INDU Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, April 12, 2000

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[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'd like to call the meeting to order, pursuant to the order of reference of the House dated February 29, 2000, main estimates for the fiscal year ending March 31, 2001—votes under Industry—and the performance report for Industry Canada for the period ending March 31, 1999.

I am very pleased to welcome here today the Honourable Ron Duhamel, Secretary of State for Western Economic Diversification. We're also pleased to have with us, from Western Economic Diversification Canada, Ms. Oryssia Lennie, the deputy minister; Mr. Gary Webster, assistant deputy minister, Alberta; and Mr. Bernard Ouellet, director general, finance.

Everyone should have a copy of the speaking notes in front of them, and a package. The minister will be speaking in both English and French.

I'll turn it over to the minister to begin his comments.

[Translation]

The Honourable Ronald J. Duhamel (Secretary of State (Western Economic Diversification Canada and Francophonie), Lib.): Thank you, Madam Chair and members of the committee. I am very pleased to be here today to talk to you about my department. With me, as mentioned, are my Deputy Minister, Ms. Oryssia Lennie, Mr. Gary Webster, Assistant Deputy Minister, Alberta Region, and Mr. Bernard Ouellet, Director General of Finance.

I'll begin with the government-wide context.

[English]

the government-wide context. Western economic diversification is very much part of the government's agenda for helping to build a dynamic economy, which in turn will mean a higher quality of life for all Canadians.

The Speech from the Throne opening this session of Parliament stressed the importance of the global knowledge-based economy, where the advantage goes to a country like Canada that is innovative, has high levels of productivity, quickly adopts the latest technology, invests in skills development for our citizens, and seeks out new opportunities around the world.

Then the budget speech, just six weeks ago, re-emphasized the importance of innovation, skills, and knowledge, inspiring a spirit of entrepreneurship to seize the opportunities of the 21st century. This might well be a description of the new focus of Western Economic Diversification Canada, or WD, as it's come to be called in the west.

[Translation]

That is precisely what WD exists to do. Madam Chair,

[English]

I have just alluded to the department's new focus, but let me take a moment to mention where we've been and where we are now, before I outline our plans for the immediate future.

[Translation]

The two first phases of WD's evolution

[English]

is where I want to start. For the first few years after the department was created in 1987, its main focus was diversification of the economy by providing venture capital to firms introducing new technology, products, or markets to western Canada. That changed dramatically following program review in 1995.

Over the past five years, WD has evolved from a four-office agency to a one-stop business support network with over 100 points of service. We've introduced new services to business within our annual parliamentary allocation. In this fiscal year, the net cost of the department is down to less than $200 million. We are more focused than ever, serving more small and medium-sized businesses in the west, helping and advising more western entrepreneurs.

[Translation]

What are our current priorities?

[English]

WD's first priority is economic diversification—one of the most constructive and positive contributions of the federal government to the west. We want to bridge the gaps in services that can hinder the growth and expansion of start-up small businesses.

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The entrepreneurs who are driving the economy, who are the driving spirit behind nearly 80% of new jobs in this country, are men and women in small businesses. There are more than 900,000 of them in the west. They need to see that the federal government values and encourages their willingness to take risks, devise new products and services, and create jobs by their hard work.

[Translation]

Through our extensive partnerships with the private sector and other orders of government, and our large network of service points, we have helped Western Canada outpace all other regions in small business growth.

[English]

Another goal of my department is to represent the economic interests of western Canada in Ottawa. For example, federal procurement often has major contracts that could just as easily be filled in the west as in any other parts of the country. The competition is stiff and the requirements are often complex, but we can help by making sure western bidders are apprised of the possibilities and told how to navigate through the procurement process.

[Translation]

WD sees the whole West, and helps make the realization of its aspirations a possibility. Our headquarters are in the West and 90 per cent of our staff are located there.

[English]

On this year's plans, I recognize that my department can't be all things to all people, and we don't try to be, but what we take on we do well. We're concentrating on five areas that our clients tell us they need most. They include investment and loans funding through the banking system or other lending institutions, with support from the department; targeted business services, such as business planning, counselling, and financing and marketing seminars; making information services for small business available online; administering western economic partnership agreements, urban development agreements, and other arrangements that support federal-provincial cooperation; and helping to deliver national programs in the west such as infrastructure projects, economic adjustment for communities like Moose Jaw, Saskatchewan, Pinawa, Manitoba, and B.C. coastal fishing towns.

As the same time, as a key part of keeping our house in some fiscal order, we are working hard to implement the new government-wide financial information strategy within the department.

[Translation]

Now, Madam Chair, I'd like to move beyond this immediate work.

[English]

I'd like to very briefly sketch out where I want the department to go in the next few years—a strategic vision, if you will.

[Translation]

Turning now to the attainable future,

[English]

In the attainable future, my overarching concern is to see the west, as a region, feel much more connected to the federal government. Westerners are passionate Canadians. They're not indifferent to the federal government, in my view. About 70% think the federal government has an important role to play in promoting economic development, and that's what WD is doing.

More than 80% want the federal government to maintain its involvement in a number of economic and social development areas. That's what we're fostering. I want to see the department sharpen its focus even more, so it can deliver four key services to westerners—services that are vital to the future of the west and westerners.

First is dynamic approaches to supporting innovation. We must create a culture of innovation in Canada, if we are to meet one of the greatest challenges ever to our standard of living: globalization. We have to keep innovative businesses here, and we have to encourage new ones to start up. The west is already transforming itself. In fact, the four western provinces account for more patents per worker than any other region or province in the country. My department must step up its efforts to support innovation and keep it at the top of the agenda for western businesses, researchers, and all orders of government.

Second, we need responsive programs to spark entrepreneurs and business development. We need to increase access to leverage funding for businesses undertaking higher-risk projects, improve the ability of entrepreneurs to tap into business information databases through electronic networks, and extend our business planning, export advisory, and marketing services.

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Third, we need expert knowledge about western economic fundamentals. We need to supplement our information on local and regional socioeconomic conditions in the west as well as to enhance our economic and business intelligence in cooperation with provinces, the private sector, and universities. This research is essential for developing sound policy options and for identifying and strengthening crucial economic sectors.

Fourth is leadership in coordinating federal programs in the west. The department must continue to work closely with regional ministers, members of Parliament, and senators. It must take a more active role in coordinating western concerns with federal line departments and increase its partnership activities with provincial and municipal governments.

To solve the large problems that remain unresolved is one of the greatest challenges facing all orders of government—and they must do so together. Governments must approach these problems together if they are ever to be resolved.

[Translation]

Madam Chair,

[English]

I began by saying that innovations, skills, knowledge, and entrepreneurship are the keys to Canada's prosperity and a higher quality of life for all Canadians.

[Translation]

Certainly my department will have to rebalance some of its corporate resources to realize this framework for the future. But it is realistic and it can be done.

[English]

It is realistic. It can be done, and it will be done. I believe that WD contains enough hard-headed idealism to shape itself into an even more responsive and more focused instrument of federal policy, to the betterment of everyone we serve in the west. We are now a department that is well positioned to take on the challenges of the year 2000 and beyond.

[Translation]

We have made great strides. We are on the right track and each year, we are improving our services.

Merci. Thank you. I am now ready to answer questions.

[English]

The Chair: Thank you very much, Minister.

We're now going to turn to questions. Mr. Penson will begin.

Mr. Charlie Penson (Peace River, Canadian Alliance): Thank you, Madam Chair.

I would like to welcome the minister and his officials to the committee this afternoon. I'm looking forward to a good discussion.

Mr. Minister, you administer a department that handles a lot of taxpayers' dollars, and I'm sure you would want to have those dollars invested wisely and to have a good return on investment. I have a question in that regard. Since the repayable loans program was discontinued in 1995, I have noticed that Western Economic Diversification Canada has consistently overestimated the amount it would collect on those loans.

We see the amount of increase for the doubtful loans being set aside going from 22% in 1995 to 27% currently. I just want to give you a couple of figures here. For example, in 1996-97 I see that the department said it would receive $70 million from the repayable loans but received only $55 million. The department projected $55 million in repayment each year for the following three years, but came up with $47 million in 1997-98, $45 million in 1998-99, and $38 million in 1999-2000. Of the projected $235 million that was to be collected, I see it coming in at $185 million—a $50 million shortfall.

Can you explain why these are substantially lower than the amount collected, and does that mean that you've written off that amount or set aside contingency plans for the difference to be written off?

Mr. Ronald Duhamel: Thank you for the question, and thank you especially for acknowledging that since 1995 we are no longer making direct loans to business. I appreciate that.

You're quite right, there has been an overestimation, or an underestimation, depending upon which side you're looking at the question from. The major reason for that—and I will encourage officials to add to this if I miss out on any of the highlights—is basically that when these loans are supposed to be paid, if we see some difficulties for companies being able to repay them, we have a couple of choices. We can say “that's too bad, it's over”, or we can say “well, look, we're not happy that you can't pay on time, but can we renegotiate that loan and come up with other terms that you can in fact meet?”

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In fact we've done a lot of that, colleague, and we believe that's a better way of doing business. I think you'd be interested to know that we spent roughly $750 million prior to 1995, as you've mentioned, and we've collected—if you look at March 22, 2000—$319 million, which is about 42.5%. We have still to receive 42%. What's been written off is 4.5%. We're in pursuit, if you wish, of moneys, and for roughly 11%, we're trying to renegotiate, trying to see what we can get from certain companies.

So actually we've done rather well. We're always unhappy whenever we don't get it all back, but if you look at what the intent was, it was venture capital. That was the intent. And we compare very favourably with a number of specialized, if you wish, institutions in that field today.

Mr. Charlie Penson: Further to that, I noticed that the department told the Auditor General in 1997 that it would commission Revenue Canada to collect outstanding loans, but I gather that the department is still handling its own collections. What happened to that initiative?

Mr. Ronald Duhamel: I'll be very frank. I did not know that we had in fact thought of doing that. That we continue to collect loans is my understanding, and I've also been advised that we've in fact been commended for the way in which we go about it. I've given some indications as to what we try to do. We believe that it's probably more cost efficient, but there again, if my officials have more to add to that, I would welcome it.

Mr. Gary Webster (Assistant Deputy Minister, Alberta, Western Economic Diversification Canada): We were pursuing discussions with Revenue Canada at that time. We had almost reached an understanding when it was realized that the Revenue Canada legislation prevented our organization from actually piggybacking on theirs in a collection format. So from that point, we have continued to manage our own receivables function, our repayables function, but we continue to look for and to discuss other options that might be available to us.

Mr. Charlie Penson: Okay. Well, just—

Mr. Bernard Ouellet (Director General, Finance, Western Economic Diversification Canada): One more point, if I may....

In 1997-98 there were plans or at least discussions that were held in regard to the possibility that Revenue Canada would be collecting, in effect, the accounts receivable from many government departments. That particular point never went ahead, so that's one issue: Revenue Canada, in terms of mandate, never went ahead with collecting on behalf of all government departments. The second point is that from a set-off standpoint, the services of Revenue Canada are still used in terms of setting off, basically against income tax refunds where required.

Mr. Ronald Duhamel: Could I just ask, colleague, for one short clarification? I've just given you figures. Does your question suggest that perhaps we ought to be pursuing this? Is this what you're advocating or recommending?

Mr. Charlie Penson: No.

Mr. Ronald Duhamel: Okay.

Mr. Charlie Penson: I'm just wondering how it would get that far with your department that they would tell the Auditor General it was what they were going to do without knowing that it wasn't possible.

I don't have much time so I want to leave that. There's a question I would have, then, considering that you're still making so-called investments now, since 1995. I would ask the question about some kind of evaluation process as to what benefit taxpayers are getting from that. How would you evaluate it? Are there internal audits that the department does? Are there current audits that have taken place and that could made public to shed some light on the performance of your department in managing the hundreds of millions of dollars that you put out in western Canada every year?

Mr. Ronald Duhamel: Yes. I think you'll be rather pleased to know that our house is indeed in order. In fact, in regard to every single audit that has ever been undertaken, whether it came through the Auditor General or was one that we asked for, we have followed up in every single instance. I feel very good about that.

When you talk about investments, colleague,—

Mr. Charlie Penson: I asked a question about whether you have any that could be tabled, though.

Mr. Ronald Duhamel: Well, I don't have them right here, and no, I will go through the regular process. I don't want to table. I mean, there may be confidential information. There could be names of people and investments—

Mr. Charlie Penson: I'm sure there are.

Mr. Ronald Duhamel: No, let's not put a negative twist on this. It's not necessary. I will make a—

Mr. Charlie Penson: I asked—

Mr. Ronald Duhamel: Now just a minute: you asked the question, and I'm answering.

Mr. Charlie Penson: —and I want you to answer the question.

Mr. Ronald Duhamel: No. I will answer the question and you will listen to my answer.

I will make available any information that you request if I've protected the confidentiality of people, as I must do by law, okay? That's clear...?

Mr. Charlie Penson: That is clear.

The Chair: Last question, Mr. Penson.

Mr. Charlie Penson: We probably have to—

Mr. Ronald Duhamel: Now let me go back to the investments, because it was the second question and I—

Mr. Charlie Penson: Just a minute now—

Mr. Ronald Duhamel: I want to answer the second question, Madam Chairman.

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He asked about the investments that were made. We've invested in community futures development corporations, ninety of them in western Canada. We've invested in women's enterprise centres, four of them, with five satellites. We've invested in Canada business centres. There are probably roughly 80, and yes—

Mr. Charlie Penson: Why don't you let the private sector do the investing? Why can't they go to a bank or a financial institution?

Mr. Ronald Duhamel: Because in many of those cases they wouldn't be getting the services we're providing.

Mr. Charlie Penson: Nonsense.

Mr. Ronald Duhamel: No, that's not nonsense. I'm sorry, sir, you don't know what it is we do.

Mr. Charlie Penson: Yes, I know exactly what you do.

Mr. Ronald Duhamel: I guess you did not listen to my remarks.

Mr. Charlie Penson: You shouldn't be in this area.

The Chair: Thank you very much, Mr. Penson.

Mr. Murray, please.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thank you, Madam Chair.

Dr. Duhamel, welcome to the committee.

I'd like to take a slightly different approach, and it's really because I—

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): The high road.

Mr. Ian Murray: I don't know whether you'd see it as a high road or not.

I was late getting here today because I just spent the better part of an hour with a farmer from Saskatchewan who's about to go bankrupt. When I look at this department, Western Economic Diversification Canada, if there's ever a need for diversification, it's probably as it relates to farmers. He and I spoke about the need for an extra strategy for some people who want to leave farming. I'm not sure if talking about an extra strategy is politically palatable to either the federal or provincial level.

It strikes me when I look at all the services offered by this department.... On the fact sheet you handed out there is a mention of national programs. You say you deliver national initiatives like the infrastructure works program, base closure assistance, fisheries adjustments and flood relief.

We have a real crisis right now, as you well know, among farmers in Saskatchewan, Manitoba, and in your own province. It struck me that perhaps Western Economic Diversification Canada could perhaps even set aside some of the other business they're doing and focus on what is a real crisis right now, if no one else is there to take the lead in this.

That's not to belittle the efforts of the Minister of Agriculture or the provincial ministers of agriculture. Everybody has been working very hard in trying to find money to help solve this problem. It strikes me that we could be throwing billions and billions of dollars at the farm problem and still not solve it. Most people who look at the grains industry agree it's going to be a long-term problem.

So I'd just like to know if you see your department playing any role in what is essentially a crisis right now. Is there some way you could see your department helping farmers diversify into something else? We have to solve.... Obviously, they have debt problems and all kinds of other financial problems. So that's where I'm coming from.

Mr. Ronald Duhamel: Yes, there are three initiatives underway that I can speak about. One is, of course, the community futures development corporations, which have a substantial loans portfolio. They can, in fact, if they choose, assist farmers in diversifying, and that's being encouraged. Clearly, that is in fact one area.

We also have some specialized funds where WD has gone in with a certain amount of money and sat down with banks so that they would in fact take greater risks. I think loan loss reserve is the appropriate terminology. It's in the neighbourhood of $50 million that we put up, and it will activate overall over $400 million. We have them in the agricultural sector and a number of other sectors as well. The prime focus in the agricultural sector is indeed on diversification.

The third point I should mention is there has been a lot of discussion and dialogue, if you wish, with regard to the merits of diversification. There are a number of attempts on the part of the farmers to do exactly that. In terms of actual funding, those are the only two sources that are available right now from the federal government, quite apart from what is available from agriculture to do what needs to be done. From Western Economic Diversification Canada, colleagues, there are those two sources only.

I should mention that there has been some discussion on whether or not there ought to be some additional funds sought to assist even more, but that has not happened as yet. I don't know if it will happen, to be perfectly honest.

Mr. Ian Murray: Could I just ask you how closely your people in the field work with the provincial governments out west?

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Mr. Ronald Duhamel: Very closely. We pride ourselves in having excellent relationships with all of the provincial governments. I am able to pick up the telephone and call my counterparts. My deputy and my assistant deputies are able to talk to their counterparts, and they in fact do on a regular basis on a number of issues and files. There's no hesitation whatsoever.

It's a good dialogue. It's a good exchange and there's a willingness. I think people recognize as well that this is the way to go. We find a political balance at election time, and in between elections we in fact try to get the job done for people.

I should mention that there is a western economic partnership agreement in each of the provinces and there's some possibility of some investments there. It's a partnership agreement, basically speaking, $20 million in each province and $20 million from the federal government, but it's intended to try to push the economy to be more innovative. Clearly, the agricultural sector would be one. There have been some investments in that, but I don't want to give the impression that all of it is going in that area. Some of it is, and it depends upon the provincial priorities, because it is a partnership.

Mr. Ian Murray: Okay. Thanks.

The Chair: Thank you very much, Mr. Murray.

Mr. Riis, please.

Mr. Nelson Riis (Kamloops, Thompson and Highland Valleys, NDP): Thank you very much, Madam Chair.

Mr. Minister, I appreciate your being here with your officials.

Perhaps I may just start off with what may sound like a simple question. It is a fairly simple question, but that is not to mean simplistic. I'll use two examples. One group of business people starts up a small firm manufacturing boats. Another one is starting up a fairly major recreational or destination resort. They come and ask, is there any help the federal government can provide? Normally, the only thing I can ever think about is Community Futures, but that's a fairly small enterprise. We're talking about people who are a little larger than the Community Futures group would be interested in supporting.

If they were talking to you, Minister, what would you say to these folks about western diversification?

Mr. Ronald Duhamel: I would ask them to contact my officials, because we have people in the field who are obviously very familiar not only with federal instruments but also there may be some provincial ones and on occasion some municipal ones as well. They have that information on the tips of their fingers. That's number one.

You're quite right, though, in referring to the community futures development corporation and in pointing out, colleague, that this can be extremely modest. It varies a bit, but generally speaking I think we would agree that it's quite modest.

Depending upon the nature of the operation, though, they might qualify in terms of those funds that I've mentioned where we have close to twenty agreements with banks and other lending institutions for leading-edge kinds of things in the agricultural sector, the environmental sector, the mining sector, the forestry sector, the fishing sector, what have you. If I were having that conversation, I would say “Go to WD. Here are the people to call. Have you checked out Community Futures? When you talk to WD, make sure you mention the loan funds we have with the banks.”

Lacking that, though, unless I'm missing something here....

Mr. Nelson Riis: Can you comment more on the loan fund with the banks? I'm not familiar with this program.

Mr. Ronald Duhamel: If you need the exact figures, I'll get them for you. Basically, we put up a pool of roughly $50 million and we sat down with the banks and we asked if they were interested in leading-edge development in a variety of sectors and financing that. They said yes. The problem we had with the banks is that we felt they were not taking enough risks, and therefore with the $50 million that was made available, there were more risks taken. It just gives them some cushion, if you wish.

We have a list of banks with which we do business on a list of files. I've mentioned the environment. I've mentioned agriculture. I've mentioned forestry, etc. We can get some actual specific documentation for you. I guess that's one example. It's all very well, I think, to say that the banks will help. In fact they do help. In fact they're in there to make money, and so are the credit unions and others.

Mr. Nelson Riis: So the entrepreneur would go to the bank to access this program?

Mr. Ronald Duhamel: No, they would come to us, and we'd make sure they went to the right bank with the right portfolio.

Mr. Nelson Riis: Okay. I have a question about Community Futures. I think I've mentioned to you privately the concern at the local level about the ongoing commitment to funding of Community Futures to enable them to plan for the years ahead.

Mr. Ronald Duhamel: You've done that.

Mr. Nelson Riis: I think you said everything's okay, that funding is not going to be reduced. You had some qualification in your comment, Minister. Could you perhaps elaborate on that?

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Mr. Ronald Duhamel: You're quite right. You've raised it with me, and you're quite right. I think I mentioned to you at the time, when you had the chat, that we had just renewed funding over five years for $90 million, and I acknowledged there were some difficulties in operating.

There will never be enough money. You know the nature of it.

Mr. Nelson Riis: But the core funding itself will continue on as is?

Mr. Ronald Duhamel: It's there. It's a five-year commitment, and the announcement was made a year ago, so it's good for another four years. But there are pressures on those operating funds. I don't want to mislead you. There are pressures on the operating funds, and we've had to make some adjustments in order to stay within our allocation. But when I say it's okay, that's what I said. I'm not nervous about that disappearing. There will be a substantial amount to continue to do business, important business.

Mr. Nelson Riis: You talk about the increasing pressures and the adjustments that have to be made. Looking at the future projections of funding for your department, I notice they fall off dramatically in the next two years.

Mr. Ronald Duhamel: Yes, they do.

Mr. Nelson Riis: Ought this to cause us to panic? What's going to change? What aren't you going to be able to do that you're doing now?

Mr. Ronald Duhamel: I'm an optimist, and I think you are too; we're both in politics. I'm going to have to look at some of the programs to see whether or not I can in fact find some savings. There's no question about that. I'm going to see if I can't do business differently in order to secure some additional funding. I'm going to have to ask the centre whether or not they can support some of the proposals that are there, which would have to change dramatically if that were not the case.

It's not a guarantee, but I feel reasonably optimistic about it. Economic development is important.

Mr. Nelson Riis: Is this mainly why people in Community Futures—the volunteer boards and some of the officers—are nervous? They hear you saying obviously adjustments have to be made, fairly substantial adjustments, in terms of matching the funding requirements, and yet you say the funding is there, but it's tough to manage and so on.

Mr. Ronald Duhamel: No.

Mr. Nelson Riis: I hear some qualifications that make me nervous, Minister.

Mr. Ronald Duhamel: Well, I'm sorry. I don't want to make you nervous, because I think you're asking the right questions, and I appreciate the support for economic development and community futures development corporations.

We've just been topped up by $2.7 million, but if you divide that by 90—and it's not going to happen that way, because it's a bit more complicated—it's still not a whole lot of money. So my caution is simply that: caution. Four years of funding has been committed. It's there. And there's a top-up of $2.7 million. But I've had to make some adjustments.

But even if I have to continue to make adjustments, the core, if you wish, what they do, which is important—those loans, those volunteers making decisions for those local communities and creating jobs—will continue.

Mr. Nelson Riis: Good. Okay. And I do appreciate the work Community Futures has done in our communities. It's excellent work.

We've just gone through a period of looking at innovation around this table. On page 6 of your statement that you read out, Minister, you say, “My department must step up its efforts to support innovation”. I'd just flag “must step up its efforts”. That's in the first paragraph.

Then in the second paragraph you say you need “responsive programs to spark entrepreneurs”.

Mr. Ronald Duhamel: Yes.

Mr. Nelson Riis: Can you explain what “to spark entrepreneurs” might mean?

Mr. Ronald Duhamel: Yes, to give them a little jolt to make sure they're on board.

Mr. Nelson Riis: What does that mean, “give them a jolt”? These are catchy phrases, but I don't have any idea what steps—

Mr. Ronald Duhamel: Let's talk about innovation. First of all, it's recognized in a number of reports that we're lagging behind in innovation. I've seen your report, but I've not read it, so I'm not going to pretend I did. But I will read it. Within the week, we'll talk about your report, if you want.

Basically what we're really saying is the future belongs to the knowledge-based society, the knowledge-based economy. The future belongs to those who can innovate more quickly and more creatively than others. What I'm really saying is my department has been innovative and creative, but we need to do more of that. When I talk about sparking entrepreneurs, I mean I want more from the entrepreneurs as well. I want them to take more risks, but I want to help them take those risks, with government.

Mr. Nelson Riis: Okay. Mr. Minister, you say you want responsive programs to spark these folks?

Mr. Ronald Duhamel: Yes.

Mr. Nelson Riis: Give me an example of a responsive program you might be thinking about. Or what are some of these steps you're planning to take? I don't mean to be hung up on your terminology, but it seems to me you're talking a bit motherhood. Yes, of course we have to support innovation, but what does “support” mean?

Mr. Ronald Duhamel: Let me go from motherhood to fatherhood then. We have these western economic partnership agreements. A focus within each of those is in fact innovation. It's leading edge. It's what can we do more in agriculture, and what can we do more in mining, in forestry, in fishing? What is it that we can do that nobody else is doing?

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For example, if we had more time we could talk about the University of Saskatchewan in Regina, where I beleive we're finding better ways of processing heavy oil. In Alberta I think we're removing the methane gas from the coal without using the coal and therefore making it cleaner and better for the environment. Those are the kinds of things we're doing with those kinds of agreements. So that's what I meant—

Mr. Nelson Riis: So just more of the same? That's what I'm hearing. That's what these agreements do now, but you are going to do more than that and.... It's not a tricky question, but can you give me an example of what—

Mr. Ronald Duhamel: No, no, no. Look, I trust you not to be tricky but to be honest, and I've never known you to be otherwise.

Mr. Nelson Riis: One of your officials indicated.... What new idea have you come up with to try to spark these entrepreneurs to step up their efforts?

Ms. Oryssia J. Lennie (Deputy Minister, Western Economic Diversification Canada): I can answer that.

We have developed linkages with universities in western Canada and tried to bring the universities and industry together to look at accelerating commercialization, for example. Innovation centres have been developed in Edmonton and Calgary, for example—there may be others—to spur innovation and commercialization. We will be continuing to look at things like the investment we made in the synchrotron. The department's investment was relatively small compared to the large project, which was $173 million. Ours was $6.83 million. But what we did do is bring the players together and facilitate that agreement occurring.

Mr. Ronald Duhamel: Let me add two others. We've assisted universities in making a proposal to the Canadian Foundation for Innovation, so that they would get their fair share. And perhaps if they could get even a bit more that wouldn't bother me one little bit. We're also going to assist—we've assisted and we'll continue to assist—in the exploring of the possibility of genome centres, with which you are familiar.

So I'm sorry I misunderstood your point, but I'll make sure that I don't use “spark” in future addresses.

Mr. Nelson Riis: No, I like the idea, but I want to know what they mean.

The Chair: Thank you very much, Mr. Riis.

Mr. Malhi, please.

Mr. Gurbax Singh Malhi (Bramalea—Gore—Malton—Springdale, Lib.): Thank you, Madam Chair.

I'd like to thank the minister for his presentation.

First of all, for what reason will the WEDC's funding level increase from a net cost of $154.96 million for 1999-2000 to $189.25 million in the year 2000-2001?

Mr. Ronald Duhamel: Is that the $34 million increase? Could you give me those figures again, colleague?

Mr. Gurbax Singh Malhi: That's $154.96 million for 1999-2000 and $189.25 million for 2001.

Mr. Ronald Duhamel: There are three components to this. There are reduced requirements in total main estimates by $3.6 million. There will be an increase in adjustments to the mains for grants and contributions—that's to meet our obligations—of $32.5 million. There's a decrease in non-respendable revenue. There's a misspelling here; I'm sorry.

Mr. Bernard Ouellet: In revenues from repayable contributions.

Mr. Ronald Duhamel: There's an increase of $5.3 million. In other words, we underestimated what we were going to get, so we have to find another $5.3 million for that underestimation. I believe that's correct. So that comes out to $34.2 million, which I believe is the figure you've noted.

Mr. Gurbax Singh Malhi: When businesses approach your agency, is it possible that they do not obtain the financing they had hoped for?

Mr. Ronald Duhamel: Yes, often, unfortunately, and for a variety of reasons. For example, if a business approaches us, they sometimes remember us as we were. We were into the venture capital area. And there's great disappointment when we can't come up with the loan. Or they may not have a sufficiently strong business plan, but we try to work with them to do that. What we try to do, though, is to bring them to a community futures development corporation, and there may be more than one that can work together on some projects. Or we bring them to the appropriate bank that would deal with that kind of issue or that kind of business they're trying to put underway. In the final analysis, there are some people who are disappointed, yes. There's simply not enough to meet the needs that are out there.

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Mr. Gurbax Singh Malhi: Can only businesses with sound business plans obtain financing from your agency?

Mr. Ronald Duhamel: Yes. You see, they go to banks and the banks would turn them down immediately if they didn't have a sound business plan.

Ms. Oryssia Lennie: If I can add to that, if they don't have a sound business plan, we often work with them. Often the banks will say these people have no business plan. So our client service officers in fact work with them to help develop a business plan that can pass muster.

An hon. member: Do you charge for that?

Ms. Oryssia Lennie: No.

Mr. Gary Webster: In fact, when the investment funds were set up originally, the banks highly valued the service of our departmental officials because of their knowledge of the business community in their locale and the needs of small and medium-sized business.

Mr. Gurbax Singh Malhi: If you had to suggest a change in your agency's mandate, what would you do?

Mr. Ronald Duhamel: The focus would be on increased innovation, and we've had a bit of a discussion on that. I'd be looking at, if you wish, des outils.... How would I say that in English? Tools, yes, thank you. I'd be looking at tools that would permit and encourage more innovation. I really believe that this is where the future lies. Innovation is discovery, the application of discovery to new processes, new ways of doing things, new products, value-added. That's where the focus is, but there would be even more if I had additional resources.

The Chair: Thank you very much.

Mr. Cannis, please.

Mr. John Cannis (Scarborough Centre, Lib.): Thank you, Madam Chair.

Minister and officials, welcome to our committee.

Mr. Riis commenced the line of questioning I really wanted to get at. Minister, I know there have been some changes in your department in terms of how things have been restructured since program review—for example, the number of officers there were, and the number of officers there are today. Could you touch upon that: what was, what is today, and how it's been restructured? For example, in regard to the support network with over 100 points of service, could you touch upon this 100 points of service.

Also, Minister, we've had, in putting our report together, a variety of Canadians who came to our committee and we talked about productivity and innovation, as you know, and also how and what we can do as a government in terms of retaining our best and our brightest. So what is your department doing to help in that way, and what is your department doing to help bring products to the market, for example? I'll lead you off with this. As you know, we've invested in the 21st century 2000 chairs—

Mr. Ronald Duhamel: Yes.

Mr. John Cannis: You started touching upon that. I know time is limited, but could you elaborate a little bit more as to how that initiative is going to help us? Also, could you tell us what was in the last budget, Minister, that in your opinion will help us retain the best and the brightest that Canada has to offer?

Mr. Ronald Duhamel: Thank you very much, colleague.

First of all, what we were is probably most easily described as follows. People would come to us with a business idea and we would then try to assess its worth, and subsequent to that assessment we would make money available. We were like a venture capital unit, if you wish, or institution. That is no longer the case. And when I referred before to my colleague from the Canadian Alliance, the $750 million is from that era. Now if you get money, you get it from the banks or the credit unions, or what have you. So that's the major change. That's one major change.

The other major change is people have said to us, “Look, we need information. What information do you have, not on my specific competitors, but if I wanted to start this kind of business, what's the market here? And is there a market abroad? It's that kind of information. Where would I go for some money? I need some help with the business plans, so what do I do?” If there were one label, it would be information gathering unit. We have a lot of information that's useful to businessmen and businesswomen, not just us.

Then I go to the 100-point service, colleague, that you mentioned. We have 90 community futures development corporations. We are in 90 communities; we blanket the whole of western Canada. We have four women's enterprise centres in each of the provinces, with five, I believe, satellite services. So for a province such as Alberta, which is large, I think the main office is in Edmonton, but there's one in Calgary.

Women's enterprise centres focus upon women entrepreneurs. You would perhaps know that women entrepreneurs are extremely successful for a variety of reasons. In fact, the latest study I saw is they're substantially more successful than their counterparts, the males.

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The other thing you had pointed out is when we talk about 100 points of service, we talk about the Canada business service centres as well. There again, these are business centres that are spread out throughout the west, that respond to the needs of the business people in the general community.

When we talk about retaining the best and the brightest, you mention the chairs, and we could mention the millennium scholarships, but we should mention the investments we've undertaken with all the granting councils, the Canada Foundation for Innovation that we've set up. Frankly, that's being looked at from outside the country. When I go outside the country, they talk to me about it.

On a micro-level, because we're a small unit compared to the whole of government, we have jobs in science and technology. We have a little program that permits the brightest and the best to go and assist the best in businesses so they can excel. We have a similar program for people who specialize in marketing and trade, there again so we can keep the brightest and the best.

Of the all the reading I've done—and this is a topic of great interest to me—the most significant variable in keeping the brightest and the best is for the young people to believe they have opportunities. Yes, salary is important to some. Yes, taxes are important to some. But in terms of what's most important, it's “Is there an opportunity here that will really challenge me? Will I be able to show people that I have a lot of talent and that I can make a significant contribution?” To me, that is the most important thing.

The series of investments, the building that the government has done, has been exceptionally good. We used to have the Harvards talking to us, stealing our brightest and our best. Now we're talking to Harvard and we're trying to get their brightest and their best. We don't steal them; we try to attract them back to Canada.

I think I've covered most of the issues you've raised, but as a final point, we have, indeed—there again, it's modest but significant—an export tool where people can find out whether they're ready to export and what they have to do in order to export. Those are examples of some of the things we're doing.

The Chair: Thank you very much, Mr. Cannis.

Mr. Lastewka, please.

Mr. Walt Lastewka (St. Catharines, Lib.): Thank you, Madam Chair.

Thank you, Minister.

I'm kind of sorry that Mr. Penson has left after only five or ten minutes and didn't want to hear the rest of the questions. I'm slowly getting to the point of having enough of the type of attitude we saw earlier. I'm not sure whether it's because WD is not known or recognized or given credit for the work they do, so I'm going to talk about Alberta.

Our portion of the economic partnerships is what, around $40 million?

Mr. Ronald Duhamel: That's correct, sir.

Mr. Walt Lastewka: How many CFDCs are there in Alberta?

Mr. Ronald Duhamel: There would be about 30. Is that correct?

Mr. Gary Webster: There are 27.

Mr. Walt Lastewka: And there are two women's initiatives, or how many?

Mr. Ronald Duhamel: There are two.

Mr. Walt Lastewka: One is in Edmonton, and one is in Calgary.

Mr. Ronald Duhamel: That's correct.

Mr. Walt Lastewka: Mr. Penson said business would do all these things, while we're filling the gap with those items that we just mentioned here.

Mr. Ronald Duhamel: Yes.

Mr. Walt Lastewka: Is there enough publicity going on with WD? Do Albertans know that WD has a presence?

I'm going to quote a vice-president of the University of Alberta in Edmonton. On my last trip there I was told that the federal government has no presence there. How would you react to that?

Mr. Ronald Duhamel: Is there enough publicity? Probably not. Are we known? Yes, we have polls and surveys to indicate that we are. But we continue to work at that, because it's like a product, if you wish. There's still a lot to do.

I have, for example, testimonies here—I won't read them out, but I'd be pleased to table them—from the Honourable Senator Pat Carney, who is not always friendly to the government; Fred Tolmie, secretary-treasurer of a tribal council; Omar Essen, general manager of Glas-Aire Industries; David Boag, president, Education International; and I could go on. The point is that these people have spoken very highly about WED and about the Government of Canada.

Let me say to you, as well, colleagues, there are people such as Martha Piper, the president of the University of British Columbia, a dynamic individual, or Rod Fraser—now that I've started naming them, I'm going to get into trouble—just two examples of people who speak glowingly of WD and the Government of Canada, its investments in knowledge-based society, and in fact some of the initiatives we've taken.

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For example, when pressed, I finally saw the light—the Canada Foundation for Innovation, the attempts we've made to involve the universities in helping us develop the economy.

So, are we known? Yes. Are we known enough? We can indeed work on it. But we have a number of significant personalities who say some very positive things about us. There may be some people who don't say some positive things, but they don't come to me; I have not heard a whole lot recently.

In regard to Mr. Penson, with all due respect—and perhaps I should have been more patient with him—I cannot believe we are not doing some good. We have 90 community futures development corporations, four women's enterprise centres, and five satellites, and we have Canada business service centres, and no good comes out of that? The banks would do it? No way.

Why have we had to come up with $50 million for the funds I've mentioned? So that the banks would take more risks. I don't say that negatively toward the banks. If I were a bank president, I'd be looking at the bottom line, and that's what they do.

We look at the bottom line too, but we take a few more risks. You heard the figures I shared with you today. Of course there are losses. We're in the venture capital area. I'm told traditional banks try to keep it at 3% or lower. Venture capitalists are in the 20% area. We may be in the 10% area. I don't think that's bad.

So no, the banks will not replace those. Frankly, we have an ideological difference. I don't believe my colleague is right, and he doesn't believe I'm right, but I don't believe for one moment we're not doing a whole lot of good for a whole lot of people.

A lot of jobs have been retained because Community Futures has been there. The women's enterprise centres have been there, and the others, and a lot of jobs have been created as a result of their involvement. They are local people. They know the community. They know what works.

We've estimated that jobs cost us, on average, probably $10,000 apiece in those kinds of initiatives. That really isn't bad. We're talking about.... Could someone remind me about the estimate on Community Futures? Is it $75,000 for community futures development corporations—

A voice: Yes.

Mr. Ronald Duhamel: —and the figure for the number of jobs that have been retained or created over the last five years? I'll try to get it. I thought it was in the $75,000 range.

So, no, I don't believe my colleague Mr. Penson is correct; I believe we are correct. But there's always work to be done. We can do it better, and we are doing it better, or we will continue to do it better. We have to work on the identity, and we have to have an even stronger presence. It's an ongoing job.

Mr. Gary Webster: In just the first nine months of 1999-2000, it was 4,167 jobs.

Mr. Ronald Duhamel: In nine months, 4,000—

Mr. Gary Webster: That's just nine months in the one year.

Mr. Ronald Duhamel: So if we extrapolate, in one year, that's.... I don't have that figure, but that's an example.

Mr. Gary Webster: If I could add one thing, thinking again of the honourable member, with respect to what we do, when the Peace River flood occurred two to three years ago, it was in fact a community futures development corporation in Peace River that coordinated the efforts of a number of economic development agencies, provincially and in the region, to ensure that full federal-provincial attention was being focused on that region at that time.

Mr. Walt Lastewka: You mean business didn't come in and start helping and fix it right away?

Mr. Gary Webster: No.

Mr. Walt Lastewka: Are you telling me they weren't there first thing in the morning to help out?

Mr. Ronald Duhamel: The banks? No, you're quite right. It has been pointed out to me—

Mr. Walt Lastewka: I guess, Mr. Minister, it's time we make that understood by people. I believe WD has done a lot of work, and I know the work done in the Edmonton area and the research area because I went to visit it, and some of your people helped me in my tour there. But the WD work is not recognized.

Mr. Ronald Duhamel: Okay.

Mr. Walt Lastewka: I believe it's time we did a little bit more publicity on the work that's done.

Mr. Ronald Duhamel: Thank you for your comments. I take them very positively.

I've just been reminded that there's a 57% awareness of WD in western Canada in the most recent surveys amongst small businesses. But you know, 57% from 100% is still 43% to go, and that's a big number.

Thank you.

The Chair: Thank you very much, Mr. Lastewka.

Mr. Riis has a final question or two.

Mr. Nelson Riis: I suppose it isn't a final question but an observation, Minister.

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You sense around the table, in some of the questions, a certain frustration. WD fills a very important need. The need I see it filling is attempting to level the playing field. I wish Mr. Penson were here, because the Canadian Alliance people are good at this idea of a level playing field: everybody should be treated equally. The reality is that if you are living in the regions of Canada, you do not have an equal opportunity with the people who live in the industrial heartland. It's just a fact of life. To me, these kinds of programs attempt to provide some equality of opportunity if you're an entrepreneur from small-town Saskatchewan or wherever.

Perhaps one of the problems we have.... I was listening carefully to your comments, and I had a sense of déjà vu. I've just read the fact sheet of all the things the core programs do. You made the comment earlier that you help people with business plans and so on. These are all great things. I remember the person who was responsible for the Business Development Bank sitting in your place. I think he said almost all the same things. That's what they do. They try to lever for financing and provide access to capital and entrepreneurs and help people with business plans, etc.

Mr. Walt Lastewka: They charge.

Mr. Nelson Riis: That's the difference, I guess.

We have a whole lot of people doing similar things, and some are charging and some are not and so on. I'm a little confused as well. I make an effort to keep this stuff clear, but I can only imagine what the thoughts might be of an entrepreneur out there who really doesn't spend much time thinking about this.

I just add this as an observation. Maybe we have a lot of overlap or duplication of effort here.

Mr. Ron Duhamel: That question is being examined at this very time, as we speak. You're quite right; there's a whole lot of information. In fact, one of the challenges may be to see if we can't simplify that information. You're quite correct in what you say.

Let me say that we cannot—and I know you appreciate this—give you all the things we do in the space we have available. For example, we didn't get a chance today to talk about some innovative projects, such as telecommunications research laboratories. The telecommunications research laboratories are in the forefront of development in information technologies. We didn't talk about TRIUMF in British Columbia, which is very important and which continues to be funded. We didn't talk about the Institute for Pacific Ocean Science and Technology.

There was some mention of the innovation centres in Edmonton and Calgary. Great stuff. The Edmonton Waste Management Centre. We didn't talk about the Microsystems Technology and Research Institute. These are all assisted by WD. We didn't talk about proteino...proteo.... Well, I'll get it. Genomics. I've mentioned the genome centres. The Canadian light source synchroton was mentioned, the Petroleum Technology Research Centre, the International Test Centre for Carbon Dioxide Capture, SMART Park, St. Boniface Research Centre, Western Canada Testing. Those are all innovative projects in the forefront of development, and we didn't get a chance to talk about them.

Maybe a lot of the stuff we do is déjà vu, but déjà vu, perhaps looked at from a different perspective, is not always bad. I appreciate your comments; they are fair. You want to try to be helpful. You recognize that not everybody starts the race from the same place. You're right. If we go the way others are proposing, we'll have about half a dozen major cities in Canada and nobody left outside those cities. Then we won't have to worry about economic development; we'll have to worry about other things.

Mr. Nelson Riis: I would assume that if a business person is interested in going to a Community Futures office to seek advice on federal programs that might be of use, they would be aware of the western development people. They'd be aware of the Business Development Bank and other federal agencies that might be of use.

Mr. Ron Duhamel: Yes, they would be. They would be aware of provincial programs as well, and any municipal programs there might be. The intent is to put it all together, to have it in one spot in order to try to simplify that mass of information that you so rightly identify.

Mr. Nelson Riis: Thank you.

The Chair: Thank you, Mr. Riis.

Thank you very much, Minister. We want to thank you for being here. Obviously, this number of programs could keep us here for a few hours to discuss, but we did only ask for an hour of your time and you've been very gracious with that time. On behalf of the committee, we'd like to thank you, and we look forward to meeting with you again in the future.

[Translation]

Mr. Ronald Duhamel: Thank you, Madam Chair. Thank you, colleagues.

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[English]

The Chair: The meeting is now adjourned.