Finance Committee on Sept. 20th, 2016

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

On the unemployment rate, with those policies and programs you have in place, how much have they been helping to improve the unemployment rates in the region? Do we still see the up days and the down days? Do we see the non-permanent positions being aligned there to keep the economy going?

[Kent Estabrooks]

Yes. Of course the economy is influenced by a number factors, not the least of which for New Brunswick was the recession starting in 2008. There are global factors that impact the economy of New Brunswick.

I might also point out that New Brunswick is one of the most export-dependent provinces in the country. Fluctuations in the value of the dollar and things of that nature have an impact beyond what ACOA can directly do at the firm level of SMEs.

Having said that, we've tracked our performance at the firm level. We're confident that our investments are generating a positive impact at the firm level. The unemployment rates also have other factors at play. There is a skills mismatch between the individuals who are unemployed within the province and the available jobs we see in sectors.

It's complicated a bit more by the seasonality of the employment, sometimes. People who are unemployed are unemployed for part of the year, and opportunities may exist at the same period of the year. It's not always that the individuals line up with the available jobs.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Estabrooks, Mr. Caron.

I do have one question I want to bring here.

I know ACOA reasonably well. I will agree with you that on firms you've operated with their productivity is better, and their contributions to the economy is better. We have some real challenges. The reason I raise this is that I'm one of the Atlantic Canadians who would love to see my kids come home and work in Atlantic Canada. It's not happening.

When I look at the numbers with ACOA being in place for the last number of years, with the aging of the population, our demographics are going the wrong way. We're still having an out-migration of youth. We're not retaining them. Even with the immigrants who come in, we don't retain them. As soon as they're a Canadian citizen or a permanent resident they go elsewhere in the country. We have a low retention of immigrants and that's with all the good work you're doing.

The problem on productivity is that the lowest productivity in Canada is in Atlantic Canada, and it's even worse in P.E.I., I hate to admit. My question is along these lines, and I'm not questioning that ACOA is doing good work. I think you are, but if we do what we've always done, then we can expect the results to be the same.

What else do we have to do with ACOA in order to increase productivity, to retain immigrants in the region, and to get our kids back home so they are contributing to our economy and not somewhere else in the world? What's the problem? How do we solve it?

We're going to be making recommendations to the minister. I'm a strong supporter of ACOA, but I want to see it be able to do the job that needs to be done. I don't like the results at the moment.

[Kent Estabrooks]

Thank you, Mr. Chair.

We believe—and I can speak from the New Brunswick perspective here—that there are really three key areas where we see possible development, and in fact they require development in some cases. Primarily, with respect to value-added resource sectors like agriculture, forestry, and the fishery, as you pointed out, there is a lack of productivity. This isn't something that we can let up on, though, because a lot of the jobs associated with value-added resource sectors are in rural New Brunswick. There are challenges there in maintaining them, so we believe we need a continued focus on improving productivity and investing in innovation in these firms. We believe that, as well, we need to expose these firms to international markets and to open up doors in terms of new sales opportunities and help them develop new products and services for rural New Brunswick.

In addition to that, a second focus would be in the area of information technology. I alluded to this in my opening remarks. In New Brunswick, we have a number of success stories in growing ICT firms, a handful of which, if I add them up over the past few years, have actually sold for over a billion dollars. The terms of the deals are private, but we do have access to some of the reported information. The important thing to note is that this wealth that was created from the sale of these firms remains largely in the region. More importantly, the individuals who grew these firms, who now serve as mentors for the start-up ecosystem, are also there. They're investing their capital and they're investing their time.

ACOA sees that investing in the start-up ecosystem, making sure it's solid, is paying real dividends. A number of IT firms that we've seen come through the start-up ecosystem, as I mentioned in my opening remarks, are garnering international recognition for their work.

The third area I want to cover, and the last area, is around clean technologies. As jurisdictions, countries, and economies around the world are moving toward reduced emissions and targets, this is opening up a real opportunity for new business in that sector, new technologies. We believe that the Smart Grid Innovation Network and the smart grid development project are really at the forefront of that. It's a unique opportunity, and we have a world player in Siemens. We have NB Power fully cooperative. They have provided an end-to-end system that can be mined for data, and there are real opportunities to develop new technologies and new ways of power generation that could then be turned out and sold to utilities around the world.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Mr. Caron, sorry; I took some time there.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you Mr. Chair.

Thank you to the witnesses for their presentation.

Mr. Estabrooks, I would like to follow up on what Mr. Aboultaif said, while keeping in mind your reply to Mr. Easter.

ACOA's plans and priorities for the next two years indicate that budgets will be cut significantly, $308 million this year and $291 million in two years. Things could change, but for the moment, we don't know whether that will be the case.

Despite these budget cuts, will be you be able to achieve your objectives?

[Kent Estabrooks]

The cuts affect the programs I referred to earlier. For example, the Canada 150 Community Infrastructure Program, or CIP 150, is a temporary program that will end on March 31, 2018. Further effects on our budgets are related to temporary programs. However, our basic budget has remained consistent since—

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

The CIP 150 is part of community development. In this case, the reduction is roughly equivalent to that. An amount of $8 million is earmarked for ACOA.

However, in terms of business development, which is, if I'm not mistaken, at the core of ACOA's activities, there is a decrease from $172 million to $165 million. Temporary programs may be abandoned or may expire, but if they are not replaced, ACOA’s primary activity will be affected.

[Kent Estabrooks]

I would like to point out one of the aspects that affects our budget.

A significant portion of our contributions to businesses is refundable. Basically, we are counting on about $45 million, which is the amount for this budget. If we can obtain more rebates, we will be able to reinvest that money in our budgets.

As you can see, these rebates are quite a significant portion for this fiscal year. We must not think that this could not happen again next year. Actually, given the current conditions, it is quite possible that our rebates will allow us to exceed the base amount of $45 million. For the same reason, we might get the same numbers next year.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I have a more general question.

Has the government's centralization affected your effectiveness? When cabinet was formed, it was noticed that the secretaries of state assigned to agencies had disappeared and that everything was ultimately centralized in Innovation, Science and Economic Development Canada.

Have there been any repercussions on ACOA’s operations?

[Kent Estabrooks]

During all the transitions within our structure, there has always been a period of adjustment. In addition, it is important for the minister to familiarize himself with our agency’s operations and to feel comfortable with the kinds of projects we support.

I think, for now, we have adapted well to the new structure. We are still able to deliver our programs and provide services to our customers.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I’m sorry to interrupt you, but I don’t have a lot of time left.

I'm the NDP critic for ACOA. I can tell you that officials have approached us saying they were afraid that the message would be diluted in a centralized structure. They also fear that, instead of sending the information on local needs to the decision-makers, ACOA would become an agency responsible for locally implementing the programs that have been determined at the top.

Could you comment on these concerns expressed by some of the Atlantic region officials?

[Kent Estabrooks]

I will say that our experience so far, in terms of communicating our needs to the minister and to the question of his having an appreciation for the Atlantic Canadian context, has been that very early in his mandate, he was out. I, personally, moderated a round table—I think he's had several round tables; he's been out several times since—and there's been an opportunity for stakeholders to engage with him first-hand regarding the challenges and opportunities that exist in the Atlantic. From that perspective, I feel that's relatively well in hand.

Furthermore, we have the opportunity to brief the minister on a regular basis on any number of topics that we think are important to the Atlantic region. As well, we are able to put that into context in the projects that get approved and that we recommend for the minister's support, which, I must say, have largely continued and continued in the same fashion as we have recommended them.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Ms. O'Connell, go ahead for five minutes.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you, Mr. Chair.

Thank you for coming today.

Tourism in the Atlantic provinces, especially this summer, from what we've been hearing, has been big. For New Brunswick, I could quickly pull up some older stats, but I think in 2012 tourism represented 8.6% of the labour force. I would assume, based on, again, what we've been seeing in the last number of years, that the number might even be much higher.

Without the current data in front of me, I'm just wondering if this is an area of focus. What are you doing in terms of tourism and the labour market and opportunities there?

[Kent Estabrooks]

Thank you.

Tourism does represent a very important important opportunity. In particular, it's driven by a couple of factors, namely the low Canadian dollar, which attracts U.S. tourists to the area, and the low price of gas, because much of our tourism actually comes from vehicular traffic coming in from outside the region. Those two things combined really paint the picture for opportunities into the future.

We work very closely with the Province of New Brunswick. They have a tourism department, so they are developing products in the tourism realm that we co-fund with them. The Fundy Trail is one such asset. There are a number of other examples of assets that we've developed for the province over the years.

But we are struggling a little bit in terms of....When you talk about tourism, our experience is that many people are quick to name Nova Scotia, and they're quick to name P.E.I., and often people are driving through the province of New Brunswick on their way to these icon destinations. Our challenge is to make sure we have enough experiential product—product that really meets the needs of the modern tourist to attract them and to retain them in New Brunswick for a few more days.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you.

Just to follow up on that, I don't know if this is New Brunswick-specific, but I understand there is an Atlantic Canada Tourism Partnership. Is that being extended? What can you tell me about that?

[Kent Estabrooks]

The pan-Atlantic agreement, an agreement struck with the provinces, is actually managed out of our Prince Edward Island office. ACOA, P.E.I..... The region also has responsibility for tourism generally. My colleague, Mr. Pat Dorsey, will be here later on this afternoon.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

I'll ask that question later. Thank you.

In which sectors are you seeing some of the highest growth that is unexpected or not what you first think about when you're...? Your agency is meant to spur growth and diversification and innovation, so what are some of the things that people might not associate with New Brunswick that you're seeing a huge boost in and that we could potentially do more with to make the opportunity go further?

[Kent Estabrooks]

Certainly, there's the area of clean technology. What I perhaps neglected to mention before is that we do have world-class research capability at the University of New Brunswick in the smart grid area. I might also add, in terms of our assets within the educational institutions across New Brunswick, we also have world-class leading research in the area of cancer, and predictive analytics and medicine based on gene therapy. The term is “precision medicine” in that there is science around adapting conventional detection and treatment methodologies around the genetics of an individual. That research is coming out of the Atlantic Cancer Research Institute. So there are all kinds of applications there.

That might surprise a number of people in terms of our having that capability.

Are there any other examples?

[Kalie Hatt-Kilburn, Director of Policy, Advocacy and Coordination, New Brunswick , Atlantic Canada Opportunities Agency]

I can add another one.

We have, as Kent mentioned, invested quite a lot in university research capacity. We're pleasantly surprised to start seeing a lot of spinoffs from that, and newer companies starting. Kent mentioned the importance of supporting the entrepreneurial ecosystem, and UNB has a leading program called the technology management and entrepreneurship program. It works with some of those technology innovators and pairs them with people who have the business management skills, and in some cases, trains them to have those business management skills. As a result, we're starting to see more successful companies come out. Often what you see is that the technical innovator is not always the business person. They can, in some cases, become that, but that partnering, along with the mentoring and the training and pathfinding into the rest of the ecosystem, is having an important impact.

An example would be Smart Skin Technologies. They are actually a spinoff from the University of New Brunswick's biomedical research facility. This is a group that really leads in innovation around prosthetics. They originally developed a coding for prosthetics that they realized could have applications in other areas—in this case, in industrial packaging.

This is a company that's now spun off and has received international recognition in that field. It's a surprising turn.

[The Chair, Liberal, Wayne Easter]

Thank you, Ms. Kilburn.

Mr. McColeman, you have five minutes.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Thank you for coming.

I think you were in the room when we had the first panel. I'm going to pose the same question to you because you said forestry was one of the major industries. What percentage of the GDP does that represent?

[Kent Estabrooks]

I have it here broken into three categories: wood pulp, value-added wood, and paper. All three represent about $1.4 billion out of a total of $27 billion.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Let me pose the question this way. First of all, we've had signals from the minister of trade that a softwood lumber deal was not in the cards in any extension of the current agreement and/or a new agreement replacing the current agreement. What we had was an extension agreed by the U.S. and Canada. You're probably aware of this.

Since we're talking about pre-budget consultations, in the event, which is a high probability, that there's not a softwood lumber deal with the United States, what kind of emergency help would you need from government if your softwood lumber industry was greatly impacted with huge tariffs put up by the United States to Canadian products?