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SUBMISSION TO HOUSE OF COMMONS STANDING COMMITTEE ON FINANCE

2004 PRE-BUDGET CONSULTATION

Building Capacity for Innovation

Presented by the Partnership Group for Science and Engineering

September 7, 2004

Introduction

The Partnership Group for Science and Engineering (PAGSE) is a cooperative association of more than 20 national organizations in science and engineering, representing some 50,000 individuals from industry, academia and government sectors. It was formed in June 1995 at the invitation of the Academy of Science of the Royal Society of Canada. On behalf of its members, PAGSE addresses issues concerning the nature, importance and benefits of science and engineering to Canadians, and promotes greater understanding by decision-makers of the role of Science and Technology (S&T) in Canada’s prosperity1.

General Comments

The quality of life of Canadians is tied to our country’s ability to compete in a global economy. Canada’s capacity for innovation in S&T is essential to maintain and enhance that ability. In order to build its capacity for innovation, technology transfer and commercialization, and increase its market share, Canada must attract or train and retain a diverse and skilled workforce that will remain current with cutting-edge S&T developments and techniques.

PAGSE congratulates the Government for its constructive portfolio of new science agencies, programs and activities over the last few years. These include Canada Research Chairs, funding foundations (e.g. Canada Foundation for Innovation, Genome Canada, Canadian Foundation for Climate and Atmospheric Sciences, Sustainable Development Technology Foundation), Canada Graduate Scholarships; and federal contributions to Indirect Costs of research in our universities. PAGSE also commends the increased funding that has been provided to the Granting Agencies. In particular, we welcome the recent creation of the office of National Science Advisor (NSA) to the Prime Minister, and his immediate mandate, which includes evaluation of these government investments in S&T. The Advisor’s input will assist the Government to position itself to address its stated national priorities regarding pressing social issues, the economy of the 21st century, and Canada’s place in the world.

Canada’s S&T capacity for innovation must be strengthened. Other governments (e.g. the UK, Asian countries, Australia) are substantially increasing their investment in national S&T capacity, while the US sees increasing international competition as a threat to its lead in innovation and to its market share. All are working to attract highly qualified personnel from abroad, and to retain their own skilled nationals. Canada must also act, now.


Building Capacity for Innovation

PAGSE considers the following to be important issues related to S&T capacity that merit consideration by the Government of Canada

1. Support for the Office of the National Science Advisor

PAGSE congratulates the Government of Canada on the appointment of an independent National Science Advisor (NSA) to the Prime Minister. The NSA’s task is imposing and expectations on him to lever Canadian S&T capacity are high. He will need access to robust assessments of scientific knowledge targeting key societal issues and sound foresight regarding the future impacts of S&T in Canada.

Recommendation:
• That the Government ensure adequate resourcing of the NSA’s office to enable it to fulfill its mandate.
• That the Government follow through on its declared support for the creation and funding of a ‘Canadian Academies of Science’. This institution would help mobilize Canada’s capacity to provide independent scientific assessments, enhance the NSA’s capacity, and provide an international voice for Canadian S&T.


2. S&T Research Capacity

Government science capacity

The National Science Advisor has been charged with identifying better ways to coordinate and integrate Canada’s scientific assets across the innovation system. Science-based Departments and Agencies (SBDAs) and Research Support Agencies (RSAs) are vital components of the nation’s capacity for innovation. In addition to monitoring and regulatory work, they conduct in-house process-oriented, thematic research to meet departmental mandates and government priorities. Moreover, they do so with a breadth of focus and a long-term perspective that is not common in other research sectors. PAGSE commends those SBDAs that have adopted the guidelines formulated by the Council of Scientific and Technical Advisors (CSTA) with respect to the selection and evaluation of S&T projects (BEST and STEPS reports). However, the perception of integrity of the selection/evaluation process, and of the quality of the science undertaken by SBDA’s, would be strengthened by adopting a uniform set of open and transparent evaluation and selection procedures across all federal SBDAs. Furthermore, a horizontal approach to federal S&T should integrate aspects of complementary university- and industry-based research with government S&T programs in innovative and mutually advantageous partnerships2.

Recommendation:
• That the Government of Canada establish a body under the National Science Advisor for strategic coordination of federal science, to prioritize the renewal of federal research infrastructure in order to improve federal S&T capacity, and to facilitate cross-sectoral research cooperation (government/external partnerships).
• That the Government establish government-wide standards for the transparent selection and evaluation of S&T projects in order to enhance the credibility of science undertaken by SBDAs.

Granting agencies

PAGSE congratulates the Government of Canada on the investments it has made through the three granting agencies over the past several years: the Natural Sciences and Engineering Council (NSERC), the Canadian Institutes of Health Research (CIHR), and the Social Sciences and Humanities Research Council (SSHRC). At the same time, major challenges for S&T capacity-building remain. For example, there is enormous pressure on granting councils created by the large numbers of new applicants for research funding, including Canada Research Chairholders, as well as the requirement for appreciably higher levels of support, in order that Canada’s current trailblazers and “leaders of tomorrow” can compete globally. Another critical area is a shortfall in funding to operate major facilities and infrastructure for which capital has been provided via the programs of the Canadian Foundation for Innovation.

Recommendation:
• To affirm its commitment to innovation, and thus retain and attract outstanding researchers to Canada, the Government should strengthen the capacity of the granting agencies to maintain a long-term perspective by accelerating the rate of increase of their funding allocations, and adopting a multi-year approach coupled with the option of a 10% carry-forward between years.

Capacity for research in remote areas

Canada’s vast landmass and seas present daunting logistical and financial challenges for scientific research. PAGSE commends the Government for its renewed investment in the Polar Continental Shelf Project (PCSP), a new commitment to the International Polar Year in 2007-08 through government departments and agencies, and (through Networks of Centres of Excellence and NSERC) the ArcticNet consortium. However, the costs of access and daily maintenance, shipboard operations, and long-term field observatories are beyond the capabilities of these organizations.

In the past, federal SBDA’s managed substantial facilities, permanent or otherwise, in remote regions of the country. Reductions in federal research platforms have left university-based scientists scrambling to assemble new ad hoc support to maintain vital facilities and to preserve knowledge that Canada needs now and in the future. By way of example, we point to the sudden closure of the Arctic Stratospheric Ozone Observatory on Ellesmere Island in 2002. In a recent report to Paul Martin by the former Chair of the Government Caucus on Post-Secondary Education and Research, science-based departments and agencies now constitute the weak link in Canada’s S&T capacity. PCSP has rendered exceptional service to northern scientific research and stands as a model. However, a long-term, strategic vision is now needed, including local capacity building, to ensure that Canada’s research and policy needs are met in remote areas across the country, and that Canada is able to take its rightful place in relevant international activities.

Recommendation:
• That the Government of Canada specifically mandate and fund SBDA operational support for scientific programs in remote areas, and create an inter-agency body to provide coordinated logistical support to the full spectrum of scientific research conducted in remote regions across Canada, particularly the Arctic. The resources must be able to provide sustained, integrated support over a wide range of geographic and disciplinary areas.
• That Canada's National Science Advisor be tasked with advising on how to structure the national inter-agency body to ensure sustained logistical support for effective research planning and operations to meet national needs.


3. Capacity for Commercialisation of S&T

The ability of industry to successfully move new inventions and ideas into the global marketplace depends on bridging the gaps in the commercialization process. Canada has invested heavily in the research pipeline upon which new products and services are based. The government has also set ambitious goals for its innovation agenda. These goals include dramatically increasing the amount of research and development conducted by the private sector and increasing the amount of investment capital flowing into innovative companies. More recently, the government has provided funding for two pilot commercialization programs aimed at universities and federal laboratories.

These are all valuable contributions to Canada’s quest to develop a knowledge-based economy that is competitive with the best in the world. But the competition is not merely watching from the sidelines. All advanced nations have developed or are developing aggressive innovation and commercialization strategies and programs. Now is the time for Canada to accelerate its efforts to realize these goals by establishing a progressive fiscal framework and creating programs that will allow companies to increase their capacity to bring their innovations to market and create new wealth.

Governments can assist smaller companies in their bid to commercialize products by becoming a first adopter of new products and services. They can also invest in proof of principle and demonstration projects. These steps will serve to increase capital required for commercialization by reducing the risk to venture capitalists and angel investors. The federal government also has a role in financing promising, innovative technology. Successive studies have demonstrated the need for more seed and pre-seed capital to stimulate company formation and growth, as well as incentives to enhance institutional investment in venture capital funds. Existing programs such as the National Research Council’s Industrial Research Assistance Program, Technology Partnerships Canada and the climate change Technology Early Action Measures demonstration program already make valuable commercialization contributions in early stage technology development, SME support, and financing pre-seed demonstration of new technology. These programs should continue and should be strengthened, with specific emphasis on the receptor capacity of Canadian industry. The government should be commended for its additional $250M support in Budget 2004 to the Business Development Bank of Canada (BDC) for specific seed and venture capital initiatives. Further support in the pre-seed/seed program area is required, including the need to enhance skills development in SMEs. Such initiatives should be private sector/BDC led, and should be market driven, national in scope and directed to towards sectors in which Canada has significant potential for long-term economic benefit.

Recommendation:
• That the Government of Canada monitor new pre-seed and additional seed funding programs to ensure that they are market driven and led by the private sector. Such programs could be administered by the Business Development Bank of Canada.
• That the government strengthen existing programs such as Technology Partnerships Canada, Technology Early Action Measures, and the Industrial Research Assistance Program.
• That the government review the highly successful Scientific Research and Experimental Development tax credit program with the view to expanding its reach further downstream towards the marketplace.


4. Future Capacity in S&T

Young Scientists and Engineers
Given the increasing international competition for attracting and retaining highly qualified personnel, it is imperative that the Government of Canada continue to strongly encourage the post-graduate training of young Canadian scientists and engineers as part of its strategy to ensure the nation’s S&T capacity in the immediate future. Many students graduate at the B.Sc. level with a significant debt load that discourages them from pursuing further training. Furthermore, small and medium enterprises (SMEs) need highly qualified personnel in order to build their capacity for innovation. Commonly, this involves graduate students and postdoctoral fellows.

Recommendation:
• That the Government examine potential mechanisms for debt forgiveness to encourage greater numbers of students to enter graduate school.
• As part of our recommendation regarding the strengthening of granting agencies, that the Government of Canada provide more substantial support through the granting agencies to cover both the stipends and the research and training costs of graduate students and post-doctoral fellows based in Canadian universities and colleges.
• That the Government ensure that post-graduate and post-doctoral academics working in SMEs be paid regular salaries.

1 For example, PAGSE organizes the " Bacon & Eggheads" breakfast lectures on Parliament Hill, in partnership with NSERC.

2 e.g. Industry Canada, 2002. Achieving Excellence - Investing in People, Knowledge and Opportunity.