Canada’s S&T and Innovation Challenges

1. Canada’s S&T and Innovation Challenges Dr. Arthur J. Carty National Science Advisor Canadian Council of Deans of Science Annual Meeting June 2007 Regina, Saskatchewan

2. Key Elements of an Innovative, Knowledge Economy Innovation Transform research results (ideas, discoveries, inventions) into practical applications to enhance economic, social well being Talent Educate and train skilled people to carry out and apply research, development and commerce Knowledge Support a strong research base in higher education and intramural laboratories to advance knowledge and generate new ideas, concepts, technologies Innovation Analogy is a soccer game: a process of continuous exchange and feedback between all players – researchers, businesses, investors, customers – to develop, market new products, processes

3. Canada’s S&T and Innovation Challenges Key Tenets • Knowledge and innovation, driven by investments in S&T determine a nation’s productivity and international competitiveness. • Successful nations create competitive advantage through people, skills, ideas and new technologies. • Government’s role: • Create effective policy, regulatory environment, infrastructure to stimulate investment • Provide direct and indirect (eg. SR&ED tax credits) support for S&T • Strengthen national and international linkages and partnerships between players (researchers, institutions, companies) in the innovation system

4. The Diagnostic: Canada’s Strengths and Weaknesses Canada’sStrengths • Fiscal discipline: 8 consecutive years of budgetary surplus – only country in OECD • Politically stable, tolerant democracy • Open market economy; a trading nation • 8th largest economy, 7th highest living standard in world • Best economic footing in G8: strongest job growth over last decade; lowest debt/GDP ratio • Very strong research base in universities: leads G8 in HERD/GDP • Highest proportion of post-secondary grads in workforce in G8

5. Leading All G-7 Countries 2004 2005-06 According to the OECD, Canada was the only G-7 country to be in surplus for the 8 successive years 97-05 and projected for ’06 and ’07.

6. International R&D Trends - HERD Canada Leads G7 in Performance of University R&D

7. Research and Knowledge Performance Indicators • Canada ranks 2nd in the OECD: higher education R&D/GDP. • Canada ranks 6th in the OECD: publications per capita. • Canada ranks 5th in the OECD: quality of publications. Source: OECD 2006, Observatoire des sciences et technologies 2007

8. Building the Research Base in Universities • GERD (05-06) (est) $28.4B (4.4% increase over 04-05) Share • Business R&D (BERD) $13.2B (47%) • Federal $5.2B (18%) • Higher Education R&D $5.0B (17%) • Foreign $2.4B (9%) • R&D spending per capita in universities and research institutes is the highest in the G-8 • $15 billion in incremental investments committed to research from 1997-98 to 2004-05 • $1.3B of new funding announced in Budget ‘07

9. Recent Federal Funding Initiatives for University R&D • Skilled Human Resources • Canada Research Chairs Program 1000 Senior Chairs 1000 Junior Chairs (over $1.5B to date; chairs renewable for 2nd 5 years • Canada Graduate Scholarships 4000 new awards ($85M per year) Research Grants • Granting Agency funding more than doubled 97-98 to 05-06 CIHR ($800M) NSERC ($860M) SSHRC ($292M) • Genome Canada $600M since 99-00 • NCE Program $83M/yr (19 Networks now funded; 5 new initiatives Support for Facilities, Equipment, Infrastructure • Canada Foundation for Innovation (CFI): $3.65B endowment; has attracted $5B of “matching” contributions. CFI requires 40 (CFI) : 60 (applicant matching) • CFI New Opportunities Fund: provides start up funding for new researchers Indirect Costs of Research • Fed Govt providing $260M in 05-06

10. Impacts of New Research FundingUniversity R&D Environment • Infrastructure and equipment competitive with best laboratories in world (CFI, GC, Granting Agencies) • Canada Research Chairs Program has attracted outstanding young and established scholars from other countries (433 Chairholders from outside Canada – Expatriate + Foreign) • Rising Canadian stars retained • Has enabled Faculty renewal at a critical time • Significant growth in research capacity in universities

11. Talent Performance Indicators • Canada ranks 1st in the OECD: share of population with tertiary education. • Canada ranks 20th in the OECD: natural science and engineering degrees as a share of total degrees. • Canada ranks 18th in the OECD: share of young Canadians with PhDs. • Canada ranks 17th in the OECD: number of people in S&T occupations as a share of total employment. Source: OECD 2004, 2005, 2006

12. Canada’s Innovation and Commercialization Challenges • Productivity gap with U.S. is widening. • 54% of R&D in Canada is performed by business, well below OECD average of 68%. • Canada ranks only 14th in OECD in terms of GERD/GDP (2.0%). • Canadian industry does not invest enough in R&D. BERD/GDP (14th in OECD). • Canada ranks 16th in OECD: high quality patents per million of population. • Canada ranks 19th in OECD: investment in machinery and equipment as a % of GDP. • Canada lags in capacity to commercialize results of research into new products, companies in marketplace.

13. Canada’s Lagging R&D Intensity

14. Comments on Areas of Strength/Weakness • Four clusters of strengths identified • Natural Resources: Oilsands and related – major strength. Also conventional oil & gas; hydroelectric power; geology; mining; aluminium production; remote sensing • Information & Communication Technologies: broadband networks, wireless; new media, gaming, animation • Health & Life Sciences: Genetics, genomics, proteomics, cancer, neuroscience. Strong trend towards interdisciplinary research • Environment: Remote sensing, physical geography, geochemistry, geochronology, hydrology, climate science, oceanography • Other strengths:  astronomy, cosmology;  emerging areas such as quantum informatics, nanotechnology “The State of Science & Technology in Canada”, Council of Canadian Academies, September 2006

15. How Canada Performs. A Report Card on Canada Comparator Countries Australia France Norway Austria Germany Sweden Belgium Ireland Switzerland Canada Italy United Kingdom Denmark Japan United States Finland Netherlands Compared Canada with other OECD countries because they are more likely to have achieved a high and sustainable quality of life and would serve as a worthy peer group. Source: “How Canada Performs: A Report Card on Canada”, Conference Board of Canada, June 2007

16. Canada’s Report Card by Domain • Canada’s performance is compared • with 16 peer countries in 6 different • domains. • Canada’s mediocre performance “will not be good enough to meet the fundamental goal of a high and sustainable quality of life for all Canadians.” Source: “How Canada Performs: A Report Card on Canada”, Conference Board of Canada, June 2007

17. Economy Domain Report Card • Canada scores an “A” on inflation, “B”s on • GDP growth, labour productivity growth and • unemployment, and “C”s in GDP per capita • and outward FDI. Canada’s worst performance • - a “D” - is on inward FDI.” Source: “How Canada Performs: A Report Card on Canada”, Conference Board of Canada, June 2007

18. Innovation Domain Report Card • “Without innovation, Canada’s economic, • environmental and social systems stagnate • and our performance deteriorates in • comparison with that of our peers. Our • competitors are not standing still.” Source: “How Canada Performs: A Report Card on Canada”, Conference Board of Canada, June 2007

19. Environment Domain Report Card • 2 explanations for our poor performance • Canada’s level of waste generation is higher than any of the comparator countries. • Our level of carbon dioxide emission levels are among the highest in the comparator group of countries. Source: “How Canada Performs: A Report Card on Canada”, Conference Board of Canada, June 2007

20. Environment Domain Source: “How Canada Performs: A Report Card on Canada”, Conference Board of Canada, June 2007

21. Education and Skills Domain Report • Canada gets an “A” ! • A well educated population is important to • Canada’s future. • Well educated citizens: • Are more actively engaged in society at all levels • Tend to make better personal choices • Earn more than the less well educated • Make an important contribution to business innovation, productivity and national economic performance Source: “How Canada Performs: A Report Card on Canada”, Conference Board of Canada, June 2007

22. Education and Skills Domain Source: “How Canada Performs: A Report Card on Canada”, Conference Board of Canada, June 2007

23. Health Domain Report Card • Governments in Canada have set a target of • a 20 percent increase by 2015 in the number of • Canadians who are physically active, eat healthy • foods and achieve a healthy body weight. Source: “How Canada Performs: A Report Card on Canada”, Conference Board of Canada, June 2007

24. Health Domain Source: “How Canada Performs: A Report Card on Canada”, Conference Board of Canada, June 2007

25. Overview of Canada’s Challenges • Canada needs business investment in S&T and advanced technologies. • Low levels of business investment in S&T are contributing to Canada’s widening productivity gap vis-à-vis the U.S. • Key Challenge: Foster a business environment that encouragescompanies to invest in S&T to improve their competitiveness through innovation. • Canada needs to use knowledge to its competitive advantage. • Canada has a strong university research base, supported by public investments in research, researchers, equipment and networks. • Key Challenge: Reach even higher for research excellence,and work to encourage practical applications for research outcomes benefiting Canadians. • Canada needs to make better use of a talented workforce. • Canada has an educated work force, but trains and uses fewer advanced research degrees (such as PhDs) than the US economy. • Key Challenge: Support the development of highly skilled people, and foster the conditions that encourage private sector use of these skilled workers.

26. Science and Technology Framework Vision to build a sustainable competitive advantage through S and T, skilled people, translating ideas, knowledge, into applications. Entrepreneurial Advantage Canada must translate knowledge into practical applications to improve economic, social prosperity Knowledge Advantage Canada must build on S&E strengths, generate new ideas & innovations to achieve global excellence People Advantage Canada must develop, attract and retain highly skilled people needed to thrive in the global economy

27. S&T Framework: Government Actions Guided by 4 core principles • Promoting world class excellence Policies, programs, and investments to inspire and assist Canadians to achieve global excellence in science and technology. • Focussing on priorities Playing an important role in supporting basic research across a broad spectrum of S&T while targeting strategic investments in research in focussed areas of strength, opportunity. • Encouraging partnerships Supporting national and international S&T collaborations involving business, academic, public sectors. Accelerating discovery, commercialization; leveraging capacity, resources • Enhancing Accountability Implementing stronger governance, reporting practices to deliver, demonstrate results for public funds invested

28. Some Specific Actions in Support of Principles Entrepreneurial Advantage • Creating a business environment conducive to private sector innovation.  establishing lowest tax rate on new business investment in G7.  improving SR&ED tax credit program to further encourage R&D.  implementing a progressive, responsive regulatory environment.  considering new approaches to stimulate risk capital investment. • Attract foreign direct investment • Strengthening public-private research & commercialization partnerships.  creating new Business Led-Networks under NCE program.  establishing a new Centres of Excellence in Commercialization and Research Program. • improve university and gov’t technology transfer • Improving the impact and efficiency of Federal R&D business assistance.  new Strategic Aerospace and Defence Initiative

29. Business Led Networks of Centres of Excellence Program • Funding envelope of $11M in 08-09 to accelerate establishment of 5-7 B-NCE’s to be proposed/led by private sector. Funding expected to support 5 such networks • Future year funding needs to be determined through peer reviewed competition. • NCE secretariat will manage program. • A private sector advisory board will be established by NCE program.

30. Centres of Excellence in Commercialization and Research Program • Funding of $350M provided over 06-07, 07-08, 08-09 • Eight specific initiatives funded: • Perimeter Institute for Theoretical Physics ($50M in 07) • $105M in 07-08 for funding of 7 centres of excellence: • Brain Research Centre, UBC • Canada’s School of Sustainable Energy, University of Alberta, Calgary, Lethbridge • Li Ka Shing Knowledge Institute, St. Michaels Hospital, U. of T. • Heart and Stroke Foundation, Centre for Stroke Recovery, U. of T. and U. of Ottawa • Montreal Neurological Institute, McGill University • National Optics Institute, Quebec • Life Sciences Research Institute, Dalhousie University • Further Centres of be funded through a competitive, peer reviewed process over 2007-2009 with remaining $195M.

31. Specific Actions (cont’d) Knowledge Advantage • Targeting resources to support world-class research in areas of opportunity for Canada. • directing resources to priority areas where Canada can build global research/commercialization leadership: natural resources, energy; environment; health S&T; ICT. • Maintaining Canada’s G7 leadership in public sector R&D performance. • new investment in Granting Councils. • leading edge research equipment, infrastructure; $510M for Canada Foundation for Innovation, $120M for CANARIE broadband network. • support domestic and international research and networks. • Enhancing accountability and value for money from Granting Councils • improving governance: separating functions of Chair and President. • adopting more integrated approach to support research, client service. • ensuring competitive peer review, excellence in awarding grants.

32. Specific Actions (cont’d) Knowledge Advantage (cont’d) • Protecting the public interest and increasing the impact of federal S&T investments. Improve federal lab capacity:  launching independent expert panel to examine options for transferring non-regulatory federal labs to universities  enhancing collaboration, partnership amongst federal labs, universities, business e.g. NSERC, NRC, BDC joint program in Nanotechnology announced recently

33. Specific Actions (cont’d) People Advantage • Creating opportunities for Canadians to acquire skills and use knowledge to give advantages for themselves and Canada. • continuing to reduce personal taxes – to help attract and retain skilled people. • working with provinces to remove barriers to labour mobility, improve foreign credential recognition. • improving quality of education by providing stable and predictable funding to provinces/territories for post-graduate education. • increasing support for research internships in private sector (MITACS). • support domestic and international scholarships in S&T. • fostering a culture of science, ingenuity and entrepreneurship in Canada.

34. Specific Actions (cont’d) Modern Approach to S&T Management • Making Canada a world leader through stronger domestic, international partnerships  working with provincial, territorial governments to ensure synergy of policies, programs  assess Canada’s S&T presence on international scene and explore options to contribute to international S&T development through Global Commerce Strategy • Revitalize external S&T advisory bodies  consolidating advisory councils into a single Science, Technology, Innovation Council reporting to Minister of Industry

35. The Competition Just Got Tougher • USA: American Competitiveness Initiative • $136 Billion, 10yr investment in R&D/Innovation • $50 Billion to double research funding (7-8%/yr) to NSF, DOE, NIST. Train math/science teachers; provide scholarships to students • $86 Billion tax breaks for companies investing in R&D • CHINA: new commitment to reach 2.5% GERD/GDP by 2020 (from 0.9%) • S&T will contribute 60% to China’s development • JAPAN: Boosts S&T research by $32 Billion over 5years, particularly in Life Science, High Tech.

36. The Competition Just Got Tougher Cont’d • INDIA: Science budget increased by 16% in 2006 particularly in biotechnology, nanotechnology pharmaceuticals • SINGAPORE: committed $7.5 Billion/5yr to drive R&D growth in key areas such as biomedical sciences; increases national R&D spending to 3% of GDP by 2010 • GERMANY: Growth by Innovating • Increase in funding of R&D in emerging technologies by € 6 Billion 06-09 • Will raise R&D spending from 2.5% to 3.0% of GDP • New holistic High-Tech Strategy to be unveiled Summer 2006