Presentation by Dr. David W. Strangway President and CEO of the Canada Foundation for Innovation to the House of Commons Standing Committee on Finance

September 26, 2001

Mr. Chairman, members of the Committee. Thank you for the opportunity to appear before you as you embark on your pre-budget process.

The events of two weeks ago make this a year like no other. All of the rules changed in the blink of an eye, making the task of identifying and setting the government’s fiscal priorities more complex and challenging than it has been in generations. Right from the beginning of my presentation I would like to wish you well in your deliberations in the weeks ahead.

Before September 11th, the spotlight was on innovation like never before. Here in Ottawa and around the country everybody was talking about it as the major driver of new public policy initiatives. I am here today to suggest that it is an opportune time to turn that spotlight back on.

The business leaders of our country agree that an investment in innovation is an investment in our future. Greater innovation means stronger industry, making Canada a more attractive place for investors.

Against a backdrop of concerns about a return to deficit spending, a potentially significant downturn in the economy and increased fears for personal security you will be faced with consideration of options to address these near-term imperatives.

However it will be equally important that the government continue its leadership role through the continuation of its investment in innovation. In reality this is an investment in a brighter future that serves as a beacon of hope in these times of doubt and great uncertainty.

While we are understandably greatly distracted by the September 11th tragedy and its fallout for the North American economy, confidence will surely be further eroded if governments detour from policy commitments that can have positive long-term effects on our economy and way of life. The Canadian government’s innovation agenda is surely one such commitment. Greater innovation means stronger industry, making Canada a more attractive place for investors. Against a backdrop of continuing concerns about productivity, competitiveness and the brain drain, the government has promised a White Paper on the subject this fall.

Innovation may sound like a vague concept, but in fact the idea of innovation is precise and important. The creation and exploitation of new ideas, processes, medicines and new ways of analyzing or understanding human and physical phenomena is what drives our modern world, increases our national well-being, and ultimately transforms our lives. What is less well understood is how innovation is fostered.

History suggests that a richly endowed, robust, publicly funded academic research endeavour is a necessity and often the birthplace for new ideas. Educational and research institutions enjoy the longer time horizons that few industries can risk. The facts speak for themselves. In the United States, 73 per cent of papers cited in U.S. patents were the result of publicly funded science.

Innovation should still be a hot topic in Ottawa. Five years ago, Canada’s investment in research and development was among the lowest of the Organization for Economic Co-operation and Development (OECD) nations. Currently, we are sixth out of the G-7, trailing all major industrial nations but Italy.

Five years ago, the U.S. government was doubling support for the National Institute of Health and adding one-third to the budget of the National Science Foundation. This built on 20 years of generous support for university research yielding an impressive list of billion dollar industries -- microprocessors, graphic displays, biotechnology and so on,

In the past few years, Canada too has begun to meet the challenge and our governments now have a more positive story to tell. It is one of our best-kept national secrets that the federal government and the provinces have made great strides in reversing this alarming trend in R&D. From being an embarrassing 15th among its OECD competitors in amount spent on R&D, Ottawa has made it a priority to bring us up to the top five by 2010.

This will require mobilization of all sectors, not only governments and universities, but also industry, which will have to accelerate the pace of innovation. There must also be vehicles to accomplish this. Thanks to the federal government, one of the key instruments is already in place.

The Canada Foundation for Innovation was launched in 1997 as an independent agency mandated to rebuild and reinvest in research labs, installations and facilities in universities and hospitals across the country. The CFI was mandated to ensure that Canadian researchers had the tools needed to generate tomorrow's ideas and to be world leaders in their fields. So far the CFI has supported more than 1,400 projects at 100 universities and hospitals.

It's proving to be very effective. Every one of the over 1,400 projects funded by the CFI, to the tune of over $900 million, has enabled institutions to find matching funding from the provinces and additional monies from the private sector and the universities themselves. The CFI's 40/60 percent funding formula is both a unique example of intergovernmental co-operation and of agencies addressing priorities that have been defined by those research-performing institutions, which employ Canada’s major pool of researchers. In the Brief that was submitted to this Committee in August we have cited several concrete examples and statistics that demonstrate just how effective the CFI programs are.

Governments seldom get credit for foresight and creativity. But the CFI is one good example of just such an initiative by the federal government. Not only is it set-up with secure funding, but its decisions are made by experts - more than 1,000 researchers, managers and users in the public and private sectors from around the world have served on panels. This ensures the CFI's integrity and credibility with provincial and other partners.

Another example is the Canada Research Chairs Program that will provide 2,000 positions for researchers at Canada's universities across the country. The federal government will invest $300 million per annum in these chairs. For its part, the CFI will invest $250 million between 2000 and 2005 to provide the chair holders with the world-class research facilities they need to compete globally and train the next generations of Canadian researchers. The CFI is helping to create the right conditions to make these positions attractive.

The result of these CFI investments is a rich variety of new projects, employing, attracting and in some cases repatriating Canadian students, researchers and technical staff who can take their knowledge and expertise into industry and into ensuring a better quality of life for Canadians.

For example, B.C.'s Institute for Technology has recently opened a $2-million, 700-square-foot lab - Canada's first independent Internet engineering lab to do research and development in advanced networking. Supported by companies, such as U.S.-based Sprint Communications, which contributed $1 million in equipment and the provincial BC Knowledge Development Fund, the lab will employ several full-time researchers and technicians. Corporate members, such as PMC-Sierra and Telus, will use the facility as a way to tune their networks.

The University of Saskatchewan is attracting interest from all over the world for its state-of-the-art synchrotron for the study of atomic matter. Its funding structure is a creative federal-provincial-civic academic, partnership. The CFI is supporting $56.4 M of the $140 million construction costs. In fact, the construction itself is bringing enormous benefits to the community. Saskatoon expects the synchrotron to translate into many commercial and industrial spin-offs and to draw new businesses such as pharmaceutical companies and environmental labs. More than $35 million annually in commercial research and development spending is expected.

White lab coats do translate into jobs and other benefits for the community. The citizens of Kitchener-Waterloo in Ontario know the leverage of so-called "clusters" - the ability of universities and research institutions to attract or spin off knowledge industries. There the University of Waterloo continues to have close relationships with both Research in Motion and Open Text - two major Canadian technology successes -- and many more.

The CFI helps unlock one of Canada's most valuable treasures - our human resources. Our best young people need a reason to stay and provide, what in the end, is the most valuable commodity Canadians can offer - innovation that benefits everyone and improves the quality of our lives.