AAND Committee Meeting

STANDING COMMITTEE ON ABORIGINAL AFFAIRS AND NORTHERN DEVELOPMENT

COMITÉ PERMANENT DES AFFAIRES AUTOCHTONES ET DU DÉVELOPPEMENT DU GRAND NORD

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 24, 1998

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[Translation]

The Chairman (Mr. Guy St-Julien (Abitibi, Lib.)): Good morning. I would like to call this meeting to order even though we don't have a quorum; we won't be able to make any decisions until we do. I know that Members of all parties have a lot of work and that today is going to be a busy day.

Pursuant to Standing Order 108(2), we are commencing a study of Aboriginal economic development.

Our witnesses from Industry Canada are Mr. Bob Dickson, Executive Director, Aboriginal Business Canada; Mr. Rick Fontaine, Director General, Operations; and Mr. Michael Jenkin, Director General, Strategic Planning and Corporate Services.

We will conclude this meeting with an in camera session. We will discuss that a little later, when we have a quorum.

I would now invite Mr. Jenkin and Mr. Dickson to make their opening statement.

[English]

Mr. Bob Dickson (Executive Director, Aboriginal Business Canada, Department of Industry): No, we don't, but we have a presentation we would like to go through with you, Mr. Chairman.

[Translation]

The Chairman: Thank you.

[English]

Mr. Bob Dickson: Thank you very much for inviting us to this committee meeting. We'd like to go through a deck presentation with you on Aboriginal Business Canada specifically, and talk about some of the other things Industry Canada is doing with respect to the aboriginal business community.

This is not a long presentation. We'll go through it quite quickly.

We're glad to be here for a number of reasons. We're quite proud of the success the aboriginal business community has achieved over the last number of years. There is, we would like to say, a real change in the approach to business development. I think we've got it right.

There's a real interesting story to tell you on the success. We think there's a real renaissance in the aboriginal business community. Remember, we're not dealing with all of the aboriginal community but with just a slice of the community. It's the business part of that community we're dealing with.

First of all, I'd like to go through with you a bit of the environment. There's just a page on this. I think you probably know most of this material, but let me touch on that a bit.

I'll tell you a bit about us. I'm the executive director of Aboriginal Business Canada. I have a couple of my colleagues here who will share this presentation. We'll take a broader look at what the Industry portfolio does and then make some conclusions.

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I should say, Mr. Chairman, it's interesting, because about a year ago you were part of opening a sawmill in Waswanipi. That was a project of ours that eventually went on to win an award for model forest practices in Quebec. You and the premier of the province were at that opening. It was quite an exciting day. The business has created a lot of jobs and great reforestation practices in that mill.

I think you know this stuff. Let me go through it very quickly.

There are about one million aboriginal people in Canada. The interesting point here is the demographics on this, and the bulge we're having in young people. As a matter of fact, 68% of them are under 30 years of age, which is a very serious issue for us. We have a special initiative around young people under the age of 30 to try to direct a lot more of our effort and our resources to that young population.

There are some encouraging signs. One of the real problems, of course, of that young population is that they don't see business development as an option. We have a chart that looks at young people of the population at large. It shows quite a substantial interest in business development and going into business, but when you look at that same aboriginal population, there isn't a large number that look at business as an option. The role models aren't there and so on. So that's a very interesting number for us and one at which we're directing a lot of effort.

The source for this material is a 1997 survey done by Statistics Canada.

As I said earlier, we work with the business segment of the aboriginal community. We estimate there are about 20,000 businesses out there, ranging from part-time business to mom-and-pop operations to larger operations.

A small percentage of the community, 4.8%, are entrepreneurs, compared with the Canadian average, which is just about double that. As well, 71% are owned by males, 29% by females. However, the success of aboriginal women in business is quite interesting, and quite good. There's a mixed view around whether education has a large role to play in that.

As you can see, 70% of the businesses we've just identified are year-round, with a smaller number on the seasonal side. They are small businesses we are dealing with, with five or six as the average number of employees. They mostly are profitable. Now, there's an interesting number. We say “most” of them are profitable, and that's quite right, but some of the work we've done shows that profit isn't the only objective in aboriginal business. The employment is a large factor. They're going into business to create employment as much as it is to make money. So any money that's made is really rolled over in the community to create jobs.

I want to share with you some of the challenges the aboriginal community faces. The key challenges are ones that you know of that all businesses face. Access to investment capital is a real challenge for the small business community at large. The right skills are needed. As well, trade and technology in any business is important. However, when we look at the aboriginal business community, they face those challenges plus others. Let's have a look at what those might be.

A lot of them lack personal and community capital for investment. The disposable income of aboriginal people in the community is limited, very limited. So when you're looking at trying to access debt capital, you need some equity out of your pocket. The amount of equity you can put together to lever the debt is limited, very limited. That's a real issue, the amount of private equity that's available to aboriginal individuals.

There are legal restrictions you know about, section 89, which makes on-reserve situations very difficult for lenders around the collateral issue. There's a real reluctance by financial institutions to lend to the aboriginal community. Those deal with track record and isolation from financial services. As well, there's a lack of understanding by the financial community of the aboriginal community. They're not sure how to deal with that community. They're not sure what the expectations are.

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As you know, the environment also includes this growing population in the urban centres. It's really magnified in the west, although it's not exclusive to the west. In northern Ontario, other parts of Ontario, and some parts of the east, large numbers of aboriginal people are moving into the urban centres. That includes large numbers of the young people as well, generally not with the education requirements we'd like them to have and not with the skills we'd like them to have. There's a growing problem there.

It's interesting when you look at some of the demographics in northern Ontario, for example—which is not unlike what you're having in the west. At one time, northern Ontario represented about 11% or 12% of the provincial population. That figure is now down to less than 10% of the provincial population, but of the 8% or 9% now represented as a percentage of the provincial population, the aboriginal part is going like that. I think that's worth noting.

There is a lack of infrastructures and networks in the aboriginal business community. We don't have the chamber of commerce networking that's necessary, nor do we have the infrastructure in many cases in terms of the opportunity to locate a business. And housing is a big problem, as you know.

So where do you locate a business? What kind of infrastructure do you have there? Again, those are real challenges.

What do we do? We work very hard at a competitive and sustainable aboriginal economy that's both domestic and international. We take a very businesslike approach to what we do. We absolutely require a business plan. There's no question about it. It must be in place. We turn away about seven of every ten cases that come to us because we are looking at results, we're looking at a return on investment. You must make some money on this business deal, or why go into business? And you must have that equity in place. We will not look at investing in a business unless there is equity there, and substantial equity. On average, we're getting about 21% or 22% of the equity from the applicant who goes into the business.

Secondly, we also put a great deal of resources into the after-care. We require the business planning up front, and we'll do the capitalization if that looks okay. We then also require that you have some business support afterwards. We put a lot of resources into that, but rightly so.

I think there are two reasons why we have success. One is the business plan and the other is this sort of shadow management, the care afterwards.

It's an economy that's based on aboriginal values and it's led and managed by aboriginal entrepreneurs. They serve as role models, and they are very important contributors to the economy. We'll talk a little bit more about that in a minute.

[Translation]

Mr. Rick Fontaine (Director General, Operations, Industry Canada): Good morning. Ours is a national program and, as such, we have set up offices in almost every region of the country, specifically the Atlantic region, Quebec, Ontario, Saskatchewan, Alberta, Manitoba and the West. The Northwest Territories and Yukon are served out of our offices located nearby. Thus our Quebec, Alberta and British Columbia offices look after various parts of Yukon, the Northwest Territories and Labrador.

Our national advisory committee, the National Aboriginal Economic Development Board, provides policy direction for the program and acts as a representative of our business clients. It currently has 17 members, most of whom are private entrepreneurs and members of Aboriginal groups wanting to defend the interests of their people.

We provide programs and services to all Aboriginal heritage groups, in other words to status and non-status Indians, Metis and Inuit. The actual location of projects is of no importance; we can just as easily get involved in projects on the reserve as off. Our programs and services provide financial and non-financial assistance.

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Also, we invest in a variety of projects in the form of non- repayable and repayable contributions, as well as in specific areas through loan insurance. Our business services take the form of advice and referrals. We are involved in marketing and awareness initiatives, as well as advocacy in specific sectors of the economy. We also hold conferences and workshops.

We participate in some kinds of research and take a lead role in others, with a view to improving the Aboriginal business climate. We also develop policies. As I said, our program operates nationally, and we are able to deliver it through the efforts of 65 full-time employees. Given the vast area that we serve and the fact that our client base is dispersed, our programs come under a lot of pressure.

[English]

Mr. Bob Dickson: We have focused our business. We aren't trying to be everything to everybody. We've really focused on work on some key, strategic areas that we think are important to the aboriginal community.

We have focused for a number of reasons: first, because of limited resources, but as well and as importantly, we want to be sure we get some results. If we focus and can do some things really well, we've made some real progress, and these are the areas we have focused on.

As to some of the work we've done internally, looking at the aboriginal economy and where the Canadian economy as a whole is going, there is a real gap developing that is of concern. The aboriginal economy is really the old economy, and you can see it sitting there. Yet the Canadian economy at large is growing in the new economy and taking a much different direction. That gap is widening and growing at a real rate.

We are trying to address that gap and bring the aboriginal community into line with where the general economy is going, and in fact where the world economy is going. In some cases, we can leapfrog some of the things that are taking place. So trade and market expansion is a very important part of what we do.

As a matter of fact, we have a brochure on trade development that looks at all the companies that trade now. We'll circulate that for you. It looks at about 100 companies that are now trading or ready to trade. Those range from the companies that have traded once or the arctic co-ops or Meadow Lake Tribal Council that trade on a regular basis. That's a very important part, and it's growing and it's quite interesting.

I could give you a number of examples on the trade side. We've broken it down into indigenous to indigenous, where we think there is a great deal of opportunity. We have some work that's going on in Nicaragua right now, Panama, and other parts of Central America. We're looking at a business in Chile, and so on. So there's great potential, and it's indigenous to indigenous.

Let me tell you a story about the Panamanian experience. We were there not too long ago, and we were meeting with our Canadian ambassador on the challenges the Canadian mining industry was having in Panama because of the challenges coming from the aboriginal community. They were asking the Canadian aboriginal folks: Can you help us? Can you help the Canadian industry? Yes, they can.

Secondly, there's a Canadian firm that has a contract in Panama now to do some clearing of mine sites, landmines, and so on, which you may have seen in the press recently. But that's an example of what we mean by indigenous to indigenous.

There are products like the company in Sault Ste. Marie that has an order book of about $5 million and exports diesel engine heaters and that sort of thing to Detroit Diesel in the United States. It's because they have a good product.

The other sector we're focusing on is north of 60, as we think there are some unique things there.

There's tremendous potential in tourism. I don't think I have to sell you on that one. It's a tremendous opportunity. It's currently about a $270-million industry in the aboriginal community. We think it has the potential to be $1 billion in a few short years.

Ecotourism is the fastest growing sector of the tourism industry in the world. What else can I say? There's a great opportunity in the aboriginal community. It's a $42-billion industry in Canada. The aboriginal component is not a large part of that, but there's tremendous opportunity there.

Our investments aren't looking at fixing up docks or looking at cabins, that sort of thing. We're looking at standards and developing the standards of these current facilities. We're looking at culturalizing them so that you have a cultural experience when you go to them. We're looking at ecotourism. That's where we're focused on the tourism side.

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With respect to innovation, we've talked about that gap. We're trying to bridge that gap. There's a lot of interesting work that's taking place around innovative firms in aboriginal communities.

I spoke about youth entrepreneurship earlier. We were putting a lot of attention into trying to develop the whole economic experience, seeing that as an option for the young aboriginal community. We've been working very closely in some very interesting things with the aboriginal youth council that's been established.

We had a meeting in Ottawa this weekend with a large number of aboriginal youths from across the country. It was interesting. They are saying we must be much more innovative in what we're doing, that we must be in the new economy. They're not looking for a gravel truck. They're not looking for a gas station. They want to be part of the new economy. It was so encouraging to hear that kind of thing.

With regard to strengthening the aboriginal businesses and financial institutions, let me just say a couple of things. We have developed about 33 small lending companies across the country. They're called “aboriginal capital corporations”. We've put a great amount of resources into this. This initiative is meant to deal with the access-to-capital issue and the challenges we talked about earlier around section 89 and the financial institutions' lack of knowledge about the business community. We've created a number of these institutions across the country to assist with that.

Community Futures is another part of that. We've had a mixed review on those capital corporations, although they're better than they used to be.

I'll just divert for a minute and show you an overhead of what they look like. These are lending companies. They don't take deposits; all they do is lend. Generally their ceiling is $250,000. The average loan is about $35,000 to $40,000. We have a range of experience. Some of them are doing really well.

You'll see that in 1993 we had a look at all of them to categorize them and we classified them in terms of their performance, how well their loans are doing, how well their receivables are doing, the management side, and what sort of cash reserves they have on hand. You can see that there is a growing trend to increase their profitability, their performance, and so on. We still do have some problems. It's not all rosy, I'll tell you. There are some management issues there as well.

So we're working with the entrepreneur to provide management skills and business support. As important as those individual businesses and the access-to-capital issue are, there is the information and where you go to get information. How do you access what you need as a business person? We're bridging that link. How do you get access to other resources, provincial resources, or whatever they might be? We're bridging that too.

As for institutional building, as I said, the capital corporations are doing quite well. We're quite happy with how that's going. They are doing far more loans than any bank is doing today. It's good to see, because they're aboriginal-owned financial institutions, locally owned, and they're doing quite well.

We're also developing some entities. For example, the tourism entity just had its launch yesterday. While we do make investments in the tourism entity, in tourism businesses, we think, along with our colleagues, that creating a body like an aboriginal tourism entity will help that whole sector. There are challenges in developing the standards and the whole tourism area. We think there's a lot of potential in doing that.

We're doing the same sort of thing on the trade side. We're developing an entity that will help the aboriginal businesses understand what the tariff requirements and tax requirements are, what you must do to export, what your product must look like, and all those sorts of things.

As we said, we work closely with the aboriginal private sector and with other business development organizations and financial organizations to make sure that help is out there. We can't do this alone, nor do we want to. We need to do this in partnership with others.

I mentioned the capital corporations. There are 33 of them, aboriginally owned, and there are other organizations. There's CASEA, the Canadian Aboriginal Science and Engineering Association. We really want to strengthen that body and make sure it provides some leadership and role models around what the opportunities and options are for aboriginal people. There are also the forestry association and the youth council that I referred to a minute ago.

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We are quite proud of the success we've achieved. I think we have the elements and pieces in place to make this work, and I think we are making it work. We've had a lot of discipline around how we look at cases and what we're looking for—due diligence as required. We don't respond sometimes as quickly as some people would like us to, but the due diligence is absolutely important.

We have invested about $386 million in the aboriginal community. That's government money we have put into the aboriginal business community. When we add up what has gone into the community, it's about $1.1 billion. Where has that come from? The $386 million has come from us and the balance of $700 million has come from financial institutions and equity from their pockets. That's not bad leverage.

There are a little over 9,000 projects, and 65% of our resources are going to the rural and remote areas of the country. That's not surprising. That's where a lot of the client base is. We are trying to address this service in the remote rural areas.

A couple of years ago we had an independent firm take a look at our investments. It based its results on the audited financial statements of the companies—not hearsay and guestimates. We did this survey and what came back was very interesting. In terms of the $386 million we put out, what's our investment like? In terms of return on taxes and people coming off social assistance, it's about $1.20 from the treasury.

It's interesting that when we did that study we had a fair amount of criticism over it around the methodology. Some said our friends did the report and that kind of stuff—we couldn't have that kind of success. Well, we did it again and asked the Auditor General and the Department of Finance to help us with the methodology and sit through the whole process. The results were the same.

We're quite happy with those kinds of results. It's really tied to the due diligence, the focusing, and the real effort around quality business cases. We're not investing in something that will be a failure. Nobody wants that. If you're putting your money into a business, you want it to be successful, and that's where our attention is.

Mr. Michael Jenkin (Director General, Strategic Planning and Corporate Services, Department of Industry): I want to speak for a minute or two about the connections between the program and other parts of the industry portfolio. As you may be aware, the portfolio consists of about 15 or so other government departments and agencies, including the regional development agencies, the National Research Council, etc.

We've been very active in the last few years in trying to draw the linkages and potential benefits from the synergies of these organizations in terms of our efforts in aboriginal business development.

As you can see, we have quite a wide range of capacities and services we can access. A lot of them are related to our new strategic priorities where we're trying to re-orient businesses toward the new economy, the knowledge-based economy, and so forth. For example, there's IRAP, the National Research Council's Industrial Research Assistance Program; our patent office; the regional agencies themselves that are very substantially involved in small business assistance and development; and the BDC and so forth, which now has, as you may know, a new aboriginal lending program.

We've also focused our work on specific areas, particularly the information provision area. As you may know, the industry department has what is now listed as the largest business information web site in Canada. A lot of the technology we've managed to partner with there has expanded our capacity to deliver information services in new ways to clients out there.

You'll notice in the brochure we're providing—we have a little business card there—not only access to strategists but also our own Spirit of Aboriginal Enterprise web site, which provides a wealth of specialized information targeted specifically at the aboriginal entrepreneur.

We have quite an interesting opportunity here to expand into new areas. Many of these information sources are not only very relevant for the new economy and entrepreneurs who want to get involved in those areas, but they provide new and innovative ways of actually delivering services that are relatively inexpensive and have a high degree of attraction to new users, particularly the young. Again, that's another major target audience for us.

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An example of one area where we're spending some particular degree of attention, again because we're focusing on young and remote communities, is the SchoolNet program. We now have over 360 first nations schools hooked up to SchoolNet as part of the Industry Canada program. We've been very active in that in Aboriginal Business Canada.

We also have a 112 CAP sites that again allow aboriginal communities to gain access to the Internet and to electronic information sources, particularly in areas of the country where these services are not normally available because of limitations on technology and so forth. This is a very key, very important part in engaging these communities in the leading edge of the economy.

That's a little bit on the portfolio itself. Just to conclude overall on the presentation, we think we've made some considerable progress in what's admittedly a very difficult area of economic development with a community that is facing very significant blockages to their own development. As you can see from the statistics that Bob cited, we think it's a very attractive record, and it's one that we feel we can build on.

Particularly in the new economy, we've been particularly key in terms of looking at the need to integrate our efforts with a number of partners out there. With the priorities that we've identified before—the ones Bob mentioned—we feel we're well positioned to effectively deal with a number of the challenges in the future, as well as with our conventional business counselling and assistance activities.

That's basically the presentation, Mr. Chairman, and we'd be pleased to answer questions.

[Translation]

The Chairman: Thank you very much, gentlemen. That was a very interesting presentation.

Before we begin the question period, I would like to ask Mr. Dickson whether there are many joint ventures with non-natives in Canada.

[English]

Mr. Bob Dickson: It's a good number. It's not as many as we'd like to have, but it's certainly a growing part of it, particularly in the resource-based industries. As you know, there are a number of them in the province of Quebec. There are a number of them out west, whether it be in Burns Lake, British Columbia, or in the Saskatchewan experiences.

In the joint ventures, I think there's a real opportunity for skills development or technology know-how to be brought to a project. So we have a good number of those, but we would in fact like to see more.

[Translation]

The Chairman: Could you tell Committee Members whether in the case of partnerships or joint ventures, it's always a 51-49% split, the Aboriginal community generally having the larger share?

[English]

Mr. Bob Dickson: It really varies, but it is quite often in that range of 49% or 50%. Our resources would go only to the percentage owned by the aboriginal community, not to that owned by the non-aboriginal community, and it's generally a ratio of 49:51 that we would look at. If it's 51%-owned by the aboriginal community, we would look at participating in that 51% share.

[Translation]

The Chairman: Thank you very much. Mr. Scott, followed by Mr. Bachand.

Mr. Scott.

[English]

Mr. Mike Scott (Skeena, Ref.): Thank you, Mr. Chairman.

Thank you very much for the presentation. Because I think I have a limited amount of time to ask questions, I would ask you to bear with me and to present answers as briefly as possible so that I can get all my questions in.

The first question I have deals with the aboriginal capital corporations you talked about. As I understood the presentation, there was $386 million put into them as seed money. Is that correct?

Mr. Bob Dickson: That's not correct. That figure of $386 million is what has gone into the aboriginal business community at large. For the capitalization in the ACCs, we capitalize and set them up, but it's a different number, which we didn't have on our overheads. In the last ten years, we've put about $200 million into that, but we do not capitalize any further.

Mr. Mike Scott: That was my question: What is the capitalization of these ACCs? It's about $200 million?

Mr. Bob Dickson: Yes, in the past ten years, but we ceased financing them about two years ago.

Mr. Mike Scott: So they're now self-financing.

Mr. Bob Dickson: They have a revolving fund through the loan repayments, and that's how they're managing them. However, there is an issue here around the fact that if they want to expand and grow, they need further capital. The issue we're discussing with them right now is how they can access some capital at the right price.

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Mr. Mike Scott: But what I'm trying to determine is whether that capital base is expanding, remaining the same, or decreasing. Can you give us an answer on that?

Mr. Bob Dickson: I can't give you exact numbers, but certainly it's increasing. The ACCs, the capital corporations, are developing or delivering more than they were when we started out with them, so they have some capital from other sources than ourselves and the portfolio has increased significantly. For example, one in the Atlantic has over 300 loans on its books. It's a very successful capital corporation. It turns over its money on a regular basis. If you look at the value of their loans plus their capital, it has increased substantially.

Mr. Mike Scott: Was the funding for the Aboriginal Capital Corporation part of what I think was about a $1-billion commitment by the federal government beginning in the early 1990s designed to reduce unemployment and dependency on reserves? Is that part of that $1 billion expenditure?

Mr. Bob Dickson: The ACCs had their origin in what was called the native economic development program, which was pre-1989. That was managed out of Winnipeg. The ACC started that at that time and continued through I believe what you're referring to as the CAEDS strategy. That was announced in June 1989 and it has continued to develop good resources through that effort.

Mr. Mike Scott: That leads me into my next question. I'm not disputing the fact that you may have had some success in some of the areas you're talking about, but the Auditor General was very clear in his assessment of attempts by the federal government over the last ten years to reduce economic dependency on the federal government by pointing out that, despite the massive cash infusions, the dependency on reserve continues to increase year over year, that unemployment continues to increase year over year, and that there's no measurable impact on those statistics, either before or after this infusion of cash.

I wonder how you reconcile what the Auditor General has said in his findings.... You mentioned you had a firm reviewing your work. What was the name of that firm, please?

Mr. Bob Dickson: The name of the firm is Goss Gilroy.

I believe what you're referring to in the AG's report is not the resources we have. I think it primarily referred to the DIAND resources, which have far more significance on the economic side than we have. Our total annual budget is $30 million. That's it. That's what we use for business development across the country. We have 65 staff.

Mr. Mike Scott: You talk about legal restrictions to collateral, and in that I agree. I think we should just call it what it is. Would you not agree that what you're saying is there are no property rights on reserve?

Mr. Bob Dickson: I'm not going to get into definitions. You know what the problem is around section 89. It's the pledging of assets that's the problem.

Mr. Mike Scott: But if you don't own property, you can't pledge it; you can't put it up as collateral. Is that right?

Mr. Bob Dickson: That's right.

Mr. Mike Scott: Has there been any discussion or any consideration on the part of your organization as to how a property right might be able to be created within the existing parameters of the Indian Act and so on?

Mr. Bob Dickson: As a matter of fact, we're having ongoing discussions with the Indian affairs department on that matter. It has the lead responsibility on the Indian Act, as you know. But there are also some innovative things taking place. Some banks are now starting to finance on-reserve on some infrastructure; for example, schools. In addition to that, the caisses populaires in Quebec are doing some very interesting work around business development and housing needs, using a bit of a collective to share in the responsibility of loans. It's built on the Calmeadow model, where the lenders share the onus of responsibility for paying back a loan among a group. They have taken that to a larger extent on housing and so on.

So, yes, there is some interesting work around that, but again, in large part it's a lack of understanding of some of the community and what they can do there, the reluctance of the banks to really lend because of that restriction.

Mr. Mike Scott: But right now you have no ongoing plan to attempt to advise the Department of Indian Affairs and Northern Development on how a private property right could be created on a reserve.

Mr. Bob Dickson: We have ongoing discussions with them on that issue, yes. As a matter of fact, we have a round table with the bankers to jointly look at that whole issue. They are quite keen to join us and to have a further look at it.

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But it's ongoing. We're looking for examples of how it might work and how we can get around it.

Mr. Mike Scott: Okay.

Just a few more questions, Mr. Chairman.

[Translation]

The Chairman: Yes, Mr. Scott.

[English]

Mr. Mike Scott: In your presentation you talked about some of the aboriginal businesses being created to create employment, and that being one of their primary reasons for existence. I am concerned when I hear that, because as a former business person, I understand there may be many reasons why people get into business, but first and foremost you have to—you have to—be concerned with profitability. If you're not profitable, you're not going to exist for any length of time, and not as a viable, sustaining business.

I appreciate the work you are doing in trying to encourage aboriginal people in getting into small businesses or getting into business, but I'm concerned that you don't have that as the primary focus of any business, because it has to be. The whole business plan is centred around profitability, I would suggest to you, not employment and not any other values. That's the prime value.

Mr. Bob Dickson: I agree with you, and that is our primary focus. If you're not going to be profitable and you can't demonstrate you can make money, why would you go into business? Why would you want to fail at what you are doing and why would you want to lose your money?

The absolute bottom line is that you must make money. You must make more money than you would by putting it in the bank. That is the primary focus, no question about it.

What I am saying is that for a business, while it's profitable, one of its objectives in the aboriginal community will be to create employment and maybe not so much on expansion and growing and being the biggest employer in the community. It is serving the community as well as making money.

Mr. Mike Scott: One last question. You talked about infrastructure briefly, but it's one of the questions that has always intrigued me. It seems to me there are many reserves I have visited where infrastructure is badly lacking.

Have you identified two or three major or significant infrastructure-type projects that could be looked at for reserve communities that would really enhance their opportunity for small businesses and so on?

Mr. Bob Dickson: We haven't looked at that in a systematic and detailed way, but I can tell you that it is not only physical infrastructure, which is an obvious one, around services, whether it be water, sewer, strip malls or that type of thing; it's also technology, around telephone lines and the ability to be able to have access to that type of thing.

In fact, I think that's the greater challenge than the other physical ones. While that's there, and it's very important, to the business community, informatics and technology is critical to growth in the long term. As we move into character-based lending as opposed to assets-based lending, which gets back to your earlier point, that really becomes important.

Mr. Mike Scott: Well, infrastructure can mean many things. It can mean roads and sewers and bridges or it can mean fibre optics or it can mean switching stations and so on. That's why I am asking you if you have looked at that.

Has there been any kind of study undertaken in Canada to look at where reserve communities may be falling short of the mark in terms of infrastructure? Are there two or three areas you have identified that seem to pattern as being short, or not up to par with other communities, where an investment in infrastructure would help?

Mr. Bob Dickson: We haven't done it across the country but in parts of the country. For example, there's the innovation centre in Waterloo. We have done a major study on the infrastructure telecommunications needs in northern Ontario.

So we've done that type of thing—spotty, but not an overall overview of those infrastructure requirements and what are the most critical to business development.

[Translation]

The Chairman: Thank you, Mr. Scott.

Mr. Bachand.

Mr. Claude Bachand (Saint-Jean, BQ): Thank you for your presentation. I did retain some of the information contained in the documents you sent us. I believe they stated that the Department of Industry's budget for Aboriginal business programs and initiatives is $30 million a year. Is that correct?

[English]

Mr. Bob Dickson: That's correct.

[Translation]

Mr. Claude Bachand: And what is the Department's total budget?

• 1155

[English]

Mr. Michael Jenkin: It's approximately $500 million or $600 million in operating terms.

[Translation]

Mr. Claude Bachand: $500 or $600 million for the Department?

[English]

Mr. Michael Jenkin: I'll have to get you the exact numbers, to be frank. I don't have them immediately at my disposal.

[Translation]

Mr. Claude Bachand: You referred to a budget of some $30 million and a workforce of 65 employees that report to the Department and administer the program as a whole. Is that correct?

[English]

Mr. Bob Dickson: I'm sorry; I didn't get the last part of that.

[Translation]

Mr. Claude Bachand: I believe I heard you say that 65 departmental employees provide services to Aboriginal businesses.

[English]

Mr. Bob Dickson: That's correct. We have in the business development area, that's right, 65 in our sector who do the work we just outlined.

[Translation]

Mr. Claude Bachand: Are any of those 65 employees Aboriginal?

[English]

Mr. Bob Dickson: Yes, there are. As a matter of fact, about 30% of our employees are aboriginal, and the two people who run the program, Ricky and I, are both Indian.

[Translation]

Mr. Claude Bachand: That's great.

As you mentioned earlier, you hold round tables with officials from Indian Affairs, given that your two departments both have budgets for Aboriginal economic development. As far as I know, Indian Affairs's economic development budget is about $50 or $60 million. I imagine that when you do get together for these round tables, you talk about what each is doing to ensure that the two departments are not providing the same services and that there isn't duplication or overlap occurring. I imagine that is one of the things you discuss at these round tables.

[English]

Mr. Bob Dickson: It certainly is. In fact this whole issue of service delivery and how we do service delivery is going to be one of our greatest challenges. I don't see any new resources coming. There are plenty of resources, but what's needed is your exact point: we have to be sure to be coordinating, cooperating, and being partners in how we do this.

If we look at the resources Indian Affairs or other departments have and what our own has, we could do a considerable amount of work. The challenge, as you just said, is this coordination and cooperation. We've begun some very serious discussion about how we'd do that. How do we make it better for the aboriginal business person? How can we enhance what they do? Not how can we enhance what we do, but how can we make our services much more effective to the aboriginal business person?

[Translation]

Mr. Claude Bachand: Someone raised a very good point earlier about access to capital. It's always difficult to get a business off the ground on a reserve. If I decided to start my own business, I could go and see my banker, who might take my house as collateral if it had already been paid. I could tell him that if I can't pay back my loan, he can always take back my house. But there is a serious problem on the reserves because the houses do not necessarily belong to Aboriginal residents.

The opening of the first Aboriginal bank gave a lot of people hope two years ago. As I recall, it was set up in central Canada. Have other similar initiatives been taken to bring together Aboriginal capital, so that banks, and particularly this Aboriginal bank, can relax the rules somewhat? I think some banks are starting to take an interest in the Aboriginal community. Everyone knows that banks make huge profits, and they have to reinvest those profits. So, it is natural that they should be more flexible when it comes to granting loans.

My question is two-fold: will other Aboriginal banks soon see the light of day and are Canadian banks showing greater flexibility, specifically with a view to allowing Aboriginal investments?

Mr. Rick Fontaine: I will try to answer the first part of your question. There are different cultural components in most communities. In some, property rights do exist, but in most of the others, we are still talking about communal property. The reserve's territory as a whole belongs to the entire community. Even though houses built there were acquired as a result of transactions with the usual financial institutions, they are still attached to the territory on which they are built and are, by that very fact, considered community property. We have approached this issue a variety of ways.

• 1200

The Kahnawake Caisse populaire created an independent trust company that provides direct loans for individual dwellings. A lot of research has been done in this area and various attempts have been made to try and relax the restrictions somewhat.

We agree that most financial institutions are very interested in entering the Aboriginal market, for fairly obvious reasons. You have seen the significant demographics that are involved in the Aboriginal community. However, financial institutions continue to seek substantial guarantees for transactions involving reserves.

[English]

Mr. Bob Dickson: Can I just add to that? The TD Bank is a good example of a first nations bank. However, let's remember it is 90% owned by the TD Bank and 10% by the aboriginal people in Saskatchewan.

There are some other examples I can build on that Ricky just mentioned. The Westbank, or at least the Indian communities in British Columbia, are working with the Association of Municipalities in B.C. to look at ways of raising capital on the market to finance some of the infrastructure needs they have. The Bank of Montreal is doing some interesting work with the post office around using that as a banking outlet in the north. The co-ops are doing a great deal in the north.

There's a progressive move on that front; they're making progress. It's going to take a while for it to really have some significant impact. There's a learning curve here; there's a role-building and capacity-building piece to all of this. Going slowly and evolving at the right pace rather than being revolutionary is, in my view, the way to go.

Peace Hills Trust, as you know, is another financial institution in western Canada that is doing very well. It's one of two Indian-owned trust companies in the country.

[Translation]

Mr. André Bachand: In your document, you talk about the importance of trade and market expansion. I think any business worthy of the name tries to penetrate new markets in order to broaden its reach and business opportunities

There is what is called the domestic market, which may be a provincial market or the Canadian market as a whole, but most businesses are now looking to compete on foreign and international markets. One example would be Canada, which is sending out Team Canada to conquer markets around the world. Should Industry Canada be one of the lead departments in these delegations, given that this is directly related to its mandate?

Has any thought been given to asking an Aboriginal delegation to accompany these teams when they go off to conquer foreign markets? I think it's important to have something other than the domestic market, be it the provincial market or the Canadian market as a whole. There are markets elsewhere in the world that could be very attractive. I think it would be a good idea to allow Aboriginal delegates to accompany these teams that are going out looking for international markets.

[English]

Mr. Bob Dickson: Thank you very much. That's a very important point, both around the role the aboriginal community plays in the larger economy and also around raising the profile, the awareness, and that sort of thing.

There was a Cree construction company out of Quebec, which has a contract in the Philippines to do some large construction work. They were on that mission. There was a company out of British Columbia. There was an education facility out of Saskatchewan, which signed, not a business agreement, but an education agreement, to use some of the aboriginal education facilities at federated colleges in South America. And fourthly, we work with a private sector board of directors that guides our program, and our chairman was on that mission as well.

That was an excellent point.

[Translation]

The Chairman: Thank you, Mr. Bachand. Mr. Dickson, I would like to know if you fund projects outside of Canada that are going forward with companies working in a partnership with businesses in other parts of the world.

[English]

Mr. Bob Dickson: We will not finance projects outside Canada, but what we will do is provide for the preparation of that project in Canada for the Canadian company. If the business plan needs to be done, if the financing needs to be put together, or if the contractual arrangements need to be put together from the Canadian side, we will look at that. Our resources are for Canadian aboriginal people in Canada, so we're very cautious about how we use those resources.

• 1205

[Translation]

The Chairman: Thank you.

Mr. Bryden.

[English]

Mr. John Bryden (Wentworth—Burlington, Lib.): Thank you, Mr. Chairman.

I have great respect for Industry Canada and most of its programs. I think it's one of the most effective ministries in government. Unfortunately, often when it comes to looking at aboriginal programs over the past, the statistics have been very brave but they've often concealed failure.

Not to suggest failure here, but I've noticed you have one statistic where you say the majority of businesses are profitable—61%. That means 39% are unprofitable. That's a huge statistic. What I would like to know is, if 39% of aboriginal businesses are unprofitable, what's sustaining them? How are they surviving if they're not making money?

Mr. Bob Dickson: Let me just say in regard to the 39% that are unprofitable, not making money, that they're breaking even. As a matter of fact, in the numbers we have—and we'll get them for you; I don't have them in my hand as I should have—I refer to the empirical evidence we have on the results of our investment. The failure rate of aboriginal businesses and the firms in which we invest is less than the national average. Those are not my numbers; those numbers are taken from the financial statements of businesses.

It's quite an interesting number, because not only are they doing as well and somewhat better than the Canadian economy at large, but they're hiring aboriginal people in larger numbers than anybody else is doing, as they should be doing, so it's accomplishing a couple of things.

So 39% is a bit misleading. I should have clarified that, and I'm sorry I didn't. A large number of them are breaking even, and that reflects some of the values that are a little different in the aboriginal business community than they might be in the community at large.

Mr. John Bryden: Of those that are profitable or breaking even, how many of them are in that situation due to the fact that they're receiving government assistance, or government contracts, or government favours in one way or another? Do you actually track those aboriginal businesses that are dependent upon the government in order to be reasonably successful or break even?

Mr. Bob Dickson: No, I don't track that.

It's interesting, because regardless of whether it be coming from government sources or not, if they weren't doing it, somebody else would be. For example, if it's a grocery store we fund in a community—mind you, we don't do very many of those any more. If we didn't, that money would be going off the community in any case. So while it's government money, through transfer payments or some other source, at least the money is staying in the community; we're building a capacity there and we have a successful business.

I don't know how much would be related strictly to transfer payments or to government contracts. I wouldn't even want to guess—it's speculative—but I see a lot—most—that are not and are doing quite well.

Mr. John Bryden: Can I then suggest to you that maybe that is something you should try. I come back to brave statistics concealing failure. If these aboriginal businesses are reliant for their success or their break-even situation upon some kind of government dependency, a government transfer or a special government program that sustains them, as opposed to other competitive businesses, I think this is reasonable in the short term, but if this is something that is built into the system, then the true success of your program is in doubt.

So I would be interested a year from now to see you come back to this committee with some sense of what's happening in that, if you're developing aboriginal businesses, whether or not they're developing in independence of government.

Mr. Bob Dickson: Thank you. We'll do that. We'll see what we can do.

Mr. John Bryden: I realize that.

Mr. Bob Dickson: It's going to be a difficult one, but we'll see what we can do.

I want to clarify that we don't provide a subsidy to the business on an ongoing basis at all. If you're having difficulty and you're going bankrupt, you have some problems and you have to deal with those problems. We're not going to come in and continue to inject money in there just to keep you afloat—not at all. We just don't do that kind of thing.

Mr. John Bryden: But I know we do have a program in which aboriginal businesses are favoured over non-aboriginal businesses for government contracts. It is an interference in the normal free market economy when that incurs. I can see a short-term program like that, but if it becomes a permanent program, then it's defeating the independence that I presume you want to—

Mr. Bob Dickson: And the competitiveness they need to achieve.

Mr. John Bryden: If I may continue along that theme, I'm also interested in aboriginal capital corporations. Is it possible for us to get a report from you that looks at each one in terms of their success? I need some sort of line on how much of the capital that has been given to them by government they're actually using up and what their return on investment is. Again, I'm afraid that if I look at this what I'm going to see is the money is outgoing and there isn't a real net profit. I would like to see some—

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Mr. Bob Dickson: I can assure you it is the contrary. In fact, they are doing quite well. Most of them are doing quite well. They have good revolving funds. Some of that money has been turned over three, four, and five times. We have those numbers and we'll share them with you.

Mr. John Bryden: If you would share it, I'd appreciate it. I think we would all like to do that, because it would be a very interesting measure.

My final question, since I don't want to overstay my time, is that I'm conscious that—or correct me if I'm wrong—you have two mandates here. One of your key mandates is to develop aboriginal businesses in remote communities, but are you also charged with developing aboriginal businesses in urban centres. If so, does that run you into the problem, if it is a problem, of developing aboriginal businesses amongst C-31s, that is, people who have little connection culturally with any reserve but are aboriginals simply by an arbitrary definition of ancestry? Is this an area of concern for you?

Mr. Bob Dickson: Our mandate, as you know, is to serve the aboriginal community wherever it might be. As we said, two-thirds of our resources are going into the remote and rural areas and about a third into urban centres. So we do finance businesses beyond just the remote areas, and we do C-31s as well. They're defined as C-31. They would be Indians, so they're part of the population at large.

It comes up in the Métis community. It is primarily not the C-31s for whom there's no question about their legal status. If they are C-31, there is no question about their entitlement. It's the Métis community where there's some question about their entitlement, about who is a Métis and who isn't. In those cases we generally rely on membership in aboriginal organizations, the community at large, and how they view them as part of the aboriginal community, that sort of thing.

Mr. John Bryden: Finally, I just—

Mr. Bob Dickson: Can I just take a minute to give you a little bit more on the ACCs? I was just handed this. We will get you this report, but here are some numbers I have. The 33 companies we have now—or they have—lent out about 11,470 loans at a value of $316 million. It's been estimated that 2.1 jobs are created for each loan, so we're looking at about 10,300 jobs. It's quite an interesting story and we'll get that to you.

It's an area around micro-lending and developmental lending that I think is very interesting. There are some interesting ones around the world, whether it be Banco Sol in Bolivia or others. I think this whole area of developmental lending is one that's very interesting, and it is growing.

This is all about developmental lending, and we'll share that with you.

Mr. John Bryden: In my village there are people who are C-31s but don't have even the remotest connection, except by ancestry, to the contemporary reserve or contemporary aboriginal community. Why should they get a special break and special help as opposed to other people in my village who look exactly like them, speak exactly the same language, have the same, shall we say, rural tradition as they do? Why should we be putting resources into people who have no other claim to it other than ancestry?

Mr. Bob Dickson: That's a larger question than I can answer. Clearly they are Indian as defined by the Indian Act, and it goes beyond what I can do to deal with that issue. But let me say that I think you could probably break out the Indian population into three categories: the ones who are really culturally based, as you have just said; some of those who are integrated into the community but still have some values; and a third group is probably those who are totally assimilated, the ones you have just referred to.

I'm an Indian. I live in Oakville and I carry on as everybody else. Mind you, I can't apply to the program, but I am an Indian person. I wouldn't say where I fit in that category. You could probably figure that out. It's a larger issue that I can't comment on. They're defined as Indians. There was a piece of legislation passed in 1985 that defines them as C-31.

Mr. John Bryden: They do take some of your resources out of your program.

Mr. Bob Dickson: They do take some of the resources out of the program, yes.

Mr. John Bryden: Thank you.

[Translation]

The Chairman: Thank you, Mr. Bryden and Mr. Dickson.

Mr. Scott.

[English]

Mr. Mike Scott: Just following up, we are going to get information on these 33 ACCs then.

Mr. Bob Dickson: Yes, you will.

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Mr. Mike Scott: Okay. The other thing I'd like to ask you just briefly is: can we have the Goss Gilroy report you talked about?

Mr. Bob Dickson: Yes, you can.

Mr. Mike Scott: You'll provide that to the committee.

Mr. Bob Dickson: There are two reports, in fact, and we'll get them both to you.

Mr. Mike Scott: Okay. I'd like to have them.

[Translation]

The Chairman: Thank you, Mr. Scott. Ms. Karetak-Lindell.

[English]

Mrs. Nancy Karetak-Lindell (Nunavut, Lib.): Thank you, Mr. Chairman.

One of the concerns that affects the people in my area, which are the Inuit—I represent Nunavut—is that when they apply for anything under the aboriginal mandate, the application forms and criteria are usually geared for first nations applications. They have put in a special request that forms and initiatives be geared specifically to cater to Inuit businesses and organizations that are putting in applications.

I wonder if that concern has been brought to your attention at all.

Mr. Bob Dickson: I understand that some of our material is in Inuktitut. As a matter of fact, we have a contract to deliver our program in the north through an Inuit organization, so it's not our staff who are liaising and working with the Inuit community in the north. An Inuit organization is delivering our program. It's done in that capacity there locally.

Mrs. Nancy Karetak-Lindell: Do you know which one that is?

Mr. Bob Dickson: It's through the CEDO organization in Nunavut. We have one in Yellowknife and one in Inuvik.

Mrs. Nancy Karetak-Lindell: Neither one of those are in my riding.

The applications you're talking about with CEDO are specifically the ones that the Inuit organizations have put in a complaint about. The Qikiqtani Inuit Association, along with the other two regional Inuit organizations, have put in a complaint or a request through my office. I believe I wrote a letter to Industry Canada about that. I'll check my files again, but it was CEDO specifically that they were wanting a change with on the application form. That's because it deals with bands and reserves, and a lot of times they find themselves trying to put a square peg in a round hole. It was felt that they were not very sensitive to the needs of the Inuit people.

Mr. Bob Dickson: I hear what you're saying. I think we have some of our material that's translated.

Second, we don't have an application form per se. I think you might be talking about the Indian Affairs program.

Mrs. Nancy Karetak-Lindell: I know it was CEDO.

Mr. Bob Dickson: Yes, that's Indian Affairs. We don't have an application form per se. Our discussions really start with a discussion between the applicant and ourselves around what they want to do. We ask whether they thought this through and whether this makes sense before we get into a business plan.

But I will follow up. I have not seen that letter, and I would like to see it.

[Translation]

The Chairman: Thank you, Ms. Karetak-Lindell. You asked some very good questions. Mr. Patry, followed by Mr. Finlay.

[English]

Mr. Bernard Patry (Pierrefonds—Dollard, Lib.): Thank you very much, Mr. Chairman.

Thank you for your presentation. It was very interesting, particularly what you can do with so few staff, and so little money also. It's very interesting.

I was listening to my colleague mainly about access to capital and things like this. But one thing you just mentioned at the end is totally the opposite. You mentioned micro-lending. I don't see that as having a lot of experience. It started in Bangladesh. The success of micro-lending is fabulous with the countries of the world. More than 95% of the people reimburse the money that is lent to them.

I just wonder if you have any statistics maybe later on about this micro-lending with the first nations.

Mr. Bob Dickson: I don't have that off the top of my head, but we can share with you some of the experiences that Calmeadow has had and the experience of the ACCs that was requested of us. That is part of what we would call developmental lending. We'll share that.

There's some interesting work that Western Economic Diversification has done on micro-lending. They've done some research papers that they put together on it. We'll share that with you. Absolutely.

Mr. Bernard Patry: I'll be very pleased. Thank you.

[Translation]

The Chairman: Thank you, Mr. Patry. Mr. Finlay.

[English]

Mr. John Finlay (Oxford, Lib.): Thank you, Mr. Chairman.

• 1220

That was a very interesting presentation. I want to go back to something you mentioned near the beginning, Mr. Dickson. You said there is a national aboriginal economic development board that provides direction for your program. Does it provide direction for other departments that are working in this field or only for the industry department? Does it provide any direction to the aboriginal affairs and northern development department? Does it provide any direction to HRD—which obviously has some responsibility with training—and so on?

Mr. Bob Dickson: We have a board that has a membership of 20, although it's not at 20 right now. There are about 14 members on the board, which is chaired by Chief Roy Whitney. It has ex officio status with respect to HRDC and DIAND, and it's an advisory board. It doesn't make decisions. It advises the departments and our minister.

Mr. John Finlay: Thank you.

[Translation]

The Chairman: To conclude, Mr. Dickson and Mr. Fontaine, Committee Members always like to hear success stories. We are pleased to note your progress and your success. We have found your comments most interesting. What region of the country are you from and what nationality are you?

[English]

Mr. Bob Dickson: I'm from northwestern Ontario. A community called Lac Seul is my home community, not very far from Sioux Lookout. As one of the members said, I haven't lived there for a long time, though. I went to school in southern Ontario. I went down there when I was 15 years old, to a fruit farm, to begin going to high school, and then went on to Wilfred Laurier University. That's where I got my degree.

[Translation]

The Chairman: Thank you, Mr. Dickson.

Mr. Fontaine.

Mr. Rick Fontaine: I am an Inuit from Uashat Mak Mani-Utenam in Sept-Îles, Quebec. I spent most of my life in Uashat Mak Mani-Utenam, but then pursued my studies at the Master's level in Trois-Rivières and Sherbrooke. I left my village a year and a half ago to join the Aboriginal Services Division of CESO in Toronto, where I worked for ten months. I have been with Industry Canada since last August.

The community to which I belong to is a very progressive one. We have had major debates about maintaining traditional community values and about our development in a contemporary world. The direction we've taken with respect to economic development has been based in part on the level of integration we wished to achieve in various sectors of the economy. We have had some major debates and discussed a number of very interesting issues. Our community has developed very rapidly over the years.

The Chairman: Thank you very much. Congratulations.

Mr. Jenkin, in closing, would you like to tell us where you're from?

Mr. Michael Jenkin: I'm sorry to have to say this, but I am English Canadian.

The Chairman: Perfect. Thank you very much.

We will continue our meeting in camera for approximately fifteen minutes. Thank you very much. We very much appreciated your testimony. Thank you very much.

[Editor's Note—The meeting continues in camera]