Industry Committee on Nov. 30th, 2009

[The Chair, Conservative, Michael Chong]

Welcome to the 47th meeting of the Standing Committee on Industry, Science and Technology on Monday, November 30, 2009. We're here pursuant to Standing Order 81(5) to review the supplementary estimates (B) for the fiscal year 2009-10.

In front of us today we have witnesses from three economic development agencies: Mr. Watson and Mr. Saunderson from Western Economic Diversification; Madame Collette and Madame Frenette from the Atlantic Canada Opportunities Agency; and Mr. McKenzie, Madame Brassard, and Mr. Bordeleau from the Economic Development Agency of Canada for the Regions of Quebec.

Welcome to each of you.

We'll begin with an opening round of statements, beginning with Western Economic Diversification.

[Daniel Watson, Deputy Minister, Western Economic Diversification]

Thank you very much for the opportunity to be here. I'll try to keep my remarks brief and leave as much time as possible for questions.

I am very pleased to be here to discuss the Supplementary Estimates for Western Economic Diversification Canada in the company of my colleagues from the other regional agencies, the one for the Regions of Quebec and the Atlantic Canada Opportunity Agency. Unfortunately, Minister of State (Western Economic Diversification Canada) Yelich was not able to join us today. However, I am joined at the table by Jim Saunderson, Executive Director, Finance and Corporate Management for the Department.

As you know, Western Economic Diversification, or WD, is the regional development agency responsible for the four western provinces.

Our mandate is to support economic growth, development, and diversification in western Canada. We do this by focusing on four priorities: technology commercialization, trade and investment, business productivity and competitiveness, and rural diversification.

The partnerships we have forged are an effective means of ensuring that our activities are coordinated with other economic development organizations working in western Canada. Our financial investments support federal, regional, and local priorities.

One of the examples of this is our Western Economic Partnership Agreements that we sign with each of the four western provincial governments and that illustrate our efforts to identify economic development opportunities in each of those areas.

WD has established a reputation as a champion of, and catalyst for, economic growth in the West. Many of our investments on behalf of the federal government—whether it is the TEC Edmonton commercialization facility in Alberta or the CanETREC northern coal research centre in Manitoba—have attracted new industry investment and are supporting the growth of new jobs and business.

Your invitation to appear today gives us the opportunity to present highlights from our supplementary estimates (B).

We are seeking an additional $62.6 million, increasing our total appropriation to $485.8 million. The biggest component for this is for the Recreational Infrastructure Canada program in an amount of $43.9 million, which is part of the 2009 economic action plan. Another $12.4 million is required for the community economic diversification initiative, which is the government's response to the mountain pine beetle infestation in British Columbia.

Another $3.8 million is

the reinvestment of receipts of repayable contributions collected in the last fiscal year. These resources are largely the result of repayable contributions made by the department a number of years ago. They will be used to fund our ongoing core activities.

There are some other smaller amounts in these estimates as well, but given the time today, I won't go into those.

As with ACOA and DEC—and they'll no doubt point to the same thing later—our strong relationships and profound understanding of our respective regions position us well to deliver on Government of Canada economic priorities while recognizing and building on the needs of local communities.

Like other regions of Canada, western Canada has been hit hard by the economic crisis of the past year. Many communities have seen their major employers reduce their operations or shut down completely.

Our department has worked extremely hard to deliver CAF and RInC program funding to Canadians in close collaboration with our regional development agency colleagues across the country. Shortly after the programs were launched in May, WD used a single request for proposals for each program. These applications were received by the end of June.

We had a significant volume of applications: more than 1,000 for the CAF program and more than 1,500 for the RInC program. Consistent with the objectives and guidelines that were established for these programs, WD's due diligence has focused on ensuring that projects we fund will be completed within the timeframe of the economic action plan.

Where it made sense in terms of ensuring speed of delivery and meeting program objectives, WD has entered into both formal and informal arrangements with provincial governments to assist the department in identifying and evaluating potential projects. In many cases, provincial governments have provided joint funding, whether as part of a formal agreement or simply to support individual projects.

Municipal governments have also provided funding for many of these projects under both programs.

To date, WD has approved over 200 projects under the Community Adjustment Fund, with total funding in excess of $220 million. These are projects such as Alberta's FireSmart Program—a $15 million initiative investing in projects in forest-dependent communities throughout Alberta to maintain and enhance the province's forests. Over a two-year period, the goal of this initiative is to create up to 1,100 seasonal, or 420 full-time one-year positions, across forestry-dependent communities in Alberta.

Under the RInC program, WD has approved more than 500 projects for funding of almost $95 million—projects like the upgrade of the skating rink in the village of Frontier, Saskatchewan. The changes will improve safety and significantly lower energy costs for that community.

WD believes that our work with CAF and RInC is realizing the goals for which these programs were established. To date, the CAF program has assisted more than 140 communities and the RInC program has helped almost 350 in western Canada.

We expect to leverage more than $430 million that would not otherwise have been invested in these communities during these challenging economic times. We will continue to monitor closely the progress of these projects and provide regular reporting and accounting to our ministers and to Parliament.

Thank you for your time this afternoon. I look forward to your questions.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Watson.

We move now to the Atlantic Canada Opportunities Agency.

[Monique Collette, President , Atlantic Canada Opportunities Agency]

Good afternoon.

Thank you very much.

My name is Monique Collette and I am president of the Atlantic Canada Opportunities Agency. I really appreciate the opportunity to appear before you today in response to this committee's recent motion to discuss the supplementary estimates related to regional development agencies and departments.

I'm accompanied by our vice-president of finance and corporate services, Denise Frenette, and if you'll allow me, I will take a few minutes to provide you with a bit of background on ACOA.

ACOA was created in 1987 to work with Atlantic Canadians to help build a more innovative, productive, and competitive economy in Atlantic Canada.

As a new model for economic development, ACOA was designed to ensure that decision-making resided in the region. This model is characterized by a decentralized approach, with the headquarters in Moncton, New Brunswick; a major office in each of the four Atlantic provinces; smaller satellite offices in each province; and an office here in Ottawa.

Together with our many partners in economic development, ACOA works to strengthen the Atlantic economy. Not surprisingly, given our mandate and program delivery expertise, we were identified, along with our colleague regional development agencies in their respective regions, as the delivery agent in Atlantic Canada for the new national $500 million program known as Recreational Infrastructure Canada, or RInC.

I mention this because the RInC program figures prominently in ACOA's most recent supplementary estimates (B), in which the agency seeks authority to draw down $5.9 million from the total of $33.9 million in funding identified for the delivery of this program in Atlantic Canada.

Other measures outlined in ACOA's most recent supplementary estimates include incremental funding of $10,407 to hire more students through the federal student work experience program and an allowance of $2,000 for an automobile for the Minister of State for ACOA.

We were aware of how critical it was to get the RInC Program up and running very quickly, to commit the funds and ensure they were expended by the deadline date. Thanks to ACOA's network of over 30 offices located throughout the Atlantic region, our well-established relationship with provincial and municipal governments, and our existing and flexible program mechanisms, ACOA was able to quickly put in place the most appropriate delivery process for this new initiative.

After our usual due diligence on project applications received, ACOA was able to quickly allocate funding to interested communities based on the quality and construction-readiness of their proposals. RInC applications started coming in to the agency in early May, following the launch of the program.

Since the launch of RInC in May, funding has been announced for a total of 125 projects, representing a total federal investment of more than $18.5 million at this time.

ACOA has long-established relationships with municipalities, community organizations, first nations communities, and not-for-profit entities. In the case of RInC, our federal funding has leveraged an additional $43 million for various RInC projects that in total are valued at over $61.5 million.

It is also interesting to note that, currently, 99 of the 125 RInC projects that had been announced are underway, and 17 projects have in fact been completed. Thus far, ACOA has received close to 250 project applications under RInC. This demonstrates that there was a pent-up demand for such an initiative aimed at repairing and upgrading recreational facilities, many of which were built over 40 years ago and were starting to show their age.

Obviously, with this level of construction activity, employment has certainly been created for Atlantic Canadians throughout the region during the 2009 construction season. We expect to see similar levels of activity during the upcoming 2010 season.

Furthermore, these RInC projects have generated millions of dollars of economic activity as communities and community groups have purchased construction materials and services for these projects. ACOA remains quite confident that all $33.9 million in federal funding identified for the RInC program in Atlantic Canada will be committed by March 31, 2010 and that projects will indeed be completed by the March 31, 2011 deadline.

I would like, if you will allow me, to give you a sense of the kinds of projects that have been completed or are under way.

Under the RInC program in Charlottetown, P.E.I., for example, the Charlottetown Civic Centre is undergoing improvements, thanks to a $60,720 contribution from RInC. This $184,000 project includes construction of a new event planning and staging area, the addition of a new entrance to the trade centre, and the installation of energy efficient lighting. This project has created roughly 15 short-term jobs.

In Halifax, Nova Scotia, the city's Centennial Pool is being upgraded to ensure that it can continue to be a focal point for local residents while integrating required improvements so that it can be used to host provincial swimming events and help train high-performance athletes. RInC funding of $1 million is being provided for this $3-million upgrade. This project is creating roughly 161 short-term jobs.

The Village of Petit-Rocher, in New Brunswick, received $250,000 towards an $860,000 upgrade of its local soccer field just in time for this summer's Jeux de l'Acadie. This project created 35 part-time jobs.

The City of Mount Pearl, in Newfoundland and Labrador, received $600,000 in RInC funding for a $1.8 million upgrade to its main soccer facility, a project that created 33 short-term jobs.

In close cooperation with the provincial governments and communities, ACOA has moved quickly to bring the RInC program on stream in order to have projects assessed and under way for the 2009 and 2010 construction season. We are confident that RInC investments are helping to put people to work on projects right now in many communities throughout Atlantic Canada.

I will be pleased to answer questions you may have about ACOA's supplementary estimates, including RInC.

Thank you very much for your attention.

[The Chair, Conservative, Michael Chong]

Merci, madame Collette.

Now we will hear from the Economic Development Agency of Canada for the Regions of Quebec.

[Guy McKenzie, Deputy Minister and President, Economic Development Agency of Canada for the Regions of Quebec]

Thank you, Mr. Chairman.

Ladies and gentlemen,

We thank you for inviting us to speak to you today about Canada Economic Development's supplementary estimates (B). My name is Guy McKenzie. I'm the deputy minister of CEDQ.

With me today from the agency are Manon Brassard, Vice-President, Operations, and Pierre Bordeleau, Director General, Corporate Services.

I hope our appearance will meet with your expectations and will answer any questions you may have with respect to increased funding for the Canada Economic Development Agency.

CED's mission is to promote the long-term development of the regions of Quebec, as stated in the legislation, “[...] by giving special attention to those where slow economic growth is prevalent or opportunities for productive employment are inadequate”.

It states that CEDQ “shall take such measures as will promote cooperation and complementarity with...Quebec and communities in Quebec”.

We provide direct assistance to Quebec's small- and medium-sized enterprises by offering them advisory services and financial support. We also assist regional business communities and the organizations that support them. To that end, we have 14 business offices located throughout the province.

Said action revolves around two main programs. First is community diversification, and second is business and regional growth.

The Community Diversification Program aims to foster the development and mobilization of communities; to support entrepreneurship and the creation or maintenance of enterprises; and, to encourage the development of tourist attractions.

The Business and Regional Growth Program aims to help enterprises improve their performance and engage in more innovation and export activities, and support the transfer of technology to enterprises.

The implementation of Canada's Economic Action Plan had an impact on our workload, but it did not seriously affect our programming. These initiatives were perfectly in line with our programming. For us, the EAP is essentially the implementation of the Community Adjustment Fund, or CAF, and the Recreational Infrastructure Canada Program, or RInC.

First, let me say a word about CAF. The community adjustment fund aims to stimulate the economy or at least mitigate the impacts of the economic slowdown on communities.

The Community Adjustment Fund is $203.3 million in funding over two years. One hundred and fifteen million dollars went directly to CAF-Forestry. Quebec invested an equivalent amount. The allocations were spread over seven agreements with Quebec, which is the implementing authority for anything involving infrastructure. Sylvicultural projects received $100 million, and bridge and culvert restoration projects received $15 million.

CAF-CED is an initiative that aims to boost the economy through adjustment and diversification measures. Eighty-eight million dollars will go toward diversification projects. So far, $48 million is committed to more than 126 projects, creating 3,125 jobs, and there is $28 million for 53 projects currently under study.

As we speak, CED has committed almost 90% of its CAF budget, and almost 12,000 jobs have been created or maintained: 9,837 jobs were created and 1,741 were maintained, as at November 29 of this year.

The Recreational Infrastructure Program, or RInC, was announced in June 2009. Through this two-year funding program, the government will invest $500 million in the upgrading or restoration of Canada's recreational infrastructure. Of this amount, $113.2 million has been earmarked for Quebec. To this amount will be added a total of $280 million from the following partners: $111.2 million from the province; $166.8 million from municipalities and school boards; and, $2 million from First Nations.

CED administers part of the program, and its implementation is carried out by CED for the First Nations and by two government of Quebec ministries, namely the Ministry of Education, Recreation and Sport (MELS) and the Ministry of Municipal Affairs, Regions and Land Occupancy (MAROT). To date, of the $78.1 million received, $31.9 million has been committed to 92 projects.

I will take this opportunity to say a few words about CED responsibilities with respect to the infrastructure program. In Quebec, CED administers the following programs: the Building Canada fund and Recreational Infrastructure Canada.

CED also participates in the delivery of infrastructure programs which will be winding down soon, such as the Infrastructure Canada Program; the Municipal Rural Infrastructure Fund; and the Canada Strategic Infrastructure Fund.

This finally brings us to the agency's supplementary estimates (B). The additional funds requested, which are $10.8 million, fit very well with our programming.

CED has requested new funding to provide the Municipality of Shannon with drinking water. CED has also agreed to help the Municipality of Shannon complete the extension of its municipal water supply system, for a total cost of $13 million. CED acted quickly, without going through the Quebec agreements, as this was an emergency measure due to contamination of the municipality's drinking water system.

An investment of $3.75 million was necessary to renew sport facilities at Laval University. This funding has been awarded through the Community Diversification Program and will cover most of the costs involved, which amount to more than $6 million. The work includes replacing the synthetic surface of the stadium, the addition of a brand new scoreboard and the installation of three new synthetic surfaces.

CED's intervention in this project occurred before the Canadian University Football Championship which was held in November 2009. Quebec had already invested $37.5 million in the expansion of the Physical Education and Sport Centre (PEPS) at Laval University.

Third, we received funding for the RInC program operating budget, which is $966,000. Estimates include the RInC program management operating costs, which are $659,000 for salaries and $307,000 for operating costs.

Finally, we received $120,000 from DFAIT and Industry Canada to pay their share of Government of Canada funding for the hosting of the 2012 World Congress on Information Technology.

I hope these facts are of interest and use to you.

Thank you, Mr. Chairman and ladies and gentlemen.

We will now be pleased to answer any of your questions.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. McKenzie.

We have an hour and a half for questions and comments from committee members.

We'll begin with Mr. Dhaliwal.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Thank you, honourable Chair.

I would like to welcome and thank the panel members as well.

My questions will go to Mr. Watson.

I'm sure you would agree that one of the key areas your department focuses on is the strategic growth industries in the west, specifically the small to medium-sized enterprises. Do you agree?

[Daniel Watson]

Yes.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

If that is the case, I wonder if you could explain why so much of their money is still on the table. Over the last year, the jobless numbers have gone up and personal bankruptcies have soared.

When I look at these numbers, 42% of this funding has lapsed. What happened? Where is the accountability? Is this why the minister of state decided not to come?

[Daniel Watson]

In terms of support to small and medium enterprises, which is obviously something the department takes very seriously, on the CAF, in fact—

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

But if you take it seriously, then why would 42% of the money lapse? That's my question.

[Daniel Watson]

There isn't 42% of our money that has lapsed.

If you're talking about the CAF program in particular, we're at almost 80% of having committed that money in the space of about four or five months, in the time since the application process was completed. That has actually gone on very quickly.

Out of something like $2.1 billion in demand for CAF, we've managed to get through the vast bulk of those 1,100 applications so far and approve a significant number of them, representing, again, just about 80% of the total number.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Again, I mean, in difficult times like these.... You haven't answered my other question. I have those numbers here and I'm certain that 42% of the money there is lapsed.

But you were talking about the contributions under the programs or projects that promote or enhance economic development and diversification. If we look at this, there cannot be any time more important than tough economic times like this, and you're still telling me that 20% of the money is lapsed.

Why would that be? Is it that there's no political will? Or do you think the political office should take more control of this money flowing out?

[Daniel Watson]

No, not at all. In fact, that 20% will be committed within a very short period of time.

Again, I should say that this is not only committing the money for all of this year; it's also committing the money for all of next year. Within something like the next 60 days, not only will 100% of this year's money be committed, or very close to it, but also 100% of next year's money on the CAF and the RInC side. Just under half a billion dollars should be committed within the next 60 to 90 days and that stretches to March 31, 2011.

You would certainly accept that it's very important to get these moneys committed, but I can assure you that in a very short period of time not only will they be committed for this year, but they will be 100% committed for next year in terms of CAP and RInC.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Was the same kind of money earmarked for Community Futures offices across the country? Can you explain what these offices provide in the communities?

[Daniel Watson]

As you mentioned earlier, small and medium enterprises are very important in the economy of western Canada and the Canadian economy generally.

Community Futures Development Corporations are over 20 years old now. They are organizations that provide services in rural Canada in particular—not just in rural Canada, but in many cases—and they're often an important source of information for small and medium enterprises on any number of subjects.

They often provide counselling on businesses that people are thinking of setting up, or they help them to grow when they've already been in operation. In some cases, they also provide financing; they have a loan capacity. In many areas of rural Canada, they have become part of the business fabric of communities.

They're a partner of ours and we provide them with financing every year to continue their operations.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

You mentioned financing. That's a good point you've brought up, but in fact, if we look at that financing situation, the Canadian Taxpayers Federation report pointed out that since 2006 the record of loan repayment has been very bad. Isn't it less than 52% that has actually been repaid?

[Daniel Watson]

I'm not exactly certain of the statistics you're reporting there. I do remember a report by the Canadian Taxpayers Federation. I don't remember any specific provisions referring to the Community Futures Development Corporations.

What I can say is that the Department of Western Economic Diversification has been out of the business of providing loans to small business for about 12 or 13 years now. At this point, we are in the business of collecting on loans that were made that period of time, but for almost the last decade and a half we haven't made any of those loans. It's not a business line that we've been in, other than to continue, of course, collecting the loans that were made a long time ago.

In fact, in the supplementary estimates today we are in the fortunate position of actually referring to excess collections, where we collected even more than was anticipated. That's in the supplementary estimates before the committee today.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

That 52% is quite high. If we look at the total number since the inception, we see that $134 million of taxpayers' money has disappeared. Wouldn't you agree that more control from the top might be necessary to deal with this situation?

[Daniel Watson]

Again, I'm not sure of the exact number that you're talking about there. It's not one that I'm familiar with.

I do know that some of the organizations we have dealt with have in fact increased their earnings on their loan portfolios and they've actually triggered some repayment provisions to the Government of Canada. In some of those situations, the success rate in repayment has been so strong that in fact we trigger some terms of the contribution agreements where they actually have to start contributing back to the Government of Canada.

So again, I'm not exactly sure what numbers the Taxpayers Federation might have been talking about there, but certainly the numbers that I'm familiar with sound very different from those.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Watson.

Thank you, Mr. Dhaliwal.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Thank you, Mr. Chair.

Thank you, Mr. Watson.

[The Chair, Conservative, Michael Chong]

We'll go to Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, Mr. Chairman.

I'd like to begin with a question for Mr. McKenzie, of the Economic Development Agency of Canada for the Regions of Quebec.

Is CANtex part of your program?