FINA Committee Report

INTRODUCTION

As part of its fall 2016 pre-budget consultations, on 20, 21 and 22 September 2016, the House of Commons Standing Committee on Finance met with representatives from the regional offices of Canada’s six federal regional development agencies: the Atlantic Canada Opportunities Agency (ACOA); the Economic Development Agency of Canada for the Regions of Quebec (CED); the Federal Economic Development Agency for Southern Ontario (FedDev Ontario); the Federal Economic Development Initiative for Northern Ontario (FedNor); Western Economic Diversification Canada (WD); and the Canadian Northern Economic Development Agency (CanNor).

This report summarizes the presentations that these representatives made to the Committee, with a particular focus on the structures and roles of the federal regional development agencies, their budgets and programs, and their performance. It also describes the ways in which these agencies support businesses, as well as specific sectors, individuals and communities within Canada.

CANADA’S FEDERAL REGIONAL DEVELOPMENT AGENCIES

The federal regional development agencies spoke to the Committee about selected aspects of their structure, their budgets and programs, and their performance and that of the businesses that they support.

A. Structures and Roles

Regarding the changes to ACOA’s structure that require it to implement programs that the federal government has identified as being important, rather than the economic development programs that it has determined based on regional needs, ACOA – Nova Scotia, ACOA – Newfoundland and Labrador, ACOA – New Brunswick and ACOA – Prince Edward Island stated that their staff have not expressed concerns about ACOA’s new centralized structure. ACOA – New Brunswick said that stakeholders have had the opportunity to engage with the Minister of Innovation, Science and Economic Development, and that the Minister has largely adopted ACOA’s recommendations. ACOA – Newfoundland and Labrador indicated that the new structure seems to have improved ACOA’s ability to engage with the other federal regional development agencies, ultimately strengthening coordination among them and improving service to clients. ACOA – Nova Scotia emphasized that, with this new structure, ACOA is more aligned with the priorities within Innovation, Science and Economic Development Canada; thus, ACOA can develop a better understanding of these priorities.

CED commented on the closure of local development centres, explaining that it has been able to manage the repercussions of these closures, and that it is focusing on diversification in the affected communities. It added that reducing the number of organizations involved in providing funds to a project would simplify the financing process, but that partners with all of the required mandates and competencies would be required.

Regarding their roles in supporting the economies in the regions in which they operate, ACOA – Prince Edward Island, CanNor, CED and FedDev Ontario mentioned that they share the common goal of strengthening and developing the economies of – and fostering economic growth in – Canada’s provinces/territories. WD – Alberta, WD – Manitoba and WD – British Columbia said that WD has four programming priorities: innovation; trade and investment; Indigenous economic growth; and defence procurement.

ACOA – New Brunswick, ACOA – Prince Edward Island, ACOA – Nova Scotia and ACOA – Newfoundland and Labrador commented that they support innovative businesses, represent the interests of Canada’s Atlantic region in federal policy development, and enable economic growth through improved infrastructure, productivity and international business development. CED emphasized that it aims to help Quebec’s businesses expand, innovate and export in order to create high-quality jobs in the province.

According to FedDev Ontario, its role is to increase southern Ontario’s capacity for innovation, entrepreneurship and collaboration, as well as to promote the development of a diversified economy in Ontario’s southern region. It stated that it fulfills its mandate by providing funds and business services, delivering federal programs, bringing key stakeholders together and acting as a champion for southern Ontario. FedNor mentioned that it aims to create jobs, promote growth and strengthen northern Ontario’s economy through programming in three areas: community economic development; business growth and competitiveness; and innovation.

CanNor said that it helps Canada’s northern communities to take advantage of economic opportunities and to develop key economic sectors. It also suggested that it addresses barriers to economic growth at what it characterized as the foundational level: road and communication infrastructure; capacity building; and skills development.

FedNor and WD – British Columbia highlighted the importance of working collaboratively and cooperatively with all levels of government and First Nations partners to meet the needs of the regions in which they operate, and WD – British Columbia indicated that it could make greater efforts to ensure that its activities are complementary to those of the Province of British Columbia. ACOA – Nova Scotia pointed out that the federal regional development agencies share best practices and communicate with each other, although each agency is responsible for promoting the interests of – and strengthening the economies within – its specific region.

B. Budgets and Programs

In commenting on the federal regional development agencies’ budgets, ACOA – Nova Scotia explained that the funding that it provides to a specific project is often only a portion of the overall funding requirement; consequently, businesses either acquire additional financing from other sources or contribute the remaining capital themselves. ACOA – New Brunswick noted that about one third of its core budget is used for community development, with the remaining two thirds allocated to businesses. ACOA – Nova Scotia said that the amount of its budget has been fairly consistent in recent years and that, depending on the year, between 15% and 20% is directed to start-up businesses.

FedDev Ontario mentioned that it expected to allocate its core budget fully, with 65% being committed before 1 January 2016. FedNor outlined that about 75% of its budget is allocated to multi-year projects, with 25% being available each year for new applicants; CanNor highlighted that about 50% of its budget is earmarked for multi-year projects.

Regarding budgetary fluctuations, ACOA – New Brunswick noted that some programs have recently been implemented, but that they are temporary and will expire in 2017 or 2018. CED pointed out that the three-year budget for its Community Futures Development Corporations has not changed, but that it and these corporations have established a three-year joint fund, with $1 million, $1.5 million and $2 million to be used in the first, second and final years, respectively. FedDev Ontario emphasized that it was established more recently than the other federal regional development agencies, which have budgets that have been continually updated. According to it, fluctuations in its budget have been caused by changes in the focus of its programs.

ACOA – New Brunswick said that the 2014 federal budget announced temporary funding for the federal regional development agencies to enable them to process applications and fund projects that focus on the rehabilitation and improvement of community infrastructure across Canada.

In addition to the discussion of their budgets, the federal regional development agencies mentioned their region-specific programming, which is outlined in Table 1.

Table 1 – Selected Programs of the Federal Regional Development Agencies

Agency	Program
Atlantic Canada Opportunities Agency	- Business Development Program - Atlantic Innovation Fund - Innovative Communities Fund
Canadian Northern Economic Development Agency	- Inuit Learning and Development Project - Strategic Investments in Northern Economic Development Program - Strategic Partnership Initiative - Economic Development Initiative - Northern Aboriginal Economic Opportunities Program - Northern Projects Management Office - Northern Adult Basic Education Program - Centre for Northern Innovation and Mining
Economic Development Agency of Canada for the Regions of Quebec	- Quebec Economic Development Program
Federal Economic Development Agency for Southern Ontario	- Investing in Business Innovation - Investing in Business Growth and Productivity - Investing in Commercialization Partnership - Investing in Regional Diversification - Advanced Manufacturing Fund - Economic Development Initiative - Eastern Ontario Development Program
Federal Economic Development Initiative for Northern Ontario	- Northern Ontario Development Program
Western Economic Diversification Canada	- Western Innovation Initiative - Western Diversification Program - Western Canada Business Service Network - Economic Development Initiative - Francophone Economic Development Organizations

Sources:           Table prepared using information from: Atlantic Canada Opportunities Agency; Canada Economic Development for Quebec Regions; Canadian Northern Economic Development Agency; Federal Economic Development Agency for Southern Ontario; Federal Economic Development Initiative for Northern Ontario; and Western Economic Diversification Canada.

WD – Alberta, WD – British Columbia, WD – Manitoba, WD – Saskatchewan, CED and FedDev Ontario explained that they provide funding to their regional Community Futures programs, which provide business services – small business loans, tools and training – to rural residents who wish to start, expand or sell a business.

ACOA – New Brunswick, ACOA – Prince Edward Island, CED, FedDev Ontario, WD – Alberta, WD – British Columbia, WD – Manitoba, WD – Saskatchewan and CanNor indicated that they deliver the Canada 150 Community Infrastructure Program, which is part of Canada’s celebrations for the 150^th anniversary of Confederation.

ACOA – Nova Scotia, ACOA – New Brunswick, ACOA – Prince Edward Island and ACOA – Newfoundland and Labrador highlighted their support for the priorities outlined in the federal Atlantic Growth Strategy, and identified five priorities established by Atlantic Canada’s premiers that are the focus of ACOA’s programming: a skilled workforce and immigration; clean growth and climate change; trade and investment; innovation; and infrastructure.

According to CED, the Quebec Economic Development Program allows it to undertake business development and entrepreneurship support for start-up businesses and for commercialization, bring local stakeholders together and promote regional assets to support economic development, and target communities that are having difficulties in diversifying their economies. It said that it has awarded more than $1 billion in contributions and grants since the program was implemented in 2012.

CanNor said that its programming – particularly the Northern Adult Basic Education Program – is delivered primarily in Indigenous languages, but also in English. It described one of its initiatives as unique among the federal regional development agencies: the Northern Projects Management Office, which supports efficient and transparent environmental assessment processes in Canada’s North. As well, it indicated that the Strategic Investments in Northern Economic Development initiative, which is a cyclical program that is renewed every two years, is expiring.

C. Performance

Regarding the return on their investments, ACOA – New Brunswick, ACOA – Nova Scotia and CED said that labour productivity in the businesses that they support exceeds that in businesses that do not receive such support, and ACOA – New Brunswick added that the businesses that it supports also have higher sales growth and longevity than businesses that it does not support. CanNor noted that 79% of the Indigenous businesses that it has supported are still in operation, and ACOA – Nova Scotia mentioned that the return on every dollar that it invests in Nova Scotia is $5.40. WD – Alberta acknowledged that its return on investment should be tracked in some way.

FedDev Ontario highlighted that, since its establishment in 2009, it has committed more than $1.6 billion, which has generated more than $2.4 billion in additional funds for businesses. It provided the example of Ontario’s manufacturing sector, to which it has allocated $462 million; this investment has leveraged $1.76 billion for businesses in that sector.

In noting their ability to fund projects and achieve results using their current budgets, ACOA – Prince Edward Island, ACOA – Newfoundland and Labrador, ACOA – Nova Scotia and FedNor indicated that they are satisfied with the amount of their funding. However, CanNor and FedNor said that they receive many more applications than they can fund. ACOA – Newfoundland and Labrador, ACOA – Nova Scotia, FedNor and FedDev Ontario commented that more funding would allow them to support more projects. Similarly, WD – Alberta, WD – Manitoba and WD – British Columbia pointed out that their current budgets do not allow them to meet all of the demands for financing that they receive, and suggested that they would benefit from more funding. WD – British Columbia emphasized that its Western Innovation Initiative program is oversubscribed.

With respect to default rates, ACOA – Prince Edward Island said that the annual default rate in relation to its portfolio is between 4% and 5%, while CED stated that its rate is 3.9% of approved contributions. According to FedDev Ontario, its default rate is below 5%. It explained that, because it was established more recently than the other federal regional development agencies, many of the businesses that it has supported to date are not yet at the repayment stage in their financing.

Finally, regarding service standards, ACOA – Nova Scotia indicated that 90% of the applications that it receives are typically processed within its service standard of 75 business days, and it added that its account managers provide clients with both initial assistance and ongoing support. FedDev Ontario said that all of the applications that are submitted to it are dealt with in a transparent process between it and the applicant, with no third-party involvement, and that applicants can meet with one of its officers.

SUPPORTING BUSINESSES

In speaking about ways in which they support businesses in the regions in which they operate, the federal regional development agencies told the Committee about their efforts to: facilitate access to capital; promote international trade; support research, development, innovation and commercialization; and encourage diversification.

A. Access to Capital

According to FedNor, geographical remoteness may lead northern Ontario’s small and medium-sized businesses to experience challenges in accessing capital; investors often consider these businesses to be high risk, and may refuse to provide funding. WD – Saskatchewan explained that it provides Saskatchewan’s small and medium-sized businesses with capital to assist with their expansion into international markets. WD – Manitoba said that Manitoba’s innovators experience challenges in accessing capital, especially in order to grow beyond a medium size; the inability to grow hinders their expansion into markets other than the United States and limits their productivity.

In mentioning the importance of capital for innovation and commercialization, WD – Saskatchewan stated that some innovations in Saskatchewan cannot be commercialized because of a lack of capital. It highlighted a specific need for what it characterized as patient capital, suggesting that a three-year investment often does not provide sufficient time for innovations to be commercialized. WD – British Columbia also identified a lack of capital as a limit on commercialization; regarding efforts to attract venture capital, it noted both its work with venture capitalists and British Columbia’s network of angel investors, and the Province of British Columbia’s $100 million venture capital fund. ACOA – Nova Scotia attributed the Atlantic region’s recent success in attracting venture capital to the Atlantic Venture Forum initiative, which targets angel and other investors who have an interest in opportunities in Atlantic Canada.

In relation to foreign investment, WD – British Columbia mentioned HQ Vancouver, which is a joint initiative among it, the Province of British Columbia and the Business Council of British Columbia that aims to encourage businesses – especially Asian businesses – to establish their headquarters in Vancouver’s Lower Mainland. It described this initiative as often targeting wealthy individuals who do not necessarily have investments in Vancouver other than real estate.

According to WD – British Columbia, governments can be an important source of capital in British Columbia. In providing examples of projects in which government investments have been made, it cited the Site C Clean Energy Project on the Peace River, the port expansion in Prince Rupert and at the Roberts Bank container terminal, the T2 Project in Vancouver’s Lower Mainland, the Trans Mountain Pipeline expansion, and passenger transit, including the Massey Tunnel replacement and the Evergreen Line between Coquitlam and Vancouver.

B. International Trade

WD – Manitoba and WD – Saskatchewan explained that exports are important to the economies of Manitoba and Saskatchewan. WD – Alberta stated that Alberta is Canada’s third-largest agricultural and agri-food exporter, and that – if value is added prior to exportation – increased agricultural exports may offset some of the decrease in the value of the province’s oil and gas exports. WD – Manitoba said that Manitoba’s agricultural sector may be able to increase its exports, and it suggested that the province’s participation in the New West Partnership trade agreement will increase Manitoba’s trade with other provinces/territories.

WD – Saskatchewan indicated that Saskatchewan exports 86% of everything that it grows, which requires that infrastructure be in place – especially in the province’s northern region – to transport the province’s products. It noted that Saskatchewan’s most significant exports are crude petroleum oil, potash, canola seed, lentils, wheat, peas and uranium. As well, it remarked that advancements in the traditional agricultural sector, such as new crop varieties and more innovative farming technologies, have led to increases in the province’s exports. It also commented that, despite the dissolution of the Canadian Wheat Board, Saskatchewan’s wheat exports have grown significantly.

According to ACOA – Nova Scotia, it is important to increase the number of export-ready businesses in Nova Scotia’s traditional sectors, such as fisheries and agri-food; it mentioned that the province’s seafood exports have increased. As well, it suggested that specific attention should be paid to creating value-added products that would enable Nova Scotia’s businesses to pursue additional opportunities. ACOA – Prince Edward Island asserted that Prince Edward Island’s aerospace and advanced manufacturing sectors are responsible for 18% of the province’s exports, and that its food sector accounts for more than one-half of Prince Edward Island’s exports and 18% of its gross domestic product. It highlighted its work with the Province of Prince Edward Island and the Trade Team P.E.I. initiative, which aims to increase exports through trade missions and other activities.

WD – British Columbia explained that, while international trade agreements are important, British Columbia’s small and medium-sized businesses need coordinated export-readiness services. It cited Small Business B.C., which is funded by it, its Community Futures Development Corporations and the Province of British Columbia with the goal of helping small and medium-sized businesses to become more export-ready. It also noted that, with the Province of British Columbia’s Ministry of International Trade and Global Affairs Canada, it is involved in a regional trade network that seeks to coordinate trade promotion activities. WD – Saskatchewan stated that it does not have a dedicated program for trade and market expansion. It and WD – British Columbia said that only a small portion of their funding is allocated to helping small and medium-sized businesses to expand into international markets.

WD – Saskatchewan and WD – British Columbia commented that the United States is Saskatchewan’s and British Columbia’s largest international market. According to WD – Manitoba, aside from Winnipeg, the large markets that are the closest in proximity to Manitoba’s businesses are located in the U.S. Midwest. WD – Saskatchewan pointed out that, although most of Saskatchewan’s exports are destined for the United States, developing markets – including China and India – are growing in importance; however, it asserted that support from Global Affairs Canada would be needed in order to increase access to India’s market. Similarly, WD – Manitoba described China and Japan as key international markets, and WD – British Columbia indicated that – in 2015 – 52% of British Columbia’s exports were destined for the United States, with Asian markets representing 38% of the province’s exports. ACOA – Prince Edward Island suggested that Prince Edward Island should diversify its export markets in order to avoid an overreliance on the United States.

Regarding softwood lumber trade between Canada and the United States, and the potential consequences for Canada’s forest sector if the bilateral softwood lumber agreement that was signed in 2006 expires without renewal, WD – British Columbia, WD – Alberta, CED, FedNor and ACOA – New Brunswick said that the forest sector in a number of Canadian provinces could be negatively affected. CED particularly noted the difficulties that would be encountered if the sector’s workers in Quebec lose their jobs and require new employment.

CED and FedNor explained that the forest sectors in Quebec and Ontario would have to diversify and add more value to their lumber exports if the softwood lumber agreement between Canada and the United States expires without renewal, and stated that they are working with these sectors to that end. ACOA – New Brunswick commented that the low value of the Canadian dollar relative to that of the U.S. dollar might allow New Brunswick’s forest sector to remain competitive in the absence of a softwood lumber agreement with the United States.

C. Research, Development, Innovation and Commercialization

In focusing on research, ACOA – Prince Edward Island remarked that Prince Edward Island’s level of innovation is suboptimal, and that it is supporting food-related research and development in the province through the Food Island Partnership. ACOA – New Brunswick noted New Brunswick universities’ excellence in relation to health-related research, specifically cancer, predictive analytics and gene therapy. WD – Saskatchewan asserted that its efforts to improve access to capital, and to provide funding for research and development, are important for Saskatchewan to increase its value-added production.

Regarding partnerships designed to foster innovation and commercialization, ACOA – New Brunswick and FedDev Ontario emphasized their work in creating such partnerships, including among businesses, universities, research institutions and governments. ACOA – New Brunswick mentioned that the current or former heads of successful firms in the information and communication technology sector have acted as mentors for the new start-up ecosystem that is developing in this sector in New Brunswick. WD – British Columbia said that, through events like the Western Innovation Forum, it tries to match small and medium-sized businesses to contractors under Canada’s Industrial and Technological Benefits program so that these businesses can become defence procurement suppliers.

With respect to incubators and accelerators, ACOA – New Brunswick emphasized its support for New Brunswick’s start-up ecosystem of incubators, accelerators and research institutions. CED noted that, during consultations conducted in 2016, it was asked to support – among other things – technology and equipment modernization, incubators and accelerators. FedNor explained that Northern Ontario has innovation clusters emerging in such sectors as health care and green technology.

According to FedDev Ontario, nearly one half of Canada’s research and development occurs in Ontario, and the province has both the highest rate of university educational attainment in Canada and the country’s largest number of universities and colleges. ACOA – Nova Scotia pointed out that Nova Scotia has the most universities per capita and spoke about the province’s start-up ecosystem, specifically highlighting the information and communication technology, life sciences and ocean technology sectors as having the potential for growth and innovation.

D. Diversification

WD – British Columbia commented that British Columbia’s service sector is responsible for 76% of the province’s gross domestic product, and made particular mention of the finance, shipping, engineering, education, film production, tourism and high-technology sectors. It remarked that the economies of Vancouver’s Lower Mainland and the southern part of Vancouver Island are diversified when compared to the province’s natural resource–dependent rural communities.

CanNor stated that the public sector represents 30% of the three territories’ collective gross domestic product; the resource extraction sector accounts for 19%, and the construction, real estate and transportation sectors are responsible for the remainder.

According to CED, Quebec has three types of regional economies – resource-based, manufacturing and urban – and approximately 50% of the province’s gross domestic product is generated by small and medium-sized businesses.

Regarding the economic importance of the resource sectors in Western Canada, WD – Saskatchewan indicated that primary resource production is responsible for 27% of Saskatchewan’s gross domestic product, and that the province’s diversified economy has perhaps led it to be among the oil-producing provinces that have been the least affected by the recent decline in commodity prices. It said that Saskatchewan is Canada’s largest agri-food producer, and that the province’s traditional agricultural sector exists alongside value-added manufacturing, including food processing and agricultural equipment manufacturing.

WD – Manitoba suggested that, among Canada’s western provinces, Manitoba has the most diversified and least resource-dependent economy; no sector is responsible for more than 12% of the province’s gross domestic product. WD – British Columbia remarked that, when compared to the other western provinces, British Columbia seems to have been less affected by the recent decline in oil prices.

WD – British Columbia characterized British Columbia’s housing sector as a potential risk. It reported that the housing sector is responsible for between 35% and 40% of British Columbia’s recent gross domestic product growth; without this sector, growth would have been less than 2%, rather than 3%. It highlighted that high housing prices have negative impacts on investment in businesses, and mentioned that continuing to expand British Columbia’s economy will be challenging if housing prices continue to increase. It pointed out that the recent efforts to reduce demand in British Columbia’s housing markets – for example, the Property Transfer Tax that is applied on foreign entities and the Empty Homes Tax – might not yet have had any effects on those markets.

In noting that the economies of some communities are relatively dependent on a single resource sector, which can be problematic when commodity prices decline, FedNor asserted that northern Ontario’s economy has been negatively affected by downturns in the mining, steel and forest sectors. It indicated that the economies in single-sector communities are cyclical in nature, and that diversification should occur through the creation of new and innovative projects in non-traditional sectors. Similarly, CED emphasized the importance of diversification within communities that rely on a single sector, and said that it supports diversification by making investments that build on existing regional advantages and by helping single-sector communities to create a more diversified economy.

ACOA – Newfoundland and Labrador stated that Newfoundland and Labrador has traditionally relied on the fishery, mining and forest sectors, and was recently affected by the boom-and-bust cycle in the oil and gas sector. ACOA – Prince Edward Island emphasized the importance of helping traditional sectors, such as fisheries and agriculture, to transition from commodity-based sectors to diversified, value-added sectors. As well, it proposed diversification as a solution to the high levels of unemployment in Prince Edward Island.

SUPPORTING PARTICULAR SECTORS

During their appearance, the federal regional development agencies made comments to the Committee about the needs and challenges of specific sectors. In particular, they discussed: services, primarily tourism; manufacturing; resources, including oil and gas, mining and agriculture; and science and technology, including health research, ocean technology and clean technology.

A. Services

ACOA – Prince Edward Island explained that the tourism sector is responsible for 7% of Prince Edward Island’s gross domestic product and that, while the decrease in the value of the Canadian dollar relative to that of the U.S. dollar has resulted in more American visitors to the province, tourists from other countries are also needed in order for the sector to grow. It highlighted the Atlantic Canada Tourism Partnership, which is funded by it, the Province of Prince Edward Island and the province’s tourism sector with the goal of expanding tourism.

ACOA – New Brunswick stated that it co-funds projects with the Province of New Brunswick’s Department of Tourism, Heritage and Culture, and that one challenge is developing an experiential product to attract tourists to New Brunswick. Similarly, ACOA – Nova Scotia indicated that Nova Scotia’s foods and wines are being marketed to create a strong culinary tourism sector in the province.

According to ACOA – Newfoundland and Labrador, growth in Newfoundland and Labrador’s tourism sector is challenging because some of the sector’s businesses, such as hotels and car rental companies, cannot entirely meet the demand for their services during the peak tourist season but have little – if any – demand during off-peak periods. It commented that it is working with provincial and sectoral partners in an effort to expand Newfoundland and Labrador’s tourist season to include the spring and fall.

Regarding tourism in Canada’s territories, CanNor noted that specific tourism markets – such as viewing of the northern lights – have been increasingly successful. In particular, it observed that one reason for the expansion in the Northwest Territories’ tourism sector is a shift in focus to Chinese tourists, and that a large hotel has opened in Yellowknife to accommodate additional tourists.

With respect to Yukon, CanNor explained that the territory’s tourism sector is robust because of its history and culture, as well as expanding ecotourism and Indigenous tourism. It said that Yukon is also relatively accessible to tourists through its roads, the deep water port at Skagway and the Alaska Highway.

Regarding tourism in Nunavut, CanNor highlighted its funding of the Nunavut Arts and Crafts Association, which enabled local artists to sell their work to tourists arriving by cruise ships in Cambridge Bay. However, according to it, Nunavut’s tourism sector faces geographical and infrastructure challenges because the territory is harder to reach than some other areas in Canada’s North. As such, it is helping to provide community-based infrastructure that will support the territory’s tourism sector, and is working with Parks Canada to encourage tourism in Canada’s northern parks.

FedDev Ontario asserted that Ontario is experiencing a shift towards a service-oriented and knowledge-based economy, and that – in southern Ontario – the automotive and other manufacturing sectors are undergoing a transition.

B. Manufacturing

According to FedNor, northern Ontario tends to have fewer manufacturing businesses than the rest of Ontario, and proportionately fewer such businesses that export. ACOA – Prince Edward Island highlighted aerospace and advanced manufacturing as emerging sectors in Prince Edward Island. WD – British Columbia suggested that there is potential for British Columbia’s small and medium-sized businesses in the defence sector, which has led WD to prioritize support for defence procurement.

C. Resources

ACOA – Prince Edward Island said that, based on anecdotal comments, there are reasons to believe that the recent decline in energy prices has had negative effects on the manufacturing and professional services sectors in Prince Edward Island, although the actual effects of this decline on the province’s economy are unclear.

Similarly, ACOA – Newfoundland and Labrador explained that Newfoundland and Labrador has been negatively affected by the recent decline in energy prices; in the past, the oil sector was responsible for nearly one-third of the province’s revenue, but this proportion is now 9%. It indicated that fewer people are now travelling between Alberta or Ontario and Newfoundland and Labrador to work; consequently, Newfoundland and Labrador has greater access to skilled labour, which has been positive for infrastructure and mining projects in the province. It characterized Newfoundland and Labrador’s energy sector as having long-term potential, and highlighted the sector’s focus on hydroelectricity and offshore oil. It identified several factors on which the future of offshore oil development depends: attracting exploration; being competitive in terms of project development; and investing in innovative technology for Arctic and harsh marine environments.

WD – Alberta stated that Canada’s oil producers receive a lower price per barrel than do U.S. producers, and commented that capital investments in Alberta’s oil and gas sector declined by $50 billion annually over the 2014 to 2016 period. According to it, this sector would benefit from more diversified markets, a reduction in its environmental footprint and a greater volume of oil exported by pipelines. It said that it expects oil sands production to rise from 2015 levels, and described the efforts of Canada’s Oil Sands Innovation Alliance; the Alliance is bringing major Canadian oil sands producers together in order to develop new technologies. As well, it mentioned that no single sector will be able to replace Alberta’s oil and gas sector, which accounts for more than 20% of the province’s gross domestic product, and identified two main challenges for Alberta: diversifying its economy; and developing new technologies to improve the oil and gas sector’s environmental performance.

CanNor noted that, while there is oil in Canada’s North, extraction and transportation infrastructure is inadequate. It suggested that the North’s mining sector is experiencing slower growth than in recent years because of low commodity prices, and emphasized that the economies in Canada’s territories need to diversify, innovate and build on the region’s natural assets. It stated that a large base metal mine in Yukon will soon close, which will lead to a decline in the territory’s gross domestic product; however, other projects are beginning that will help offset the negative economic effects, including a gold project and a copper base metal project.

WD – Saskatchewan characterized the recent decline in commodity prices, especially those for oil and potash, as challenging for Saskatchewan; the oil and gas sector is responsible for 15% of the province’s gross domestic product, while resource production is responsible for 27%. It highlighted a recent merger in Saskatchewan’s potash sector, and commented that the province’s farmers have concerns about adequate competition among retailers of fertilizers and other nutrients. It also indicated that Saskatchewan’s economy could benefit from the mining of rare earth metals, such as zinc and gold, as well as from a potential new diamond mine. As well, it identified the possibility of diversification in Saskatchewan’s agricultural sector, and made particular mention of the Global Institute for Food Security, which invests in businesses in the agricultural-biological sector, and Ag-West Bio, which promotes Saskatchewan’s biotechnology sector internationally.

FedDev Ontario explained that energy prices are high in Ontario, which increases the cost of doing business in the province, but that these prices have not led businesses to leave southern Ontario. FedNor said that energy prices are relatively higher in the northern part of the province, and it observed that high energy costs are a concern for northern Ontario because the region’s major sectors have significant energy needs; often, these northern businesses cannot afford to take advantage of growth opportunities. According to it, northern Ontario’s mining sector has potential because of significant mineral resources and growing global demand for minerals. It described northern Ontario’s mining cluster as innovative and knowledgeable, and characterized the Ring of Fire development as a generational opportunity. It noted that northern Ontario’s agricultural sector is growing due to the affordability of land and longer growing seasons that enable the production of different crops.

While indicating that the issue of pipelines is outside of their mandate, ACOA – New Brunswick, ACOA – Prince Edward Island, FedDev Ontario and WD – Saskatchewan provided general comments about the Energy East pipeline project. ACOA – New Brunswick and ACOA – Nova Scotia suggested that the project could lead to opportunities, including jobs during construction and for ongoing operations. FedDev Ontario said that the project would be positive for Ontario, but mentioned that new construction jobs would be concentrated in Quebec. WD – Saskatchewan mentioned that the project would be beneficial to Saskatchewan in two respects: creating jobs; and exporting the province’s oil. WD – British Columbia asserted that there would be economic gains for Canada if oil could reach tidewater more easily, and pointed out that communities along the proposed pipeline’s route could benefit from these gains. It stated that some First Nations communities along the proposed route could benefit if certain barriers to their economic participation in such projects were removed.

Although not focused on the Energy East pipeline project specifically, WD – Alberta observed that limited pipeline capacity results in opportunities to increase the amount of oil transported by rail, and commented that pipeline projects should consider the environmental and social effects.

WD – Alberta, WD – British Columbia and WD – Saskatchewan indicated that Canada’s western provinces have been experiencing an economic downturn, especially because of challenges in the oil and gas sector that are a partial result of declining commodity prices. WD – British Columbia explained that, unless the federal government asks it to do so, it cannot implement community adjustment programs for communities affected by declining commodity prices or trade.

WD – British Columbia said that there is uncertainty in British Columbia’s forest sector for two reasons: a mountain pine beetle infestation that is reducing the amount of timber; and the expiration of the 2006 softwood lumber agreement between Canada and the United States. As well, it suggested that reduced demand for coal has had negative effects on British Columbia’s economy, and mentioned that it is working with the province’s mining companies in an effort to introduce small and medium-sized businesses into their supply chains with a view to improving efficiency and innovation.

D. Science and Technology

ACOA – Prince Edward Island identified the bioscience sector as being important for Prince Edward Island, and ACOA – New Brunswick emphasized its emerging knowledge sector. FedNor described the health research sector as an emerging sector that has potential but requires greater access to capital, while WD – Saskatchewan highlighted the Vaccine Infectious Disease Organization as part of Saskatchewan’s science and technology sector that is helping diversify the province’s economy.

ACOA – Nova Scotia noted the ocean sector’s growing importance in Nova Scotia; the sector employs 35,000 people and accounts for 12% of the province’s gross domestic product. ACOA – Newfoundland and Labrador also mentioned the ocean technology sector, in respect of which more than $30 million is spent annually on research and development in Newfoundland and Labrador.

WD – Alberta characterized the information and communication technology, nanotechnology, life sciences and pharmaceutical sectors as important emerging sectors for Alberta, and WD – Manitoba suggested that Manitoba’s cold weather is beneficial for the development of cold water testing facilities.

Regarding clean energy projects, WD – Saskatchewan and WD – British Columbia commented that the federal regional development agencies collectively have committed to doubling their overall funding for such projects, and WD – Saskatchewan observed that part of the funding for the Western Innovation Initiative will be devoted to clean technology projects in Canada’s western provinces. WD – Alberta explained that, since 2013, it has funded 29 clean technology projects valued at about $40 million; many of these technologies have the potential to be exported. CanNor said that, of the 60 applications it had received for clean technology projects, 11 received funding.

ACOA – Nova Scotia stated that businesses in some new sectors in Nova Scotia, such as clean technology, are increasing their international market share. It provided the example of Nova Scotia–based CarbonCure, which retrofits concrete plants with a technology that recycles carbon dioxide. FedNor highlighted the significant investments that Ontario’s forest sector is making in value-added forest products and in new clean technology, both of which are leading to operational improvements, job creation and business expansion.

ACOA – New Brunswick mentioned that there are significant global growth opportunities in clean technology in New Brunswick, and cited New Brunswick’s Smart Grid Innovation Network. ACOA – Prince Edward Island characterized Prince Edward Island as a world leader in renewable energy, and provided the examples of the Wind Energy Institute of Canada, which is located in Prince Edward Island, and Aspin Kemp & Associates, an ACOA-supported business that is a global leader in the development of power management and energy storage technologies for the marine, and oil and gas sectors.

ACOA – Nova Scotia highlighted the Cape Breton–based Membertou First Nation’s strong business foundation, and explained that the Nova Scotia Mi’kmaq Energy Innovation Summit will be hosted in Cape Breton.

WD – British Columbia stated that, along with Indigenous and Northern Affairs Canada, it supports clean technology projects through the British Columbia Indigenous Clean Energy Initiative. WD – Alberta mentioned its involvement in a project that, through a process called biomethanization, converts garbage into useable fuel products. According to it, the environmental sector – which includes businesses involved in land remediation, climate change mitigation, water treatment and waste management – is an important sector in Alberta. WD – Manitoba cited Manitoba’s emerging bio-composites sector, which converts agricultural waste into bio-fibre materials that are used by the manufacturing sector.

WD – Saskatchewan said that Saskatchewan is a leader in innovation linked to traditional sectors, and mentioned the province’s agriculture biotechnology and energy clusters, as well as its carbon capture and storage sector. Regarding carbon capture and storage technology, it described the technology used at the Boundary Dam Unit 3, and noted the potential to export this technology, particularly to China.

CED outlined that some of its programs support businesses focused on the electrification of transportation infrastructure, including in Quebec.

SUPPORTING SPECIFIC GROUPS AND COMMUNITIES

The federal regional development agencies informed the Committee of their support for specific groups and communities, including Indigenous peoples, workers, and areas with limited connectivity and other infrastructure.

A. Indigenous Peoples

Regarding its involvement with Indigenous peoples, WD – Saskatchewan highlighted that Saskatchewan’s Indigenous population of 178,000 individuals represents 15.6% of the province’s 1.14 million residents. It emphasized the importance of working with Saskatchewan’s Indigenous peoples and communities to improve their economic outcomes, which results in community and social benefits. It also mentioned its support for Indigenous skills training and economic growth, which is designed both to increase Indigenous peoples’ labour market participation and to improve living standards in Saskatchewan. As well, it described the significant socio-economic gaps between Saskatchewan’s Indigenous and non-Indigenous populations, and it stated that it attempts to adopt what it characterized as an Indigenous lens for much of its work.

WD – British Columbia commented that it has worked with Indigenous communities to support skills development and entrepreneurial training so that their residents and businesses are better able to participate in British Columbia’s economy. It suggested that initiatives and projects that are designed to enhance economic development must meet Indigenous environmental and cultural standards. WD – Manitoba described Manitoba’s Indigenous population as being younger than the province’s non-Indigenous residents, and pointed out that this young population requires assistance to become fully integrated into the provincial workforce.

WD – Manitoba observed that labour shortages in Manitoba are being addressed in partnership with Indigenous training providers, and WD – British Columbia noted that it has been working to promote skills development and entrepreneurial training for Indigenous individuals. It indicated that it has funded a variety of mobile trades training trailers, which attempt to take training directly to British Columbia’s First Nations youth and communities.

ACOA – Newfoundland and Labrador said that it is working with Indigenous peoples to build business capacity, assist in business planning and mentoring, improve community-based infrastructure, and ensure the existence of infrastructure for industrial development. It explained that, because of a substantial Indigenous population, much of its programming in Labrador is focused on Indigenous communities. ACOA – Nova Scotia highlighted its work with the Mi’kmaw Economic Benefits Office, which it funds in order to ensure that best practices are shared among Indigenous communities, and that these communities have the skills and labour that are needed to benefit from major projects.

Similarly, FedNor asserted that Ontario’s Indigenous population is young and is growing quickly, and that contributions by Indigenous youth will be important to the success of the province’s economy. It commented that it helps northern Ontario’s 110 Indigenous communities by supporting strategic planning, as well as by establishing economic development offices, incubator malls and community infrastructure, including airports in remote communities.

FedNor suggested that Indigenous communities prefer to negotiate resource extraction agreements themselves, and it noted that Indigenous and Northern Affairs Canada provides Indigenous groups with funding for these kinds of processes.

In mentioning Indigenous land use, CanNor pointed out that land use and ownership in Nunavut had to be considered when Indigenous and Northern Affairs Canada was developing a process by which the staking of claims could occur electronically. It emphasized that work is required with the Nunavut Planning Commission regarding the Nunavut Land Use Plan, and highlighted caribou protection as a continuing concern for the Inuit because the moratorium on hunting the species is infringing on Indigenous rights in some ways. It also cited the need to incorporate both more traditional knowledge and an evidence-based approach into protecting caribou.

Regarding project funding and loans provided to Indigenous communities, ACOA – Newfoundland and Labrador explained that it considers Indigenous projects along with all others when it is undertaking its operational planning and budgeting. ACOA – Nova Scotia indicated that its support for Indigenous projects totalled $1.9 million last year, ACOA – Prince Edward Island said that it is currently reviewing eight Indigenous projects, and ACOA – Newfoundland and Labrador stated that – over the last five years – it has funded 66 projects with Indigenous communities totalling just under $9 million.

WD – Saskatchewan reported that, in 2015–2016, it provided 101 loans to support Indigenous economic development, while WD – Manitoba remarked that it has provided 55 loans totalling $2 million to projects in Manitoba’s Indigenous communities, thereby creating and maintaining 226 long-term jobs.

FedNor commented that it has funded more than 111 projects with Indigenous communities, while CED said that it has recently implemented 19 projects with Indigenous groups totalling $7 million, leading to the creation of between 70 and 77 jobs focused on tourism in northern Quebec.

WD – Alberta pointed out that almost 15% of Canada’s Indigenous peoples live in Alberta, and it indicated that it provides indirect support to Indigenous peoples and their communities through Treaty 7 Community Futures. WD – Saskatchewan noted that, in 2015–2016, 450 of the 3,444 clients served by its 12 Community Futures Development Corporations were Indigenous. It mentioned two Community Futures Development Corporations in particular: Beaver River, where 219 jobs were created over the past year through 103 loans totalling $4.2 million; and Visions North, where 13 loans valued at $767,000 led to the creation of seven jobs.

According to WD – Saskatchewan, one in six projects that it approved for the first intake of Canada 150 Community Infrastructure Program applications were in Saskatchewan’s Indigenous and northern communities. CED said that it had received applications for 67 projects from Indigenous communities as part of this program.

WD – Saskatchewan also indicated that it funds the Aboriginal Business Service Network, and reported that – between 2015 and 2016 – 113 businesses were created, maintained or expanded, 64 jobs were created or maintained, and 62 business training sessions involving 163 participants were held.

B. Workers

Regarding regional unemployment, FedNor remarked that northern Ontario’s unemployment rate varies between 8% and 11%, depending on the community. WD – Alberta commented that, at 8.4%, Alberta’s unemployment rate is above the national average and has nearly doubled in the past two years. WD – Saskatchewan noted that, although Saskatchewan’s unemployment rate – at 6.3% – was below the national average in 2016, this rate was lower before the recent decline in oil prices; it was 3.8% in 2014. WD – British Columbia explained that British Columbia’s unemployment rate is about 6%, and that there has been employment growth in Vancouver’s Lower Mainland and the southern region of Vancouver Island; the unemployment rate has been rising in other areas of British Columbia.

While WD – Manitoba stated that – in 2015 – Manitoba had one of Canada’s highest employment growth rates and one of its lowest unemployment rates, and that the province’s economic growth rate is expected to be higher than the Canadian average in future years, it acknowledged that the regions of the province that have higher-than-average unemployment may have such challenges as low socio-economic status, isolation and a lack of employment options. In describing ways in which it has tried to address these challenges, it identified its involvement in: the environmental aerospace testing facility in Thompson; the University College of the North; its Community Futures Development Corporation; and the Northern Manitoba Sector Council, which delivers skills training for the mining sector. It also mentioned its activities designed to reduce the economic impact resulting from the closure of the Port of Churchill, and it pointed out that federal involvement will be needed in the development of a long-term plan for this community.

Regarding shortages of skilled labour, and the importance of attracting and retaining a skilled workforce, ACOA – New Brunswick said that a mismatch between skills and available jobs in New Brunswick is complicated by the seasonality of the province’s employment. WD – British Columbia noted that British Columbia is experiencing a growing skilled labour shortage, while FedNor stated that employers in northern Ontario are having difficulties in accessing skilled labour because of vast geography and sparse population. CanNor explained that Canada’s North continues to have a significant shortage of skilled professionals; one half of the North’s working-age residents, and one-quarter of Nunavut’s residents, have a grade 12 education, which leads employers to rely on fly-in, fly-out workers.

ACOA – Prince Edward Island asserted that Prince Edward Island’s tourism sector has difficulties accessing labour because it needs workers at the same time as employers in the farm and fish plant sectors. WD – British Columbia observed that British Columbia’s technology sector is experiencing a skilled labour shortage, although not in relation to workers with engineering and mathematical skills. It suggested that businesses in British Columbia’s technology sector are having difficulties attracting workers with marketing, management and executive-type skills.

ACOA – Prince Edward Island, ACOA – New Brunswick and CED highlighted that an aging labour force is leading to labour shortages in Prince Edward Island, New Brunswick and Quebec. WD – Manitoba identified outmigration of Manitoba’s residents to other provinces in search of higher wages and more diverse employment options as a factor that is contributing to the province’s skilled and unskilled labour shortages, while CanNor said that those who are born in Canada’s North tend to continue to reside there. CED identified a lack of what it characterized as entrepreneurial carry-over as a factor that is contributing to skilled labour shortages in some regions of Quebec.

CED and ACOA – Prince Edward Island highlighted the importance of retaining youth in Quebec and Prince Edward Island, with ACOA – Prince Edward Island noting that support for economic growth is one way in which to retain young people; it made particular mention of Prince Edward Island’s start-up businesses. Similarly, ACOA – New Brunswick suggested that issues relating to New Brunswick’s aging labour force might be resolved by helping small and medium-sized businesses to expand and create jobs; then, workers would have an incentive to remain in the province and the presence of jobs would encourage immigrants to settle there.

Regarding immigration, ACOA – New Brunswick referenced its Atlantic Growth Strategy, which includes a pilot program to attract 2,000 primary immigrants to meet specific skill needs. ACOA – Prince Edward Island highlighted its work in three areas: with the Greater Charlottetown Area Chamber of Commerce, the University of Prince Edward Island and Holland College to recruit international students; with third parties that provide retention and settlement services for entrepreneurs; and with foreigners seeking to invest – and often live – in Prince Edward Island. It also referred to P.E.I. Connectors, a program that it administers with the Greater Charlottetown Area Chamber of Commerce; the program’s goal is to match possible foreign investors with partners in Prince Edward Island.

WD – Manitoba also advocated immigration as a means of alleviating specific skilled labour shortages in Manitoba, and it outlined its work with the province’s post-secondary institutions and the Province of Manitoba to address the skilled labour shortages being experienced by StandardAero and Magellan. It also described its partnership with businesses and Indigenous training providers designed to address labour shortages, and provided the example of the Neeginan aerospace training centre, which provides training that is tailored to local business needs. Regarding training initiatives in British Columbia, WD – British Columbia said that it can provide capital for such initiatives, but cannot provide training itself.

C. Connectivity and Other Infrastructure

Regarding connectivity and other infrastructure, FedNor indicated that northern Ontario’s sparsely-populated geography leads to gaps in broadband access, as well as transportation and other infrastructure challenges. It commented that 29 of northern Ontario’s Indigenous communities are accessible only by air or by winter road and, regarding connectivity, it noted that it has historically funded broadband development across northern Ontario; however, the federal government recently announced a new broadband program, and it does not wish to duplicate any of those efforts. FedDev Ontario identified challenges with broadband coverage in certain parts of southern Ontario, but suggested that the federal budget would include measures to address these challenges.

According to CanNor, like northern Ontario, Canada’s North is sparsely populated; it has 40% of the country’s land mass and its 75 communities are inhabited by a young population of 119,000 people, 49% of whom live in one of the capital cities in Canada’s three territories. It explained that northern Canada lacks connectivity; however, it pointed out that the situation differs across the territories, with Yukon having fairly efficient communications capacity through its land-based fibre network and the southern part of the Northwest Territories being better connected than the territory’s northern part, which – like Nunavut – is served by satellite. It also drew attention to studies that it has conducted with Innovation, Science and Economic Development Canada that are aimed at understanding the connectivity challenges in Canada’s North. It stated that the Arctic Fibre project may help to bring connectivity to northern Canada, but said that this project – which is expensive and was proposed several years ago – faces competition from other projects and connectivity solutions.

CanNor characterized the infrastructure deficit in Canada’s North as a fundamental barrier to economic growth. Regarding road infrastructure, it suggested that some of Canada’s territories have a road network that is larger than that in other territories; for example, all of Yukon’s communities except one are connected by road, there is a road network in the southern part of the Northwest Territories but no roads in the territory’s northern part, and there are no roads in Nunavut. However, it mentioned that there is interest in three road corridors in the Northwest Territories: one road would extend up the Mackenzie Valley, connecting Yellowknife to Inuvik and Tuktoyaktuk; one road would connect Whati and a mining project with an all-weather road; and one road would connect the Coronation Gulf down to the road network on the east side of the Northwest Territories. It asserted that these corridors would be transformative for the Northwest Territories’ economy.