:
Thank you very much, Mr. Chairman.
If it's okay with you, I thought I would, for a maximum 10 minutes, do a bit of an overview.
[Translation]
It is a pleasure to be with you today.
I should also tell you that my French is not very good.
[English]
I thought in my opening remarks that I would say four things. The first is a little bit about the council.
The council started in May of this year, so we've been at it for nearly six months. The council is made up of 14 members from a range of different areas—academia, business, and some people from outside and inside Canada. Our mandate from the minister was to look for ways to significantly increase inclusive growth in Canada. With that as our background, we spent time trying to make sure we have a good understanding of the context.
The context or the situation for Canada is pretty tough as we look forward. We have a lot of great strengths and weaknesses but we've enjoyed about a 3.1% GDP growth rate for the past 50 years. As we look ahead over the next 50 years, unless we do something significant, we will see a growth rate of about 1.5%. It will be cut by more than half. On the GDP growth rate side, it's even starker. It goes from 1.9% GDP growth rate to about 0.08%. A big chunk of that is driven by demographics. We have literally one of the most rapidly aging populations and therefore one of the most diminishing workforces of any OECD country. That is just to put it into context. There are many other elements to be looked at—our share of global trade and what's happening on that front, and the quality of our workforce in terms of education, and so forth.
The big message for us is that we are going to need to do something substantive to be able to change the trajectory from a significant shift down to upwards. That was the context. Basically, we think we should have a target. With that target, we want to force ourselves to think boldly and raise that GDP growth rate, which has been going down to 0.08%, up by a percentage to 1.8%. In terms of the median household pre-tax income, that would mean we would see a $15,000 shift versus what the trajectory would otherwise be out to 2030. We're trying to use that as a target, if you will, to force us to look for ideas that are going to really shift it. We also have the view that we don't want to have 95 different ideas. We'd actually like to have fewer than 10, but have them really have a jolt or a push to them. We wouldn't be sort of spreading the peanut butter across multiple things; we want to make some choices. That's just the background in focus.
We then picked four streams to look at. First was infrastructure and capital, because they're among the biggest levers for improving productivity over the long term in an inclusive way. We looked at market competitiveness and trade, because they're also big drivers for growing GDP and GDP per capita. We looked at labour markets and skills, and then we looked at innovation. We then looked for the ideas within those four buckets.
Last week we released the first wave of ideas. There were three of them. The first is around infrastructure and establishing an infrastructure bank. Underneath that is having an infrastructure strategy, and this basically would be what municipalities and provinces would be servicing. But we should have a view about where productive infrastructure could be developed, and that includes everything from the transportation sector to technology, 5G, and also our electricity grids. Being able to transfer our green energy to different parts of North America, as well as in country, would be good.
Having an infrastructure bank that would have an infrastructure strategy, and the notion, too, that there would be.... I'm just going to stop at that. The infrastructure bank is the main one.
Our view there is that we want to leverage private capital, because we see the infrastructure gap being about $500 billion in Canada. There is no way public money can fill that gap—the deficit would be too significant—but we think there is a way by matching, if you will, the public funds with those of private sector investors. We think it could be at a ratio of 1:4—for every dollar of public funds, we could get four dollars of private. It would really help us close the infrastructure gap and provide a significant jolt to productivity growth for the country. That was the first bucket of recommendations.
The second was on immigration. There were a number of pieces to the immigration side. The first was around high-skilled labour. A lot of businesses are concerned that they can't get the talent they need from outside to fill key positions. It takes way too long to do that. It's a very arduous process, and we want to simplify and speed up that process.
The one that seemed to get more attention was to actually increase the amount of immigration significantly, by about 50%. We said we wanted to flange that in over five years. It wouldn't just be a jump up, because we have to make sure the absorption systems are in place, but basically we would be going from 300,000 to 450,000 over five years. That talent would be very targeted. It would be younger people with particular skills that we are looking for. We think we can leverage the great universities we have in Canada in terms of attracting more talent to come to the country. We think that's actually quite essential, given the significant drop we are going to have in our workforce over the next 10 to 15 years.
The third bucket of recommendations was around a foreign direct investment agency and having a fairly aggressive one that would target particular investments. This is with a bias towards greenfield investment, as opposed to brownfield—in other words, not trying to find companies to take over Canadian companies, but to find investors who want to invest in Canadian companies or Canadian infrastructure. That's an area where we think we could do much more. We punch way below our weight on that side in Canada. We've lost significant ground over the last 20 years. We are at about a quarter of the rate of countries like Australia, New Zealand, and others. Again, we think a targeted approach to finding the right capital and people would help boost it.
Those are three parts of the first wave. We are doing it in waves, because we are hoping this fits the digestive tract, if you will, of the government. We are working on a second wave, which is around skills. We are very concerned to make sure that the 18.1 million Canadian workers continue to be skilled up properly, given all the technology shifts that are going on. We think that about 50% of jobs can be automated over a 10-year period, so we are looking at the skills side of things and what we can do to improve that.
We are also looking at how we can improve the participation rate in the workforce from existing Canadians. How do we get more women into the workforce? That number has plateaued. How do we get more first nations into the workforce? That number is quite low. How do we reduce the frictional unemployment? There are a lot of unfilled jobs out there. We want to have a set of ideas or recommendations around that. The skills innovation area is one.
The second is innovation itself, how we can help more Canadian companies commercialize and scale at a higher rate. In Canada, we seem to be very good at inventions but not at translating the inventions into large commercial successes. We think there are things we can do on that front.
Finally, we think sectors are going to be important. Agriculture and food is a very underplayed sector. By being a global champion in agriculture and food, health care, and a number of other sectors, we could also boost growth as we look ahead.
I should probably shut up; I'm talking for too long. Those are the things we're working on now, and the plan is that we would release them at the end of the year. That's the thinking, and we're still debating and working on it. Forgive me for talking for so long.
[English]
Thank you, Mr. Barton. Thank you first of all for your service to Canada, and through you to the other members of the council, my thanks for your constructive suggestions. I know these things will be debated avidly in Canada. I had the opportunity to hear you speak at the Public Policy Forum, and I know you've been beating the drum around the country and the world. So thank you for that.
My colleagues will have other questions on the infrastructure proposals. We know the Caisse de dépôt et placement du Québec has proposed a pretty sprawling public-transit project in Montreal that would connect the West Island and Laval and the South Shore.
Is it public transit, or some other sorts of investments, that would attract pension funds and other wealth that, as you say in your paper, is now parked on the sidelines or garnering negative returns? What kinds of projects would attract returns that would interest this kind of capital?
:
There's a range, and they would include those transit examples you mentioned. I think we see this in a number of cities. Four of the ten most congested cities in North America are in Canada. So I think we need more of that in Montreal, Toronto, Calgary, Vancouver. There would definitely be a transit piece to it.
The second thing is around the gateways. We think agri-food is a big opportunity for Canada. We should be a global champion, but we don't have the capacity in the rail and in the ports to be able to deal with that. We haven't done the analysis on it, but I'm looking at the Emerson report, which we considered quite closely, and we think that there's infrastructure there and that there are investors who would love to invest in a port or in rail hopper cars. People would be interested in investing in any part of the infrastructure that's there. In that case, businesses in a sense would be paying the fee the investors would get.
We think electricity grids are another possibility. We're fortunate to have one of the biggest sources of green energy, but how do we transport that energy to different parts of the country, or to the U.S.? We think there's an opportunity there. There's a pretty standard fee-based approach we think we could build into that, which investors would see. Then there's the whole 5G broadband area, which we think is going to require investment across the country. This is one we believe can be structured. This has been happening in other countries, like India, where they're getting people to help pay for the infrastructure that's being laid down.
I don't know if that gives you the detail, but our sense is that ideas should also be coming from the municipalities and the provinces. This isn't a case of the federal government telling us what they want to do. The idea is that there should be some screening or criteria. For example, the project should be over $100 million. Institutional investors aren't really interested in investing in anything less than that, and we think it's necessary in developing that pipeline of the projects you're mentioning. I don't know if I'm being specific or not.
:
Sure. As I think you were saying, I said at the outset, we're at around a quarter of the level of what we see with peers, and it's dropped.
We talked about the challenges with a number of people who invest overseas. First of all, there are multiple groups, so you have multiple provinces trying to attract, for example, a Japanese company to be based there. People find that confusing. They don't find that attractive. They think, “Are we going to insult someone if we go here or go there? Who's our counterpart to help us stickhandle our way through it?” The good news is that people are trying, but it's not coordinated. There's a sense of confusion that's there.
The other element is that we just don't talk to them. We're not at the table with them, and so people are investing in different parts of the world. Canada has many attractions, and we're seeing that people don't know where to go to. Often it's not only about getting the money, but it's also about having the people to go with it.
When a company is, for example, establishing a headquarters or a new plant, they want to also be able to move the people. How is that coordinated with immigration? That's where it's disparate. That's where people get confused and say it's too complicated and difficult.
:
That's a great question, by the way. I'm taking notes from what you guys are saying on these things.
We have roughly 1,000 officers out there, and our sense is that only about 11 of them are actually focused on what we're talking about here, so there are not enough people doing this function.
We haven't gotten to the federal and then the provincial side of it. We've also seen, by the way, that there's also a group of people operating at the city level to try to attract.... I would hope there would be some opportunity to look at some rationalization, so that we're just not adding those to this. We think the numbers who are actually dedicated to this, if I can call it, marketing aggressively for Canada are very small right now, but we need to establish that.
The only other thing I'd say to your point is that Mark Wiseman, in particular, has what he calls the “stop-do” list. Not only should we be making recommendations about what we should be adding, we should also be looking at what we're taking away. For example, I think we see that on the innovation side.
Sorry, I'm probably talking too much.
:
Good morning, Mr. Chair.
Thank you, Mr. Barton, for your service, on both the public side and the private side, for many years, for Canada.
Earlier this week, we had the Bank of Canada governor and the deputy governor come speak to us. In their writings in the last few papers they've put out, they've talked about two broad impediments to increasing our long-term growth rate. I think their forecast is about 1.5%. One is the labour force, specifically, the labour force growth rate. The other is the broad bucket of innovation/productivity and how Canada can do better.
I'm just specifically looking at the labour force growth rate, not really the participation rate, because that hasn't really changed in the last 20 years. The labour force growth rate is slowing down. Our demographics are not the worst in the world, but they definitely could be better, and we have this immigration system. One of the key recommendations you and the Wise Persons' Committee put forward is to increase immigration from 300,000, gradually, up to 450,000.
I'm a proponent of that. I think it's been proven that immigration is good. My concerns right now are that when I look at a number of very, very successful entrepreneurs in this country, people such as my parents, under our current system, they wouldn't get in. I would say that probably the top business people in Canada currently could not immigrate to Canada under the current system.
The LMIA process by employers is broken, as I call it. It's slow. It's tedious. I've heard a lot of feedback that basically you are guilty until proven innocent when you are trying to prove that you actually need the person to come through.
I'll stop in a second, but I'm an individual who had the privilege of working for a U.S. investment bank for almost a decade, in the United States, going there under an H-1B visa, and seeing how their system worked. I'm not saying it's better or worse.
I want you to focus your comments this morning on the importance of immigration, not only attracting the best but having a larger piece of the pie come over.
Yes, we have a similar view to yours. This declining workforce worries us, because, again, it's happening so quickly. My personal view is that for Japan it's too late; they've gone beyond the curve. The amount of immigration they would require to do it would be too significant to be practical in the time frame, so I think there's an urgency to it.
The way we looked at it, just quickly, one thing was to facilitate entry for top talent. That goes to your point about delays with the LMIA exemptions, and how you go through it. It just takes too long. In the round tables and discussions we had around the country, we saw countless examples of Canadian companies that ended up putting a key part of their business in New York because they couldn't bring that capability into Canada. Doing that was just too arduous. We did want to expand the exemptions for some of the senior executive roles. We wanted to have a two-week process. We said let's put a time frame on it; it takes too long.
Also then, relax some of the restrictions once the permit's in place, because there is also quite significant retention. So there's a top talent piece that we felt was important, and we think it actually leads to fewer jobs being created in Canada because that occurs so slowly today.
The second was around the students. To your point about not qualifying, we have a lot of superb international students who come in and who we think would be terrific entrepreneurs and people who would create jobs and build businesses, but the point system makes it very difficult for them to stay. That's quite different from how it typically would be in the U.S. Obviously, the U.S. is a lot worse right now than it has been, but that's a very big source for Canada.
Australia's third-largest export is education, foreign students coming in, and we think that's something. Then there's this 300,000 to 450,000 target we're trying to hit, but flanging it in 15,000 people at a time to move it.
The last thing is the accreditation standards, because we also need to make sure that when people come in they actually can get a job. The number of people who are electrical engineers or medical doctors and who are driving taxis because the accreditation service doesn't work is a problem, so we have tried to make some recommendations around that.
:
Yes, we are. We're trying, Mr. Chairman, and you should tell us whether we're doing so adequately.
One of the things we've been doing is regional round tables. They've been exactly instructive, as you've said. The first one we did was in eastern Canada, in Halifax. I know that's not in Prince Edward Island. The notion there was to ask what opportunities we see in this region in terms of the sectors that we could bring in and in terms of the types of companies, and also what is going on with the universities. That was quite different from what we saw in Vancouver, where there was a different range of things. We got very clear feedback from those. It was a mixture. It was small business, large business, academia, and labour unions. We had a broad mix of people. That's one way we're trying to do it, and we're continuing that.
We've done that in five parts of the country. I'm going to Regina on November 10, for an agrifood one, looking at pulses and what we could do on those, and wherever that will move, with some technologists who we think we can bring in from Israel and from parts of Europe—Switzerland in particular. There are companies that we think we can bring into that.
We are trying to recognize that there are very big regional variations. I think this national agency has to look at it that way. That's why we think there's a need, in a sense, to have a bit of strategy around the types of companies that we want to have in Canada, in these different regions, and then go after them and try to bring them in, as opposed to doing it from the bottom up.
:
I appreciate your honesty and your dedication to putting forward some ideas, because, quite frankly, one thing we've been very critical of is the lack of economic growth despite the high costs. As you said, higher deficits down the road, if we invest in the wrong kind of infrastructure, could leave us saddled with long-term debts. Seeing our ability to promote economic growth is important.
I will say, though, that Mr. Caron does raise a good point. Many of the things you're proposing here are, in some cases, polar opposites of what the Liberals campaigned on. For example, you've suggested that tolls can actually help pay for infrastructure and bring foreign direct investment. The Liberals campaigned on removing tolls.
The Liberals have said they want to see 67% of their infrastructure budget going towards social and green infrastructure. You instead have said it should go into more transit infrastructure that's productive, such as rail and ports, and whatnot.
Is your report basically somewhat of a tacit admission that the current plan the Liberals have offered, and ran on, is not working?
:
I fully agree with you on diversification. I think it's good. It's in all our interests that the Canadian pension funds are investing overseas.
The only thing I would say, though, is that there is a humongous oversupply of long-term capital versus infrastructure projects. Every pension fund in Canada, in the United States, in Japan, and in Europe would love to invest more in infrastructure. There are simply not enough projects that have been put forward.
That's what I said about the competition. That's why I'm not worried about private equity coming into this. They won't play. They won't get the returns they want in this. That's why when someone in Australia puts in a bankable project for people, you literally have a swarm of people because there are just not that many. We think there are those in Canada; they just need to be structured.
We want this infrastructure bank to be independent and to have world-class structuring skills, so that it can set up these types of things to be attractive but also good for Canadians. It takes a specialized set of skills to do that.
Again, I agree with you on diversification, but there are simply not enough infrastructure projects. It's one of the strangest problems in the world, because we have all this infrastructure and we have all this money, but it's not happening.
:
Thank you, Mr. Barton, for your presentation this morning.
I'm not going to ask you to comment on my first couple of comments, but as a Conservative from Alberta, I want you to know that there's just about nothing that I agree with in what Mr. Caron said, other than the fact that the Liberals did not campaign on this agenda. In fact, their agenda in the election campaign was trying to out-NDP the NDP. I actually think, Mr. Barton, that your committee has thrown this government a real hot potato, because they did not campaign on the kinds of things that you're talking about, almost all of which make sense.
I don't expect you to comment on that, but I do want you to comment on this. As I said, I'm from Alberta, and I'm sure you're familiar with AIMCo. I know that AIMCo, which manages about $80 billion in Alberta pension funds, has difficulty in trying to find the appropriate investments in Canada. They're investing in infrastructure in Australia, in Chile, and in Argentina.
Here's what I think we need to take into account. Given the right opportunities, I'm sure these Canadian pension funds would like to invest in Canada and make the Canadian pension dollars work for Canadians. I'd like your response to that.
:
Right. I think the first thing is that there are not enough infrastructure projects being done; there simply aren't. That's the first point.
The second point is that we think there's a benefit to the taxpayer of having more infrastructure being built.
The third point I make is that Canadians pay far less in terms of fees, tolls—however you want to put it—or availability payments, than anyone else does. We're on the far extreme side of that.
In terms or recycling, all we're saying is that some infrastructure projects may have been built—because a lot of private investors don't want to invest in pure greenfield projects—that could be made available for private investors to invest in if they are not looking for outrageous returns. That would free up money to allow more infrastructure to be built. That was the basis for the asset recycling, looking at things like airports. We think there would be a net benefit to taxpayers. They're run better, and again, doing this frees up more capital to invest in these other areas.
We had two round tables with indigenous groups. Carol Anne Hilton is a member of the council from Vancouver, and she is very involved. We've had a number of one-on-one sessions with groups. I was involved in about six of them. We have been engaging, and to your point, I think we are probably not doing enough, but if I look at what regions and so on are doing, it's very much.... We are trying to make sure that we have that lens where we are, but if there are other things you think we should be doing, I would love to hear about them, because we are probably missing some things. We're trying. That's what I would say on that.
:
We'll reconvene. I think we have most members here and our witnesses.
Just so the record is clear, I know that both witnesses know that we are doing pre-budget consultations in advance of the 2017 budget. The theme we've been working towards is how we can achieve better economic growth within this country.
We have two very important agencies before us this morning. With the Business Development Bank of Canada, we have Mr. Denham, who is president and chief executive officer, and with the Export Development Corporation, we have Mr. Daignault, who's the president and chief executive officer.
I believe you each have a short presentation to start with, and then we'll go to questions.
Welcome, both of you. The floor is yours.
:
We'll do it alphabetically, I guess.
Thank you, Mr. Chairman.
My name is Michael Denham, and I'm the president and CEO of the BDC. I was appointed to the position recently after a 27-year career in the private sector.
[Translation]
I would like to start by congratulating the committee for its consultation work with Canadians in preparation for the 2017 federal budget. This is important and demanding work, especially given all your other work and all your other responsibilities.
[English]
So thank you.
My staff tells me you've had at least 16 meetings, and you've heard from over 160 organizations. I can only hope you find something new and unique in what I have to share with you today.
BDC has one overall aspiration, which is to make Canadian entrepreneurs among the most competitive in the world. We have more than 2,000 employees located in 100-plus business centres across Canada. We have over 2,000 interactions per week with entrepreneurs. We receive over three million visits per year to BDC.ca. As a result, we feel we have a good sense of what's going on with entrepreneurs in the country.
We seek to tailor business solutions according to the circumstances of entrepreneurs. We take financial risks that other financial providers do not. Our financing portfolio stands at $24 billion. We're a bank, and we make credit decisions within given parameters. The most important parameter is an expectation that the enterprises we lend money to will prove economically viable so that money lent will be repaid with a return reflecting the risk taken. This means we're self-sustaining and not dependent on the taxpayers of Canada.
It also means that we can reinvest profits in initiatives aimed at satisfying business needs that others cannot meet. We're Canada's small business development bank and we're immensely proud of the role we play. Most of all, we're proud of the 42,000-plus businesses we support from coast to coast.
I'm often asked how Canadian businesses are faring in the face of economic uncertainty, global challenges, massive disruption, and significant technological change. There's one word that comes to mind—“resilient”. As the Governor of the Bank of Canada indicated in his progress report on the Canadian economy which he gave in Whitehorse this past June, there's flexibility among Canadians. For the governor, this creates confidence that Canada will get through the current adjustment period and that the economy will return to natural self-sustaining growth.
Let there be no mistake about the fact that Canadian businesses are facing tremendous challenges and opportunities. Let me take you through some of those and tell you about how we're addressing them at BDC. The first challenge is access. We know there are still financing gaps, particularly for certain entrepreneurs: young entrepreneurs, new Canadians, entrepreneurs with thin or little credit history, fast-growth firms, indigenous businesses, and cyclical sectors. These are just some examples of those experiencing difficulty accessing financing.
The second concern relates to scaling up the size of businesses in Canada. Canada has made good progress in the start-up space; however, we struggle in building large firms able to punch above their weight in terms of economic impact. A BDC study released in September confirms that there are dramatically fewer businesses expanding in size than there were 15 years ago. Many firms wanting to grow continue to face financing issues, and, compared with other jurisdictions, this leads to deal sizes that are relatively small. Moreover, the greater presence of foreign investors in later stages may result in stronger pressure for early exits and foreign ownership in foreign markets. BDC has responded by increasing its lending volume from $4.8 billion in 2016 to an all-time high of $5.2 billion for the current fiscal year. This is in addition to the $250 million in venture capital we'll be investing this year in technology start-ups. We're also providing leading-edge business advisory services, including to so-called high-impact firms that have the potential to really move the growth needle for the country.
The third issue, which everyone knows, is that too few Canadian companies export, and of those that do, not enough are expanding into emerging economies where growth opportunities abound. In this regard, BDC focuses on export readiness, equipping small companies to expand into new markets, including choice of the market to which they seem particularly well suited. This go-to-market strategy is being developed hand in hand with EDC, with whom we already enjoy excellent relations.
A fourth dimension of business performance in Canada concerns productivity, that is, how efficiently goods and services are produced. Canada's labour productivity growth slipped in the decade ending in 2014 from an average of 1.4% per annum, over the prior eight years, down to 0.9%. Although this statistic is alarming for people who study Canada's economy, more than half of the 1,500 Canadian companies we recently surveyed don't formally measure their productivity. This finding prompted BDC to introduce, just last week, a free diagnostic tool for all Canadians, developed in partnership with Statistics Canada. In less than two minutes, by filling in seven data points, a business can find out exactly how it compares with peers and receive a link to sources for making improvements in its productivity.
[Translation]
I could talk at length about Canadian companies and the situation they are in, but it would be preferable for me to do so as I answer your questions.
If, after this meeting, you have other questions in terms of developing your recommendations on the competitiveness of small and medium-sized businesses, I will be happy to help answer them for you.
:
Mr. Chair and honourable members of the committee, thank you for inviting Export Development Canada to appear before this committee. We appreciate your interest in EDC's work with Canadian exporters and our perspective on helping Canadian companies to expand into international markets.
EDC is a crown corporation, mandated to help Canadian companies go, grow and succeed internationally by providing financial, insurance or expert advice as they seek to grow their business. EDC is an arms-length crown corporation and does not receive annual funding from the Government of Canada.
[English]
Since we were founded in 1944, we have helped Canadian companies of all sizes undertake more than $1.3 trillion in exports and foreign investments. We started here in Ottawa, but have since grown to establish 18 offices across Canada and 18 international representations. Most of these locations are in high-growth emerging markets.
In 2015, almost 7,500 Canadian companies used EDC services to undertake more than $104 billion in international business. This included roughly 6,000 Canadian small and medium-sized enterprises that were helped by EDC to conduct more than $15 billion in export trade and foreign investments.
Although EDC is an arm's-length organization, we share with the government's commitment to grow Canada's footprint in emerging markets. This includes helping more Canadian companies to become leaders in innovation-focused sectors, like clean technology. For example, in the past five years EDC has supported 128 clean-technology companies doing $2 billion in exports.
[Translation]
More broadly, EDC partners with companies across all sectors: light manufacturing, information technology, infrastructure, clean technology, natural resources, oil and gas, and transportation.
As the global economy continues to be influenced by globalization and fluctuating trade dynamics, we need to do more than ever to ensure that Canadian companies can compete and that we can continue to create an attractive investment climate.
[English]
No two companies are alike, and that means adjusting our offerings to the specific needs of trying to break into new markets. However, recent research conducted by EDC found that 65% of Canadian exporters start by exporting to the United States. The U.S. market is similar and presents lower risks. Twenty-two per cent of companies take their first international step in non-U.S. markets and others are simply born global. Approximately 13% of companies we spoke with enter multiple global markets at once.
This variety of experiences presents EDC an opportunity to help companies across all stages of their exporter journey. This includes offering economic analysis and market data, assisting with market access, or helping them to meet their corporate responsibility obligations alongside providing our traditional financing and insurance products.
This also means that EDC partners with other Government of Canada organizations, like BDC, to ensure that the entirety of a company's needs are being met. Since the signing of our formal partnership with BDC five years ago, there have been over 1,000 cross-referrals between our organizations.
EDC participates in other government-wide partnerships, like the accelerated growth service, which brings together Global Affairs, NRCan, ISED, BDC and many others in order to help high-performing, high-potential companies leverage the full benefit of government services.
Additionally, EDC works closely with Global Affairs Canada and the Canadian Trade Commissioner Service to introduce foreign buyers to qualified Canadian suppliers through matchmaking missions, trade shows, and one-on-one meetings.
EDC works hard to build relationships with large multinationals interested in doing business with Canadian companies, or those who have a large footprint and supply chain network in Canada. An example of this would be General Electric or India's Tata Group.
Once EDC's team has a detailed understanding of a company's supply chain and business goals, we can set up introductions to qualified Canadian companies with well-matched offers.
In 2015, EDC led 26 matchmaking events. These resulted in over 1,000 introductions between 133 foreign buyers and 450 Canadian suppliers, the vast majority of which were small and medium-sized enterprises.
[Translation]
When speaking to our staff spread around the globe, I am fortunate to hear incredible stories of Canadian companies of all sizes working to grow their business, secure contracts, or fulfill a once-in-a-lifetime growth opportunity.
EDC considers it a privilege to work with Canadian businesses that constantly impress us with their innovation and determination to grow to new international markets.
[English]
There is more to the EDC story, but I will stop here, and I look forward to engaging with you on any questions you might have.
Merci beaucoup.
:
This is a very complex topic, and there are many reasons for that.
I will highlight that the biggest issue for exporters, issue number one, is not financing. Issue number one is to understand the opportunities and to find the right partners or the right contacts in the markets.
If you look at the various needs, you'll see that the financing piece is number three. First, if they don't have a sense of the opportunity, and they don't know how to talk or who to talk to in the given market, it's very difficult for them to even understand their financial needs.
From that perspective, this is why from EDC's standpoint and from GAC's standpoint, and working with the trade commissioners, there is a lot of work being done in the markets to understand who's who, and to understand which companies have a potential interest in doing business with Canadian companies. By making that connection, you end up defining the opportunity and defining the financial needs.
:
Thank you both for being here today.
I'm going to start with Mr. Denham.
Mr. Denham, obviously politicians, and Canadians generally, sometimes have varying perceptions of BDC, because your bank is so often in the background. In my area of the Okanagan, Brian Kemp is one of your representatives. He is at all the networking events, so he's constantly trying to get the name out there.
I think one of your challenges, though, is that people have a perception. For example, in my small business I made contact with BDC, and the programs and services offered at the time didn't match what I needed. However, things change. I think that's one of the biggest challenges; people don't recognize that your program changes.
How do you get it out there that BDC is available to help small entrepreneurs?
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It's something we're always focused on. My perspective is that there is an awful lot of benefit we can provide to entrepreneurs. The key challenge for us is to get the word out so that they understand it.
We do a number of things. We've recently started to advertise just to create more awareness as to what the BDC is.
I made a bit of a joke the other day, that just for a couple of games, as an experiment, we had the BDC logo behind the net here in Ottawa. When Auston Matthews got his four goals, they were all in front of the BDC logo, so unaided, awareness spiked up in southern Ontario big time that week.
Second, we have a very well-visited website, BDC.ca, with about three million visitors per year. That's constantly being refreshed and updated. It's very catchy, and it tries to show a range of what we do. In the context of our new branding, I think it's a lot clearer than it was.
More importantly, to your question, we take a lot of steps locally to get word out. We're active with chambers of commerce across the country, and we're very active with the accountants, the lawyers, and the advisory network. We're constantly having open houses and things in our neighbourhoods, and the hope is that through the Rotary and Lions Clubs, etc., we're staying in touch with entrepreneurs so that we hear what matters to them, and we can refresh them with respect to the services we provide.
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I actually have an example that is the exact opposite of Mr. Ouellette's. Many of the credit unions in my area—and I've heard from some banks as well— often do more business now because your BDC will join in and take a certain amount where the traditional banks or credit unions aren't willing to invest. That co-operative approach, I think, ends up seeing a lot more products funded, so I would encourage you to continue that.
Again, I know it's always a bit dicey when you're talking about working with or against the banks; there's always a balance between the two.
You mentioned venture capital. A number of us visited Israel, and we heard from a gentleman who is renowned in Israel. He actually visits Canada quite often. He said something that stuck in my mind: “I would love to do something in Canada, but you guys make it so difficult.”
Is it because each province has its own set of rules when it comes to capital and those kinds of investments, which makes Canada's new venture capital ecosystem so difficult? When we're talking about attracting foreign direct investment, when we say “Canada”, it's a much different brand from, let's say, New Brunswick or British Columbia, etc.
Do you have any thoughts on some of these barriers to having people come in and invest in Canada?
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Thank you very much, Mr. Chair.
Thank you very much to the witnesses for joining us today.
I know more about the Business Development Bank of Canada and less about Export Development Canada. But I am somewhat aware of the work that the organization does.
I do not have a lot of questions for Mr. Denham because, as I said, I know the bank quite well; there is one in Rimouski, in my constituency. The BDC has an excellent reputation among business people. The bank is not in competition with other types of investments. It actually works in synergy with different groups, such as Canada Economic Development and Investissement Québec. I don’t have a lot to say to you except to congratulate you for your work and to hope that it continues.
My first question goes to Mr. Daignault and is about the new mandate that EDC received in budget 2015.
You did not talk about it a lot in your presentation. The mandate covers the work done in international development. In international development, we know that Canada has frozen its budgets for direct aid, for example, the aid intended for the Canadian International Development Agency, or CIDA.
However, there was an announcement about an initiative that will provide about $300 million in coming years, in order to establish a financial development institution that is supposed to help with investments in developing countries. I'd like to know your opinion on the integration of this new mandate with the one that EDC already has.
Mr. Denham, unfortunately I missed the BDC logo; I was busy watching Connor McDavid.
I am also on the industry committee, and one of the things we've been talking about there has to do with how manufacturing can succeed in some very difficult times around the world. One thing that was mentioned earlier was how to make sure that our businesses understand the opportunities that exist in other places, and that really becomes one of the critical components. Of course, included in that are research dollars, money that goes into universities and other research groups. When I was in Germany about three weeks ago with the science minister, it was interesting to find that, as far as Canada is concerned, we've been investing the same amount of dollars into our universities and research groups as Germany does on a per capita and GDP basis.
The issue is that we don't get businesses that are going to invest in conjunction with them. There are three critical components to this. The first is our geography, as it takes us six hours to fly from one side of our country to the other. The second is jurisdictions, as we have different provincial and territorial governments that seem to get in there, and that was raised earlier as a concern. The other is market access, of course. Germany is the draw. That's where people are going to come. When they look at us, they want to see how many other issues there are and whether they can get into the United States, and how they can get into a 300-, 400-, 500-, 600-, or 700-million-person market? These are the kinds of issues we have, and of course BDC and EDC work together to try to help businesses do that.
You mentioned the limited growth in the 10-year span from 2004 to 2014. I think we have to recognize that in 2008 and 2009 even the banks weren't lending to each other. There was a credit issue. Right now it's a confidence issue. We see that in Alberta, where I am from. There are concerns about the changes that are there. There is money available for the basic businesses that are working today, but there isn't that underlying capital pool that says, “I think that's where we want to go in the future.” Right now the critical mass is really in whether or not we can have that happen.
As an example, the Alberta government had a technology fund, which was designed so that the money would come in and go specifically to projects that were going to reduce greenhouse gases. Then, of course, we come up with the clean coal issue. Right now we have people, listening to politicians and so on, who drive by our coal plants in Alberta and say, “When did you shut that down?” Well, it's not shut down. You can't tell it's running. We have that kind of technology, which we should be selling around the world. Instead, we are tying our hands, because we are picking and choosing winners. How do you make sure that the investments you are putting into business are reflecting the realities of the world and not simply the ideas that we might have here in Canada at this moment?
I was in Calgary last week. It was Small Business Week, and I did a bit of a cross-country tour and spent a full day with a number of tech entrepreneurs in Calgary. I found it very heartening when later that week, the Calgary Chamber of Commerce hosted its event, which is a kind of small trade expo, a tech expo, and I think over 1,600 companies showed up to participate, which was a record. Even this week in the news, we saw that there are more start-ups now taking root in Calgary than there ever have been and frankly there are more than in many other regions in Canada, which, again, I think is tremendous. Your points remain valid, but I think we're starting to see some early-stage traction, which is good.
The angle we take with respect to your topic is more local and it relates to local ecosystems that basically are designed to create a flow of research and intellectual property from universities through to commercialization and, ultimately, export sales. There are a dozen or so incubators/accelerators across the country and we've chosen these based on research and, basically, have picked those that we think have the formula right. The role of these groups is to provide that connection. So they're meant to have porosity vis-à-vis the universities and research organizations. They're meant to be a conduit into which organizations like ours and others can invest venture capital.
One key thing, to get at your question, that really defines success is whether there is an anchor tenant to almost provide big company support and offtake for a lot of the ideas and people. The set-up here in Ottawa now is relatively healthy by global standards partly because of the beneficial effects of the role that Nortel and others played over the years.
One reason Kitchener-Waterloo is so robust is that BlackBerry and RIM have left a very positive legacy there. One of the reasons you have a nice sector in Montreal around life science is that big pharma has played a role there.
So there are some key ingredients that you need to make this flow from research and intellectual property through to commercialization work. They are related to venture capital, to the institutions themselves, but also to some corporations that play this role of creating demand for the ideas and also creating a nice flywheel in terms of talent as well, and that's where we're focused.
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Those things didn't come up, per se.
To take a step back, the starting point for the research is that we think it's very important for Canada, as a country, to have more of what we call mid-sized companies, those that are 100 employees plus, because those are highly correlated with more spending on R and D, more hiring, more international expansion, and more innovation. So the research is on how Canada is doing in that regard.
We started the research over the course of the 2000s and we found that we're at about two-thirds the level of the U.S. on a size-adjusted basis, and the gap is even bigger now.
We looked into examples of those companies that have actually grown to get to that threshold. What we found they had in common—and this is correlation not causation—is that they invest their top core productivity and they have operations in more than one jurisdiction, either more than one province or more than one country.
What didn't come out of that were the points you were making around regulation, tax, etc. That said, I do know that our entrepreneurs, the clients we have, value simplicity. One of the reasons that this AGS effort has been relatively well-received is the fact that it gives entrepreneurs simple access to multiple federal organizations, including EDC and ourselves. So simplicity matters. But I can't give you any perspective on the extent to which regulation, tax, etc. have been impediments.
Mr. Daignault, Mr. Denham, welcome to the committee. It is a great pleasure to have you here.
As my colleagues said, you are both doing essential work for our Canadian SMEs that export or that need funding.
I represent a riding in Quebec. Now, as we know, the Quebec economy is largely based on SMEs. I often hear SME representatives talk about funding, marketing products and developing markets. I fully agree when you said that entering into international agreements requires guidance for our SMEs. Indeed, a free-trade agreement provides access to a market, but it requires a lot of support. Having done this for 20 years of my life, I can tell you that getting into or expanding certain markets requires a lot of support, especially in emerging economies.
Could you tell me, from your respective fields, what more we could do in this regard in terms of programs in five or 10 years, so in the short, medium and long term, to help small and medium enterprises with funding, marketing and exporting?
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Thank you, Mr. Champagne, for your question.
The current environment is one where growth is slow and technologies significantly change the situation. The traditional business model—take Canadian company Nortel, for example, which has a local supply chain, produces locally and exports a finished product—will be less and less common. In fact, this trend will continue. I think that the supply chains will continue to fragment.
Which means that today, a small company that wants to take advantage of international opportunities rather than stick to a local company, must find a foreign company to sell its products and services. Obviously, everything related to support, market recognition and free-trade agreements makes a significant difference because it simplifies the work of the entrepreneurs.
As for knowing whether we currently have the capacity at EDC to meet this need, I would say that we have the flexibility to do so. We think we are able to serve these clients, even though the world is increasingly complex and we need to take action more and more quickly to stay relevant for these companies. But I think we can do it.
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Interestingly, on my last visit to our office up in Vaughan, I was hot on your heels. As I was entering the building, your colleague from downtown was leaving. They really appreciated your interest and your time. So thank you for popping by to visit us.
Your question relates to things that we see that are different across the regions and that could be worth reflecting on and learning from. I think the biggest differences we see across the regions do relate to two things. One is that with respect to our traditional lending business, we do find that Quebec is noteworthy in the sense that it has a lot of provincially focused sources of capital, be it Investissement Québec, La Caisse de dépôt, Fonds de solidarité, or others, all of which play a very useful role with respect to ensuring that liquidity is available within the province. We work closely with them.
The biggest differences we see regionally are more around venture capital and the different levels of maturity of the local ecosystems, if you don't mind my using that word again, across the regions. I think there's a lot we can all learn from those that are most successful in Vancouver or Kitchener-Waterloo most notably, and from some of the lessons learned. Canada can't have 85 or 90 successful incubators and accelerators to support tech firms. We just don't have the scale. We encourage folks to be quite thoughtful when picking spots, to make sure we have the right ingredients to make these work. I think we can learn a lot of good things from places like the Kitchener-Waterloo area, Vancouver, Montreal, and so on that we should be trying to learn from and extending to other regional areas.