[Recorded by Electronic Apparatus]
Wednesday, May 3, 1995
.1537 
[English]
The Chairman: I call the meeting to order. Welcome to you, Mr. Axworthy, and also Ms Smith and Ms Flumian. I understand, Mr. Axworthy, those are the people who have joined you today at the table.
Today, ladies and gentlemen, we're considering the main estimates for 1995-96, votes 1 and 5 under Western Economic Diversification. The other thing I would like to do at the same time - presuming there is unanimous consent, and I believe there is - pursuant to Standing Order 81(7), is to also proceed to consider the departmental outlook document. Is that agreed?
Some hon. members: Agreed.
The Chairman: Mr. Axworthy, that saves you another visit. I'm not sure you realize the ramifications of that motion.
Hon. Lloyd Axworthy (Minister of Human Resources Development and Minister of Western Economic Diversification): Yes.
[Translation]
Mr. Leroux (Richmond - Wolfe): Too bad.
[English]
The Chairman: So if there are no preliminary matters, the floor is yours, sir.
Mr. Axworthy: Thank you, Mr. Chairman. I'd be happy to come back if that were required, just for the pleasure of your company, but I admire your efficiency in combining this all into one.
The Chairman: This is a very efficient committee; this is the industry committee.
Mr. Axworthy: I'll take a few minutes to both deal with the spending estimates by giving you a little sense of the directions we've established and then talk a little bit about the initiatives we see in future.
As I pointed out to the committee last year when I appeared, in 1993 when we took office we began to establish some fundamental new directions for Western Economic Diversification. One was to focus on the small business emphasis, which would mean we would restrict our repayable loans only to companies with 50 or fewer employees, and that we would also work with the four provinces and industry in the western region to develop broad-based, strategic collaborations, partnerships, and arrangements that would allow us to get the best efficiencies by working together, as opposed to being fragmented.
I think we've had some very useful success in those areas. To give you some examples, we were able to work with about 100 small companies in western Canada that deal in the food and beverage value-added processing area. They've come together in an association called Food Beverage Canada, where they combine their efforts to develop a marketplace in the United States, primarily the western United States, by meeting various quality tests, promotion and development. We provided them with short-term assistance to get them up and running, but they are now working in a complete and cooperative way across the western region.
.1540
We've also worked very closely with the Canadian Exporters' Association to establish a western office, which they just did in Calgary, Mr. McClelland, about a month ago.
In cooperation with the Canadian Exporters' Association, we have initiated what we call the international trade personnel program, which provides assistance to small business with an export orientation to hire recent graduates of colleges and universities to work on export promotion and development. In effect, it's an internship program with small business to help our young people coming out of school with their new skills and fresh ideas get oriented toward export development. So we'll provide support for internship projects.
We've already signed two agreements. Two firms in Alberta have agreed to start. We only announced that about two or three weeks ago, but it's up and running. We've had a terrific response from the members of the Canadian Exporters' Association and small business.
Not only does it provide these young people with an experience that is very important for developing their ultimate career in export promotion and development, it's also of some importance to the companies themselves. As you know, for smaller firms to break into export markets there has to be a lot of front-end time. You just don't buy a trip to Mexico City and land at the airport and sign a contract. It takes some real development time.
I was interested to learn, at the Canadian Exporters' Association meeting I attended in Calgary, that Canadians have a very good record in achieving contracts given by the World Bank and other organizations, but we have very few Canadian firms competing for them. One of the reasons is that many of our small and medium-sized firms simply don't have enough people on staff to allow them to do the front-end development work to get the project in place. We believe our internship programs will be able to help those firms to develop that kind of capacity.
We also have worked very diligently - I want to give credit to the deputy minister, Janet Smith, who was the chief initiator - in developing a tourism alliance for western and northern Canada. That's an eighteen-partner alliance for cooperative international marketing. We brought together transportation firms, tourism firms, the provincial governments, and ourselves to work on an agreement in which we would combine efforts to develop international marketing programs, particularly in the areas of ecotourism, aboriginal tourism, and northern-based tourism.
In addition to the general tourism, we are now working on a computer program whereby we would be able to use the Internet and information systems around the world to provide people with information about combining integrated tourism packages in western Canada.
We also worked on developing what I think is a very interesting program with a firm called Northstar out of Vancouver. They made a proposal about the need for export financing in western Canada. They said that one of the real problems we had was getting financing for small firms. So we've worked with them in collaboration with the provincial governments and the banks to provide them with commercial financing to small export businesses. We provided them with a grant for front-end administrative costs.
They've now been able to provide a capital pool of about $30 million for export financing of small business in western Canada, and have developed a number of clients since that time.
I just give you those by way of an illustration of the sorts of things we're trying to work in in a pan-western way, if you like, as part of our mandate to develop the collaborative partnerships with the business sector in the provinces for approaching these areas.
In this past year, we also undertook to provide for closure on a number of outstanding issues that we inherited from past governments. For example, we were able to finally negotiate an agreement as part of the South Moresby deal that the previous government put together in which we would provide a community-based economic development plan of $32.2 million in that area. That finally completes the South Moresby agreement.
What's interesting about it, and is worth pointing out, is that it is a community - I think members of the Reform Party would know this, because one of their colleagues represents that area - in which both aboriginals and whites had been in real conflict over the South Moresby proposal for a long time. This economic development agreement is a full partnership for those communities in developing joint projects for the economic development of the island itself and to maintain and develop enhanced cooperative ventures in that region. So we were able to complete that, as well as the small craft harbour at Sandspit.
.1545
We also completed the previous government's commitments on New Flyer Coach, which is the bus company from Winnipeg. That was a commitment that had not been closed by the time we took over, but for which we were able to provide closure. We did the same thing in the province of Alberta with Newness Company which is a logging machine company, and in Saskatoon we've been working with them on the development of pasta plants.
One other initiative we took that I think responds again to some very strong demands that we received was the establishment of a network of women's enterprise centres across western Canada. They are devoted primarily to providing business information, advice, and revolving loan funds for women who want to start their own small businesses. It's an initiative that had been strongly recommended by a number of business organizations and groups, and I think the recent report we received from the CFIB pointed out that women still have real difficulties and handicaps in receiving lending from financial institutions.
I believe this network, which will be fully operational by the summer in the four major centres across western Canada, provides an enormous assistance. By the way, as our figures show, women in small business are probably the most active entrepreneurs in Canada, have the highest level of success, and are most anxious and interested in developing their own small businesses. We believe these small business centres will provide the kind of support system that will enable them to develop further activities.
With respect to the budget and the way it affects our estimates, as members probably know, having carefully perused the books - you probably spent all evening doing that - in 1995-96 our grants and contributions will be reduced by 31%; in the following year by 51%; and in 1997-98 by 87%.
In other words, the draw upon the Consolidated Revenue Fund will be reduced by 87%. Beginning in 1996-97, we will then draw increasingly upon the revenues collected as a result of our repayable loans that have been established. So in effect, by 1996-97 we'll be collecting about $70 million in repayments. So in effect, we'll be virtually self-financing at that time, with only about a $25 million draw on the CRF from the present level of over $200 million. So it can demonstrate that the agency itself will in fact become in large part master or mistress in its own house as far as financing is concerned.
Speaking of that, Mr. Chairman, I want in particular to say that taking into account this new climate I described and the direction set out in the budget, we are now initiating a second major phase of change in the operation of western economic diversification.
The first thing we will be doing is getting out of the direct lending business. It's probably the first regional agency that has initiated that. What we will now be doing, rather than giving direct or repayable loans to individual firms, is using our funds to provide investment capital funds in western Canada, targeted or tailored to specific gaps in the capital market for small business.
That means we will use our money for leverage to provide, through banks, through the Farm Credit Corporation, and through the credit unions, new capital investment pools. Our money will provide more patient money, meaning that the money can stretch out a little longer, that we can reduce the risk level, and that we can provide the stimulus for the private sector to become the major initiator in these areas.
That means the lending will be done by private institutions. WD officers will help small businesses prepare their applications and develop their projects, but the due diligence and the lending will be done privately through the private sector initiative.
I can indicate to you that we have reached in principle already, even though we just announced this about a month ago, an agreement with the Royal Bank to establish a capital investment fund for agro-biotechnology in western Canada of about $35 million of capital.
We have a negotiation under way with about four or five other private sector lenders in areas like tourism, knowledge industries, and so forth, whereby we provide the leverage money, they provide the broad capital, they will do the lending, and we will fill in the capital gap that we identified very much within it.
If I could, Mr. Chairman, I want to pay tribute to some of our colleagues. We set up a committee of our caucus to look at the business interests in western Canada, chaired by Morris Bodnar, the member of Parliament for Saskatoon. A number of the initiatives we're putting forward are based upon the very broad-based consultation they did during the past year.
.1550
In addition to this new investment fund program, which I think is quite exciting, frankly, because it really demonstrated a new partnership arrangement with the private sector, we've also taken over responsibility from another department, which I have association with, for the community futures programs in western Canada. That means the 79 community futures groups.
The local community economic development groups will now come under the aegis of Western Economic Diversification so that we can begin providing, in partnership or collaboration with these new investment funds, a new network of rural-based economic development funds in western Canada, so that they will now be able to provide, through that existing network, a new capital source and a new network of business services. If I can just go ahead for a minute, we are also consolidating and rationalizing federal business advisory services in western Canada into one big consolidated network.
So the Canadian business centres operated in the major centres in western Canada will coordinate their activities now between the Canada business centres, women's enterprise centres and the community futures groups, so that in the rural areas they will now have the same full access of information and support for small business as we provide in the larger cities through the community futures groups. We are now undertaking a major consultation with the community futures activists or organizers in western Canada to bring that about.
A third area that is very important is to provide, as the department has always done, some initiative and leadership to respond to problems and initiatives in western Canada. We are presently working and developing a memorandum of agreement with the Canadian Space Agency by which we will be able to assure full participation of western Canadian firms in the new Canadian space program. That memorandum of agreement will give us the full access to their information and ensure our procurement.
We are also working with the private sector, the military and others to establish a new consortium on aerospace training in western Canada that will provide opportunities particularly in the export market for aerospace training, which is a very broad one. As you know, NATO and many Asian countries are now in the market for new aerospace training opportunities.
We brought together the major aerospace companies, the military and others to work out a new consortium that will be primarily centred in Manitoba and Saskatchewan, although we're quite happy to have CAE in Alberta fully involved to provide that kind of opportunity.
The adviser group will be reporting back to me by the end of June, and I can indicate already that there's been a number of initiatives coming out of this particular aerospace training initiative that I believe will result in very tangible benefits in a very short period of time in terms of substantially enhancing western Canada as a source of training opportunities in the international global field.
So that, again, will strengthen the sort of role we can play in ensuring that western Canadian interests are represented at the cabinet level, within the government apparatus, and provide a way of bringing together the various players in western Canada when we face other problems.
Finally, Mr. Chairman, in anticipation of questions, members may notice that while I said there is substantial reduction in our grants and contributions over the next four years, the estimates show an increase. Of course, as everybody would know who read them, that is caused primarily because we are also administering the infrastructure program in western Canada. We are the lead agency for the infrastructure program that spent just over $520 million in western Canada and created about 25,000 jobs from our estimates.
So we will continue to be the major initiator of infrastructure activity, and that's why it's reflected in our estimates as an increase, but in fact it simply reflects that 1995-96, as you know, will be the major activity year for infrastructure programming and that's why estimates reflect that kind of program.
In conclusion, Mr. Chairman, we are clearly announced on some new territory for a regional development agency. We think that the new investment funds, the new emphasis on rural development, the enterprise centres for women and the new collaboration of strategic initiatives across western Canada will place us properly, as we should be, to facilitate things happening, set a proper economic framework and provide those resources that are necessary to stimulate economic activity, as opposed to trying to replace economic activity.
.1555
The Chairman: It's interesting that when you come from Atlantic Canada and you hear about Western Diversification.... We had ACOA here yesterday, and it was interesting to see some of the similarities. But obviously it's interesting to watch the diversity of Canada and some of the changes that are more germane to western Canada and what's working out there. But I think it provides us with some interesting comparisons and some things that work. I know that Mr. Dingwall is looking at things that are working out west that might work in the east.
Mr. Leroux, I guess you're leading things off this afternoon.
[Translation]
Mr. Leroux: Mr. Axworthy, first of all, I want to say that, in these new directions that economic development is taking, the will to diversify, to consider the new economy and to use all possible means at our disposal to ensure economic development are all clearly apparent. That was very clear in the presentations we heard yesterday and today.
Having heard this presentation on the broad orientations of economic development, going from the general to the particular, I would now like to ask you for some specific details. In the context of these new directions, among other things, we see that Western economic diversification will be taking over responsibility from Human Resource Development Canada for the Community Futures Program, with reduced funding.
I would like to know more about this change; what is the mechanism, who will administer the program, and what will the decision-making process be, in order to see, as I said, what this means in concrete terms. We have now been introduced to the broad new directions, we know the new language that is being used, and the will that has been expressed. We would like to know what it means in concrete terms: who has priority, what is the chain of command, what are the decision - making processes, who will intervene, what are the mechanisms, etc.?
[English]
Mr. Axworthy: Just to backtrack a little bit, the Community Futures program was originally an initiative of Human Resources Development. But in going to the program review last year, we concluded that, because its orientation was primarily toward economic development purposes, and because as Minister of Human Resources I was trying to simplify my own department so we can focus primarily on the job training and employment development areas, we felt it was more useful to transfer responsibility for Community Futures to the regional economic agencies.
So FORD-Q, in this case, will take on this responsibility in Quebec. There's Western Economic Development, ACOA, and so forth. In Ontario, it's FedNor and the Department of Industry in southern Ontario.
The purpose is that we can then get some synergy or critical mass of economic development in the non-urban areas. Rather than having fragmented, separate departments working in individual areas, by bringing Community Futures under our economic development agencies, as I pointed out, we could now combine those with the business information centres. We can set up a network of business information that has previously been given to centres located in Vancouver, Calgary and Edmonton. We can now have that network extended out to the rural are as well, using Community Futures as a source of that kind of business advice, consultation and information.
Again, I'll just speak from my own experience. I've described to you the new investment fund program we're starting on in which we're going to leverage private capital for economic development purposes. We can negotiate that with credit unions so that this private capital could be available to the Community Futures groups. They would have access to that capital source, which they didn't have before.
In other words, we can get some combined and integrated strength from having Community Futures under the development agencies as opposed to under Human Resources. So we've already taken responsibility for them as of April 1. I think FORD-Q has already initiated that. ACOA is doing it. By the summer, all the Community Futures programming will be under regional development agencies and the Department of Industry.
[Translation]
Mr. Leroux: I am still trying to find out what concrete role the Department of Western Economic Diversification will be playing, exactly, with a reduced budget. You say that WD will continue to work with the provinces and with industry in order to focus resources and growth possibilities.
.1600
The budget statement indicated that you wanted to avoid the duplication inherent in the system by attempting to centralize or to conclude agreements with other departments.
Can you tell us how you are working to eliminate overlap and duplication through concrete mechanisms and programs that currently exist in each Western province; you might also tell us about your links with other departments which spend money in the West on development or other initiatives. Will there be concrete co-operation that will take the form of signed agreements, or some other mechanism?
How will this be done? How will you proceed, in concrete terms, so that there is a leader, and so that WD becomes a catalyst for development? In other words, what concrete mechanisms will you be putting in place?
[English]
Mr. Axworthy: Mr. Chairman, last year, just really at the beginning of our mandate, I had two separate meetings with provincial economic development ministers where we discussed those areas where we would want to collaborate and co-operate on jointly. We signed a general framework agreement with the four provinces that set out a series of objectives and principles.
Since then we have now been working on specific MOUs. Tourism is a good example of that, and I indicated in my remarks that we now have a tourism alliance in the four western provinces and the territories to work together on joint marketing programs.
I also indicated we're negotiating an MOU for the Canadian Space Agency that will ensure that procurements and activities in these areas will proceed.
We are negotiating a science and technology MOU with the four provinces, again so we could ensure that we don't duplicate expenditures in that crucial area. As soon as our own science and technology review is tabled we would then be able to finalize this particular agreement.
In some very specific areas, I can just give you an indication that we are working with the Government of Saskatchewan with this new Committee Futures thing to see how we could link up with the local economic development authorities in Saskatchewan where we could share space, share information, share people, if you like. We're proposing a pilot project in Moose Jaw, if I'm not mistaken, to see how we could provide that kind of integrated approach, both federally and provincially.
So with this new system just in place we will be pursuing whatever areas of collaboration we can with the provinces.
[Translation]
Mr. Leroux: I also want to ask you about the results of that MOU. Will it be managed by your department, under the mandates you have been given? Will WD administer this joint mandate with its own staff and funds, or will WD personnel be shared in the implementation of these plans?
[English]
Mr. Axworthy: It depends on the agreements themselves. As I said, the direct result of that tourism agreement was that at the federal and provincial government level we basically promoted the leadership of the private sector and used some of our resources to bring the private sector players and tourism together. They've taken over the chairmanship and they are actually running it now, so we are members of the alliance. But now it's a private sector-led initiative and the provincial governments are also partners in it.
In the case of the science and technology arrangement, it would be mainly a co-ordinating role to make sure that we didn't overlap expenditures in various areas.
I can't tell you much more about it in the area of the local economic development, because we're just starting that and we've just taken over the Community Futures, but I'm open to any proposals.
We planned a meeting with the provincial economic ministers this spring, but because of the elections taking place in the provincial governments there, we decided we would wait until the fall to follow up on some of these initiatives.
Other things we just did, for example...we agreed that one of the areas that would be of some concern to all of us in western Canada was the changes in transportation, so we again had an agreement on pursuing common goals in transportation. My own department paid for a major study on the railway network and its comparison with U.S. rates because of the changes going on in the WGTA and other matters.
.1605
We have now distributed that study and all the provincial governments have access to it. We hope we can come to the next meeting and work out what our responses will be. But I think it has already had some results, because I noticed in a couple of provincial budgets they've reduced their tax revenues on fuel gas, which is one of the areas noted in the study as making our own railways somewhat uncompetitive. Some of the provincial governments have started to bring those down.
I wouldn't say it's direct correlation, but it certainly reflects the kinds of discussions we've had.
[Translation]
Mr. Leroux: I would also like to hear more about the mechanisms by which you intend to co-ordinate the interventions of the other departments. In yesterday's presentation, you did not mention the importance of research and development strategy and of what this will mean in terms of co-operation with the Department of Industry, which is very important in this regard.
In concrete terms, what is going to happen in this area?
[English]
Mr. Axworthy: The department play is to make sure there is an interface between western Canadian interests and the various federal departments. The deputy minister and her staff played quite a substantial role in liaising with departments of industry, the other regional development agencies, agriculture, energy resources, transportation. So we do have a number of connections that we make. But it is really a pragmatic one based upon the issue. To give you an example, in terms of the aerospace training initiative, we're working very closely with the Department of National Defence on that one and the Department of Industry is supportive. We are also working with some of the crown agencies that are interested and involved.
In other areas, dealing with problems in the tourism area, we are working very closely with the Department of Indian Affairs to work with them on joint initiatives.
Western Diversification has worked very closely with my Department of Human Resources Development on developing a tourism initiative, so that we supply some capital support for new tourism projects and Human Resources provides employment money to actually help build them. So if communities feel they need to upgrade their facilities, we can do it through a combination of WD providing some of the capital and Human Resources providing the employment money.
[Translation]
Mr. Leroux: I'd like to speak again later, Mr. Chairman, because I have some other questions I would like to ask.
Do these agreements translate into MOUs? It seems that what you are saying and what I heard yesterday with regard to ACOA is a little less developed that what I have heard from the Federal Office of Regional Development - Quebec which refers to actual MOUs signed with departments for the purpose of co-ordinating regional development interventions.
What I heard from FORD-Q about the signing of MOUs with other departments involved in development I have not heard from you, nor from the minister responsible for ACOA.
[English]
Mr. Axworthy: It's just different, Mr. Leroux. Each region has to approach things differently. That is one reason why I think it is important that there be regional agencies to reflect the diversity of the country, because each region has a somewhat different way of doing things. We respond to what our own provincial government thinks is the best way to deal with them, and FORD-Q does it with its provincial counterpart and so on.
I think that is one reason why we're able to show some flexibility at the federal level, because we have the regional agencies that can be tailoring their own approach to fit the specific characteristics of those regions.
[Translation]
Mr. Leroux: I'm talking about federal departments, not provincial ones. I'm talking about the agreements entered into by other federal departments who spend funds in the same regions. That is what I am referring to.
Mr. Axworthy: For the same reasons, the existence of a Western economic development agency allows us to develop specific plans for the West, to develop a regional approach.
.1610
[English]
That's why, in the way we approached the program review, we felt it was very important to maintain the regional agencies so that we could ensure there was both that flexibility and diversity at the federal level to respond to the different regional characteristics we have as Canadians.
The Chairman: I think, Mr. Leroux, he's trying to say to you that western Canada is a distinct society.
[Translation]
Mr. Leroux: Perhaps, but the result is the same. When one claims to be a leader, to be at the forefront of economic development, you can't simply consult a number of interested parties. You must have protocols: it must be agreed that one will manage it, one will apply it, and one will start it up. Otherwise -
Up until now, I have not seen any sign of concrete leadership. I have heard no one say: We are the ones who will be signing the protocols so that there is really a direction to economic development. That is what I mean.
[English]
Mr. Iftody (Provencher): Thank you for your presentation, Mr. Minister. I just wanted to pursue a couple of points you raised in your presentation. You've commented on them briefly. Of course, I'm particularly interested in rural western Canada, particularly rural Manitoba. This committee has dealt with concerns over access to capital and small business. Again, we've just completed a second round of discussions and hearings with the banks.
I want you to comment in a little more detail about some of the initiatives in the rural areas. We've talked about the move from Community Futures, which is a rural-based initiative, into Western Diversification. We've also talked a bit about the role of credit unions and your negotiations with them.
The Federal Business Development Bank ostensibly does 60% of its business in Manitoba in the rural areas. I would like to know if there are negotiations going on right now with the FBDB and the credit unions to work collaboratively, for example, with the Community Futures groups. How would you see that coming together over the next number of months?
Mr. Axworthy: Mr. Iftody, I'll make a general comment. Then I would ask Ms Flumian, who is the ADM responsible for these negotiations, to give you more particulars.
The establishment of these individual community investment funds, which are geared to small business, I think will in themselves have a major impact on rural and small-town lending and investment. Many of them are set up specifically for those purposes.
To give you an example, they are presently negotiating a proposed capital investment fund for agrifood processing that would allow the bank in question - I'm sorry I can't mention it, because the negotiations are still going on - to provide lending.
But in the longer term, as you know from your own experience, small businesses have difficulty in rural parts of the country in first getting access to capital, getting someone to talk to them. Second, they must make sure that the money is patient enough to give them a chance to begin doing it, and also to ensure that there is some acceptable level of risk.
By setting up these investment funds, our leverage ensures that those things take place. So whether it is in the agricultural biotechnology area in which there is a lot of activity in Saskatchewan and so forth, or whether it is in the agrifood processing area, which is spread throughout western Canada all the way from the Fraser Valley right through the prairie provinces, that sort of fund would be available.
.1615
Tourism is another good example. Tourism operators are often in non-urban areas, and a small operator has difficulty oftentimes attracting capital to improve facilities. Under this program - and again we're negotiating in these areas - we would be able to ensure that the investment fund gave full access.
At a second tier of opportunity this basic policy will enable us also to set up investment funds in the local areas, whether it's credit unions or others. We could negotiate a common pool within regions to directly supply...and that's where the connection with the Community Futures becomes interesting, because they have their own small capital funds. They could use some of those to lever that larger investment fund we would support.
Let's just say for the sake of argument in your own Steinbach area, which is a very successful business area but is always looking for ways of expansion, if you found in fact that there were areas of development.... Let's say Steinbach wanted to move into a higher value-added area of food development, then we would be able to help set up one of these regional investment funds through the local credit unions. Businesses in those areas could then draw upon it with the same criteria, more patience, a somewhat more credible risk factor and perhaps a better prime rate.
Maryantonett might want to comment further, because she's been doing the negotiations with the different financial institutions.
Ms Maryantonett Flumian (Assistant Deputy Minister, Western Economic Diversification): Yes, sir, we are currently negotiating with the Federal Business Development Bank and also the Farm Credit Corporation, which will have, I think, impacts into rural western Canada. The minister mentioned the areas in which we're undertaking some of these negotiations. We're trying to address both capital gaps and areas where there may be a problem in accessing capital.
In terms of our discussions with the various lending institutions, we had discussions with the major co-ops and credit unions across western Canada and we are now waiting for the completion of consultations that are taking place with all the Community Futures committees. Those are intended to be completed by the end of May, and at that point we'll have a sense of what the Community Futures committees themselves think the local capital gaps are, and then we'll go back and re-engage in a series of discussions and no doubt come to some agreements with credit unions and co-ops at the local level.
Mr. Iftody: I just want to make a comment. I read a report about a year ago out of Manitoba which showed that over the life of the program of Community Futures the government invested about $16 million and through the funding of different kinds of projects in the rural areas had actually leveraged $60 million through the credit unions and banks. I think they demonstrated a great deal of success, particularly in terms of getting in what we call micro-businesses - five or eight employees at a time in the rural areas.
If I can choose Saskatchewan and rural Manitoba as examples, are there any kinds of themes emerging from the FBDB, the Community Futures and the credit corporations? Are they telling you that here are areas we can't go into and we need some help in terms of the high risk?
Ms Flumian: It's too soon to tell yet. The consultations began about a week and a half ago. So in about two or three weeks' time we'll be in a better position and we'll be happy to provide you with the information once we have it.
Mr. Breitkreuz (Yellowhead): Thank you, Mr. Minister, for appearing and for your presentation.
You talked about clean-up projects from previous governments, strategic programs and current initiatives, but you didn't mention the Winnipeg Jets, which is of course current and topical and does fall under the purview of the estimates in light of the infrastructure component. Mr. Minister, you said yesterday that the prospective buyer's application for funding under the infrastructure program meets the program's criteria. The only thing holding it back is the absence of a formal business plan.
.1620
Once the prospective buyer submits the business plan, I'd like to know how much money he'll be asking for.
The Chairman: Mr. Breitkreuz, I'm not going to interrupt; I'm going to wait to hear your question. But I am only cautioning that the chair is going to ask you the question to think about how it might specifically relate to estimates. I'm not trying to interfere with your question. I'm just going to caution you before you finish your question. Go ahead.
Mr. Breitkreuz: The estimates are there, and this is a current thing. I wouldn't think it would be in the estimates. So the next question is, of course, where will the money come from?
Mr. Axworthy: Mr. Chairman, the money is in the infrastructure program. Each province has been allocated a certain budget, and the Manitoba budget hasn't been spent yet. When the request was made, we said we'd respond, but I should say to you that considering recent events, your questioning may be somewhat historical.
As you know, we held meetings yesterday with members of the NHL - the commissioner and the present owner - and the problem wasn't the capital granting money. It was teams trying to exist in small markets and facing potentially substantial operating losses. Without knowing what players' salaries are and all the other economics that go into it, you would need somebody that would be able to provide some underwriting of potential losses. Clearly, as I indicated, that's not something the government could do.
So the developments would have to take place by the private sector group that's initiating it, and I gather they are holding a press conference in about half an hour from now. I'm not sure the results would be very positive for people in Manitoba or for western Canada - or for Canada at all - because I think it's a very sad day when a sport that's brought so much enjoyment and pleasure and has meant so much to Canadians finds itself getting priced out of places that simply don't have large markets that they can rely upon. I feel very badly about that.
Mr. Breitkreuz: It would be a big loss to Winnipeg and to Manitoba for certain.
Talking about the infrastructure spending in western Canada, which of course has been rolled into WD's budget, totalling some $478 million for fiscal year 1995-96, or just under half a billion dollars, according to the estimates, WD will actually be reduced to just over $9 million for fiscal year 1997-98, and we certainly commend you and the government for those reductions.
We've said all along that regional development spending just doesn't seem to work. At the same time, billions are being spent on infrastructure, and the President of the Treasury Board recently stated in committee that the infrastructure program will produce only 8,000 permanent jobs. That works out to $750,000 per job.
I'm just asking how you can justify spending this kind of money on highly questionable infrastructure projects.
Ms Bethel (Edmonton East): On a point of order, Mr. Chairman, I didn't think the infrastructure program was part of the estimates.
Mr. Breitkreuz: It's being delivered by Western Diversification.
Ms Bethel: I'm sorry.
The Chairman: Sorry. Please continue, Mr. Breitkreuz.
Mr. Breitkreuz: So I mention these infrastructure projects. It seems as if you feel there's a need for restraint, yet this kind of spending continues.
Mr. Axworthy: Mr. Chairman, first let me recall for the member that the initial call for a new infrastructure program came from the Canadian Federation of Mayors and Municipalities, which identified a serious, growing deterioration - an erosion - of the fundamental infrastructure of this country, but with very severe economic costs.
When you have a breakdown of bridges, roads, sewers, water treatment plants and so forth, you end up paying money. You lose productivity. It becomes costly, and the necessity for a modern country to modernize its infrastructure was a high priority. We put it forward as one of the major objectives in the campaign and, as you well know, received a mandate from Canadians to govern, I think, in some part because of that commitment.
.1625
So the investment has to be considered in light of what it adds to the various infrastructure areas. You say irrelevant projects, but in British Columbia, for example, we were able to participate in a huge project, over $200 million into the massive water treatment system for the entire lower Fraser Valley area. I don't think that would have happened if we hadn't come in and stimulated or offered that kind of development.
We could give you a long list of a wide variety of projects. Certainly in the rural areas of western Canada, local municipalities who had been facing a series of restraints over many years found this to be one way of improving their road systems, their drainage systems and their water treatment systems.
I'll give you one example in my own province where we were able to develop, in cooperation with the rural areas, a natural gas program to deliver natural gas into about 18 communities, somewhere in that area. It means this natural gas distribution network will give them an enormous competitive advantage in attracting new industry that they couldn't have offered under the old system.
So the first thing to take into account is to evaluate the infrastructure as an infrastructure program.
The second and equally valid objective, I think, was to get people back to work. In a lot of municipalities they were taking people who were drawing benefits from social assistance or unemployment insurance and were able to engage them in very active work over several months to do something very important. I could give you lots of testimonies about the importance people felt about actually getting back to work. As you know, the construction industry itself has been through a real slump over the last several years, with unemployment rates sometimes in the western provinces at 25%, 30%, 40%. Well, we were able to bring those unemployment rates down substantially.
A third and larger economic feature of the infrastructure program was its ability to act as a catalyst, a kick-start, to generate growth, because it's not just a case of somebody building a sewer program. People are buying products. They are buying pipe. They are engaging engineers. There's a whole series of tertiary, secondary kinds of impacts and so the overall economic impact gets things rolling again. We felt, coming in, that we had to sort of start that ball rolling, and I think it has worked.
I would say to you that in addition to the direct job impacts and the new infrastructure, I think it also was one of the catalysts that has given Canada right now the highest level of economic growth of any country in the OECD.
The Chairman: Do you want to share some time here? Okay, Mr. McClelland, you've got about three minutes, if you want to take a crack at the minister here.
Mr. McClelland (Edmonton Southwest): Thank you.
Mr. Minister, first of all I want to congratulate the government in general on the outlook document. It makes this whole review process much more meaningful. The outlook document shows very clearly that the economic activity of Western Diversification has changed dramatically, going to $9 million in just three years from now.
Over the course of this first year, our committee has dealt extensively with the role of banks and extensively with the role of the FBDB. The FBDB may not have had a sterling reputation in the regions, but neither did Western Diversification. Rightly or wrongly, Western Diversification was perceived by many people in the business community to be a political...that perhaps you had to have contacts in order to access it.
Now, wouldn't it make sense for the FBDB, in its new mandate, and Western Diversification to work toward merging so that we'd have a much stronger presence providing the tertiary work that governments can provide to business and to emerging businesses that may not be provided by the private sector? The private sector would and should have the first crack, but wouldn't it make sense, if we are going to have a government or public presence in the marketplace, that it come through one agency, probably the FBDB because of its renewed mandate?
.1630
Mr. Axworthy: Mr. McClelland, that was an issue that we in fact looked at during the program review. For a number of reasons we felt that while there should be a renewed mandate for the FBDB, it was important to maintain the distinctiveness of the regional agencies, for reasons I partly alluded to in my response to Mr. Leroux's comments. I believe my colleague, the Minister of Industry, is preparing proposals with respect to a renewed mandate.
The FBDB is a national organization, and while it has branches, it doesn't necessarily orient or tailor its own response specifically to Quebec, western Canada, or Atlantic Canada in the peculiarities or distinctiveness, if you like, in those regions.
I use the example not just in the direct lending area, but to give you an example of what we are working with on tourism or aerospace training. Those would not be mandates of the FBDB. They're not designed for those kinds of economic development tools.
Mr. McClelland: There's no reason why they could not be, and for instance, it could then be fair to southern Ontario, which is left out of the loop here. We are in fact a country, and certainly provision could be made for regional differences. We do it all the time.
I just ask that this be considered.
Mr. Axworthy: It's an important point, but the mandate at the FBDB is as a lending agency. To rebuild it as an economic development agency, you would have to then do what we are already doing. Not only would you lose the time, but you would also end up having to start all over again and probably lose that regional focus at the same time.
I should say that we are working closely with the FBDB on this new investment fund proposal. We have a very cooperative relationship with them and I think it's the proper relationship, because as I said, we're getting out of the lending business and they will stay in the lending business.
We will connect with them as we will be able to help leverage money, because they have to go with the going rates and so on. We are able to work with them, along with other private financial institutions or the FCC, to try to fill the gaps and let them do the due diligence and the lending. We can do the promotion development, especially for rural areas.
This was an assessment made during the committee assessment that I asked my own colleagues in the west to do. In rural areas in particular, having this Community Futures network tied in with us, they were able to use our own experience gained on the economic development field. I think it provides a good partnership arrangement, and we collaborated then with the FBDB.
I wouldn't want to see them merge, because I think you would lose something of value and not gain very much as a result.
Mr. McClelland: Thank you. Is there any time at all?
The Chairman: If you want one last question, go ahead. I don't mind. You're on a roll. As long as you're complimenting the government, you can continue.
Mr. McClelland: It's interesting in checking the outlook document and also the estimates that, although the activity of the Western Economic Diversification office is going to be reduced from $412 million this year to $95 million in three years, the number of full-time equivalents is only decreased by about 17. It's also interesting to note that in the Human Resources, the national capital region has 61 full-time equivalents while the Alberta regional office has 58, and yet it's Western Diversification. Why are there so many people in the national capital region?
Mr. Axworthy: The deputy minister says they need that many people just to keep an eye on me.
First, there are some basic services that are provided in Ottawa because they're tied in with the informetrics services, for example, which is tied into the Ottawa system anyway, such as computer servicing and everything else. We just do some of that basic data processing work here.
We are also expected to provide support services so that this committee can receive its paper on time and questions can be answered effectively in the House when you raise them.
I don't think members of Parliament quite fully appreciate how much resource a department must devote to ensuring that the democratic system is open and transparent. That means that members of Parliament have access to information, questions are answered, inquiries are met, and information obtained.
.1635
If we were simply a private business, as I've heard you comment from time to time, you wouldn't have nearly the same level of accountability. We are in a parliamentary system, thank goodness, and that simply means we need to have people servicing that system. It is very important to do that. That's what makes it work, not like a private sector business all the time, but one that is accountable in a public transparent way.
In a sense, it's my choice as a minister that I want this department to be proactive. It's not purely a lending agency. If there's a dilemma such as a closure of defence facilities in western Canada, I want this department to be taking the initiative to bring together people to help develop a solution or a response to that. If we are asked by the government to deliver an infrastructure program, which is a $500 million undertaking, we must have the capacity to respond to that. One of the reasons why the person-years haven't really declined is that we're still delivering a $500 million program in addition to our regular programming.
It's that ability not just to be strictly mechanical, but also to be entrepreneurial, creative, and responsive in a public sense.
The Chairman: Mr. Breitkreuz, is this related?
Mr. Breitkreuz: It's a follow-up on that.
The Chairman: Okay. You're way over on the time, but I'll let you continue for another brief second and then we'll take a few Liberal questions.
Mr. Axworthy: Liberal-minded questions.
Mr. Breitkreuz: Thank you very much.
With this leverage of money for small and medium-sized business in western Canada from the private lending institutions, will the federal government be guaranteeing those loans?
Ms Janet Smith (Deputy Minister, Western Economic Diversification): No, all we're doing is changing the risk by backstopping it. If they say something is too risky for us, by saying that they'll cover some of the losses if they occur, it makes it more possible. That's all.
Mr. Breitkreuz: Will it then be a lender of last resort?
Ms Smith: No, not necessarily.
Mr. Breitkreuz: Not necessarily.
Mr. Axworthy: Mr. Breitkreuz, one thing we discovered in the discussions is that especially in emerging areas of development, knowledge-based industries are really growth potentials in western Canada. This is where you don't have a big building on the corner; it's not a supermnarket or factory, and it often depends on the brains and the talent of people.
Biotech is a good example in Saskatchewan. That complex around Saskatoon is really billing itself as a world leader. They had trouble getting capital because it isn't a big asset in the traditional ways of doing things.
By working as we are now doing with the Royal Bank on a special biotechnology investment fund, as the deputy minister has said, we can reduce the risk factor so that the banks feel there is more of a comfort zone and dedicate that capital toward the biotechnology industry in western Canada. It is similar for knowledge-based industries.
I'll give you one example. In my first round of discussions when I was in Vancouver, I met with a group of business people whom the B.C. Board of Trade brought together. There was a very aggressive and active young woman who was in film-making in British Columbia. As you know, Vancouver has become a major centre for film production on the west coast. She was saying that it was impossible to get a loan. She said she could be doing five times the business in terms of developing material for television networks and everything else, but she just couldn't get anyone to finance her because what's she's selling is her talent and the creative ability of the 10 or 15 people on her staff.
That's a brand-new kind of lending. We're prepared to talk to one of the banks or lending institutions to see if we could provide a little buffer on the risk end, to see if they would then be prepared to give that young woman a loan so she can produce a new television series, or whatever the case may be. That's the kind of thing we want to try to do.
Mr. Mitchell (Parry Sound - Muskoka): Welcome, Mr. Minister. I want to stay a little bit on the same topic and talk about these investment funds.
I noticed your phrase ``new kind of lending''. We have some banker types in the audience, but I didn't see the exact expressions on their faces when you used that phrase.
I'd like to understand exactly what you mean in terms of working with the financial institutions. Let's take a specific fund that you're going to set up. Are the banks going to contribute x number of dollars into the fund and is WED going to invest x number of dollars in the fund? Is that the way it's going to work?
.1640
Mr. Axworthy: I'll ask Madam Flumian to give you perhaps a specific example of that, because she's been in the negotiation with the institutions.
Ms Flumian: So far in the kinds of discussions we've had, first I have to say that we may have different types of funds that are structured in different fashions, depending on the sector and the problem we're trying to address. That's because not all sectors and not all problems, in terms of access, are equal.
As for the one we've been holding discussions on in the area of biotechnology, all of the investment in terms of the funds that would be lent by the lending institutions would be put up by this particular lending institution. All the creation in the fund - the minister spoke of $30 million or $35 million in loan activity - comes from the financial institution.
In this particular case, we're assisting in this alliance to create a loan-loss reserve pool in which public dollars would be used to try to take the particular lending institution higher up the risk curve than they would normally operate.
In return for that, we get different treatments in terms of lending instruments. They'll be lending money out because the commercial decision will be theirs in terms of making the final decision.
We'll have more patient capital, as the minister said. So we're talking about loans that in the biotechnology area tend to be longer in duration before commercialization. We're talking about loans that go probably up to seven years or so in duration. We're talking about subordinated debt instruments. We're talking about the capitalization of interest payments so that the cashflow problems at the front end of the start-up are not the same as they would be under normal loan arrangements.
In that particular sector, we're looking at those kinds of instruments and at our contribution being applied to helping to reduce the risk as a lending institution moves higher up the risk curve into areas in which they would not have been before.
Mr. Mitchell: Do you envisage that being the more or less standard model? It would be a risk situation as opposed to a direct contribution of funds.
Mr. Axworthy: As I indicated, Mr. Mitchell, we're out of direct lending business. We would be working through financial institutions who will do the lending, provide the capital, do the due diligence, and decide on the risk. We're simply providing a loss reserve.
There may be other variations on the theme. It depends on negotiations. We're open for proposals from the different lending institutions as to what they think would be useful to enable them to fill that capital gap in western Canada.
Mr. Mitchell: One of the things we thought we saw as a committee last year as we went through this and talked about the Small Businesses Loans Act, was that the chartered banks were using the program when they could have used standard lending. In essence, we ended up subsidizing the banks in that type of lending.
I'm a little bit concerned from the way you describe it. A financial institution that might have chosen to lend to that biotech firm anyway will take advantage of the fact that WD is going to underwrite some of the risk. Are you putting some sort of safeguards in there so that type of thing won't happen?
Ms Flumian: Yes, we are. We're looking for incremental expenditures by way of the leverage that's being provided. As our negotiations are completed and all of this moves into the public domain, I think you'll see some of those safeguards. We are looking for incremental activity.
This is an area that's growing very rapidly. It's an area in which the banks have feared to tread up until now.
Mr. Mitchell: I take it that the banks are not going to be charging a fee for doing this?
Ms Flumian: They will.
Mr. Mitchell: So they are going to charge you a fee, even though you are going to underwrite -
Ms Flumian: No, no. They are not going to be charging us a fee.
Mr. Mitchell: Good. If I understand correctly, most of the capital that is going to be made available is going to be in the form of debt capital, not equity capital.
Ms Flumian: It will depend on the sector. There are some sectors in which that's a requirement, so that's the way we'll structure the arrangements.
Mr. Mitchell: One of the experiences we've had with the labour equity pools is that there's been money there but, as we've examined them, the money hasn't been flowing to the small business sector. Are you putting some sort of safeguards in place so we don't find the same experience happening with this initiative you're undertaking?
Ms Flumian: Yes. There will be restrictions that will target this money to small and medium-sized enterprises. In addition, in the first one we're negotiating, we will be establishing a management committee, because this is an experiment, if you will, and it's all very new to us. We'll be meeting on a fairly regular basis to make adjustments because we want this activity to take place in western Canada. If, without knowing it, we set up some impediments in negotiating the funds, we will go back to examine them and make the necessary changes.
.1645
Ms Bethel: Mr. Minister, in your outlook document you talked about WD support for women entrepreneurs. You highlighted it beautifully and you talked about the initiatives you will be pursuing. How will these initiatives be evaluated and measured? Can you be sure there will be no duplication overlap with other programs offered?
Mr. Axworthy: First, generally there aren't any other such programs offered but -
Ms Bethel: I guess I meant to entrepreneurs, not gender specific.
Mr. Axworthy: Let me first provide you with a little more detail. Each centre is a product of very extensive discussion in each of the provinces, so there's been a very active negotiation and consultation with a wide variety of business organizations and groups representing women, such as the women's business professional groups and so on.
The board itself is a private sector board. It's drawn from the community. They will manage and develop it and provide for a direction to ensure there isn't that duplication. In some cases it is a collaborative one where there are programs being developed, say, particularly to help single-parent mothers. Then the business centre would provide the support and training for them in a small business sector. My own human resources department, for example, does a lot of work with UI recipients in helping them get their own businesses started. The business centre can provide them with the back-up and support system.
To give you an example, just in the operation of the Manitoba centre, which I recall has been going just for five months, we've already had close to 1,500 inquiries. There have been 500 loan information calls and already a number of loans advanced. It shows that in a very short period of time there is an enormous demand for this kind of service. I think the reason was clear. We only undertook it, again, to fill a necessary gap in what was available, and particularly to respond to the fact that there had been certain areas of restraints or limitations on women getting loans and oftentimes getting the access to information. There's an enormous value, for example, in the group development sessions where people come together to share their experiences of women getting into business.
So it's not just a one on one; you don't just walk in front of the desk of a lending officer. There are a lot of seminars being held to encourage people to get into business in discussions I have had with them in the centre.
In another province where we're about ready to go, they want to tackle it differently. They want to do what you call virtual reality, so there wouldn't be a building at all. It would be an information network system for women so they could plug into their computers and their businesses. That way they would feel they could get a better reach out to many of the rural areas. Each has some of its own variation but is filling that kind of need.
I will ask the deputy minister to talk about this specific evaluation, which she would be responsible for.
Ms Smith: This is the five-year initiative. There's an evaluation plan for year three and there is a framework for it. Mainly what we're looking for are things like whether there was an increase in women entrepreneurs as a result of this, whether we expanded exports or sales, and whether there was an increased awareness of the entrepreneurial option among women. We can provide you with a complete list, if you like.
Ms Bethel: Mr. Minister, I want to commend you for the work the caucus did in their travels. Certainly the collective wisdom - I just attended the ones in Alberta - was really tremendous. The SMEs certainly shared some really good in-depth needs with that committee.
But as a looked over the report and read over the outlook document, I felt there were two areas they were telling us they really needed help with and that we had something to offer, and they were alliances and networks, and market intelligence, especially international market intelligence. I wonder if you could comment on what specifically we might have in those areas.
.1650
Mr. Axworthy: I think we're already trying to address that by two items I've already mentioned - the alliance, for example, of about 100 food processing companies that have now come together as a consortium where they share market information. They're developing joint market development, particularly in the western United States. Where they need to meet certain quality test controls to get their products on the shelves, they can combine forces, because they're all small businesses; they don't have a major research lab to do it. Similarly, the tourism alliance is another good example of that kind of partnership arrangement in mainly the private sector.
I go back a little bit to the question Mr. McClelland raised. That alliance, I can say with some certainty, I don't think would have happened if officials of the department hadn't spent a lot of time just talking to people - schmoozing, if you like, just bringing people together, overcoming a lot of the reticence that oftentimes takes place. The people in industry sometimes look at each other a little bit suspiciously, thinking they're competitors, as opposed to realizing that as they come together in a cooperative way they all benefit from it.
Ms Bethel: Are there any initiatives for others in agrifood? That is a terrific one. I'm thinking about biotechnology, some of the sectors that you've identified.
Mr. Axworthy: Yes, we have a centre in Saskatoon of the biotech firms that we have been.... I can't take credit for the previous government, which did the initial funding for that in terms of getting them started, but we've continued in that area.
I would also point out something that's really important, just as an example, which was the establishment of a direct office of the Canadian Exporters' Association in western Canada. It will be located in Calgary. In many cases they are the prime mover in sharing information.
The thing we would like to look at, coming out of the committee report - and it's simply in the development stage and must await some discussion with the provinces - is to go to this kind of computerized information system that would provide access for western Canadian firms to international markets in certain areas. Those are the kinds of discussions that we want to hold with them, because they have their own network as well. We want to make sure we're not duplicating it.
Ms Bethel: I really appreciate it.
As I listened to those SMEs, the wisdom they had to offer us, I thought what a shame it is just Western Diversification there. It was really unfortunate that trade wasn't there, Export Development Corporation, industry, tourism through the heritage department, and so on.
I notice, too, that the Minister of Industry has said they have begun their reform and renewal of the SME support. I guess my question to you is how is WD involved? I would certainly hope they are involved. How are these others involved? You probably can't answer for them. Last, do you see a role for this committee in terms of the reform of SME support?
Mr. Axworthy: One thing I would like to underline - I commented on it, but maybe it didn't carry the weight it should - is that we are establishing a network of business centres where we're consolidating in western Canada a single point of contact for all federal government programming for small business through the Canada business centres, through the women's enterprise centres, and now through the Community Futures so that there is a single point of contact where all the flow of information from the variety of government departments relating to trade, economic development, research and so on can all be had at the same place. As I said to Mr. Leroux from the Bloc, we also are seeking to work out those in cooperation with the provinces and municipalities so that we co-locate them and do them all in the same place.
So not only are we consolidating the federal activities into single points of contact, at the same time we're stretching those points of contact out into the rural areas as well through the community Futures network so they have virtually equal access to the same information as if they were in downtown Edmonton.
Ms Bethel: But in terms of this specific reform, you're not involved at this point.
Mr. Axworthy: That's part of it. In a sense we're doing the western end of much of that reform.
.1655
Mr. Knutson (Elgin - Norfolk): My question is very brief. Mr. Minister, you've provided in your report an indication of what Western Diversification is doing in the area of tourism. I just wonder if you could give us more specifics. I'm curious as to how you're going to measure the success of your involvement over the next three to five years.
Mr. Axworthy: I'll ask Ms Smith, my deputy minister, to do that. She's been the impresario of the tourism alliance.
Ms Smith: How I would measure it is this way. If we have funded some upfront part of it to try to get it moving, within five years it should be fully funded by the industry. They should have a joint marketing plan whereby they market western Canada as western Canada. They will have product lines within that, such as business travel or adventure travel and so forth. But we should be totally away from dissipating all our efforts in the marketing end of things and getting more for the money we spend, because at the moment I think we're confusing people.
I would like to see them develop some kind of computerized database, particularly in the international market. People could find out more about western Canada, because I'm told it's very hard to get information. It's very confusing to people from, say, Europe, and if we can develop some kind of interactive database that people can work with, I think that would be useful. That's what we're trying to do.
Mr. Knutson: What other specifics are you doing?
Ms Smith: That's it.
Mr. Knutson: That's it? What about Asia?
Ms Smith: Oh, in terms of markets. They want to start with what they call the long-haul U.S. market, but certainly the marketing plan will cover the other markets. I just meant Europe as an example, not as an exclusive.
The Chairman: Mr. Rocheleau and Mr. Leroux, you each have a short question, and then we're going to call for the votes.
[Translation]
Mr. Rocheleau (Trois-Rivières): Minister, we know that following development in the Crow's-Nest Pass Agreement, the sum of $3 billion, approximately, will be paid as compensation to western producers. Can you tell us whether guidelines have been established to prevent the development of new agricultural or agri-food activities that would conflict and compete with other established activities in other provinces such as Quebec? Does that issue concern you?
[English]
Mr. Axworthy: I really think that would be a question Mr. Rocheleau may want to pose to my colleague the Minister of Agriculture. I could venture a general answer, but I couldn't give you specifics. I think Mr. Goodale would be much better placed to give you the answer.
The Chairman: I agree, Minister, that this doesn't necessarily relate to the estimates. But you've asked the question, and he's given you an answer.
Mr. Axworthy: I will certainly talk to Mr. Goodale and make sure he knows of your interest. I think it's a realistic question, having once been the Minister of Transport and having to change the system de Nid-de-Corbeau. I know the sensitivities, but I can't give you the answer. I just don't have the information on it.
[Translation]
Mr. Rocheleau: I raised the question because, in Quebec, we've always feared that western economic diversification would be effected, in part, on the backs of the Quebec economy and Quebec farmers. That is why I asked the same question last year. There have been developments since then. We know that there will be compensation payments? We know that the Crow's-Nest Pass rate has been abolished. I would like to be reassured, on behalf of Quebec agricultural producers, in this regard. That was the intent of my question, Mr. Chairman.
[English]
Mr. Axworthy: I think it's certainly a relevant question, but I just don't know enough about what Mr. Goodale's planning in relation to the various programs coming out of the WGTA to give you an answer. I just don't know.
The Chairman: Thank you, Mr. Axworthy.
Mr. Leroux, do you have a couple of short questions?
[Translation]
Mr. Leroux: Yes, one last question. On the topic of the investment fund, you refer initially to priority sectors such as agricultural biotechnology, biotechnology in the agri-food industry, tourism and the environmental industry.
I have two short questions for you. The first one is on tourism. In light of the agreement you refered to earlier, have you established some type of direct communication with the Canadian Tourism Commission, in regard to the strategy you are developing? Is there some kind of coordination on that, or are things happening on parallel tracks, with no communication?
.l700
How are things being done?
[English]
Mr. Axworthy: The deputy minister indicated that the primary focus for the association now is to develop its information marketing programs for certain international regions to fully understand the beauties and attractions of western Canada. That's their major focus as the present time.
We see the tourism investment fund - I should say that it's in the early stages of discussions - providing for investment capital for people who wanted to improve their facilities. Or, to give the example given by the deputy minister, if we were to establish a computerized information network that could make sure packages of tours for the northern tier of western Canada were available to tour operators in Asia, then that kind of capital investment fund could be used and taken on by the operators themselves to develop that kind of a system.
It would certainly be running in parallel, and we would be taking our lead very much from the tourism alliance people. They are running so fast and so hard just to develop things that we'll be hard-pressed to keep up with them.
[Translation]
Mr. Leroux: When the commission testified before us, its representatives said that its focus, its main strategy, was directed to domestic travel. They said nothing about programs to target overseas clients. They were much more interested in domestic tourism, within our borders. I just wanted to say that in passing.
The Canadian Tourism Commission seemed to be focusing its strategies on getting people to travel within the country, rather than on clients from other countries who would come here. You don't seem to be going in the same direction.
On agricultural biotechnology, in 1986, the Conservatives had decided to link up health and agriculture to create a virology supercenter in Hull. The facilities were renovated in 1992 at a cost of $2 million, and in 1993, they decided to relocate the center to Winnipeg, in a riding you know well. Your predecessor inherited the virology center, if you will.
I would like you to confirm that that is a part of the strategic plan, because you are announcing it now, and that announcement had been made previously. Does your agricultural biotechnology plan include the relocation to Winnipeg of a center than had just been renovated to the tune of $2 million, as well as the transfer of jobs from the National Capital Region to that part of the country? Why has that decision been maintained?
[English]
Mr. Axworthy: In fact, it's a good practice not to be answerable for the actions of one's predecessors, but the virology lab is virtually constructed now. It's simply a matter of getting it into operation. But it's more of a public research facility, not a private sector operation. It's been sponsored through the Department of Health, and it is designed to do testing on a variety of health matters.
What we're dealing with is quite separate from that. It's more to provide capital for private firms to develop in the biotechnology area. The major area of development in that has been in the Saskatoon area. They've concentrated very much on biotechnology initiatives for agriculture. They're developing new species, strains, and so on. It's a very fast-growing area, and they've had trouble getting capital.
I simply provide this as free advice. You can take what you want from it. When I was in opposition, I spent my time thinking about some of these things, contradictory as that may seem, and spent a couple of years in western Canada finding out what we needed to develop. The major problem that businesses faced, especially small businesses, was access to certain kinds of capital. There was general capital there for lots of things, but it was in those specialized areas.
That's why, when the Prime Minister was good enough to give me this portfolio, I focused very much on that. We spent a lot of time talking to the various business organizations in western Canada; they agreed. But we didn't see, for budget reasons and others, that we could mount a huge capital fund of the government. That's why we hope this experiment we're trying in terms of using private capital with some public leverage will produce the kind of results and fulfil the very substantial capital gap we face in the western provinces. I would certainly recommend it to anybody else.
.1705
The Chairman: Mr. Leroux, you may be in opposition for a long time.
[Translation]
Some hon. members: Oh, oh!
Mr. Leroux: Why would you think that, Mr. Zed, since sovereignty is around the corner?
Some hon. members: Oh, oh!
[English]
The Chairman: Don't hold your breath.
[Translation]
Some hon. members: Oh, oh!
Mr. Leroux: We musn't forget one important aspect which is very important, Mr. Zed.
[English]
The Chairman: Thank you, Minister, Dr. Smith and Madame Flumian. We appreciate your sharing once again the views of your department and commend you for your dedication not only to western Canada but to all Canadians. I know you work hard. All colleagues commend you for your hard work and that of your department. Carry on. Keep up the good work.
Mr. Axworthy: Pass the estimates.
The Chairman: Well, we're about to call those.
Shall vote 1 carry? Do you have a motion, Mr. McClelland?
Mr. McClelland: Mr. Breitkreuz has a motion.
The Chairman: Would you please put your motion, Mr. Breitkreuz.
Mr. Breitkreuz (Yorkton - Melville): I move that vote 1, Western Economic Diversification, in the amount of $30.058 million, be reduced by $10,275,333.
The Chairman: A reduction! I'm surprised. Could I see the motion, please?
I have a motion that vote 1 for Western Economic Diversification, in the amount of $30.058 million, be reduced by $10,275,333. You've heard the motion. Is there any explanation? No. Any questions on the motion?
Motion negatived
The Chairman: You lost it by a hair.
INDUSTRY
- Industry, Science and Technology and Consumer and Corporate Affairs
- Industry and Science Development Program
Vote 5 - Capital expenditures $6l,389,000
Votes 1 and 5 carried on division
The Chairman: Shall I report these votes to the House?
Some hon. members: Agreed.
The Chairman: I shall so report.
We're adjourned, ladies and gentlemen, until Tuesday, May 9, when we will hear from officials from the Departments of Industry and Finance.