[Recorded by Electronic Apparatus]
Tuesday, May 14, 1996
.1533 
[English]
The Vice-Chairman (Mr. Valeri): I'd like to bring the meeting to order.
We'll resume consideration of our order of reference dated Thursday, March 7, 1996 relating to the main estimates for the fiscal year ending March 31, 1997. Is there unanimous consent that I call votes 70 and 75 under the Federal Office of Regional Development - Quebec?
Some hon. members: Agreed.
The Vice-Chairman (Mr. Valeri): Thank you.
We have with us today the Hon. Martin Cauchon, Secretary of State for the Federal Office of Regional Development - Quebec.
Thank you, Mr. Minister, for coming before the committee today.
We do have approximately two hours to spend today with FORD-Q and ACOA, not two hours with FORD-Q. So we'll get started and ask the minister to present the opening remarks. If he could keep his remarks to between ten and fifteen minutes, it would be appreciated. Then we'll go to questioning.
Thank you.
Hon. Martin Cauchon (Secretary of State, Federal Office of Regional Development - Quebec): Thank you very much, Mr. Chairperson.
[Translation]
Dear colleagues, I am pleased to be here with you today to finally report on the status of the work carried out by the Federal Office of Regional Development-Québec since my colleague, the Honourable Paul Martin, who was at the time in charge of the federal office, appeared before you last year to explain the fundamental changes that were implemented and which have led to the positive results we're starting to reap today.
Before we delve into the subject of FORD-Q, I would first like to introduce you to the members of my team who are responsible for the change that took place in FORD-Q and who made this Office a very efficient department. Let me introduce you to Mr. Renaud Caron, Deputy Minister of the Federal Office; Mr. Guy McKenzie, Assistant Deputy Minister, Operations; and Mr. Michel Cailloux, Assistant Deputy Minister, Policy and Liaison.
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A lot of changes have been made to the Federal Office team over the past year. The Minister of Finance's last report talked about the priority that the current government gives to regional development. Evidence of this priority can clearly be seen by the fact that the three regional development agencies now come under the portfolio of Industry Canada.
Today the reason for such a restructuring are becoming obvious when you look at what is happening in the field. Our government policies on businesses are more in sync with each other, we are pooling our energies so that, at the end of the day, we, namely, the team at Industry Canada and the three regional development agency teams will together reach the government's job creation objectives.
[English]
With the change of last year also, we renewed our faith in the regions of Quebec and in the regions of Canada with the other agencies. We renewed our faith in SMEs, which became quite clear in August 1995, because with the revision of programs, we made sure we focused on the right target for the development of the regions in the province of Quebec.
Since then it has become quite clear that our top priority will be, of course, the regions, but we do believe the development of the regions goes through the SMEs. That's why actually our main target and our basic program is based on SMEs for the development of all the regions in the province of Quebec.
[Translation]
By creating the new Industry Canada umbrella with the three agencies and by rethinking the FORD-Q program, we forged ahead with a new philosophy that reflects the nature of federalism, namely, a very flexible system that evolves in keeping with the needs of the people. Consequently, our regional development policy is very flexible. The policy takes the regional interests into account and provides that the regions set their own priorities.
I would now like to review briefly the three distinct concepts underlying this reform. Firstly, we wanted to develop a new concept of regional development. I talked about cooperation and flexible policies. This is why we implemented what we call the Small Business Access Centres.
The Small Business Access Centre is a single window service that can be found in each of our13 regional offices and which provides all small and medium-sized businesses with a full range of federal SME services. In addition, you will have access to advisors at this Centre and to unbelievable databanks that deal not only with Canada but with the international scene.
Secondly, we wanted to review our intervention tools. Everyone is aware of the program review that took place. We, at the FORD-Q, ran over 40 programs, if my memory is correct. We rethought our entire program and came up with one unique program which we refer to as IDEA-SME. This program focuses primarily on the needs of the small and medium-sized business, which today has a performance measurement framework. This is a very useful and effective program that we can use in the field. In February 1996, we already had established partnerships for 304 projects.
I would like to mention a few projects such as, for example, Technica Medic Inc. of Ville Saint-Laurent and the Angus Development Corporation located in the Montreal neighbourhood of Hochelaga-Maisonneuve.
Thirdly, we wanted to redefine how our human resources were to be used within the department. In the Small Business Access Centres, our advisors play a much more active role in meeting people, in stressing cooperation and in working with the various groups to prioritize their intervention and economic development activities.
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Today, we are talking about a new economy based on high technology and knowledge. Consequently, all structures, such as that of the government or the banking system, are undergoing some very interesting basic changes that are promising for the years ahead.
For the time being, the Office's role is to support those businesses that already want to go forward in the new economy and work in the high tech sector. Such businesses are really having financial problems, because we are in the process of moving from the tangible to the intangible.
We have signed strategic agreements with various financial institutions to give companies working in this new economy access to financing. I'm thinking, for example, of our IDEA-SME fund with the Business Development Bank of Canada. There is also the agreement we signed recently with the Royal Bank of Canada regarding a fund, an others will be set up in the near future. All of this is designed to help companies move from the old economy to the new.
[English]
Our aim and goal in regional development is to work in partnership and cooperation with the organizations at the community level. We also bear in mind the fact that with the federation we have in Canada, we must make sure we're managing in order to eliminate what we call duplication. We're managing in order to be involved with cooperation, but with cooperation according to our jurisdiction. When we talk about jurisdiction, it means to be involved as regards our plus value as the federal government.
[Translation]
Here are some examples of cooperation agreements.
[English]
For example, FORD-Q has some agreements with other ministries. We've created a specific program in order to help SMEs get to the exportation market. That program is called NEXPRO, and it's for new professional exporters.
[Translation]
Under the NEXPRO program, we help businesses demystify export markets. This is essential, because today most jobs are created by small and medium-sized businesses that have developed their export capabilities.
There's been other changes as well. One fundamental change was introduced as a result of many discussions with business people. We have moved from a grants system to a system of repayable contribution. Since January 1996, most of what we do is in the form of repayable contributions. There are some exceptions, as in the case of some non-profit organizations.
We are in a transition phase at the moment. The programs we have introduced are beginning to show results, and people are starting to adjust to this new approach. I must say that the indications are already quite hopeful, because we have a good team that reflects the vision of regional development based on community realities. In order to deliver our programs and listen to people carefully, we have set up 13 regional offices throughout Quebec. They are our Small Business Access Centres.
We also have a strategic partnership through the Community Futures Program. There are55 Community Futures Development Corporations which are part of the FORD-Q family and are an extension of our 13 regional offices.
.1545
In addition, we have 150 people working in customer service. The new approach to regional development is important. It is more flexible and in tune with reality. It allows us to react quickly by working with people. It also enables us to fine tune policies that really meet peoples' needs.
For example, in the Lower St. Lawrence region and in the Gaspé Peninsula, when there were some problems regarding the Atlantic Ground Fish Strategy, and the reduction of quotas and stocks, we had to intervene, because the region's economy was based on fishing. We set up a special development fund with the assistance of the people in the area.
At the moment, the implementation is going quite well. In the Quebec City/Chaudière - Appalachian region, an economic change in direction is under way. Emphasis has been placed on certain high tech areas. I am thinking, for example, of the National Optics Institute, which allowed us to set up a development fund for the Quebec City/Chaudière - Appalachian technoregion.
These are good initiatives, because they are close to the people. One of the duties of the Federal Office of Regional Development-Quebec is, without any doubt, to get involved in the Montreal case. We must ensure that Montreal can continue to enjoy economic prosperity and take its place once again as a great metropolis not only of Canada, but of the whole world.
[English]
In other words, FORD-Q is looking at the 1996 and 1997 years. We're very optimistic, as I said. We're quite pleased, actually, when we look forward, because FORD-Q has brand-new tools and a new organization. Our program is very flexible. It's important to be flexible and to work close to the population, because we're working in a brand-new economy that is deeply in transition.
[Translation]
I will close by saying that we want to help people. There's been a good reaction to our effort. We also set an example, because we're in the process of setting up what is known as the ISO system, which are international standards that we apply ourselves at FORD-Q.
That, Mr. Chairman is an overview of the Federal Office of Regional Development-Quebec. Its primary focus is regional development through high tech SMEs.
[English]
Thank you very much, Mr. Chairperson and dear colleagues, for your time.
[Translation]
The Chairman: Thank you, Mr. Cauchon.
[English]
We'll start with Mr. Leblanc for ten minutes on the first round.
[Translation]
Mr. Leblanc (Longueuil): The Secretary of State spoke about the federal government's great flexibility as regards regional development. Why is it that the grants for regional development in the Maritimes, with a population of 2.4 million, total $354 million, where those for Quebec, with a population of 7 million, total only $271 million?
If that is an example of the federal government's great flexibility, it obviously involves considerable inequity.
Mr. Cauchon: You've raised an interesting question. We should avoid comparisons in talking about regional development. Canada is a vast country and the economic realities of the Atlantic provinces and those of Quebec are absolutely and fundamentally different.
.1550
The correct question is as follows: does the current budget of FORD-Q meet the needs of Quebec in all respects? For example, for the program IDEA-SME, which has not yet completed its first year, there is a $22 million fund that is expected to grow in the next few years to reach a threshold level of maturity.
On the basis of our experience, we can state now that the funds available are more than adequate. In addition, it must be understood that we have a new philosophy, a new strategy, and a new approach, all of which mean that governments are no longer simply providing grants, but are focusing more on repayable contributions. This means that governments will be making their human resources more available to SMEs and this is producing results that speak for themselves.
I'm thinking for example of the Pro-Est strategy, and I'm sure my colleague from Hochelaga - Maisonneuve could talk about it. Because of the extremely difficult economic times for industry, the region had to take charge of the situation. And that is really what happened. We began working with Pro-Est. We managed to develop the plastics processing sector there.
We've just completed another study that examines the possibility of developing the environmental sector. In all respects, even if we compare the budgets of the various organizations, the difference is very slight. I would like to tell you that with our programs, the vitality that exists in Quebec and the fact that high technology is so developed there, the Federal Office of Regional Development (Quebec) has all the resources it needs to meet its obligations.
Mr. Leblanc (Longueuil): I would not want to blame the Secretary of State with responsibility for Quebec. He has just assumed his position and I hope that in the future, he will carry more weight than his predecessor. When we realize that there is a 300% difference between the funding for the Maritimes and Quebec, we see that there is something really unfair here. I hope that he will be able to exert more pressure than his predecessor did, so that there is more equity in the federal government's effort to promote the economy of Quebec.
Mr. Cauchon: If we look at the total budget, we see that the western agency's budget is about $361 million, FORD-Q's budget $369 and ACOA about $355 million. So if we want to make comparisons FORD-Q compares favourably. As to the reference to my predecessor, I must say,Mr. Chairman, that I do not share my colleague's opinion.
The previous minister did an outstanding job. He really made the Federal Office of Regional Development (Quebec) into an ultra modern regional development tool. Today, we can congratulate him. If I can do as much during my term, I will be very pleased.
Some honourable members: Bravo!
The Vice-Chairman (Mr. Valeri): Mr. Rocheleau.
Mr. Rocheleau (Trois-Rivières): Mr. Cauchon, I noticed that in your opening remarks, you did not use the word ``Quebec'' once. And yet you are the person responsible for the Federal Office of Regional Development for Quebec.
What do you make of the Quebec government's legitimate involvement in the economy through economic development councils, offices of industrial commissioners, the Regional Development Secretariat, the SOLIDEs, a number of players involved in the Fonds de solidarité, which has established a regional focus, through the Department of Industry and Commerce, which works with SMEs just as the BDC, and through the Société québécoise du développement de la main-d'oeuvre (Quebec Manpower Development Corporation)?
As a Quebecker, what official role do you give Quebec in the area of regional development?
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Do you and your officials see yourselves fundamentally in competition with the government of Quebec, or are your efforts complementary to those of the Quebec government? That is a fundamental question.
Mr. Cauchon: I'd like to thank my colleague, who is the opposition critic. I practiced law for a number of years, and that is what we call a run-on question. It calls for a run-on answer.
The name FORD(Q) ends with the word ``Quebec''. The long title is Federal Office of Regional Development "Quebec". So I certainly did say the word ``Quebec'' several times in my remarks. I would like to tell the honourable member that I am a Quebecker and that I am very proud of that, but that my vision is clearly different from his. Quebec can be very, very strong within a united Canada. Contrary to what he said, the more I can say the word ``Quebec'', the happier I will be. So you will be hearing me say it a lot.
The question about the partnership is a very good one. For years, the Quebec government and the Canadian government had an agreement that harmonized regional development initiatives. The agreement expired, and under the new government in Quebec, although my predecessor tried on a number of occasions, he was unable to get an agreement on regional development signed with his provincial counterparts. Consequently, when we repositioned our program, we did so on the basis of this fact. On the Quebec side, there was no inclination at that time to sign another regional development agreement. Hence, we decided to intervene in an area where we had some value added. This led to our current programs for SMEs working in high technology, research and development and exports.
We would like to have as many partnerships as possible. Today we hear a great deal of talk about partnerships, but we must always remember that Canadian federalism is based first and foremost on a partnership. I have some very instructive examples here. Let's take the Tristan & Iseut plant, for example, which was announced on February 26, 1996, and which is also a partnership.
There is also the Greater Montreal Convention and Tourism Bureau, which was announced after discussions with the Quebec government. This was sought after, desired and requested. So this shows that when we act together in the best interest of a population, we can achieve great things. In the case of the Bureau, we combine our efforts to set up a tourism promotion campaign of the City of Montreal. This of course may lead to some future economic spin-offs. In some areas, a partnership was used for Pro-Est initiatives as well.
So you can see that the Canadian government is very receptive to anything we can do in the area of partnerships.
[English]
The Vice-Chairman (Mr. Valeri): Mr. Ménard, I think you'll start the second round.
[Translation]
Mr. Ménard (Hochelaga - Maisonneuve): With pleasure, Mr. Chairman.
[English]
The Vice-Chairman (Mr. Valeri): Mr. Hill, please.
Mr. Hill (Prince George - Peace River): Thank you very much, Mr. Chairman.
I would like to welcome the secretary of state before the committee. Thank you very much for appearing to explain the main estimates and the direction of FORD-Quebec.
In preparation for the meeting this afternoon, I requested a list of contributions that were made by FORD-Q in the last one to two years, and that wasn't forthcoming. I had a call and they said it was very difficult to put something like that together.
I wonder if you could explain something to me. I have received from ACOA a projects information report, which quite handily and in quite a concise manner outlines the names of the applicants, the project locations, the amount of assistance provided, and those types of details.
.1600
Perhaps you could explain to the committee and to myself why something like that isn't available. The explanation that was given to me over the telephone was that you're in a state of upheaval with the computers. I must confess that I'm not really computer literate, so I don't understand all the workings of the computers. I find it quite amazing that this type of information wouldn't be readily available, not only to a member of Parliament but to the taxpayers.
Mr. Cauchon: Thank you very much for your questions. Mr. Chairperson, I was made aware this morning of that demand, and I know that demand was to the department last Thursday afternoon, if my recollection is good. You would imagine it's not a question of bad faith. Asking a department to send over a list of all the projects in which we've been involved over the last two years is not a normal and simple demand. It takes time for my people to set all the projects together.
Let me tell you, sir, that as soon as we get all the projects we'll send the list over to you. More than that, if you would like to have a meeting with the persons involved in those projects and the persons in the department working with the question of helping small and medium-sized enterprises, we'll be more than pleased to have you come to the ministry and to discuss with you your comments and observations.
Mr. Hill: I can understand, Mr. Minister, that there might be some problems putting together the completely up-to-date information. As I recall, the request I made - it wasn't a demand, it was a request - was that even if you had stuff from a year ago or whatever, that would be fine. If ACOA can produce that same type of report at the time of a request, I don't understand what the problem is. Anyway, we'll let that one go.
Considering the fiscal reality facing the country, I find it very encouraging that your main estimates show a decrease of about 31.7% in grants and contributions, recognizing that everyone in every department has to face the fiscal reality that the country's facing. I'm somewhat alarmed that the operating expenditures have increased by 7.9%, according to page 4 of the main estimates. I just wonder if you could explain to us why your operating costs are increasing at a time when you're actually loaning out less money.
Mr. Cauchon: Mr. Chairperson, indeed, if you have a look at the budget de fonctionnement, it seems that for 1996-97 there is a small increase. First of all, that's because of the new philosophy we have in our department with the question of the program IDEA-SME. We need more counsellors in the field to get in touch with people and to deliver goods.
Last year we also had a new component to our ministry. It comes from Human Resources Development Canada through the Programme d'aide au développement des collectivités. We're talking about those Société d'aide au développement des collectivités, those 55 offices I was discussing in my first intervention.
That added people to our team. We reduced our manpower in the department, of course, but on the other hand, as we gain and as we change our philosophy, we need more people in the field. We're not intervening any more with subsidies. We're giving contributions. That's why we have a small increase, and I think it's according to the best interests of the population. We're now in a much better position to provide people with our services.
Mr. Hill: I notice also on pages 4 and 5 of the main estimates, Mr. Minister, that the liabilities for FORD-Q under the Small Businesses Loans Act have increased an estimated 450% over the past two years. If you look on page 5 it's estimated that actual use was $16.4 million or something like that, and page 4 has an estimated $70 million increase in liabilities for 1996-97. I wonder how you could explain such a dramatic increase in such a short period of time.
.1605
Mr. Cauchon: Because it's a technical question, I will ask the assistant deputy minister to answer.
Mr. Michel Cailloux (Assistant Deputy Minister, Policy and Liaison, Secretary of State (Federal Office of Regional Development (Quebec)): The figure you see in the estimates has a direct link to the volume of business being done under the Small Businesses Loans Act. As the volume increases, the coverage for potential losses has to increase as well. We get these figures directly from Finance and Industry. They're in our budget just to cover for eventual losses, and they're a percentage of the volume of business being done.
So if the volume of business increases, the coverage has to increase. If the volume of loans goes down, we are provided lower figures.
So these are not funds that the FORD-Q can reallocate to other activities. They're basically there to cover for potential losses, and they're in accordance with the Financial Administration Act. These figures are automatic for every regional agency across Canada.
Mr. Hill: Based on past performance, do you have any estimate of how much of that$70 million that you're estimating for next year would be a potential loss? Is it the entire amount? How has it been running in the past as a percentage of liabilities?
Mr. Cailloux: I can't provide you with very clear figures now that the act has been amended. What I can indicate, however, is that since the act has been amended, the provision for coverage is less than it used to be and according to our information actual losses have been lower than usual, than the figures shown here.
If we don't have losses as severe as those that have been predicted, this will go back to the consolidated revenue fund and will not be something we can reallocate within the department.
The Vice-Chairman (Mr. Valeri): Mr. Benoit.
Mr. Benoit (Vegreville): I found the minister's statement that when you're dealing with economic development you must avoid comparing yourselves to others to be very interesting.I doubt that Alberta, British Columbia, and Ontario feel that way.
Many people and groups, including think-tanks such as the C.D. Howe Institute and the Fraser Institute, have said that the effect of economic development programs is actually negative to the very industries that are meant to be helped by the programs. They've presented evidence to show that this is the case. This would lead me to wonder why this economic development program and others aren't being phased out over a set period of time.
Mr. Cauchon: It's a very interesting question. Maybe, under the previous philosophy we had, when we were talking about regional development we were talking about intervening in small and medium-sized enterprises with subsidies. But actually what we're doing as the Canadian government is really putting forward a program with FORD-Q, which put into place a new philosophy and new ways of seeing regional development. It means going back in the field with contributions, and also going back in the field in order to work close to the people, work close to the community, and work in partnership.
That way of doing things proved to be quite successful. A minute ago I was telling some good stories about Montreal; for example, when we talk about Pro-Est. It was very difficult in that area.
We've been working together and, looking forward to the end of the 1990s, it seems as if we have a quite good base in the industrial area with regard to plastics and the environment.
Mr. Benoit: How are you going to evaluate if this new way of doing things is in fact providing the benefits intended?
Mr. Cauchon: We have ways. Actually, we tried to put into place some evaluation processes.
My deputy minister, Mr. Caron, will intervene in order to explain in detail what we're doing on that side. That's a good question.
Mr. Renaud Caron (Deputy Minister, Secretary of State (Federal Office of Regional Development (Quebec)): Right now we're doing a framework for a relation. Before the end of the year, for the first time in the department in the federal government, we will obtain recognition of ISO 9001.
We have to evaluate the results, so I have to come back to the first part of your question.
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It is a new program that we have now. It was formed after consultation with the private sector, boards of trade, some consulting firms and other organizations like those you named. It involves facets of partnership with the private sector and other organizations in two main areas: the promotion of external trade, and research and development in SMEs, mainly in SMEs with loans.
The Vice-Chairman (Mr. Valeri): Do you want to pick this up in the next round?
Mr. Ménard: One more question.
The Vice-Chairman (Mr. Valeri): You can pick it up on the next round, because we'll be back here.
Mr. Cauchon: If I may, I would like to give a short answer. The question just raised referred,I guess, to comments made last year by the Auditor General. Those comments were based on the previous program in our department. Actually we're pretty active on the side of putting into place a new management framework, a strategic framework to control our intervention in the field.
Thanks, Mr. Chairman.
The Vice-Chairman (Mr. Valeri): Thank you. Mr. Shepherd, please.
Mr. Shepherd (Durham): Thank you. I will direct my questions to Mr. Caron, the deputy minister.
The Auditor General's report back in November 1995 makes a comment that 30% of projects would have been carried out as planned regardless of financial assistance. Would you respond to that?
Mr. Cauchon: Would you repeat the question? I am sorry. I didn't get it all.
Mr. Shepherd: The Auditor General made the statement, in reviewing the accounts of FORD-Q, that 30% of the programs receiving assistance would have gone ahead without the assistance.
Mr. Caron: The period covered by the Auditor General was 1988 to 1993. You have to know that. Also, they say after this we were in a good way and we established good programs related to needs.
It was subsidies during that time.
Mr. Cauchon: If I may, Mr. Chairperson, it was a pretty long period covered by the Auditor General at that time.
I just want to point out something interesting that has been raised here. At that time FORD-Q was involved with SMEs and the true meaning of subsidies. Providing subsidies means we're giving money based on programming and there is not really control afterward. But with the new programs we have, where we are talking about contributions, there is much better control. We're following the corporation we're helping through our funding. Of course, we're also looking forward to getting our money back. So it's a brand-new philosophy.
There is this interesting comment made by the Auditor General. But, Mr. Chairman, with the system we actually have in place, this could barely happen now.
Mr. Shepherd: Just to work my way through specific examples, I have a press release that came from you people on May 6. It involves a company called Tirex Canada Incorporated and a $500,000 contribution. This is an American-owned company. How is this assisting Canadians in small enterprises?
Mr. Cauchon: What was the corporation?
Mr. Shepherd: Tirex Canada Inc., a U.S. based -
Mr. Cauchon: Tirex Corporation is mentioned in an announcement made two weeks ago. It involves a patent to be developed in the province of Quebec. The patent is related to used tires. If you want to talk about environment, the question of used tires in North America is a huge problem. It is pretty complex. Someone has developed a new patent process to help us take care of this waste and recycle the used tires.
What we did two weeks ago was to get involved, with a Canadian corporation, in helping set up a plant in the Montreal area. They will develop a prototype, a prototype as we say in French. After, some small SMEs will probably buy out the process and keep creating jobs in Quebec and elsewhere in Canada.
.1615
The main target there was the very interesting patent per se and les retombées économiques we are going to have afterwards.
Mr. Shepherd: Did you check for the possibility of patent infringements?
Mr. Cauchon: Yes, we did, to my best recollection. When I got there, being a lawyer, one of the questions I asked was whether it was a brand-new patent. According to what I've been told and according to what we know, it's something quite amazing. That's why we're getting involved.
Mr. Shepherd: Did you check to see whether there are Canadian companies that have this technology now?
Mr. Cauchon: The company with this technology is a Canadian company. We're getting involved in this venture because we're talking about a patent with a Canadian corporation. It is owned by a Canadian corporation. Apart from that, afterwards, we're pretty sure it will be successful. Some Canadian SMEs will probably buy out the process and use it across Quebec and across Canada.
Mr. Shepherd: I believe it's a subsidiary of an American-owned company. It's an American-owned company.
Mr. Cauchon: I don't know, but if I may, just a moment - -
It's a 100% owned corporation we're getting involved with. The majority of the shareholders are Canadian. It's a Canadian corporation. As I said, what is interesting with Tirex is that afterwards small and medium-sized enterprises are going to be able to use this technology.
Also, I would like to point out, Mr. Chairman, that it's a repayable contribution.
Mr. Shepherd: I just want one clarification. The source of this press release is: Tirex Canada Inc., a subsidiary of Tirex America Incorporated, listed on the NASDAQ stock exchange.
Mr. Cauchon: Mr. Chairman, I realize this is a very specific question on a specific project. I know we proceeded with the project two or three weeks ago. If my colleague would like to have more details on this project, we'll be more than pleased to have you meet with people in the department.
The Vice-Chairman (Mr. Valeri): Great. Thank you, Mr. Shepherd.
There are a couple of minutes left. Mr. Lastewka.
Mr. Lastewka (St. Catharines): Thank you, Mr. Chairman.
I know the discussion went on about how much money was in FORD-Q and ACOA and so forth. Some of us live in areas where there aren't programs like this. But our concern is that very often when you assist organizations like FORD-Q - I'll also be asking these questions to ACOA - you assist companies that then directly compete with other areas of Canada.
What mechanisms are you putting in place so we're not just spending Canadian tax dollars to move jobs from one side of the country to another side of the country?
Mr. Cauchon: This is a very interesting question. As a matter of fact, what was unfair in the past was that we were getting involved with corporations and giving them subsidies. This was sort of unfair for the corporations in the field.
Another interesting result of regrouping the three regional agencies under the same umbrella within the portfolio of Mr. Manley and Industry Canada is that we're talking to each other and we're working altogether. We're part of the same team and the same portfolio, so we very often know what is going on in the other parts of the organization. Our deputy ministers are also getting in touch very often.
Mr. Lastewka: My second question concerns my understanding that you're getting away from grants and subsidies to loans. When would you -
Mr. Cauchon: Not really. It's not the same thing. It's not loans; it's repayable contributions. It's a bit different.
Mr. Lastewka: Then I need to get some definitions here.
Mr. Cauchon: Maybe afterwards if you want to get -
The Vice-Chairman (Mr. Valeri): If some details of these definitions could be provided to the member -
Mr. Cauchon: My colleague -
Mr. Lastewka: I guess I'd like to know the different categories, including the interest of repayable and so forth.
Mr. Cauchon: It's a legal detail.
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Mr. Lastewka: Could you, in your report - I think Mr. Hill was getting at this - also provide us with information on how many of the companies you've helped are actually doing a certain percentage of exports? Or are they more domestic? Are we trying to get more companies to do exports in your detail?
The other question is, of all of the SMEs that you're helping and starting out, how many would be innovative, new products, versus old products?
Mr. Cauchon: That's quite a specific question, again.
Regarding the question of export, as I said in my main speech, Mr. Chairperson, most of the job creation that we have is due to the fact that SMEs are successful in the international market and in exportation. So of course we're mainly involved in high technologies, but we're looking forward to helping those SMEs in going on the international market. This is one of our main targets.
The Vice-Chairman (Mr. Valeri): Perhaps what the minister can do, since some of the questions require some compilation of data, would be to take note and provide that information to committee at some point in the future.
Mr. Cauchon: My pleasure, Mr. Chairperson.
The Vice-Chairman (Mr. Valeri): Thank you, Mr. Lastewka.
We're going to five minutes. Monsieur Ménard.
[Translation]
Mr. Ménard: I hope you'll be a little generous today, because it is my birthday and I am from Montreal. I think you will take that into account, Mr. Chairman.
[English]
The Vice-Chairman (Mr. Valeri): Happy birthday.
[Translation]
Mr. Ménard: I would like to welcome the minister, who shares my passion from Montreal. I'm going to ask some brief questions.
Would the minister give us a little more information about the fact that there is still no agreement on regional development between Quebec and his department. Does he intend to correct the situation fairly quickly?
Second, I know that the minister, like myself, believes very much in CDECs (Community and Economic Development Corporations) in communities like Montreal. Could he tell us a little about the initiatives taken by his department with CDECs and the budget that has been set aside for them for the next few years? Is this a winning formula for Montreal?
My third question is about the Industrial Recovery Program For South West Montreal (IRPSWM). If I recall correctly, the Deputy-Minister, Mr. Caron, was involved in it. This program used to be very popular in Montreal. It had made it possible to recycle industrial buildings and use them for other purposes. It would be attractive to have a tool like that to promote regional development in Montreal. It might be worth checking whether the program could be reactivated within the existing budget.
Does FORD(Q) have programs at the moment specifically designed for market studies? If so, I would like to tell the minister here and now that I'm very interested in the project in my area.
The minister will agree with me that Montreal depends a great deal on tourism development. In fact, a special advisor to the Prime Minister said that in the next few years, the most promising area for development is tourism.
Is it not unfortunate that FORD(Q) withdrew its financing for the Jazz Festival? How does the minister see the cooperation between the tourism industry, Montreal and his department?
If I have enough time, I would like to ask a question about housing, but I don't want to go too far, Mr. Chairman.
[English]
The Vice-Chairman (Mr. Valeri): Mr. Ménard, happy birthday, first off, but you do realize that there are five questions in your first...?
Mr. Cauchon: There is more than one question, Mr. Chairman.
The Vice-Chairman (Mr. Valeri): I think it was five; I counted five.
Mr. Cauchon: How many hours do I have?
The Vice-Chairman (Mr. Valeri): You don't have many hours; you have a few minutes.
[Translation]
Mr. Cauchon: In response to your first question about the regional development agreement, Mr. Ménard, I will repeat somewhat my comments to Mr. Rocheleau. We want a regional development agreement with the province of Quebec. Both my predecessor and myself have tried to achieve such an agreement. Clearly, we could simply extend the previous agreement.
However, we must understand that the program has been redesigned, and that the IDEA-SME program is based on the federal government's value added.
.1625
This program is geared more to regional and local circumstances. Yes, it does depend on cooperation with community organizations.
You refer to the CDECs which are somewhat like the DFDCs in the regions. The CDECs in downtown Montreal are the delivery-arm for some programs. For example, CDECs deliver the SEI program, Self-Employment Assistance, for Human Development Canada. They are advisors. I think the results of the actions taken by CDECs are very conclusive.
There is also the work done at the community level by RESO centre-south in the City of Montreal as well.
Mr. Ménard: Do you finance the CDECs?
Mr. Cauchon: RESO centre-south is a model in which community people manage the money to respond to local requirements.
In response to your question about festivals, I would just say that this is a period of austerity, and like all levels of government and almost all industrialized countries, we have to choose our priorities. However, I think that the Department of Canadian Heritage is involved in all of the major festivals in Montreal.
With regard to the tourism sector, Industry Canada implements national policies through the Canadian Tourism Commission. FORD-Q creates associations to help promote our regions and cities internationally.
The Convention and Tourism Bureau of Greater Montreal work in cooperation with Tourisme Québec, the City of Montreal and the RDC.
Mr. Ménard: But the Convention and Tourism Bureau is practically an empty shell. They don't have much money.
[English]
The Vice-Chairman (Mr. Valeri): Mr. Ménard, you are at a -
Mr. Ménard: But it's my birthday, Mr. Chairman.
The Vice-Chairman (Mr. Valeri): I know that, but it is unfair to the other members. So I apologize for -
[Translation]
Mr. Cauchon: If I may, Mr. Chairman, I would like to point out that a $13 million budget for promotion is not an empty shell. I'd like to find an empty shell like that on the beach.
Mr. Ménard: Mr. Cauchon, we could talk about this again if you like, but -
Mr. Cauchon: That would be a pleasure.
Mr. Ménard: And no one is doing anything about the Jazz Festival anymore. I have a question on that. I know that you are a strong believer in tourism, just like I am. According to my information, the Convention and Tourism Bureau - which is currently a paramunicipal body, has budgets. I am not saying that they're doing nothing about tourism, but there is a concern here. The Jazz Festival generates a lot of tourism.
Mr. Cauchon: I wouldn't know what to tell you about the Jazz Festival. It does not come under FORD-Q.
Mr. Ménard: Minister Manly was providing their funding until last year.
[English]
The Vice-Chairman (Mr. Valeri): Thank you, Mr. Ménard. You've had your opportunity.I appreciate it very much.
I'll have to move to bring an end to this session. I do have one comment, which is a question from Mr. Lavigne. Then we'll bring the session with FORD-Q to an end, because we do have ACOA waiting.
Mr. Lavigne (Verdun - Saint-Paul): Can I take five minutes? It's my birthday today. You don't mind, Mr. Chairman?
The Vice-Chairman (Mr. Valeri): You're too old.
Mr. Lavigne: Come one, I'm just 51.
[Translation]
I've been listening to my colleague on the other side; he point out that you're not using the word ``Quebec'' often enough. Quebec is part of Canada. When you talk about regional development in Canada, it is important that you mention Quebec.
Mr. Cauchon, you have commented on programs at length. What do you plan to do - or what are you doing at present - about duplication between the federal and provincial governments? Have you done anything concrete? Are there any new programs?
Mr. Cauchon: In the past, RDC had a regional development agreement, which has now expired. We have asked for that agreement to be renewed, but the province of Quebec is not prepared to renew it at this stage. We therefore established the IDEA-SME program, which is aimed at generating federal added valued and avoid any form of duplication.
.1630
With respect to regional development, our current approach seems to be working very well for everyone.
[English]
Mr. Hill: I have a point of order, Mr. Chairman. In light of the Bloc being given two opportunities to ask questions, I would like to go on record as requesting from the chair that I be provided the opportunity to ask one short question before you dismiss the witnesses.
The Vice-Chairman (Mr. Valeri): No problem. Normally what we do is run a list and you indicate to the chair that you want to be on the list. Mr. Benoit was going to come back to continue his questioning, but he subsequently left and so I assumed that you didn't want to ask a question.
Mr. Hill: Thank you.
[Translation]
Mr. Lavigne: You mentioned a development program for Montreal, Minister. Could you please elaborate a little on that?
Mr. Ménard: A very good question.
Mr. Cauchon: It's a development issue. For the city of Montreal - which has high-priority in Quebec - the federal government used to intervene in various areas of development. We studied a series of reports on problems specific to the city of Montreal, and always took concrete action. Examples of areas in which we took such action include high technology, international development, SME development, culture, heritage, transportation and economic development.
We will continue to intervene in these areas, in line with the new approach to development. Nowadays, people are working in cooperation, forging partnerships and setting priorities. Any measures affecting the Montreal region will of course be considered in partnership with the city of Montreal and the province of Quebec, and will be tailored to the region's circumstances and needs.
Mr. Lavigne: I have a question about the Corôna Theatre in St. Henri. There was a partnership between the city of Montreal, the private sector and FORD-Q. How much longer will it take before something is done? Is this partnership going to translate into concrete action in the near future?
Mr. Cauchon: Since you're asking me about a specific issue and I don't have the file with me, I would ask my colleague to come and meet with departmental officials, who will bring him up to date.
[English]
The Vice-Chairman (Mr. Valeri): Thank you very much, Mr. Lavigne.
Mr. Hill, do you have a short question?
Mr. Hill: Yes.
The Vice-Chairman (Mr. Valeri): We do have ACOA waiting. I'm sure you have a number of questions for them.
Mr. Hill: I'm sure I do.
Mr. Chairman, I appreciate the opportunity for a short question, and I'll be quick. Following up on the question posed by Mr. Shepherd earlier, I'm a little bit dismayed that not only could the information not be provided to me about the specific contribution, but in light of his question I've heard you mention at least three or four times during your responses that the questions were specific. I thought our purpose was to ask specific questions.
In light of that, perhaps with a simple yes or no, could you assure us that the foreign parent company of Tirex will not financially benefit from this contribution? Yes or no.
The Vice-Chairman (Mr. Valeri): It's a fairly hypothetical question. I don't believe that the minister has any way of knowing whether Tirex will benefit from that, yes or no.
Mr. Hill: I think that was what Mr. Shepherd was trying to get at. It was who these programs benefit.
Mr. Cauchon: The only answer I can provide is that if there is any question on that specific project, people who are interested could come over to the department and the person in charge of that file will provide them with all needed information.
The Vice-Chairman (Mr. Valeri): Thank you.
Thank you, Mr. Minister, and your colleagues, for coming to the committee today.
I would like to suspend sitting for two minutes while the Minister for ACOA comes forward.
.1635
.1638
The Vice-Chairman (Mr. Valeri): Colleagues, we'd like to resume the sitting.
We have before us, for the second part of this session, the Hon. Lawrence MacAulay, Secretary of State for ACOA. Is there unanimous consent for calling votes 25 and 30 under the Atlantic Canada Opportunities Agency?
Some hon. members: Agreed.
The Vice-Chairman (Mr. Valeri): Thank you.
.1640
Mr. Minister, I believe you have a brief. We've allocated about ten minutes for that and then we'll go to questions. Perhaps you would also like to introduce who will appearing with you today.
Hon. Lawrence MacAulay (Secretary of State, Atlantic Canada Opportunities Agency): Thank you very much, Mr. Chairman and colleagues.
First, I'd like to introduce Paul Leblanc, who is vice-president of finance and corporate services with ACOA. We're pleased to be here and ready to roll.
Since I became Secretary of State for ACOA three months ago, I have travelled all over Atlantic Canada to meet with dozens of small business owners and entrepreneurs. What has struck me most is the determination of these people to build something lasting and worthwhile in their part - and my part - of the country. It is this determination that makes owners of small and medium-sized businesses in Atlantic Canada so important to the region's economy. After all, they account for 90% of our new employment. Today, both the self-employment rate and the business start-up rate in Atlantic Canada exceed the national average.
However, just as important is the degree to which entrepreneurs are leading the region's economy into new and emerging sectors. They are chiefly responsible for the steady diversification we see on the east coast in areas like pharmaceuticals, health care and software, among others.
I am proud to be part of an organization that has helped small and medium-sized enterprises in Atlantic Canada to grow and prosper, but because these businesses are diverse in the goods and the services they provide and in the business sectors they occupy, it shouldn't surprise anyone that their experiences, challenges, opportunities and needs are also diverse. One size does not fit all.
Meeting this great variety of business needs with a range of programs and services tailored to specific conditions and circumstances is really what the Atlantic Canada Opportunities Agency is all about. Since the end of the 1994 program review, we have moved from being mainly a provider of direct financial assistance to being a provider of multiple services to businesses.
We have done this to better support our clients, but also to reinforce our mandate to increase new employment opportunities and earned income across the region.
Business owners and leaders have told us they need more and better promotion of the concept of entrepreneurship, particularly at the public school level. When you think about it, what better time to start young people thinking about what their futures can be?
So ACOA-supported programs are now being offered to 50,000 students in Atlantic Canada. In the near future, in partnership with the four provincial governments, we hope to make entrepreneurship education programs available to every student in the region. But business owners have told us they also need help in learning how to export more efficiently, how to manage their businesses more efficiently, and how to obtain and use appropriate technology. So ACOA coordinates training programs for new exporters. We do that to try to increase the number of Atlantic Canadian firms doing business in foreign markets.
ACOA also helps in the teaching of management skills and the promotion of international quality standards. In the areas of innovation and technology, ACOA fosters more and better links between business and the research and development community, and it helps in the transfer of commercially viable technology to the private sector.
Business leaders have told us they need better access to capital and to information. We certainly recognize the lack of venture capital in Atlantic Canada, so we have helped to put together the$30 million ACF Equity Atlantic Inc. with our provincial government and chartered bank partners.
We're also doing our best to convince conventional lenders to increase their investment activities in small and medium-sized enterprises, particularly in the intangible areas such as new technologies, staff training, trade development and the like that are crucial for long-term business success.
ACOA is not a bank, and there are some people around here who need to be told that. ACOA does not duplicate the lending functions or operations of any bank in any way. In fact, ACOA's direct investment in business accounts for only a small amount of both our budget and our mandate.
.1645
It's important to stress that where we do make investments, they are strategic in nature. They are of a type and a form unsecured, interest-free and fully repayable that is simply not available through any other government department, institution or commercial lender in the region. The agency does not compete with commercial lenders. In fact, by its selective involvement, it lowers the risk for commercial lenders, which allows banks to become involved in valuable start-ups and expansions they otherwise would not consider.
ACOA also plays key coordination and advocacy roles, particularly in initiatives designed to improve the economic landscape of Atlantic Canada in general. We're in partnership with the provinces to deliver cooperation agreements. We're in partnership with industry organizations to develop commercially promising sectors. Take tourism for an example, where we work directly with the private sector and the Atlantic Canada Tourism Partnership to promote, organize and expand the industry.
As you can appreciate, then, ACOA is interested in all the conditions and circumstances that define the economic environment in which business must operate in Atlantic Canada.
Not long ago we commissioned a study by KPMG Management Consulting and Business Development Information Incorporated, and we're glad we did, because the study shows that in comparison to the United States, Atlantic Canada shows a real cost advantage for both setting up and operating a business.
ACOA will continue to emphasize that kind of diversified approach to business support and economic development in Atlantic Canada, one that is geared to the various needs our small and medium-sized enterprises have declared, despite the fact that federal government funding is tight. In fact, ACOA has undergone significant budget reductions over the past several years, and these reductions are reflected in the resources ACOA has been allocated for 1996-97.
The $16.2 million reduction in ACOA's spending authority for 1996-97 from the previous year is a combination of increase in funding for programs such as Community Futures, TAGS and repayable contributions, totalling $67.8 million, offset by reductions totalling $83.9 million. These reductions are for the most part the result of cuts in the past three federal budgets and the wind-down of the Canada infrastructure works program.
While the agency will be spending about 11.3% of its total budget on vote 25, operating expenditures, it should be noted that only $9.8 million of its operating resources could be considered overhead. The balance of $30.1 million is directly related to program delivery.
The vote 25 operating expenditure budget shows an 8% reduction from the 1995-96 forecast, which compares favourably with the total budgetary reduction of 5%. There has also been a decline in the core staff of the agency from 373 in 1994-95 to 353 in 1995-96, and the core staff allocation further declines to 333 over 1996-97.
However, it must be remembered the agency has been given the responsibility by the government to deliver a number of initiatives in the regions, such as the Canada Business Service Centres, base closures and the Canada infrastructure works program. Accompanying the responsibility for delivery of these initiatives is the requirement for additional resources to effectively deliver them.
I am optimistic about the future, because right now ACOA is positioned better than ever to deliver the broad array of services that small and medium-sized enterprises in Atlantic Canada need to be successful and to create jobs.
.1650
As a member of the Industry portfolio, the agency's capabilities and resources are strong and deep. In fact, Industry Canada's strategic priorities - the focus on small and medium-sized enterprise development, trade and export, technology and innovation, and better opportunities for youth employment - echo our own priorities. More than this, our involvement allows us to provide Atlantic Canada with the best nationally administered business programs and services available, particularly in the areas of trade and research and development.
As a member of the portfolio, ACOA benefits from an even greater degree of national-regional cooperation and coordination with respect to access to capital, foreign investment, business services and counselling, and community economic development. The new relationship also confirms ACOA's fundamental role as a diversified, multifaceted development agency designed to meet the specific and varied needs of Atlantic entrepreneurs.
Our responsibility is to provide critical field intelligence related to Atlantic Canadian issues, conditions and circumstances - the type of on-the-ground research and data required by a jobs and growth strategy that is relevant to the region.
To sum up, ACOA has assembled a broad range of skills and resources - an inventory of specific business services and programs - to provide Atlantic Canada's business community with a sturdy and diversified support system, one that is unique in the region both for its comprehensiveness and its relevance to the real and varied needs of its clients. By working together with private and public sector partners, we are helping Atlantic Canadians position their businesses, communities and themselves to face and meet the challenges of the next century.
Thank you very much.
The Vice-Chairman (Mr. Valeri): Thank you, Mr. Minister.
Mr. Leblanc, please.
[Translation]
Mr. Leblanc (Longueuil): For quite some time now, I have been wondering about the astronomical sums of money that the federal government is pouring into the Maritimes each year. Over the last ten years, the federal government has spent billions of dollars on regional economic development in the Maritimes.
I would like to know why the Atlantic region cannot find some way of lowering their unemployment rate and boosting their job creation levels.
Wouldn't it be better if the federal government encouraged the region to show more initiative, rather than continuing to pour in money? As far as the Atlantic provinces are concerned, the federal government is a real cash cow.
After all the efforts made by the federal government, and after all the money that has been poured in, the Maritimes still have an extraordinarily high unemployment rate. I would like someone to explain why.
[English]
Mr. MacAulay: Thank you very much. We do have a high unemployment rate, and of course it's the responsibility of Canada as a nation to help us develop any way it possibly can. With ACOA, and the funding through ACOA, we have reduced the unemployment figures over the last year,I think by 1% across each province in Atlantic Canada. With ACOA's investment, since its inception, the businesses who have been aided by ACOA have created 82,000 jobs to date. Without ACOA or some regional development dollars, these jobs would not be in Atlantic Canada and we would just have a more deprived area.
[Translation]
Mr. Leblanc (Longueuil): Have you asked yourselves whether the federal government is acting properly?
Is the federal government acting in cooperation with the people of the region, or do the people of the region just expect to get and keep on getting, as they do in developing countries? After all, it's been going on for a very long time. And there has not been a significant increase in employment in the Maritimes, particularly in Newfoundland. Are federal government investments properly targeted? Are they properly evaluated? Something doesn't seem to be working well in the system.
.1655
[English]
Mr. MacAulay: Of course, and ACOA has evaluated its process and the progress it has made in Atlantic Canada. Of course you realize what happened in Newfoundland for the major downturn in the economy. It is not my responsibility, but it's Fisheries'. We all know that a devastation such as that is hard to accept.
For example, when $1 is invested by ACOA in Atlantic Canada, $1.90 is returned to governments in taxes. For each $1 invested, $4.20 is added to the GDP in the Atlantic region.
So without the involvement of ACOA we would have much less.
We also work in cooperation with the provincial governments across Atlantic Canada. We coordinate our efforts with these governments, and each premier in Atlantic Canada has indicated strong support for ACOA and the regional development dollars and the good that it has done.
[Translation]
Mr. Leblanc (Longueuil): You have not answered my question very well. I would like to know if federal government activities are appropriate. Are measures properly targeted? We keep seeing the same thing happening all the time. We give and we give and we give to developing countries, and we almost always see the same kinds of results. It seems that the people of the Maritimes do not want to change. There must be something that isn't working, since we keep seeing very high unemployment rates.
The Maritimes get a lot of assistance per capita. The people of the Maritimes seem to be living off the federal government, and things are not getting any better. Maybe they are not being given enough responsibilities. Maybe the federal government is intervening too much. I would like to know why the system doesn't work.
[English]
Mr. MacAulay: I wouldn't want to get into an extended political argument, but Atlantic Canada is not the only region in Canada that has some unemployment problems and needs development dollars. It's all in how you evaluate or indicate what development dollars are, but the truth is that the dollars that are being spent in Atlantic Canada have been and are being returned to the taxpayer.
The changes we have made in ACOA, repayability for one thing, mean that the dollars that are invested, third-party investors' dollars not secured by ACOA, in order to encourage banks and lending institutions to be involved where we need them for start-up costs, now will be repayable to the Government of Canada.
I don't know what the percentage is, but the small business start-up rate is higher in Atlantic Canada than it is anywhere else in Canada. So it's obvious that what we are doing with ACOA has had a major effect on small business start-ups.
From 1991 to 1996 the people with the intent to start new businesses went from 7% to 14%. We have changed some of the attitude in Atlantic Canada, from ``Who are we going to work for?'' to ``Who is going to work for me?''
My opening statement also indicated that the entrepreneurship programs in the school system are going to do a lot to educate the young people in Atlantic Canada about the value of entrepreneurship and tourism, foreign export, and whatever.
That is what we must do in Atlantic Canada.
[Translation]
Mr. Leblanc (Longueuil): Well, I wish you the best of luck and I hope that your approach to the Maritimes succeed. The better you fine-tune your measures, the less we will have to pay.
[English]
The Vice-Chairman (Mr. Valeri): Do you want to respond to that?
Mr. MacAulay: No. Probably I'd better not.
The Vice-Chairman (Mr. Valeri): Mr. Hill.
Mr. Hill: Welcome before the committee, Mr. MacAulay.
.1700
In your remarks you spoke about the need to educate young people in school about the value of entrepreneurship. It's my understanding that the program you're putting forward, ACOA, is partially funding kindergarten to grade 6, with the aid of provincial education departments.
I'm not an authority but it's my understanding, from talking to a lot of small business people in my area, that it's difficult to find a grade 12 graduate who can make change without a calculator. I wonder if, with your intention to fund with tax dollars entrepreneurship for kindergarten to grade 6, you've done any research to show how those children at such a young age are going to respond to this.
Mr. MacAulay: Thank you very much, Mr. Hill. It's kindergarten to grade 12, in fact.
I don't know. We just started the program so it would be difficult to evaluate the effect it would have, but it's without a doubt vitally important that young people understand the importance and the value of entrepreneurship.
Mr. Hill: I certainly agree with teaching this type of thing in the schools with high school students. I would suspect that research would show a responsiveness there and maybe even in junior high, but I can't see the allocation of funding to kindergarten and primary grade students being very successful.
I know you can't evaluate a program before it's done, but certainly you can do some research as to whether it's going to meet with much success.
Mr. MacAulay: What is spent in grade 1 and what is spent in grade 12 would vary, but I don't have those exact details.
Mr. Paul Leblanc (Vice-president, Finance and Corporate Affairs, Atlantic Canada Opportunities Agency): I might just add that ACOA's strategy, this component of the entrepreneurship development work, is to effect a change in the culture in the long term, to help attitudes change and to have greater entrepreneurship in business by having a more entrepreneurial culture generally. General research indicates that a modest investment can go a long way to effecting a change in the culture. Not all of it is obvious in kindergarten; it spreads through all the years.
Our work is primarily to lever with a small investment the investment of each of the Atlantic provinces to pool their moneys together to develop a curriculum that can be used throughout Atlantic Canada.
Mr. Hill: We'll leave that one for the time being.
The main estimates state - and you've made reference to this during your opening remarks, Mr. Minister - that ACOA places the emphasis on assisting small and medium-sized enterprises. However, in the numbers the department provided to me in May 1994, Bombardier Incorporated received a contribution of $22,827 from ACOA, and yet for the fiscal year 1994, Bombardier's net income was some $175 million. That doesn't sound like a small or medium-sized enterprise to me.
Another one that jumped out at me was that ACOA provided funding of some $559,000 to Sears Canada. How do you explain ACOA, with their emphasis on small and medium-sized businesses, assisting mammoth corporations like Bombardier and Sears Canada?
Mr. MacAulay: Of course, Mr. Hill, the change on the emphasis in ACOA was made in 1995. Previous to that, there had been a number of large companies involved.
Mr. Hill: So their mandate previous to 1995 was to assist large companies?
Mr. MacAulay: Large and medium-sized. Now the emphasis is on small and medium-sized businesses.
Mr. Hill: So I have your assurance that this isn't going to happen any more?
Mr. MacAulay: That is the direction ACOA is going in, yes.
Mr. Hill: Also, in the Auditor General's 1996 report, he raised some serious concerns about the initiative with the closure of the Canadian Forces Base Cornwallis in Nova Scotia. Apparently, it wasn't until after ACOA had already doled out some $2.7 million, or 36%, of its approved funding that a business plan was even received from the Cornwallis Park Development Agency.
.1705
Can you assure us here at the committee that, at least in the future, ACOA will find out exactly how each public dollar is intended to be spent before they release the funds?
Mr. MacAulay: As for the Cornwallis Park Development Agency, what took place there was that a number of dollars were aloft. A business plan and a number of other things that the Auditor General indicated were to be put in place. But as you would well understand, Mr. Hill, when you have an operation that costs $30 million a year to operate, there had to be some funding in place in order for this base to be maintained.
Also, this development agency, which is a board that is responsible to and appointed by a community, needed expertise in order to put a business plan and certain things together. That is another reason why dollars were allotted before the business plan was put in place.
The funding was done on a quarterly basis. ACOA, in its observations, felt that the progress wasn't fast enough, so it was changed then to be allotted on a monthly basis.
Finally, there was a problem identified by ACOA, and funding was cut off until the business plan was received.
The Auditor General did make a number of observations that we understand are very important, but it's important to state that we addressed all the issues, including the business plan, before the Auditor General wrote his report. That's not to indicate that we didn't take the Auditor General's report very seriously, but the truth is that we did address all the issues before that.
Mr. Hill: During your referral to the question from the Bloc earlier, you used a number indicating that ACOA has created 82,000 jobs. I believe you used this number: for every $1 invested, ACOA creates $1.90 in tax revenue for various levels of government.
I find that quite mind-boggling, especially in light of the fact that not only the Auditor General but the media and a lot of people in Atlantic Canada themselves have questioned those types of numbers. I'm sure you remember the 42,000 jobs - this came out a while ago - that ACOA claimed it created between 1988 and 1992.
Yet, when the media, primarily, tried to drive an investigation to have ACOA actually prove that, rather than just throwing out a number, as you did today with 82,000 jobs, there was some real difficulty in providing the proof. They hid behind the Privacy Act and said that it wasn't fair to the businesses to reveal that information.
Now we have a situation in which ACOA is spending even more taxpayer money on legal costs to fight the Information Commissioner of Canada in court to prevent that information from being released. How do you prove that ACOA actually created that number of jobs?
Mr. MacAulay: We use the Conference Board of Canada's numbers. That's what we used for the 82,000.
To get back to your 42,000, you're referring to a court case, I believe, Mr. Hill.
Mr. Hill: Yes.
Mr. MacAulay: It's not the total of 42,000 or 82,000 that's being disputed. ACOA itself, as well as the Auditor General, gave us credit for doing this and decided to do an internal evaluation. The reason why ACOA wished to do this evaluation was to find out exactly how we were doing with the dollars we spent.
This is the only thing we did. We hired a private firm. When they asked the company about the number of jobs it created, they indicated to the company they would not.... Let's say it was your company and there were 20 jobs. We wouldn't use your company and the 20 jobs figure; we would use the total figure. That was to provide some confidentiality for the businesses.
.1710
We did that. To my knowledge, the Auditor General has not indicated that there's anything wrong with our figures, but a newspaper decided to take us to court so we would have to release them.
The courts agreed that what we did was correct, and we will not be releasing the figures - only because we gave the word that we would not release the figures, not because the jobs were not created.
The Auditor General looked at this, and he did not indicate that the figures were incorrect. That's why that was done.
Mr. Hill: He questioned those figures.
Mr. MacAulay: He took a sample. He questioned them, but I don't think he questioned whether they were or were not created. He didn't say if it was incorrect or correct.
We hired a private firm to do it. The only thing ACOA wanted was to be sure that your and my dollars were being spent properly. We found out that they were. But we gave our word that if you had created 20 jobs, we wouldn't use you and the 20 jobs as promotion for ACOA.
Mr. Hill: I'll pursue this.
The Vice-Chairman (Mr. Valeri): Ms Skoke, please.
Ms Skoke (Central Nova): I have a few quick comments, and then I'd like to ask the honourable minister a question.
First, thank you for appearing here today. As you know, I'm the only Atlantic member, so I would like to go on the record as taking exception to the comments the Bloc member made about Atlantic Canada. I take considerable exception to that, and I want to go on the record as saying that historically Atlantic Canada has made a great contribution to this country. In fact, I think we were the first responsible government, first in ship-building, first in manufacturing glass, first in having a newspaper, first in manufacturing steel, and probably first in having a steam engine - I could probably go on forever - until the opening of the St. Lawrence Seaway. Now most of our good Atlantic Canadians are residing in Toronto and elsewhere in central Canada.
Having said that, I, for one, feel that taxpayers' dollars are well spent in the Atlantic region. It's very important that export and trade and innovation and developing the information highway and so on should be given opportunity in the Atlantic region. It's long overdue.
I take exception to the fact that the Industry Canada budget focuses primarily on central Canada - I'm making reference to the national budget - and that ACOA, as we can see consistently, has had its budget reduced in each and every year, including this year.
Therefore my concern, which is shared by many Atlantic Canadians, and my question to the minister is, what assurances can you give us that ACOA will be there in the long term and certainly in the short term, and what effect, if any, does this reduction in the budget have on ACOA's ability to operate?
I want to point out that Atlantic Canadians recognize that ACOA is not a bank. They recognize the important role it plays with respect to community economic development, entrepreneurship development, trade, tourism, and our adjustment activities, including base closures and TAGS, and certainly with respect to our small and medium-sized business.
I want to touch on one more point before the minister responds. It has to do with the issue that was raised by the Reform Party regarding our young entrepreneurs. I want to indicate that this is a very successful program in the Atlantic region. Just a few weeks ago I had an opportunity to attend an awards banquet for 560 high school youth in Atlantic Canada who take part in that program. I think you'd be quite impressed to find out just what they do and how they've opened their own businesses and what moneys they've made.
Mr. MacAulay: Thank you very much. I don't want to get into a political argument about which regions are prosperous and which ones are not either, but one can be tempted.
As the minister has indicated, and as I've indicated and the Prime Minister has indicated, regional development is very important to the country, and what ACOA is responsible for in Atlantic Canada is vital to the Atlantic region.
You referred to ACOA not being a bank. I said that because a Senate banking committee report was issued that didn't turn my crank very well, either. But in a way it probably gave us an opportunity to take a good look.
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I talk to many business people in Atlantic Canada, and the ones I run into, anyhow, are very supportive of ACOA and what it has done. I've indicated before that for each dollar spent, $1.90 is returned in taxes; for a dollar input, $4.20 is added to the GDP in the area, and business people know that.
It's sometimes difficult to get a good news story for ACOA, or anything else sometimes in government, but 92% or 94% of the projects that ACOA has been involved with have been successful. Of course with the banking committee's report coming out -
In one area I had a gentleman who suggested that probably what needed to happen was for the business development bank and farm credit and all these other development agencies to come under the umbrella of ACOA. This was one suggestion that I heard.
Then a big concern for many groups in the east and the west in this country is that decisions be made in the area that is responsible - that Western Diversification could take care of the west, ACOA the east, and FORD-Q in Quebec. This is just a suggestion I heard. It was indicated as a Main Street response to a Bay Street suggestion, and I don't think that's too out of place either.
It's obvious that the business community in Atlantic Canada very much needs and appreciates what ACOA has done; we have created the jobs and we have now changed our intent to medium- and small-sized businesses. A lot of the dollars will be returned - third-party returnable dollars.
I think ACOA has responded to the interest of Atlantic Canada, to the needs of the business community in Atlantic Canada, and that's what the Government of Canada wants to do, so to me it would only make sense that ACOA would remain. There is a reduction, but of course there has been a reduction in every department in this government, I believe, over the last number of years. Quite honestly, we can't spend dollars and continue to spend dollars we don't have.
The Vice-Chairman (Mr. Valeri): Thank you, Mr. Minister.
Mr. Murray, please.
Mr. Murray (Lanark - Carleton): Thank you, Mr. Chairman. Mr. Minister, it's good to have you with us.
I just have one question, and it relates to education. You've talked about the entrepreneurship program and education, but in the expenditure plan, which talks about certain factors that influence the economy of the Atlantic provinces, it says, and I quote:
- A less educated workforce, especially in rural areas, presents challenges to both the private and
public sectors.
You talk a lot about partnerships with the provinces and working closer with the provinces. Has this question of education itself been raised as a concern? The Atlantic provinces have more universities than probably anywhere else in Canada, but going back to elementary and high school even, is there something that's being done in cooperation with the provinces to encourage education itself and not just the entrepreneurship program?
Mr. MacAulay: In Atlantic Canada I think there have been 500 student start-ups in business already, and with the entrepreneurship that's at least a start in trying to change the attitude, as I was mentioning to Mr. Hill.
What we have to do in Atlantic Canada is change the attitude, and the entrepreneurship program in the schools will certainly bring it straight to the eye of the student that if you don't have this and you don't have that in the line of education, then these opportunities will not knock on your door. That's our responsibility in cooperation with the provincial governments in the area.
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Yes, we are trying, and we are working to improve the education system to ensure that people stay in school. There's the stay-in-school program.
Mr. Murray: Is that something you've heard from prospective employers? Have they said that perhaps a better-educated workforce would be of great help in trying to establish industry in the Atlantic provinces?
Mr. MacAulay: Of course it can be a problem in an area.... If you're taking in a computerized set-up and nobody knows how to run a computer, you have a major problem. In the rural areas in my province and, I would suspect, across Atlantic Canada, it is a problem. That can also affect attracting businesses, because we have pretty much everything to attract business. I think we're in very good shape as far as having educated people too. I would never want to leave the impression that we don't have the people who can do it.
The KPMG study we did indicated that all of the environment in Atlantic Canada - the climate and everything - was more favourable and that it was more financially feasible to start a business in Atlantic Canada than it was anywhere along the east coast.
You can't all work in fish plants. All of these things change. I know that. You know that. The education system has to know that.
I think we have 75 million people within 1,000 kilometres of Atlantic Canada. That is a massive market. New technology is coming on every day, and what we have to do.... It's my responsibility, the provincial government's responsibility and the education system's responsibility to provide the right atmosphere to be able to feed that potential export market that is there in so many areas. There are a lot of people who are not very far away.
Mr. Murray: Thanks, Minister.
The Vice-Chairman (Mr. Valeri): Thanks, Mr. Murray.
Ms Brown, please. Mr. Hill, you have some comments as well.
Ms Brown (Oakville - Milton): Thank you, Mr. Chairman. I have good news. It's not my birthday. If it were, I wouldn't admit it.
Some hon. members: Oh, oh!
Ms Brown: I want to give the minister a chance to talk a little bit about his province, because Atlantic Canada is made up of four provinces and I know he's from Prince Edward Island.
Just so that we can have a really clear picture of ACOA, I'm wondering if he knows how many ACOA dollars went into P.E.I. last year, for example. How many of the 353 staffers of ACOA work in P.E.I.? How much venture capital from the ACF Equity Atlantic Inc. was invested in P.E.I.?
Mr. MacAulay: It's broken down across Atlantic Canada in this way: 30%, 30%, 30% and 10%. Prince Edward Island receives 10% of the ACOA funding. That's how it's disbursed. As for the number of jobs, I, of course, from Prince Edward Island, could not be totally opposed to.... Though ACOA did change its direction to small and medium-sized businesses.... Value-added has done an awful lot in my province for job creation.
Not too many years ago, we were growing 40,000 to 50,000 acres of potatoes. It was sometimes difficult to market them. Now we're growing over 100,000 acres and we have no problem marketing them. That's because we have value-added to a great extent in that area. Without ACOA's involvement, that would not happen. You can argue that they would have done it somewhere else.I was in Africa once and I did see a McCain's plant there, but that does very little for the workers in Prince Edward Island or Atlantic Canada. The processing plants and the value-added plants on Prince Edward Island have done an awful lot for our economy.
Ms Brown: But you're saying that Prince Edward Island receives about 10% -
Mr. MacAulay: Ten percent of the funding, yes.
Ms Brown: - from ACOA, probably 10% of the venture capital and probably 10% of the staffers, about 35 staffers.
Mr. P. Leblanc: There are about 25.
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Mr. MacAulay: Venture capital, of course, is one of the big problem areas. In fact, we had none. That's an area that was identified by ACOA. Now we have, as I indicated, a fund that is just about to start. There is $30 million of venture capital. I know that's not very much, but it's a start.
Ms Brown: How much money goes into this education program we were talking about for young entrepreneurs? Do we pay the school boards? How much federal money is put into that program?
Mr. P. Leblanc: I would have to confirm to give you an exact figure. I would say the approximate range is $500,000, which matches investments by each of the provinces. One of the keys to that strategy is instead of writing entrepreneurship curriculum four times for each province, the role ACOA plays is to persuade the provinces to come together and write it once and then share it among the four provinces.
Ms Brown: Does ACOA have a deputy minister? I noticed when FORD-Q was here they were referring to the deputy minister.
Mr. MacAulay: Yes.
Ms Brown: What did ACOA do with the information they got from the KPMG study? Did they also put money into promotional packages to advertise that fact, or are they expecting the provinces to take the information and sell their own provincial economic opportunities?
Mr. MacAulay: There'd be absolutely no difficulty in getting the provinces to pick up on that. The provinces are always trying to attract industry.
Ms Brown: Not what would happen; what did happen.
Mr. MacAulay: When did the study come out?
Mr. P. Leblanc: The study was released approximately three weeks ago.
Mr. MacAulay: We didn't get much time...but I don't think that's going to be a major problem. It indicates that the conditions in Atlantic Canada are very favourable. Of course, that's only a start. What you have to do is get them to come after you indicate that the conditions are favourable.
Ms Brown: I have one more question, Mr. Chairman. It's about ACOA not being a bank.I couldn't understand why you were saying ACOA's not a bank because the investments are unsecured, interest free.
Mr. MacAulay: That's correct.
Ms Brown: Were you trying to say that the Senate was suggesting you were competing with the banks and therefore you were saying you weren't competing with the banks?
Mr. MacAulay: I'm saying that we're not competing with the banks. What ACOA does is as you have indicated. That is done through third-party, unsecured, interest-free loans. It creates an atmosphere where banks will enter the picture. It provides us with start-up capital for businesses in Atlantic Canada. There's no other government institution that you can go to to receive this type of funding.
Ms Brown: I understand that, but it seems to me the taxpayers of Canada should be pretty worried about it. It says by its selective involvement in the market it lowers the risk for commercial lenders. That means you take the people the banks won't take. They're loaned Canadian taxpayers money.
Mr. MacAulay: The fact is, of course, you realize it was not even returned previous to this. It was given as a grant. Then businesses indicated that it would be much better that it would be interest-free but repayable.
Previous to 1995, we gave grants to businesses in order to get the banks to become involved. Now, we put interest-free dollars in in order to have banks and lending institutions get involved.
Ms Brown: I find this unbelievable.
Mr. P. Leblanc: As the secretary mentioned earlier, the final consequence of this story is that you get a small business start-up where there otherwise would be none. The commercial bank would not be involved in that project. By ACOA being involved, the risk is lowered, the entrepreneur invests, there's a private sector investment -
Ms Brown: Why is the risk lowered?
Mr. P. Leblanc: It's lowered because ACOA has provided money on better terms to the entrepreneur. The key is, can you do it with a reasonable success rate? Will you pick the companies and work with them in such a way to get a reasonable rate of success?
I think, as Secretary MacAulay pointed out, that the rate of success in the projects - our evaluations indicate very clearly - is better than 90%.
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One has to go to the final step in that logic and ask what happens. The result is you get new business start-ups where there would be none and you get expansions where there would be none. You get the job creation benefits and the return to the taxpayers through the taxation system.
Ms Brown: But don't you think there would be a higher success rate in the start-up of new businesses across Canada if they didn't have to pay interest on the money they borrowed? Often it's the interest payments that kill them when they go into a bit of a downturn.
Mr. MacAulay: But of course these are regional development dollars that were allocated for Atlantic Canada, and the change was made by ACOA in response to the business community. We cannot provide interest-free dollars for every business that operates in the country. That would be impossible.
Ms Brown: How are we going to get these students to understand what entrepreneurship really is if they're nurturing their little businesses with ACOA dollars, which have no interest attached? How can we ever make them competitive in Canada, much less in the global marketplace, if they're being fed money in a way that nobody else is, that is, interest-free?
I'm talking about the long run. I'm not demeaning what Roseanne was talking about - 550 students, etc. - but if they're starting their little businesses with interest-free loans, once again, it's like a dream world.
Mr. MacAulay: But the banks are also involved, and they have to return those dollars, plus they must return the dollars that ACOA gives them interest-free. The dollars must be returned; the bank's will be returned with interest, ACOA's without. Without those dollars, you would likely have nothing.
Ms Brown: Well, it's an improvement over just giving them the money non-repayable, but when do you predict we'll be moving to ACOA dollars that have interest attached, even if it's slightly lower than the bank's?
Mr. MacAulay: At the moment I don't believe I could answer that, because we just changed our emphasis in 1995, so I don't know. At this time we're not planning to charge interest. They're interest-free loans.
The biggest problem we have in Atlantic Canada is access to venture capital, and with the interest-free loans, we can attract the banks to get involved with a new business. Without them, we would not.
The figure of 82,000 jobs has done a lot for Atlantic Canada and for Canada.
Ms Brown: Thank you, Mr. Chairman.
The Vice-Chairman (Mr. Valeri): Thank you, Ms Brown.
We'll have the final comments from Mr. Hill.
Mr. Hill: Can I have as many questions as Ms Brown had?
The Vice-Chairman (Mr. Valeri): I was referring to the fact that whether you have comments or questions, you are the last person on my list.
Mr. Hill: Oh, I see. Thank you, Mr. Chairman.
Getting back to the issue of how many jobs have been created, I think the concern, Mr. Minister, is with the methodology of how the numbers were created. Unless you can prove the methodology used.... This was the concern, as I understand it, of the Auditor General. He had some concerns about the methodology.
You can pick a number out of a hat or you can go and ask companies that have expanded, and they can say they created twenty new jobs - to use your number from some fictitious company - and that all of those were attributable to ACOA funding. Unless we understand the methodology used, we have no way of knowing how many would have been created by that very same company if they hadn't received the funding.
Mr. MacAulay: Thank you very much, Mr. Hill, but you're incorrect. The Auditor General indicated that the method we used was good. He also indicated that we went farther than anybody else in trying to establish what effect we had. That's what the Auditor General said.
Mr. Hill: So he had no problem with the figure of 42,000 jobs between 1988 and 1992?
Mr. MacAulay: He did not dispute the 42,000 jobs, no.
Mr. Hill: Okay.
You said earlier in your comments that small business start-up rates - and I forget the number you used - have been on the increase from a year ago or something like that.
Mr. MacAulay: Yes.
Mr. Hill: Isn't the more important number not how many small businesses started up but how many are still successful a year later?
Mr. MacAulay: You're absolutely correct, and that's why the 92% to 94% success rate is a very important figure in ACOA's statistics. Of the businesses aided by ACOA, 92% to 94% are successful.
Mr. Hill: Is that overall, over the total years DEVCO has been in business?
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Mr. MacAulay: Since its conception, yes.
Of course, what is highlighted by media and even possibly by some opposition members are the failures. One failure and 200 successes can indicate.... I know that's not your intention.
The one problem ACOA has is that it's been successful but it hasn't received all that much positive media. There's been a fair bit in the last while, but not a lot. I think for a development agency to have a 92% to 94% success rate is fabulous. I think to have $1.80 for every $1 invested returned to the taxpayer is a good investment, and it's a good move when for every $1 it invests it adds $4.20 to the GDP.
In all, I'm sure what you and everybody else wants to do is to help the economy of Atlantic Canada. In fact, that's what ACOA is doing and will be doing. I'm not saying we don't need change.
Mr. Hill: How do you base the numbers, the 92% to 94% success numbers? Are they based on the companies still in operation, the companies that actually got a net profit, the companies actually employing someone? What is that figure based on?
Mr. MacAulay: Of course without the net profit the company wouldn't be in operation very long, but I'd have to ask Paul.
Mr. P. Leblanc: Mr. Chairman, the calculation is based on the companies successfully functioning in realizing the objectives of the project we had supported. That figure was reported to Parliament in the five-year report that covered 1987-1992.
That was the report wherein, I might add, was outlined in great detail and precision the methodology that was used to do the job calculations and the other economic impacts that had never before been reported for regional development. In that five-year report to Parliament, those methods were described for parliamentarians in detail. As ACOA's legislation requires, we will report again on the next five years, which I guess will be in 1997-98.
Mr. Hill: I just have one final question. You referred earlier to the Senate banking committee and the recommendations it made to eliminate the regional development agencies. I believe the term you used was that you're taking a good look at the recommendations. What do you expect to come from that report and how seriously are you taking the recommendations?
Mr. MacAulay: I don't want to mislead anybody at all. I read the report and the press releases, and the only thing the Senate banking committee did was probably wake up some of the business community and even myself and everybody else around. It said, ``Look, perhaps one of the best development agencies ever could be in jeopardy if we don't really realize exactly what we're doing''.
This is why business leaders in Atlantic Canada indicated to me that probably some of the crown corporations across the country, like Farm Credit Canada and others, should be under the umbrella of ACOA. Business people in Atlantic Canada want decisions made for Atlantic Canada in Atlantic Canada by people who understand, and that's what's done with ACOA.
The Senate banking committee brought a lot of information out of the business community in support of ACOA. They indicated, and I'm sure you'll agree, that they like decisions for western Canada to be made in western Canada as much as can be. Under the umbrella of industry, it's also under central jurisdiction, but the decisions are made in Atlantic Canada.
That is what the business community wants. That is what the premiers of the four Atlantic provinces have indicated to the government. They strongly support ACOA. They're fully aware of the major effect it has on the economy of Atlantic Canada, and if we were to lose that it would be devastating to the Atlantic region.
All that was indicated to me was that possibly the Senate report has some people thinking about not doing less, but putting more under ACOA so that you and I have our decisions made in our own regions but are still under the umbrella of Industry, which makes pretty good sense.
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The Vice-Chairman (Mr. Valeri): Thank you, Mr. Hill.
Thank you, Minister. Thank you for coming before the committee and providing us with some insight into ACOA.
Mr. MacAulay: Thank you very much. Mr. Hill or anybody else who wishes any information, I'd be pleased to hear from you any time.
The Vice-Chairman (Mr. Valeri): Thank you.
Before adjourning, I have asked the clerk to contact the Secretary of State responsible for FORD-Q and request his office to provide written responses to a number of the detailed questions asked by members of this committee who may have required a compilation of the data. I just state that for the record. That information will be forthcoming to the committee.
The committee is adjourned until 9:30 a.m. Thursday, May 16, 1996, when we shall have the Social Sciences and Humanities Council before us.