
Those stages I listed above are true for every small business. Anyone building a pizza chain or a car dealership has the same problems, but high technology has one other overriding risk, which relates to the pace of change. We're constantly worried that what we're doing is about to be made obsolete by somebody else, particularly by somebody elsewhere in the world.
.1030
So the underlying stress of high technology is not only the same as for other business, but the rapid rate of change drives enormous risk, because even if you do it right, someone else may have done something slightly better slightly sooner.
Of course everything I say in a presentation like this is very personal. I don't know that these are the answers and I certainly don't envy you your tasks in trying to come up with answers for how the government can help R and D.
I took a look at the three stages Fulcrum's been through and highlighted some things that were useful to us and areas that continue to be useful to others.
At the early stage, clearly the focus should be on R and D. At the ``Is it inventable?'' stage, the essence of success is R and D. I agree that the support for R and D is absolutely the single most crucial element, through support programs such as IRAP, which were terribly useful to companies like us in our early stages and still are. We've used IRAP extensively and very successfully.
As for the R and D tax incentives, the absolute dollars are smaller for us, but the scale is the same. The tax support for R and D is extremely important for us and allows us to deliver more R and D than we otherwise could afford. If you invest 15% of your revenue in R and D, you need at least a ten-to-one payback from R and D to even break even. R and D support is critical.
For small companies, R and D consortiums can be useful. We're members, for example, of the Canadian Strategic Software Consortium, which, again, has been useful to us. It allows a small number of Canadian companies - I think six - to group together to look like a micro-mega-company of six times the size to tackle some R and D programs that none of us on our own could do.
Lastly I'll talk about post-secondary education. I realize responsibility for this at the government level is often clouded, but it is alarming to us that there should be any sense whatsoever that we would back off on support for education, particularly post-secondary, particularly technical, and particularly at the excellence level. We're competing with people worldwide for the very best, and it's absolutely essential that we continue to encourage children to stay in school, stay in university and excel.
Let's move from the very earliest stages in the focus on R and D. Not that R and D is not important everywhere, but if we think of a mid-sized company, the government can play a role in the procurement area. I hesitate because my opening slide points out that no amount of government procurement in Canada can change our ratio of sales very much. But particularly at the mid-stage, government has a role to encourage early adoption through what I call creative procurement.
Think about this. There are projects, for example in the federal government, that Canadian technology companies can satisfy, which, when commercialized, can then be sold on a much bigger scale to other organizations. We've had a number of examples here, such as pilot projects at the Library of Canada. We now have a very major contract with the Bibliothèque nationale in Paris, for example.
So the creative use of pilot projects, test beds.... Remember, most Canadian technology companies are very small. We have 300 employees. Every single one of our customers is much bigger than us. How do we get the test examples of the use of our products in the real world? We have to have early test site customers.
Our very first customer was Revenue Canada Taxation 13 years ago. That's the kind of early procurement that we can then take responsibility for leveraging globally. It's also for reference accounts. It has been our experience that when we sell worldwide, people would be very surprised if we in fact did not have Canadian government reference accounts when we're trying to sell to the governments of other countries.
In the middle at least, government can spend money on Canadian technology in a way that encourages early adoption. Last week I was speaking at a Government on the Net Conference and talking about these ideas, and a manager came up to me and said, ``But Peter, I'm a manager in the government, and I am not rewarded whatsoever for taking any risk. If I take two paths, one with your software and one with some other mainstream software, and my project is delayed a week, I will have my knuckles rapped. How can I be rewarded for taking risk by partnering with you?'' That's a challenge.
Let's move to the growth stage, which is where I would say Fulcrum is now. It's a $70 million company growing at 50%, 60% or 75% a year. Here we have a cultural problem that I'll get out on the table. We have to let our winners keep on winning. Think of Nortel's growth; Nortel is adding each year probably the entire Canadian software sector on top of itself. Even Fulcrum will add next year $30 million or $40 million in sales. That's ten $5 million companies.
So one of the things we have to do is recognize that once a company is doing well, we have to encourage it to keep doing well and to keep doing well here in Canada, not relocate just at the time when the payback is big.
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We have to do something about what I call facilitating the flows of risk capital from major capital pools. We have to get the major pools of capital in Canada, the banks and insurance companies and others, more oriented towards risking money on companies such as ourselves. I have no idea how that should be accomplished. It's just evident to me that our needs for capital now are greater. We listed our company on the NASDAQ stock exchange, as so many companies do. Capital remains a problem for companies our size, not just start-ups.
The second thing is we have to foster a breeder environment. Nortel was an interesting example. I'm also very aware, of course, of what Newbridge has done here in Ottawa by spinning off small companies. They have become a major venture funder of new spin-offs. The knowledge that companies such as Newbridge or Nortel have about what to invest in is a remarkable knowledge, and we have to encourage and foster it. I don't know how - perhaps through favourable treatment for spending money in that way. But clearly, if we look in Ottawa, between Mike Cowpland and Terry Matthews we have people who have proven they can push high technology into overdrive. We have to encourage them to keep going.
In the last point I say reconsider capital gains treatment. These are all touchy subjects, but I'll take it from a very personal point of view, that of Fulcrum. I don't think employees at Fulcrum have ever resented the income tax we pay on the salaries we earn. We've been very fortunate. But I must say when you have employee stock option programs, employee stock purchase plans, to induce your employees to drive the extra distance, it does seem painful that when all the risks have been considered, from all the early stages, and finally we're a public company and finally stock appreciation is an issue that can reward employees, you lose 50% of it when you go to cash it in. As I said, I understand it's a touchy subject, but certainly for high-tech entrepreneurs, who are very mobile individuals, if we were, for example, suddenly to find the U.S., or California, were to treat capital gains on employee-owned company shares much more favourably, our brain drain problem would accelerate enormously.
So what's my summary? It's a difficult problem to solve, and we certainly don't have the answers, but with a mid-sized company such as ours, high technology is intrinsically very risky and we can't get around that. Unless we're willing to tackle programs that are very likely to fail and absorb that up front, we won't be successful.
I summarize it with three points. We have to make it as desirable as possible to be centred in Canada. By ``centred'' I mean like Nortel. Their R and D is here. Their strategic planners are here. Their marketing gurus are here. They are the people whose skill sets are needed to foster others. It's not a sales force issue, it's a central R and D and marketing issue.
You have to be centred here, but you also have to make it as easy as possible to sell worldwide. Buy-Canadian policies are not of interest to us. We're very glad the countries in which we sell don't have too-strong buy-there policies, because we're selling nine times as much outside Canada as we're selling inside Canada. We certainly care about free trade. We care about open skies. We care about instantly trying to be a world company.
The last thing is we have to focus on encouraging winners and not trying to pick winners. My own experience, as with many of us, is we didn't know what would work and what wouldn't work. Fulcrum is my fifth company. The four previous ones were not very successful. I have no idea how an outside agency such as the government can hope to pick winners, either. I think what we can try to do is when we see someone winning at whatever scale, encourage them to keep winning and keep winning here. You take a lot of bets; some will pay off. The trick is not to cash out on the winners too early.
The Chairman: Thank you very much, Mr. Eddison. You've raised a lot of points we've heard before, but you've given them a focus. Having the two companies sitting beside each other will give the members a chance to ask questions of big and small companies together.
I'm going to turn to Mr. Schmidt now. I remind you we will joined by two other people via teleconferencing within the half hour. We may end up interrupting you, Mr. Schmidt, or another member, in the middle of a question.
Mr. Schmidt (Okanagan Centre): Thank you, Mr. Chairman.
Thank you for appearing before the committee. I think it's a tremendous opportunity we have to listen to people who are practitioners on the cutting edge of commercialization and innovation.
I want to ask Dr. Simson if she could explain in a little more detail the recognition for innovators she referred to in her points to consider for the future.
Exactly how should we recognize innovators? What should be done? I think it's very close to the idea that has just been mentioned about encouraging the winners to keep on winning. Could you go back from that a bit and say how we could get an encouragement climate that would tell innovators they're going to be recognized and rewarded for the innovation they've created?
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Dr. Simson: I believe there are two levels of ideas. There is a level of support within a corporation, which is internal to the company, and there is what the public sector can do.
I'll tackle the public sector first. I believe that the government, the people in Parliament, can be very influential in getting the students and the young to enter the fields of science and technology by promoting those fields so that students understand there is a future out there and the future employment opportunities are very high. So the government should put that in the educational system and support it very strongly.
The other one I mentioned during my talk was trying to reward people with a kind of personal prize for being an innovator, and to have successful commercialization of the innovations, of course, and to have something Canada-wide that is going to be publicly recognized, like the Governor General's awards for the arts, for example. Government should have something of that nature for innovators, something that is publicly known. And there should be a big fanfare about it.
In my opinion, it is extremely important to get into this. And government should recognize people in the public sector who are working very hard to be innovative, like people in the government laboratories. Work with people and provide them with financial incentives or soft incentives to do so.
I will go along the lines of what we heard from the private sector. They try to help the people when they get some financial returns on their risk and their hard work. Try to see if the government can help in fostering that.
Mr. Schmidt: Okay. I understand that very well.
I really would like to explore just a little more this idea of encouraging youngsters and budding scientists who are at university now. It seems to me that one of our previous witnesses indicated this should start at the kindergarten level. So does this almost suggest a change in the culture and in the attitude of the public of Canada towards science and technology and innovation?
If that's the case, what would you suggest? How would you suggest going about bringing this change into being so that we actually have a new value orientation, a new attitudinal adjustment towards science? At the moment, everybody seems to think science and innovation are tough. Everybody thinks it's an area that's very risky, that you'd be better off not getting into it, because, after all, successes are very limited and really it's not the place where most of us should go.
Dr. Simson: I think that in the area of kindergarten to grade 12 there are a lot of fine examples of a lot of initiative, and I can characterize them. If we could expand that, it would be beautiful.
I was actually personally involved in this particular one, which I think is being taught in the Ottawa-Carleton region. I'm referring to what I call the teacher-internship program. The way to influence the young population, of course, is to work on the teachers, because if you touch one teacher, you're touching hundreds of kids.
Try to foster the understanding of what science and technology is for the teachers. Ask them to go to the industry and to do internships in the industry. We want them for that. Have the boards of education put that in parts of their career development and have even the principals of the schools going on industry internships for a couple of weeks or months so that they understand the particularities of science and technology. Also, grade the skills of a teacher. Some of the teachers are not even computer-literate. We must have that in the school system.
There is a partnership program in the Ottawa region, which is called PARTNERS and is a business and education partnership between the schools and the industry. In this partnership, we create two things. Again, we create training of the teachers. It's better to have the students starting in grade nine doing a couple of weeks of co-op student-type internships in the industry to give them a flavour of what high-tech and science and technology are all about, what the opportunities are and how important it is for them to be familiar with it from the start. So that is this kind of system.
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We also have to tackle what I call the directors of education of the boards and educate them about science and technology. We have to tackle the people in the orientation offices in the schools, especially for students' last two years in the school system. We have to have people in the industry. I mean, I do that a lot. A lot of Nortel people do that - go and make presentations and talk to the kids when they are making their choices. Will they go to university? What should they do, medicine or arts? Tell them about science and technology. We should have government people, such as people from the NRC, foster that. That would be be an initiative the government as a whole should be involved in.
Mr. Schmidt: I think telling is one thing, but doing is another. I'm really concerned about this, because attitudes generally aren't changed by listening to people talk. We can tell people to have all kinds of attitudes, but that doesn't change their attitudes.
I'd like to shift the emphasis a little bit to the actual curriculum. I think you're both interested in this. We've had people come with two kinds of conflicting information. One is that we don't have enough skilled people; they just aren't there. There's a shortage of people we can employ in our business. We heard this from Newbridge. I don't know if Nortel is having the same problem, or whether you are. On the other hand, I hear that we are graduating more engineers than ever before.
So what's happening? We have a surplus of graduates on the one hand who can't find employment, and yet you're saying we have a shortage. There is a gap here. There's not a meshing of opportunities with supply. This question is for either one of you. I think you both have an approach here.
Dr. Simson: I can tell you what I know about what we're doing at Nortel. I don't know what the other companies have been telling you. We have difficulty in finding engineering skills in this country. There are two types of difficulties. There is the strict number of people - there is absolutely not enough of them.
Mr. Schmidt: Enough of whom?
Dr. Simson: Engineers in electrical engineering, computer engineering, and computer sciences. There are not enough in those disciplines. We have to really push people to go into those disciplines. Unfortunately, those disciplines are perceived as being the most difficult ones. That may be why the enrolment is lower in them. We have to try to do something to change that kind of mindset.
The other area is also that the electrical engineering, computer sciences, and computer engineering that are currently taught in universities may not reflect exactly what the companies and the high-tech companies need. We need to change it so it evolves more towards what we effectively require when we -
Mr. Schmidt: How can we do that?
Dr. Simson: Through university-industry partnerships. As I explained in my presentation, there are a lot of programs with universities where you work with the faculties. Firstly, and the best way, as a matter of fact, is to have professors working on research projects with industry so that they understand what kinds of research topics are important, and what new things the industry is working on, so they can change their curriculum to address that. So there is the content of the curriculum we can work on.
The second very important part, which is related to the student retention and the student willingness to go towards that, is the delivery of the curriculum. We work a lot with university professors to change the way they deliver the curriculum, not only the means themselves - we do help them to teach not with antiquated types of things such as writing on a board, but through video means and trying to work a lot with PCs and electronic mail and accessing the Internet so they have the most up-to-date topics on the subject - but also the way they teach themselves, the way they ``image'' the project. If they are closely related to industry they can refer in their courses to how they know about Nortel doing this, and Newbridge or Mitel working on that.
They can also bring people from the industry to give talks or even to lecture - creating that kind of incentive too is very important. The industry people come and give a couple of lectures to the students so they'll have a feel for what's available out there. It's very attractive for the students. It helps student retention in university because they understand what the industry is going to be all about and they can become more interested.
The Chairman: Thank you. If you don't mind, I'm just going to get a couple of people in before we take the break.
Mr. Murray, did you have some questions?
Mr. Murray (Lanark - Carleton): Yes. Thanks, Mr. Chairman.
Thank you both for being here. It's been very interesting.
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I just want to pick up on something Mr. Eddison said about the problem of flow of capital from major capital pools. We've had witnesses tell us that the country is awash in capital - venture capital, funds, lots of money to go around. I'm just wondering why you focus on that as a problem for your company.
Mr. Eddison: I wouldn't say I focused on that as the key problem. I pointed it out as one of the problems. I happened to talk to our chief financial officer before I came and I asked him if he could make one point, what it would be. He said he'd make that point. So he focuses on it more than I.
In general, it has always seemed to us that the risk reward aspect of investing in high technology somehow just doesn't work very well for most big Canadian holders of technology, with the obvious exception of companies like Newbridge and others that invest in things they understand.
I don't know how we can make it more attractive for people with money to risk it on technology, but they seem unwilling to do that, in our own experience. Yes, there's a lot of capital there. The price of getting it seems to be very high.
Certainly a little earlier, when we were trying to think what we should do - go public, do this, do that - we were completely unsuccessful in getting any risk capital from Canada. We had a number of opportunities in the U.S. We listed in the U.S. rather than Canada. It was easier and more straightforward. We could get a better price. So on one hand there's lots of money, but on the second hand the money doesn't seem to be aware of the risk requirements of companies like us, for whatever reason.
In other words, I don't have an answer to the question.
Mr. Murray: So you are talking about recent experience, not five or six years ago.
Mr. Eddison: This is reasonably recent experience in the last two years.
I think it's getting better. We see initiatives with people saying there have been opportunities for venture capital start-ups and things like that, but it still seems to me that in general we have a risk-averse culture. We talked about that for other reasons, and I think it spins over here.
I agree with the member that a changing culture is very difficult, but in general we don't celebrate the winners the way some other places do. I think that shows in many ways, including the banks' reluctance to at various stages lend us money without us giving up our houses.
Mr. Murray: It's interesting. Last night on CBC's The National there was a story on where the jobs are. It's encouraging to see those kinds of stories on the news, because they highlighted the importance of getting a good education and being willing to change. I think it's an important part of this cultural shift that's required.
Dr. Simson, you were talking about supporting basic research. I think we all agree that government shouldn't be in the role of picking winners and losers and we should be supporting winners. I'd like to know how, when, and who should choose those areas to focus on, and how we should go about supporting them.
Dr. Simson: The basic research context was based on the fact that we should, as a country, look at basic research into disciplines that are going to be the most favourable for the country overall. One example that comes to my mind is information technology, where you have a lot of potential growth, job creation and generation within that sector. But also, that sector is enabling other sectors to become more innovative and to become internationally competitive because it provides them with the tools to compete in the international market. If we pick up disciplines like that and support that, then you have duplications of job creation and wealth across several sectors in the country.
Mr. Murray: So you're saying we should just open our eyes and see what's happening. It's not a great mystery. Just pick those successful industries and try to push them along further rather than -
Dr. Simson: Help them - especially the ones that are going to create ripple effects. We talked about the fact that in information technology, telecommunications, we have more than 55 companies created out of Nortel. I think there is a proliferation of companies, and it continues. Newbridge and Corel continue into that proliferation. So there are benefits to other sectors, as I've mentioned before.
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Basic research is really related to the government providing funds to groups like NSERC, for instance, to it still providing the grants and supporting the networks of centres of excellence. Across the country, they are going to universities in specific areas where there are pre-selected fields. Again, on the NCEs, make sure that we pick up the winners and continue to support the winners, not continue with the other ones. Put all the funding in the ones you think are going to be providing successful for the country.
Mr. Murray: Would you feel comfortable making a comment on government labs? You've mentioned the importance of NSERC, which provides money to universities and researchers. What about research done in government labs? Is that something you see as a great value to the country, or should it be skewed differently perhaps? I don't know if you have any familiarity with it or not, but if you could, please comment on that.
Dr. Simson: I do. I am actually on the NRC council, so I am very much involved in the NRC itself.
I think the government labs can make a tremendous contribution in the country, especially with the way NRC is going right now. For instance, it is pushing towards innovation and entrepreneurship - who is in the company.
There are two basic approaches for government labs. The first is in work on basic research, again in partnership with industry. Don't work in esoteric research in which you don't know where the applications will be. Create a partnership with industry and understand where the basic research can potentially lead to in terms of some new product or business later on. Work on those areas. And the second aspect by which the government labs can be very useful to the industry is through helping them in the middle stage - validation of the concepts of technologies - because the industry may not have the possibility to do that inside their own resources. My partner here was referring to the trials, field trials and incubation. The government labs can be perfect incubators for testing a technology concept that's going to lead somewhere, again in partnership with industry.
So you have those two aspects. First, I don't believe we want to have government labs involving the last one, the implementation and commercialization aspect, unless they want to spin off a new company, like NRC is doing. These two aspects I believe are crucial. We should really push NRC to change their structures for these - give them the rewards they require for that. There's struggling right now with the reward system. With salaries frozen and all that, it's very difficult to motivate people. We have to change the reward system. And the culture associated with working in partnership with industry should be a key element and should be also financially rewarded.
Mr. Murray: I'm glad you raised that, because I was going to ask you about the incentive problem in government labs.
Dr. Simson: It's a big problem.
Mr. Eddison: One comment I would add is that in my experience, most mid-sized technology companies actually don't do basic research. Companies the size of Nortel do, but companies our size and most other companies that I know of that are our size or even slightly bigger do not do much basic research. It's too risky and too expensive for us. Even on a risk threshold, it's the extreme risk.
In that sense, I think there is a type of research that is done in government labs that companies like our own are certainly not in any way trying to replicate. I've been involved personally in one particular little project where some early work done in a research lab was later turned into something quite useful.
The middle range of high-technology companies do not have the capacity to do basic research. If that is not done in places like NRC, from our point of view, it will not be done. Very large companies can do it, but we cannot. So we certainly encourage that role at NRC, because there's.... We can be good at commercializing things, but we are not inventors in that sense. We don't have the money, time or patience to stay on projects that long. We're driven by quarterly results, and basic research is hard to fit into that. We therefore see a strong role for NRC before companies like ourselves.
The Chairman: Thank you.
I'm going to ask Mr. Shepherd to start his questions, and then we'll take a break and hook up with the people from Vancouver. Are you ready now, Mr. Shepherd?
Mr. Shepherd (Durham): Thank you very much.
I guess I'm fixated because I just returned from Taiwan. I'd just like to maybe ask you some questions about some of the things I found there.
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They created a science park and had two universities, all their science labs, and all their commercial companies in one place. As I talked to some of our trade people - you talked about Newbridge Networks and others who had been there - the one thing that occurred to me is that in our federation, it is difficult to create this kind of cluster technology. The reason is that as we try to promote different areas, governments get in the way. In other words, if the government says it wants to be involved in biomedical research but it's going to happen in this part of Toronto, somebody in Vancouver is upset about that. Is our method of governing ourselves a real hindrance to creating this kind of technology synergy?
Mr. Eddison: I'll give a quick answer, then I'll turn it over.
I think your observation is very insightful, and it's an issue of critical mass. People who live in Ottawa talk about Silicon Valley North. One of my observations is that this phrase can only be used by people who have never been in Silicon Valley. It's a scaling issue, and there is no doubt that the critical mass and the benefits or synergy gained from critical mass are essential.
It is true that when you're trying to build a high-technology industry, when you have an incubator fertilization problem for global sales that is fundamentally at odds with a regionalization policy, I don't know which is the more important. As an example, I'd say Ottawa has begun to reach critical mass in technology in the place where I live, but only just. To imagine trying to do this several times in several locations I think brings us below the critical mass of synergy. Most people who I know in Silicon Valley - we have a lot of partners and friends there - have worked for many companies in their high-technology career. They move from here to there, learning something each time. That can only come from having many companies in the same location.
So I think there is a conflict between trying to build things in many different places and trying to get critical mass.
Mr. Shepherd: You mentioned that your company is listed on NASDAQ.
Mr. Eddison: It is now on the TSE as well, actually, although it was not initially.
Mr. Shepherd: I see.
Just getting back to Mr. Murray's question about access to capital, I heard a comment - I think it was from Jetform - but I wasn't exactly sure how to put my finger on it. They seemed to indicate that the pure accounting methodology used to get on NASDAQ was a lot easier than that of the TSE. In other words, the financial statements also somehow look a lot better on NASDAQ than they do on the TSE. Could you address that?
Mr. Eddison: I don't have any knowledge of that. I could ask people inside Fulcrum and they could get back with the answer.
I'm not aware of the technical accounting differences one way or the other. I am aware of the fact that, for example, since there are so many more U.S. high-technology analysts who follow so many more companies, it's still far easier to get people to give knowledgeable opinions on early-stage companies when you're trying to list in U.S. than it is in Canada. There is just a wider variety of people who can give positive opinions, and that is necessary for large investors. I just don't know about the technical accounting differences, though.
Mr. Shepherd: There seemed to be a method of capitalizing intellectual property that the TSE doesn't want.
Getting back to the training aspect, what is it that governments can do? Canada historically has had a very poor track record for companies doing in-house training. I suggest that some of that is because of multinational corporations with head offices somewhere else and so forth. But we talked about partnerships - university and business partnerships, etc. What can the governments do, say in the matter of tax policy, to provide more incentives for in-house training?
Dr. Simson: Just with respect to a tax policy exclusively?
Mr. Shepherd: I'm thinking that we obviously give investment tax credits for expenditures in science and technology, for instance, but we don't give tax credits for training. Is that something that should be explored? Would that tip the edge in the corporate world in order to get this synergy going between companies and the education system so that they're all working in the same vein?
Dr. Simson: In the same vein for training in-house corporations or for partnership with universities or government laboratories, giving the equivalent tax credits - if there are any - will be extremely beneficial. That's part of the incentives I was referring to with Mr. Schmidt.
We have to create incentives for people to work together for the goodness of improving the education system. We have to create incentives for the company that are equivalent to any tax credits for training and development budgeting inside the company, for working with universities to change curriculum. Because we spend so-called R and D money there, providing incentives for equipment donations or cash donations for the universities would be an absolutely wonderful thing to do.
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There are also incentives within the universities themselves, or the educational institutions themselves: changing the kinds of incentive awards or salary scales; carrying a development for faculty staff when they do work with industry. Right now, they get no credits. They are evaluated based on the number of papers they publish, and things like that. When you partner with industry, you are really not better off in the educational system. If you are an excellent professor, if you use the latest up-to-date technologies, if you invite industry partners to make courses, you are not really better off than another traditional professor.
Mr. Schmidt: What is it about our corporate culture...? We look at other comparative regimes in other countries, and they seem to be more advanced in this area. I hear companies coming before our committee saying that they can't get people. Why haven't they taken it to the next stage and trained those people themselves if they're so concerned about it? Why do I hear people saying that they're only going to be able to hire 500 people in Canada because there aren't any, that they have to go to the United States or China to find people? Why aren't companies doing that themselves?
Mr. Eddison: I'll give you the view of a small company, because it's a very good question and companies of our size should take a large part of the blame.
We don't spend enough time on general training, and I think it's partially because we don't have time, or at least we perceive that we don't have time - so that's a non-answer. I agree that we underspend on training. I'm not sure that it's a tax issue or anything else for us. It's a time-to-market issue. We wish there was more cross-fertilization by which we could take from other companies people who have learned on the job and could then come to work with us. For that next stage, we'd recognize that people in our company who've learned on the job would go someplace else.
We don't spend money on training as much as we should because we aren't willing to take the people off the job to go to get trained. That's the reality. I therefore don't know how you really tackle that problem. I would just say we are at fault there, as well.
The Chairman: Doctor, did you want to add one comment before the break?
Dr. Simson: Yes. The latter comment is relative to this issue of training. I'm going to talk for companies like Nortel, the larger companies. We do spend a tremendous amount of money and time in training and developing our people when the requirements are changing to evolve the skills of the existing population base. There is tremendous support there and we spend lots of money on that.
What you refer to about the hiring of new people concerns new opportunities and any new growth that is coming. And, like my partner said, time-to-market is of essence, so you want to have people with the right skills. Any new employee, even with the right skills or the right university diploma, has to be trained for in-house things. But you need to have all those people in the right quantities and with the right skills base in order to train them so that they are proficient at managing the project right away.
It's this issue - the second one - that is important to us. We want to have enough people entering the door with the ability for very fast internal training. We don't want to be spending months and months before they are up to sufficient enough scratch to even handle any projects in the company, to even tackle this time-to-market and competitiveness that we are fighting every day.
The Chairman: Let's take a break and let the technicians set up our new witnesses. When we return, we'll go to Mr. Lastewka. He'll start the questioning after that.
The meeting is suspended for ten minutes. We'll meet again at 11:20 p.m.
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The Chairman: The committee will resume its consideration of science and technology.
We are joined now by two participants from Vancouver: David Levi, who's the president and CEO of Working Opportunity Fund; and Dr. Julia Levy from QLT Photo Therapeutics Incorporated.
Welcome to both of you.
Mr. David Levi (President and Chief Executive Officer, Working Opportunity Fund): Thank you.
The Chairman: Our process is to have the panellists speak for ten minutes.
In addition to the members of Parliament you'll meet as we go around, we also have hereDr. Claudine Simson from Nortel and Peter Eddison from Fulcrum. They have already spoken; we've been talking for about an hour.
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Starting with David, we'd like the two of you to speak for about ten minutes each on some of your thoughts on this issue, and then we'll open it up to members to continue their questioning.
For all four of you, feel free to indicate to me that you'd like to answer a question in addition to the person to whom the question is addressed.
David, I'll turn to you to start.
Mr. Levi: I have a few notes I've made along the way, so I'll start with those.
When we're looking at critical industries for the future in Canada, as a venture capital fund we look for those industries where we think the most growth, particularly in British Columbia, is available to us. The most difficult process is identifying those companies and being able to pull them from the university context and from the small discoveries that are made at the university level and that start outside the university with their technologies.
From our perspective, the area that has the most rapid growth in this province - I think it's true across the country, and certainly we see it when we look at the U.S. marketplace - is the communications industry. As we can see today through video conferencing, it has become an absolutely critical component of our daily lives.
When you look at the opportunities for growth in the global marketplace in the technology industries, being able to produce a product that can be sold in consultation or together in a joint venture with some of the larger companies, such as Northern Telecom and some of the companies in the U.S., such as Ameritech and others, is absolutely critical for us.
The key industries in our portfolio are in the technology sector. In particular we have a number of companies in software, where the multiples are very high. The opportunities are very high for us to invest large sums of money and at the end of the day be able to make large sums of money.
I want to go back just for a moment, though, and talk about the problem we have in trying to identify some of these companies. I view the marketplace of new and emerging technologies as a bit of a minefield. You have a tremendous number of opportunities, but you have a great deal of difficulty identifying those opportunities.
Some of the universities have started to help us with that identification process in the form of tech transfer departments and those kinds of things, but the problem we have once we've been able to discover those opportunities is in moving them from a university context into a commercial context. So one of our largest focuses tends to be looking for those technologies that we can successfully move to a commercialized state.
As I said before, the area we're strongest in on the technology side in British Columbia is biotech, which I'm sure Julia will speak about in a few moments. At the same time we have a number of companies forming a core of emerging technologies in British Columbia, very young technologies in the electronic software and telecommunications industries.
Going back ten years ago, the technology industry in British Columbia was in its infancy. Many companies had eight to ten employees. Today we have many more companies, because we've been doing this for about a ten-year period. If you were to track QLT and other early success stories in British Columbia, you'd find we have many more companies now that have 30, 40 or 50 employees and are now available for financing by venture capital companies and so on.
But with this size increase has come a great number of other difficulties in the companies. A lot of the companies have human resource problems that they are not capable of understanding in terms of developing their company beyond the stage of a very small new technology discovery company. They also have difficulty in being able to attract the kind of long-term capital necessary in order to build a much larger revenue-producing company in the $20 million to $30 million a year range. That tends to be the area of growth that's necessary before they can look towards the public markets.
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If we're looking at these kinds of impediments in these companies as they're being developed, what we frequently find hidden below the surface are large human resource problems they require assistance with. Of course there are issues about the patentablity of what they have. Thirdly, I think the largest single issue is usually the distribution issue: how can they distribute their product and sell it outside of the local marketplace?
All of the companies we're involved with are internationally oriented for their sales. The marketplace in British Columbia - or even in the rest of Canada - is not nearly big enough for them to be successful here. One of the key elements for government and one of the key elements for us in the private sector is ensuring that the distribution network can be provided on an international basis. That's a critical area that we have had some assistance with from Export Canada. There needs to be further development in that area for companies to be successful overseas and in the United States.
The other area, as I've said before, is the IP area. It's very expensive to ensure that the product you have is clearly patentable and is therefore something that you can commercialize in that process.
The other area that we find the most difficult for companies is just the very practical area of dealing with the international law associated with a lot of these products. We have companies that frequently find themselves in early litigation in the United States on patents and processes they've put together. With very little support to the companies, those kinds of things can actually stop all of their sales, and because they are at such an early stage, it can actually kill the company.
I think those are at least two critical areas the government could assist in.
Other than that, one of the areas of competition that we have to recognize - and I know it's not what the committee probably wants to hear - is that in the United States there are some very well developed granting processes that are available to emerging technologies, processes that we don't have in Canada. The government there tends to spend a lot more money per capita on research and development, so there are a lot more larger grants available for companies there.
Of course, Department of Defense spending also has become a critical element in early support for U.S. companies. It is very difficult for small Canadian companies to access the defence bureaucracy, if I can call it that, in the U.S., where frequently there are significant early orders that would assist the companies in being able to succeed. I think that's an area in terms of free trade and issues of that kind that the government could probably assist a number of our small companies with.
I'm just looking through the remainder of the questions, and one of the points I wanted to raise is something we're starting to see in British Columbia. It's the issue of skills training for our future industries. A number of our companies have started to work very closely with the technology institute in B.C. to try to create technicians for this industry.
I think one of the problems we have in B.C. is that we frequently find ourselves chasing the same tail over and over again. If one of our companies is expanding by 20 or 30 software engineers or electrical engineers, the problem they have is that on an ongoing basis they usually end up stealing them from another one of our companies.
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In British Columbia we have a severe shortage of qualified people who can develop software and telecommunications technologies. I have to underline that this is a very serious problem for us in that some companies have already indicated to us that because of the speed at which they have to grow, they're not going to be able to find the people necessary in British Columbia to make it happen. They are looking at setting up offices outside B.C. - in some cases they're into the United States - where they can find qualified personnel, because all they do here is spend their time taking people from one company to another.
If there is an area that we need to emphasize in the educational system, it's the area of science and technology, which seems to be missed at the very early stages at elementary school and in high school. What that leads to, of course, is a lack of interest when they get to the university side.
Somebody put it best when they said that no one signs up for engineering courses - that's considered very nerdy - until you explain to them that those engineers are creating all those video games that everybody is watching on television. So I think it's a very key area for us in terms of human resources.
I think I'll stop there. I'll let Julia carry on.
Dr. Julia Levy (Chief Executive Officer, QLT Photo Therapeutics): A number of things I'm going to say are probably repetitions of what David and others have said to this committee. Certainly, if I say what I'm going to say in going through these questions, then I think it's fairly self-evident that the new economy is going to rely on jobs in high technology of a variety of types: information, telecommunications and certainly biotechnology.
I am the CEO of QLT Photo Therapeutics, a biopharmaceutical biotech company that is developing drugs for the treatment of cancer and other conditions. We're fairly far along in this stage. We've had 12 years of experience in trying to grow a high-technology company on the west coast. I still have a lot of scars to prove that we've done it.
As for the question in terms of what the government can do to promote emerging technology, I'm going to speak of my own experience. I think the biggest barrier or problem that emerging biotech companies have in this country is around the regulatory issues that come out of Ottawa. We do not compare very well in our country with other regulatory bodies like the FDA. We have a very bad track record. This is very discouraging for Canadian biopharmaceutical companies.
It's easier for us to do clinical trials or evaluate our new products south of the border because the FDA works efficiently and rapidly. I've heard complaint over and over again from other biotech companies right across the country that it is extremely difficult to break through the barriers of the health protection branch. We are delayed usually four to six months behind American companies in getting into the clinic because of the various regulatory rules and the slowness with which the health protection branch works. I'm not trying to blame these people; I think they're overworked. But somehow we have to try to break this barrier so we can do clinical trials properly in this country.
It's also discouraging for American companies that want to do clinical trials in Canada, where it's actually a little bit cheaper to run them because of our health care system. This would bring revenues into the hospitals if it was easier for people to get into this country to do the clinical work.
So it could work in both ways. I think this is a really major problem. It's a recurring theme as I go through the other questions. The impediments standing in the way of emerging technologies could well be regulatory in other areas as well as in the pharmaceutical industry. I think we just have to become a lot more efficient in this way to be competitive with the rest of the world. I think we may end up on the tough side of getting drugs approved even in this country because of these regulations we have.
I think I'd like to speak a little bit about a point that David made also in terms of bringing in highly trained personnel. We have a big problem in this area partly because Canada does not have a pharmaceutical industry. We have branch plants of multinationals here, so the emerging biotech companies in this country are really trying to stand alone without a base for people who actually understand how to run these companies.
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We are not competitive in terms of bringing people in from the U.S., because of our tax system. It's very difficult to explain to people that the health care system is actually a big benefit, because they only see what they take home in their pay cheque at the end of the month.
I'm not suggesting government can do anything about our tax structure - obviously they can't - but there may be innovative ways of giving tax breaks to highly qualified people being brought in, even if you make the tax break for a couple of years. They tend to forget, after the tax break time is over, that then they're paying higher taxes. They've become Canadians by that time.
There may be creative ways that don't cost government too much that will make it easier for high-technology companies to bring in the appropriate people at the senior levels, because we really do lack them, and not just on the west coast. I think we lack them right across the country.
I think that the technology institutions are doing a very good job, by and large, in terms of training people technically. The universities, on the other hand, should.... People coming out with training in the sciences - bachelor of science degrees for example - tend not to be able to get jobs in industries like biotechnology because they're only sort of half-educated. Most of them end up going to institutes of technology for an additional two years of training before they can be useful in the industry.
That's probably not the best way of spending our tax dollars. There should be some kind of seamless connection between the technology institutes and the universities, which doesn't exist at this time. The skills training issues are something that government should really pay attention to in terms of indicating what is needed in the society, rather than looking at institutions that have been going for decades.
Other points.... I think someone asked what steps should be taken to promote a climate that encourages both science and entrepreneurship. I think you have institutions in Ottawa that actually are very good, and I'd like to put in a plug for NSERC. Their university-industry program I think is exceptional. It really does work very, very well, and it should certainly be encouraged and certainly continue to be funded. The NSERC people are very geared towards this kind of liaison between the academic institutions and industry.
That really sort of covers most of what I have to say about where I think we should be going.
The Chairman: All right. Thank you very much. You'll find that the members are very interested in your testimony, and there'll be lots of questions, giving you a chance to expand on these views and your overview.
I'm going to turn now to Walt Lastewka, who is the vice-chair of the committee, to begin questioning. The questioning for the members is open to the previous witnesses as well as to the new witnesses. Mr. Lastewka.
Mr. Lastewka (St. Catharines): My number one question is about the regulatory system and remarks that were made about it. I need to understand a little bit more clearly. Is it the regulatory steps that we have to go through in Canada - are they different in other countries? Or is it the fact that, as you mentioned, they're short-staffed and everybody's overworked?
I'm trying to understand if the problem is the amount of regulatory items we have in the system or the number of people we have working in the system.
The Chairman: Dr. Levy, do you want to start?
Dr. Levy: The rules and regulations are not particularly different, say, between the FDA and the health protection branch; in fact, they are really quite similar. The timing, however, is very different.
I'll just give you an example. With the FDA, if you wish to start a clinical trial, you put in your application, which is very similar whether it goes in in Canada or in the U.S. The ruling at FDA is if you don't hear from them within 30 days, you can start the clinical trial.
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What normally happens during that 30-day or four-week period is you will receive two or three phone calls from the person reviewing your application. They may have questions, which you answer. You form a dialogue, basically, or start to form a relationship with that person.
The experience we've had is they are there to help you get into the clinic as fast as possible and to make sure all the safety issues have been addressed. Safety is their major concern, as it is in Canada.
With the health protection branch, our experience is as follows. And we are not unique; you can go to any biotech company in this country and they will say they've had the same experience.
In Canada you have a 60-day waiting period, and it's inevitable that on day 59 you will get a phone call from the HPB with questions that you simply cannot answer in 24 hours, because you have to write them down. That means the time clock starts again and there is another 60-day wait before you can get into the clinic.
This can happen two or three times. With us, every time we have put a new clinical trial into the health protection branch, we've had a 120-day wait before we can start clinical trials. This is very discouraging, because in a small biotech company, that puts you four months behind in terms of getting your clinical data together so you can actually evaluate what you're doing.
Other companies I've talked to have had six- or eight-month delays with the HPB because of this time clock thing, whereas with the FDA there is no such thing. You get your 30 days, and if they have a problem, they will continue to work with you. At most, if you have a bad problem that has to be addressed by rewriting or something like that, it still doesn't mean the 60-day plus 60-day problem.
That could be changed.
Mr. Levi: Can I just make a comment?
The Chairman: Please.
Mr. Levi: It's important for the committee to know how important a four-month delay can be for a small biotech company. Most biotech companies are funded almost on a pay-as-you-go basis. Very few of them will have the financing in place for more than a year. Because they have no revenues, they are going to be expending money on an ongoing basis, and people who finance biotech companies are reluctant to put three or four years worth of money into the biotech company and therefore allow the biotech company to weave its way forward.
Generally what happens in terms of financing is you get a financing term of maybe six months to one year. At the end of the clinical trials or during the clinical trials, more money will be added by the investors, based on the early results. So a four-month delay can actually put a company into severe crisis, because they've eaten up a third of the money they may have available to them and still have no results to show to the investors, who are going to put the next round of financing in.
The Chairman: Thank you. That's a very good point.
I'll turn to Mr. Lastewka.
Mr. Lastewka: We heard from Dr. Simson about high-technology and time to market, and from Mr. Eddison about the importance of everything we do, including regulation. I'd like to go now to the area you probably didn't want the committee to hear. We're now hearing that businesses want grants, and all I've heard for the last five or six years is ``Businesses, get out of the granting system''. I don't understand that. What's changed now?
Mr. Levi: You have to take a look at the difference between the businesses you're hearing from, which are in the general business community, and the businesses in the early-stage high-technology community. When you're dealing with ideas, it's frequently very difficult to understand the commercialization of such ideas.
The risks of financing early-stage investment are very high. Take UBC, for example. They have identified somewhere in the neighbourhood of 150 to 200 technologies that are turned out every year by the university, of which possibly one or two may at the end of the day become a product that can be sold somewhere. That could be done just by royalty or by the creation of another company.
The problem for people who are in the financing business is, with that number, how do you go through a selection process? Generally the way the selection process occurs is you allow them to self-select, and the way they self-select is usually by receiving grants from peer reviews through the National Research Council and others so they can bring their technology to a point where you can see an opportunity for commercialization.
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Prior to the point of commercialization is the point I'm speaking of as an area that tends to be fairly heavily granted in the U.S. and to some extent granted here in Canada.
Our problem is getting those early-stage ideas to a commercializable stage. I would agree with you that at the commercializable stage there are people like us and others who are prepared to make investments in those companies, but there's a big difference between those two. That difference lies in an early idea that has to go through several stages before we, as an investor, can say, if we work on this for the next four or five years, we will have a commercial product at the end of the process.
The Chairman: Okay, thank you.
Mr. Lastewka, one more question.
Mr. Lastewka: My question is on your involvement with the IRAP in your area.
Dr. Levy: We're certainly very familiar with it. IRAP and the university industry grants that are given through NSERC have a very significant function. The IRAP, in particular for early companies, is excellent. It really is an excellent program.
Mr. Levi: I agree with her.
Mr. Lastewka: Could I then assume that what you were getting at is that IRAP should have more dollars to help the emerging companies? Was that what you were getting at?
Mr. Levi: Yes. Essentially what I'm saying is there is this gap. IRAP is there, but it could use more funding, because the early-stage companies we see need that kind of funding in order to survive.
Dr. Levy: You're talking about the little gap that exists between that very early company and the availability of venture capital. The venture capitals have to see a bit more than a good idea coming off the lab bench.
Mr. Levi: That's right.
The Chairman: Thank you very much, Mr. Lastewka.
We're going to turn to Mr. Schmidt, who has teary eyes from hearing the voices of fellow British Columbians.
Mr. Schmidt: I'm very happy to hear and see you.
I'm particularly impressed, Mr. Chairman, that you and the participants in British Columbia are using modern technology. I think this is the first example, in this particular group, of where we have tested or talked about technological development.
I was particularly intrigued by a comment you made, Dr. Levy. I believe the words you used were ``a seamless connection'' between universities and institutes of technology. I would like to explore that a little bit further, because it seemed almost as if you were suggesting that some of the moneys ought to be shifted a little bit, and maybe we should not put as much money into the university area as into the technical institutes.
I'd like to know how you would suggest we bring about this seamless connection so indeed we could eliminate this turf war that exists at the present time.
Dr. Levy: Well, I guess one way would be to accredit the institutes of technology and have the accreditation work across university lines or junior college lines. Certainly in British Columbia right now this does not exist, although two years ago the provincial government held a summit on skills training where this idea was discussed at great length and certainly adhered to by most of the participants.
The seamless educational system ties in to the whole concept of ongoing education, which our young people are going to need as they go forward in this changing world. The whole concept that once you get a diploma out of one institution that's it, you can't do anything with it, is really inappropriate and very wasteful in terms of the tax dollars that go into education.
How do you achieve the seamless connection between different institutions, as you put it, all of whom are fighting over a pot of money? Obviously their vested interest in this is in getting as much as they can for themselves, and unfortunately the victims of this battle are the students.
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We have to do better than we're doing now. What I see around me at the higher institutions is the view that if we get more warm bodies sitting in our classrooms, we're going to get more of the pie. We don't really care what we're teaching them, and we don't care if what we teach them is completely useless after four years, but we're getting a bigger piece of the pie. That's a fairly unkind way of putting it, but it's an example of the worst case of what can happen.
I don't know how you force university presidents and the administration to sit down and to really look at what they're doing for young people coming out into the community after four years. Certainly I know that people coming out of BCIT are much more sought after in the industry areas than are people coming out of the universities with bachelor of science degrees.
One of the ways of doing it may really be by trying to have a very clear look at what is needed in the new economy, at what kinds of skills are needed, and to then try to determine which institutions can best provide those skills. I think NSERC again did a very useful piece of research in terms of looking at where they thought the jobs would be at the turn of the century - and that document is available. It really seems that there are certain things being taught in the universities in which we should not see as many students as we do now. This is just in the science and technology area; I'm not talking about the humanities at all because that's a different issue and it's not really why we're here today. In technology, I think there are a lot of students who certainly don't realize until they come out of the university with their bachelors degrees that this does not give them any opportunity for employment.
Mr. Schmidt: I think you put your finger on a very key point there, Dr. Levy. That has to do with the funding. It seems almost as if the universities are more concerned about getting warm bodies into the classroom. Is it perhaps then that the problem lies with the nature of the funding formula? Ought the basis for funding for universities be shifted, be moved in such a way that there's an incentive for the universities to train people in a way that gets them into jobs in the marketplace?
I suggest that maybe the students have a role to play here. They are the ones who are ultimately going to have to market themselves in the competitive marketplace. Ought some elements of that competition be introduced into the universities? Say, for instance, that it's not an automatic suggestion that the money is given to you if you have a student in your class. Rather, let the students decide where they are going to go, and then have the money follow the student rather than the first way around.
Dr. Levy: That's an interesting idea, but I don't know how you'd do it.
Mr. Schmidt: There are some programs in various other parts of the world that would use what we would call a voucher system. That is in effect a negotiable certificate at the university, but it is the student who chooses rather than the professor or the president of the university.
The Chairman: David, do you want to respond?
Mr. Levi: I can't comment specifically about the voucher system, but I wanted to just take one step further back because I think it is equally important: There may be various ways to get the money to follow the student, but I think one of the biggest problems we have is that we don't have enough students going into the science and technology area. That goes back as a reflection to our elementary and high schools in terms of getting people excited about being in these industries. I heard a statistic just the other day that less than 0.1% of science teachers in elementary schools have studied science in their degrees. Less than 0.1% have a bachelor of science degree.
What we have at the elementary level are teachers who are really the ones who are going to instil an interest in science and technology, but who don't come from a science and technology background. Our problem in some cases, then, is that we have space left begging at universities where there are courses available, but they simply aren't getting the students to sign up for them. That means that we need to work, both as a country and as a province, towards getting people interested in science and technology at very early stages.
Dr. Levy: Certainly one of the things one should look at very carefully is how the teachers are trained. Are they trained to address the needs of the new economy or not? I suspect they're not if you look at faculties of education within the universities. In fact I'm certain they're not in some institutions, because I know people who are in the faculties and who are very frustrated by the fact that they can't alter their training for the K-through-12 teachers.
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Mr. Schmidt: I wonder if we could move to a whole different area, and that has to do with the global market for the products you actually develop and the services you have.
I think it was mentioned earlier this morning by our other witnesses that what we want to in fact do is have the innovation capability, the personnel and the development of technologies, the ideas and innovations here, but then market them globally because that's where the larger market is. We need a large marketplace in order to finance the innovation properly. So the question I would have for you is how you would suggest that this global marketplace be developed. How can we help industries like yours, companies like yours, be successful in that global marketplace?
Dr. Levy: In terms of the biopharmaceutical industry, you're absolutely right. The cost of developing a single pharmaceutical product is so exorbitant that you have to have a worldwide marketplace. Otherwise, you could never do it. The standard statement for developing a single pharmaceutical is that it takes at least ten years and costs between $100 million and $200 million. I never believed it until we went through it, but that is in fact a reality. I think we got our first product out under $100 million, but it was ten years and it was about $75 million. So that's what it costs. Government cannot be expected to participate in funding that kind of research. It has to come from the private sector.
In terms of worldwide marketing, a small company like ours - we have about 115 employees - could not possibly do that. The way in which our industry works is through the forming of strategic alliances with larger companies that are multinational. They will then market our products in different countries. We have different marketing partners for the U.S., for Japan and for Canada. We're not a marketing company, but what we want to do in terms of our industry is partner with a company that has the ability and the skills to sell our products in a particular jurisdiction. There's no way that our biotech industry in Canada right now could do anything other than that. If you look at BioChem Pharma, which also has products out there, they're partnered for marketing with the large pharmaceutical companies.
So there is a way to do that. It's not really a big barrier. If you have something good, these companies will eat it up. You have no problem finding marketing partners.
The Chairman: Thank you.
Go ahead with a quick remark, David.
Mr. Levi: Just quickly, I think that's true of technology companies across the board. Whether they're in electronics or telecommunications, they are all looking for partnerships with people like Northern Telecom and others. I think there is potentially a government role in assisting in getting those potential partnerships together because a lot of time, effort and expense is had on the part of little companies that are trying to introduce their products to these large distribution networks.
The Chairman: Thank you very much, David and Mr. Schmidt.
Before I turn to Mr. Leblanc, I wonder if can indulge the committee with my own question for Dr. Simson.
Has Nortel ever considered a major sort of public affairs or public relations campaign to encourage students into science? Has that ever been part of your thinking, given what everybody's been saying about the need to have younger people thinking of science in a more positive way? Has that ever been considered?
Dr. Simson: It hasn't been as a major Canada-wide campaign. We have initiatives, particularly in the Ottawa-Carleton region, where we work a lot at influencing the children. As I said, we have the teachers coming in on internships, the students coming in on internships. We try to educate the teachers on how to deliver the right courses in science and technology. We participate also with the Fields Institute in Toronto in seminars, workshops and forums for teachers in the Toronto area, but they are not Canada-wide.
The Chairman: Okay, thank you.
Dr. Simson: We also have the National Learning Institute, which is teaching teachers and is providing training for teachers nationwide, but not yet a public campaign.
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The Chairman: Thank you.
[Translation]
Mr. Leblanc, do you have any questions?
Mr. Leblanc (Longueuil): Yes. To continue in the same vein as the Reform Party member, with respect to the marketing of new products, you said a little earlier on that the Export Development Corporation did help, but not enough. Do you have any ideas on how to improve that? Should the government involve itself to a greater degree in the export of new products? That is my first question.
Secondly, other witnesses have already said that taking out a patent is a rather long and costly procedure. Do you have any ideas on how to address that issue?
[English]
Mr. Levi: Let me start with the second part of your question, which deals with patents. Unfortunately, in the last four or five years I've had to become somewhat of an expert in it with the companies we're dealing with.
I think the key issue here is that even when you have a patent, you don't have certainty, but in order to get a patent, you're looking for an opinion by a major law firm, usually in the United States. That's generally where your largest market is going to be for whatever product you're selling.
That is an incredibly lengthy and expensive process. A lot of small companies have great difficulty being able to afford the cost of the patent, which makes it difficult for them to approach financiers.
When a company comes to us and tell us they have this great idea, our first question is whether they've patented it. Their answer, eight times out of ten - if they're young - is, no, we have not, we have only started the research process. We know from that perspective that before we can put a dollar into that company we have to have a patentable product that is in fact under way in terms of the patents. We will then spend anywhere from two to six months working with various legal firms we have established relationships with in the U.S. and spend anywhere from $10,000 to $20,000 just to ascertain whether the product is patentable. Then there may be additional costs beyond that in getting it patented.
So there is a fairly lengthy process involved in which, if you are a company that is not involved with a professional venture capital firm or something along those lines, I think they would find it extremely difficult to bring their product to a commercialization stage because of their lack of information and contacts into the U.S.
If the government is looking for an opportunity, the idea of facilitating the provision of legal services or early patents reviews would probably be very useful to young companies that are unable to attract financing because they don't have a patent position at that point.
On the export side, I think there are probably two things we could look at. First, the Export Development Bank is really structured to deal with large sales in the international marketplace. Their fee structure is established around the kinds of large receivables you'll find in Asia or in the United States. Frequently they are just too expensive or too complex for a small company of 10 to 30 employees who are trying to sell to an international marketplace.
I'm sure the committee will understand that when you're selling into Asia, into China, into Thailand or into some of those countries, even though the receivable may not be questionable, because a government body or utility is buying the product, it may be 60 to 90 to 120 days before you get paid for that product. We have a system in place that works well for large contracts but doesn't work well for small contracts.
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The other area I think the government might look at is in the facilitation, as I said earlier, between small companies and the large strategic partners that are available worldwide. The biotech industry is very small in terms of the multinationals. You know where to go. The streams are fairly easy to access. If you have something, it'll get done. If you're dealing in the communications, electronics or software area, there are a number of large partners, but getting through to those partners with a new product that isn't specifically within the area they normally operate in can be more difficult. There might be some utility in having trade shows or trade connections with small companies and strategic buyers or distribution networks worldwide.
The Chairman: Any other comments? Dr. Levy.
Dr. Levy: No, I think David said it all.
The Chairman: Fine.
[Translation]
Mr. Leblanc.
Mr. Leblanc: I simply wanted to say to Dr. Levy that in Canada we do have firms that are not simply branch plants of american companies. We have, in Montreal for example, the Institut Armand- Frappier, which does very high level biotech research. I might add, for Dr. Levy's information, that considering today's communications technology, she should have no problem contacting the Institut Armand-Frappier which is located slightly east of Ottawa.
Quebec is still a part of Canada. If you need information, we are there. I might add that there are, in the Montreal Region, several companies that are not simply subsidiaries of american firms.Mr. Chairman, that was just a bit of information I wished to communicate to Dr. Levy.
[English]
The Chairman: Thank you. Mr. Bodnar.
Dr. Levy: I would like to comment on that because I'm very familiar with Institut Armand Frappier. I have some good friends there. I already mentioned BioChem Pharma, which is the biotech part of Institut Armand Frappier and our sister company, I think.
I said that we had difficulty attracting personnel. My company and BioChem Pharma are the two senior biotech companies in the country. We train people, and then they go work elsewhere, as David said. We don't mind that.
I'm quite sure that Institut Armand Frappier is having exactly the same experience, because there are a lot of small biotech companies in Montreal with which we're very familiar. I happen to be very glad that Quebec is still part of Canada.
The Chairman: Mr. Bodnar.
Mr. Bodnar (Saskatoon - Dundurn): Thank you, Mr. Chairman.
I have a report from the Canadian Federation of Independent Business. It refers to a skills shortage in industry. They state this:
- Although there is huge public concern about a lack of available jobs in the marketplace,
business owners often see the issue from a very different perspective. Those who are offering
jobs in the economy often come up short. More than 45 percent of businesses surveyed report
that they have difficulties finding qualified labour to meet their employment needs. ...
Sometimes skills shortages mean that vacant positions remain unfilled within businesses.
The Chairman: I'll ask Dr. Simson to respond first, and then we'll go to our other witnesses.
Dr. Simson: I believe your question is about two levels. We're dealing with the training of people who are already hired by the company, and the training of people we are hiring. I think it depends on the companies and the country.
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Consider the training of internal people. In companies like Nortel, as I said before, we spend a tremendous amount of money and effort on training and development of our people and on being proactive in upgrading the skills of all people so we don't end up with an obsolete labour force in our company. That's the other fact.
Other companies that are smaller may not have the privilege of having the money to train their people. We heard that from Peter, actually. The government may have influence there in maybe providing some incentive, as was mentioned by Mr. Schmidt, I believe, for people to spend money on training and development. That could push the smaller industries to develop their people, and the bigger industries would benefit from it too. So there is that hat you can have.
Now let's go to the hiring of new employees when you have a need to grow your business and you need employees right away, because, as I said before, time to market is of essence. You have to get moving in getting products out, so you need the people with the right skills.
You don't have the time to train them to tackle the problem at hand. You want the resource in place so you can give them just a couple of weeks to get used to the company and the way of doing things, working in teams, and bang, they are productive. That's what you require in the high-tech industry, because the development cycle of most of the products now, including large products for Nortel, is one year to 18 months. You don't have time to train people for six months, so you want the people coming in to you with the right skills.
What you could do as a government is promote the fact that industry should help the educational system to change their curriculum content and delivery of their curriculum so their students get the right skills. When they get out of the schools, they should have what it takes; they should be computer-literate, know how to deal with computers, know the latest electrical engineering and have the latest skills in electronics. They should not be working on things of the past.
The industry should definitely help. They should put their requirements on the table and help the universities to change themselves, in a way. The government, through funding and incentives to universities - through NSERC, for instance, or the NCEs - could help them get to that point.
The Chairman: Thank you.
Are there any comments from Vancouver on this?
Mr. Levi: Yes, I want to put this into context, which is important.
Julia's company, which has 100 employees, is one of the largest biotech companies in Canada. Most of the companies we're talking about in our industry have fewer than 20 employees, and most of them are not making any money. Most of them have no revenues at all, or if they do have revenues, they're certainly not substantial enough for them to make any money at this stage. Though not in their infancy, they are still in their teenage years and reliant on their parents, which are the financiers, to be able to get to the point where they can go out on their own.
The reality here is that training is very expensive, and if you're a company that's losing money or has no revenues, every nickel you have is going into either developing or selling your product. They simply don't have the resources to be able to go out and train people.
The larger companies do a lot of training in the technology and science areas. They recognize that's how they hold onto their employees, because these employees are in high demand, and they are looking for educational opportunities for themselves. Companies need to do that to hold onto them. Number two, of course, they need the skill sets to be continually developed.
But smaller companies, which are the vast majority of our science and technology companies in the country, simply don't have the resources to do that kind of training.
Dr. Levy: I would like to comment on a small incentive the B.C. government has. I'm not sure if it's going to be renewed next year, but I hope so. This is where government perhaps could participate, although it does mean spending tax dollars.
There is an incentive to industry to hire first-time graduates in that 50% of the salary of that first-time technology graduate, be it in chemistry or whatever, is paid by government.
That seems to me a very enlightened approach. There you are bringing the companies in to do the training and you're providing them with an incentive, because they get a person at 50% of the cost. It's worth their time then to do that, because it does take time to train people.
Something like that might be worth thinking about at the federal level.
The Chairman: Thank you very much.
Mr. Bodnar, one more question.
Mr. Bodnar: This is on a different topic, and it's more from self-interest than anything.
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Having two young daughters at home in high school who are, from a proud parent's perspective, very good in the sciences, it seems there is very little encouragement for women entering this type of area as a career - in engineering, in the sciences generally.
What can be done by a government to encourage women to enter fields of engineering and the sciences, so that they can fill a role in the future that they have not filled in the past?
The Chairman: Might we hear from Dr. Simson to start, please?
Dr. Simson: There are lots of things the government can do; I will just capitalize on what they have been doing through NSERC recently. I don't know if you have heard that NSERC has just created five new chairs for women in engineering in the country - original chairs - based on the work that Nortel and NSERC have financed, and the chair of Women in Engineering, held byDr. Monique Frize.
Part of that is specifically looking at the issue and the cultural issues in the schools and universities associated with influencing women to get into science and technology. We can do more of those; we can have the initiative expanded and put even more money into those chairs. The money is not enough to have a big impact even regionally right now. You can expand that to have more people associated with the work those chairs are doing.
Those chairs are trying to understand two things. First, what are the cultural impediments in our society to women getting into those fields? The second aspect is what solutions can be provided in the enviroment we are facing right now. How can we work proactively in influencing, and how can we work on the existing base to change the way women are perceived, or the way they perceive difficulties?
Other programs.... You can help the universities also once they have women starting in universities; help them with difficulties they face with math and science and technology, in which they were not pushed in school - this is after the fact, if you like. Support the universities financially into getting into those types of issues, and patronize a program like that, which absolutely needs financing.
Again, it's helping the females, providing them with support and additional courses, additional faculty members, and supporting them into getting the right level of mathematics and sciences that they did not acquire in the school system. So you tackle it from two fronts.
The Chairman: Thank you very much.
We have two more members who'd like to ask questions. Perhaps I could ask them to be brief and then we can maybe go on for another ten minutes or so. How is that for everybody?
Mr. Shepherd, do you have a question?
Mr. Shepherd: Yes; I'll just ask a very short question.
You were talking about the globalization of technology. Canada has trade offices and embassies all over the world. You seem to intimate that's not working very well. Why isn't there a synergy between evolving technologies and businesses and the commercialization and marketing of that through our existing trade offices?
Mr. Levi: There tends to be a gap right now between the trade officers in various countries and the connection at this end. When our companies are exploring the idea of a contract overseas, they are essentially told by Canada to contact the trade officer in that area, and that's a very long distance, if I can put it that way.
There seems to be a gap, structurally, for our companies at this end who are thinking about going overseas, in terms of drawing the connection here or bringing those trade officers back more often to meet with people who are thinking about doing business ``down there''.
With our companies it's mixed, obviously, depending on the skill of the individual officer. Some of our companies have reported very good responses from the trade offices when they have gone to certain cities overseas. They all seem to have difficulty, though, in figuring out how to connect into the system on the Canadian side - for deciding where they're going to go into the international marketplace.
Because our trade officers are literally outside of the country, we need to develop further links inside the country to access those trade officers. I know there have been reports that some of our companies have been very happy while others have felt it's been a waste of time. So it really depends on the individual officer, how long they've been there and what level of contacts and connections they have.
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The Chairman: Thank you. Mr. Lastewka.
Mr. Lastewka: This question leads from Mr. Bodnar's. I want to ask it of all three of you.
Have you had meetings or discussions with the ministers of education in each of the provinces concerning the problem - that is, the lack, or the insufficient amount, of engineers, be it electrical, electronics, computer, engineering or computer software? Were they familiar with the problem, and did they come up with a plan to fix it? Or is it just out there lingering?
I'd like to hear from the witnesses on that.
Dr. Simson: Nortel did not have officially any meetings with the education minister. We had a lot of discussions with all the universities in Ontario and across the country - presidents of the universities, the VPs in academics. We've had extensive discussions on programs. We're on advisory boards in terms of directions and so on.
The Chairman: Thank you.
Anything from Vancouver? Any direct meetings with the minister or with post-secondary education?
Dr. Levy: Yes. Actually, one of my other jobs is chair of the premier's advisory council on science and technology in British Columbia. Our committee has had a fair amount of communication, not just with the education minister but also with the cabinet. This has certainly been one of the pressure points we have verbalized and reiterated in terms of getting the cabinet to understand the importance of these advances in the schools. I think we actually have made an impact, and I think we will see changes in B.C.
Mr. Levi: What you're trying to accomplish here is a change in culture that's really been put in place for a long time. If you look at the last university era, it really reflects the industrial age we have gone through. Universities are now slowly starting on the path of the information age.
It's a process, and it's a tough one. There are interests that lie in the past. I think that's why the technology institutes have been so successful. They haven't been drawn to issues of the past and are therefore able to make a quantum leap ahead of where the universities are. But it's going to take effort, at the federal, provincial and industry levels, to continue to push the universities in particular towards that new culture.
Mr. Lastewka: We talked about both seamless communication and working arrangements between the colleges and the universities. I believe this still all falls under the ministers of education of each of the provinces. If, from an industry standpoint, from a technology standpoint, we're talking about the importance of the time element in getting things to market, why isn't it the time element of getting the skills of people to market?
I'm having difficulty, Mr. Chairman, understanding why we can't get that reaction.
The Chairman: I don't think we will put the witnesses on the spot to further answer the question.
If any of the witnesses have any final comments, I'd like to hear from them in terms of wrapping up.
Dr. Simson: In terms of wrapping up, I think there are two ways in which members of Parliament can be very useful. The first one is communicating to the country, to the population, to the public your interest in science and technology. Just the fact you have this Standing Committee on Industry means you are interested in the innovation gap. Raise the awareness of the public, and communicate with the industry. This kind of communication is vital.
The second aspect is for future of members of Parliament. We should try try to see if we can get people with actual science and technology backgrounds in these positions in the future.
The Chairman: Let's not go too far. We like lawyers, you see. Walt's background is in engineering -
Mr. Lastewka: I agree with Dr. Simson on that. I think that's an excellent....
The Chairman: Any comments from Vancouver in terms of wrapping up, or anything you think we've missed that you'd like to put on the record? Or have you covered most of your points?
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Mr. Levi: The only thing I'd like to add is something I know the government is already working on, but I think it needs to just be reiterated: there are infrastructure issues here as well.
Since telecommunications are primarily a federal issue, the federal government can continue to put pressure on all of our communications companies - whether it's the cable industry or the telephone industry - in continuing to develop the electronic highway and its speed. That's one of the key advantages Canada has, because we have some of the best telecommunications networks in the world here. That allows companies, industry, and those of us who are video-conferencing today to really access this new information age. You see that when you go to other countries that don't have systems that are as strongly developed. But there's still more that can be done in building that infrastructure across the country.
Dr. Levy: Perhaps I can enlarge on that.
I think David has actually put his finger on the biggest challenge in terms of the educational system, and that is the information highway. This has been discussed at the level of the B.C. government with the Minister of Education and other ministers because it carries a huge cost. People use the buzzwords, but it's not at all easy to envisage how every school in British Columbia can be linked. It's okay for the big cities and the major communities, but I think it will be a major task for governments at all levels for the next decade to try to give our young people that opportunity.
The Chairman: Thank you.
On behalf of all the members of Parliament at this table, we'd like to thank each of you for your time. I found this to be a very exciting panel. I think we've benefited from the fact that we have been fewer in number. We've had a long conversation with each of you, and we've had a chance to draw out some of your answers.
To people like Dr. Simson, I know you come from a very busy organization. That you have given up so much of your time is really appreciated.
To the Vancouverites, to join us in this way is a breakthrough in technology, as Mr. Schmidt said. And it warms my heart, David, to see a Vancouverite with a tie on at 7:30 a.m.
Mr. Levi: It would warm your heart if you knew how much snow was outside in Vancouver right now.
The Chairman: We very much appreciate that you made the effort to meet us on our timetable. I hope you feel you're part of this national dialogue. Thank you again for contributing to this conversation.
The committee is adjourned until next Tuesday.