PAPRICAN goes global to keep abreast of rapid changes within pulp and paper sector and to diversify revenue base

One of Canada's oldest not-for-profit research institutes is going global in response to the forces of globalization and consolidation transforming its industry, and in response to changes in the way governments provide industrial assistance. After 75 years of serving the needs of Canadian producers, the Pulp and Paper Research Institute of Canada (PAPRICAN) has opened its doors to foreign pulp and paper producers whether or not they are affiliated with Canadian producers.

New categories of membership have been created to accommodate foreign firms who wish to gain access to PAPRICAN's research, or require specific contract research to be conducted. The seeds of change at the Institute were planted in the mid 1990s when the federal Program Review cut support for an ambitious research program on Progressive System Closure to close up all processes used by the industry. Stopgap funding was secured through the last part of the decade, but it became clear that a radical new approach to generating operating revenue was required.

The new strategy is being implemented as PAPRICAN begins using the last federal funds it will likely receive that are not repayable. The recent federal Budget contained a one-time grant of $9 million to provide bridge funding to the Institute during its transition to a new funding model, stemming from an aggressive new business plan approved by its board in April. That support will probably be spread over three years and is managed by a joint steering committee of PAPRICAN senior management and federal representatives. It accounts for 8% of PAPRICAN's annual operating budget of $36.5 million.

Its only other source of funding relates specifically to R&D on system closure and comes from a three-year extension of its contract with Technology Partnerships Canada (TPC). Like all other TPC assistance, it is a repayable loan. If future public support is forthcoming, it will likely be in support of research relating to public policy issues in the area of the environment.

"We have to find significant new revenues and it's a big challenge," says Dr Joe Wright, PAPRICAN's president. "Our business plan lays out targets to supplant the money we receive now because the TPC and federal bridge funding will run out. Contract research will become a bigger piece of our budget but it won't exceed 15%."

PAPRICAN also benefits from a refundable 40% tax credit from the government of Quebec for expenditures paid to research consortia like PAPRICAN. Wright says there are plans to lobby other provincial government to introduce similar measures.

New membership

categories

The new membership scheme creates several new categories to allow domestic and foreign firms to collaborate with PAPRICAN researchers in different ways. A Full Member is granted full access to all intellectual property (IP) and royalty-free use in member company mills among other benefits. Associate Member status is available to firms outside Canada with a direct affiliation with a full member. Royalty payments must be made for access to IP and rates for contract services are higher.

An Associate Plus membership is available to foreign firms with no affiliation to members and pay fees that contribute to basic research programs and infrastructure, with the right to use IP on a royalty-free basis. PAPRICAN is also opening up specific elements of its research programs to firms seeking specific knowledge or expertise, requiring premium rates and a three-year commitment.

"Canadian companies on a global scale are relatively small, making per-company fees relatively high. We can lower their fees by making up for it with new members. It's leveraged research," says Wright. "We have five or six new members committed and there are a lot of irons in the fire, but it's hard work and it will take a couple of years. This is a major sea change for us, from being an introspective Canadian institute to a global player. But it's the way everything is going these days."

Wright notes that competing nations receive higher levels of non-repayable support from their respective governments, ranging from 13% in Finland to approximately 50% in France. That base support has become extremely important in the wake of the changes rocking the pulp and paper industry, resulting in massive losses for many players and a reduction in the amount they devote to R&D.

Wright says he's optimistic the quest to expand the membership base will be successful, particularly after examining the results of a benchmarking study PAPRICAN conducted. The study showed that its research in the areas it has chosen to focus on are "equal or better" than any of its major competitors.

Federal support has evolved over time

PAPRICAN has received federal funding since its inception, but from the early 1950s to the early 1990s, that support has been almost exclusively for capital assets. Its main research laboratory in Pointe-Claire was built by the feds in the late 1950s and expanded in both the 1960s and 1980s. Throughout this period, operating costs were covered by industry in the form of membership fees and in support of research programs. The Pointe-Claire facility was purchased outright by PAPRICAN in 1998.

It also operates a major laboratory in Vancouver, as well as research outposts in Prince George BC, McGill Univ, Univ of British Columbia and Ecole polytechnique. Plans to enter a co-operative relationship with the Alberta Research Council are also being considered.

PAPRICAN's staff of 345 includes 120 researchers, 150 technical staff, 20 trades people and 55 administrative and library personnel. If it is successful in increasing revenue through membership, additional research personnel will be engaged on a contract basis.

But first comes the labour-intensive job of getting the word out and convincing foreign firms of the benefits of PAPRICAN's research - a task made more difficult by the volatility of the market. Wright says PAPRICAN will leverage the Institute's global reputation and contacts, make creative use of its web site and employ a targeted approach to entice prospective companies to join. "We have a great story to tell. Transferring technology into applications is our strong suit and we do it very well," says Wright. "But the industry still has a long way to go."

R$