Finance Committee on Sept. 21st, 2016

[The Chair, Liberal, Wayne Easter]

We'll call the meeting to order.

My apologies, witnesses. What we were discussing is that due to the votes tonight, we will try to cut at least the last two panels back to 45 minutes. We'll see what we do with the second panel, which is from WED, and whether or not they're here in time.

With that, I welcome the representatives from the Federal Economic Development Agency for Southern Ontario. As you know, we've invited you before the committee because, pursuant to Standing Order 83(1), we are doing pre-budget consultations in advance of the 2017 budget. Our major theme is how to achieve better economic growth in Canada, and the economic development agencies are a fundamental part of that. I welcome Nancy Horsman, president, and the other representatives.

The floor is yours. Then we'll go to questions.

[Nancy Horsman, President, Federal Economic Development Agency for Southern Ontario]

Good afternoon, Mr. Chair and committee members.

First, thank you for inviting us to appear before you today on behalf of the Federal Economic Development Agency for Southern Ontario, more commonly known as FedDev Ontario.

My name is Nancy Horsman; I am the president of the agency. I am accompanied by my colleagues Alain Beaudoin, vice-president of Policy, Performance and Partnership Management, and Frank Lofranco, vice-president of Business, Innovation and Community Development.

FedDev Ontario was created in 2009 with a five-year mandate to respond to the effects of the global economic downturn in southern Ontario. In budget 2013 the agency was renewed for a further five-year mandate, which ends at the end of March 2019. FedDev Ontario is headquartered in Waterloo, with offices across the region in Ottawa, Toronto, and Peterborough, and it employs approximately 230 full-time equivalent staff.

Southern Ontario is a unique region and a key contributor to the Canadian economy. The region is home to approximately a third of Canada's population and accounts for more than a third of national employment, gross domestic product, and exports. Southern Ontario is also home to key clusters, including automotive, finance, information, and communications technology, and life sciences, and many of these are supported by incubators and accelerators.

Ontario is Canada’s research and development engine. Nearly half of all Canadian private sector R and D is performed in Ontario. Ontario also has the highest rate of university education attainment in the country and the largest number of colleges and universities.

Nevertheless, the region has not been immune to the pressures of the changing global economy. Similar to other advanced economies, the region is undergoing a shift towards a growing service-oriented and knowledge-based economy. Many of the region’s traditionally strong industries, such as manufacturing and automotive sectors, are in transition.

And while economic conditions in the region have improved in recent years, ongoing challenges remain.

FedDev Ontario’s programs and services are meant to leverage the region’s competitive advantages to address these challenges. Our core mandate is to strengthen southern Ontario’s economic capacity for innovation, entrepreneurship, and collaboration, and to promote the development of a strong and diversified southern Ontario economy.

Our programs and services are well positioned to support the Government of Canada's priorities, including Canada’s innovation agenda, and to support communities in transition. FedDev Ontario is working to help partners in the region to drive economic growth; support firms’ ability to adapt, become more productive and access new markets; and invest in projects that create good, well-paying jobs.

In delivering on its mandate, FedDev Ontario plays a number of key roles. We fund targeted projects, along with other partners, to stimulate the Ontario economy. We deliver national programs in our region. We provide business-related services to firms and other stakeholders. We bring together key stakeholders to improve the performance of the Ontario economy, playing a convenor role. Finally, we act as a champion for the region of southern Ontario.

We were provided a budget of $920 million over our current five-year mandate to carry out these roles. The agency's core programs are the southern Ontario prosperity initiatives, the advanced manufacturing fund, and the eastern Ontario development program, each of which I will explain briefly.

The southern Ontario prosperity initiatives include four initiatives that cover a range of business needs in the region.

Through the investing in business innovation initiative, the agency supports early-stage companies in areas such as access to capital, mentorship, and work with incubators. Through the investing in business growth and productivity initiative, the agency helps small and medium-sized enterprises scale up capacity, access export markets, and adopt technology to become more productive.

Through the investing in commercialization partnerships initiative, the agency invests in projects that strengthen clusters and/or create innovation, always with the goal of commercializing new technologies or processes. Through the investing in regional diversification initiative, the agency supports communities to leverage their unique assets, diversify their economies, improve competitiveness, and attract investment and jobs.

The advanced manufacturing fund helps manufacturers adopt cutting-edge technologies which strengthen their position in global supply chains.

To serve the ongoing economic challenges of youth exodus and the transition of traditional sectors in eastern Ontario, the agency has a program called the eastern Ontario development program. This program promotes business development, community innovation and strategic collaboration and is delivered through the region’s Community Futures Development Corporations.

FedDev Ontario, like other regional development agencies, plays an important role as a federal delivery agent for national programs, specifically, the community futures program, the economic development initiative, and the Canada 150 community infrastructure program.

The community futures program helps the small businesses that are the cornerstone of our rural communities to seize opportunity and expand through access to loans, training, and networks.

The economic development initiative focuses on strengthening innovation, entrepreneurship, partnerships, and diversification of economic activities in official language minority communities. In southern Ontario, the EDI program is designed to meet the needs of Ontario's francophone communities.

The Canada 150 community infrastructure program is being delivered by regional development agencies across the country to celebrate the 150th anniversary of Canada's Confederation in 2017. This national program supports the rehabilitation or improvement of existing community infrastructure. This includes projects that support indigenous communities and that promote a clean growth economy. FedDev Ontario is delivering $88.8 million of CIP 150 funding in southern Ontario.

FedDev Ontario also delivers business-related services through industrial and technological benefits activities and Canada Business Ontario, or CBO, which is part of the Canada Business Network.

FedDev Ontario provides support to the southern Ontario aerospace and defence sector and facilitates participation in Canadian defence and security procurement by leveraging opportunities under the industrial and technological benefits policy.

Canada Business Ontario provides information through its online, contact centre, and outreach activities to people across Ontario on how to start, manage, and grow a business.

FedDev Ontario's contribution to achieving positive economic outcomes is realized not only through co-investing in projects and delivering services, but also through acting as a convenor and champion for the region.

The agency convenes key regional players to seek a common vision and encourage the development of coordinated plans. We actively promote the assets in the region. The agency also provides regional intelligence by playing a role as the bridge to and from Ottawa.

Since its creation in August 2009, FedDev Ontario has committed more than $1.6 billion, which is estimated to have resulted in more than $2.4 billion in additional leveraged funds. This includes more than 325 projects with small and medium-sized enterprises, more than 50 projects with incubators and accelerators, and more than 200 projects with manufacturers. Those are just our direct investments. We also do investments through third-party delivery with the Canadian Manufacturers and Exporters and the Yves Landry Foundation.

This fiscal year, FedDev Ontario is on track to fully spend its allocated program funding of $227.7 million, using $25.7 million of operating funding. For the remainder of our mandate, the agency will continue to assess proposals, deliver programs, and monitor and measure performance of its portfolio of investments. We will continue to provide business-related services and act as a convenor and champion while planning for the renewal of our mandate.

In closing, I want to thank you for the opportunity to appear before you today.

My colleagues and I welcome any questions you may have.

[The Chair, Liberal, Wayne Easter]

Thank you, Ms. Horsman.

To save me Googling it, what is the Yves Landry Foundation? I haven't heard of it before, to be honest.

[Alain Beaudoin, Vice-President, Policy, Partnership and Performance Management, Federal Economic Development Agency for Southern Ontario]

Thank you for the question, Mr. Chair.

It's a not-for-profit organization that is working very closely with manufacturing companies to support their efforts to train and retrain their employees when they're adopting new technologies or new processes and when they're investing in machinery and equipment. Essentially, it tries to support their efforts to better integrate and to increase their productivity and competitiveness.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Turning to five-minute rounds, we have Ms. O'Connell first.

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

Thank you, Mr. Chair.

Thank you for your presentation.

I understand the role you play in terms of working with companies and individuals to innovate, but when you see impediments to that innovation, do you also speak to the government or the minister about those impediments? I'll give you an example.

In Pickering, my riding, we have employment land just north of Highway 407. It's certainly not rural. It's not developed yet. The lands are provincially owned. They're on the market for sale and designated as employment lands. We can't get Internet there. How innovative can we be and how many jobs can we create when we can't get Internet north of the 407? Anybody from Ontario knows that this certainly is not a rural community, let alone the rural portion of my riding.

Do you advocate, when you see these types of impediments, for something like that?

[Nancy Horsman]

Our role, as I said, is to encourage entrepreneurship and innovation and to promote a diversified and strong southern Ontario economy. Our focus in terms of our programming is really on innovation, on increasing the productivity of companies, helping companies to scale up, building and strengthening clusters or areas of innovation, creating and convening collaborations or partnerships among universities, research institutions, and business, and creating those knowledge spillovers and benefits that come from the collaborations.

We do keep in very close contact with the minister and the minister's office on what's going on with our programming in the area and what's going on in the region. Our efforts are very much project based, so we help companies that are, for example, undertaking to expand a plant, get a new product to market, or commercialize a new idea.

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

In regard to priorities on diversification, do you have priorities in the field of Ontario agriculture? Specifically, do you cut out any portion of your budget for projects or opportunities for agriculture?

Again, in the area I am from, for many farmers it is much more lucrative to sell their land to developers for home development in the GTA than to farm it, especially when some of these lands.... Again, it's passing down through generations. What support is there when farmers or their families want to take it on? Maybe they need new equipment, but instead of investing in that equipment they decide just to sell the land, in many cases for millions of dollars. If there's something available to encourage them and to help and support them to expand their operation, that might make the difference in losing that land forever.

[Nancy Horsman]

We do have a role in terms of regional diversification. We have a program called “investing in regional diversification”, which would be much more focused on projects that are brought forward to us by potential recipients, projects that would have to do with creating innovation and creating productivity.

We also invest in the community futures development corporations, which are there basically to support rural communities. They do business supports. They have an investment fund that they can use to lend to businesses in the region. As well, they provide other business supports, such as mentorship and networking and that kind of thing.

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

Thank you.

I appreciate that these programs exist, but my question was much more around your goals and objectives. If you have a goal and objective for agriculture, for example, as part of diversification, and not just for manufacturing in Ontario, then it's much more than program based. You'd be going out seeking opportunities and looking for these connections, versus waiting for projects to come in.

Frankly, farmers probably don't think about FedDev and what opportunities exist there. That's not the natural connection. I guess I'm looking more for.... Perhaps you can provide it to us later, because I'm sure I'm almost out of time—

[The Chair, Liberal, Wayne Easter]

You are.

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

—but what are those tangible results in terms of goals and strategies instead of waiting for project-based applications?

[The Chair, Liberal, Wayne Easter]

Go ahead. A short answer would be good, Nancy.

[Nancy Horsman]

I was going to add that FedDev Ontario is one of many players in the region. There's the Ontario government and there are also a number of federal players that support the region as well as the entire country. Our interest is in southern Ontario. There are the Community Business Development Corporations and the Export Development corporation, and there's the Department of Innovation, Science and Economic Development. There are many other players.

I think you asked where people can go to find out what programs are available. That is an issue that I think we're all trying to grapple with. We have something called the Canada Business office for Canadians who are interested in starting a business or need help with their business. There's a pathfinding service available to them through that service, not just with federal programming, but also with Ontario programming.

[The Chair, Liberal, Wayne Easter]

Thank you, Ms. Horsman.

Ms. Raitt, you have five minutes.

[Lisa Raitt, Conservative, Milton, ON]

Thank you very much.

I'm wondering if you're able to tell me how many applications you receive in a year for various programs. What's the ballpark? I'd like to know what your percentage of approval is, based on the total number of applications that come in.

[Nancy Horsman]

In terms of the Canada 150 program, we had over 1,000 applications in the first intake and over 1,000 applications in the second.

In the first intake, 380 of the projects were funded. Some of those applications were not necessarily eligible. We don't have the number with us, but that's something we could follow up on and provide to the committee. There's much more demand than what we are able to fund.

[Lisa Raitt, Conservative, Milton, ON]

I'll tell you why I'm asking, and it's not about your entity, but about what's happening on the outside. I'm going to bring it to your attention, and I'd like you to tell me if you know anything about this situation in Ontario.

There is a company situated in Cambridge, Ontario, that is called “Mentor Works”. Mentor Works advertises on its website that it can help companies obtain Canadian government funding and has a 95% rate of success. Now, you've just told me that these guys get 30%. They say in their website that they're able to do this in part because they have close relationships with funding body representatives. Finally, it's a former FedDev Ontario employee from three years ago who is the business development executive there.

Can you tell me what safeguards you have in place to ensure we don't have a situation where companies can sell close relationships with a federal funding authority and brag that they have a 95% rate of success?

[Nancy Horsman]

I am not aware of Mentor Works. When we have a funding relationship with an applicant, it may be even before the application is finalized. We are working closely with those recipients. We're not working through a third party, and I can absolutely say that: we are working with the recipients themselves.

We spend a lot of time ensuring that on our website the terms and conditions and the application guidelines are very clear and transparent, and we do keep them as simple as possible so that applicants don't need help to do this. If they do want help, they can come to us. We have program officers that are available and work with the potential recipients.

[Lisa Raitt, Conservative, Milton, ON]

It is of concern, obviously, because by saying that they have a 95% success rate, they're marketing themselves as the way in which to obtain funding from FedDev specifically, because they're located in Cambridge, which is right next to Waterloo, and the people who work there live in Waterloo and Guelph.

I would give it to you for consideration. You have notice of it. It is a website that's live. I would hate to see a situation where Canadian businesses are being set up in order to ensure their clients get greater access than anybody else—and a paid service. As long as you're aware of it, and you're putting in place what you need to do....

As well, I would note once again that it's a former FedDev Ontario employee advertising that they're a former FedDev Ontario employee and, bragging about close relationships with funding body representatives. This is a real issue, and you really have to look into this and get a handle on it.

That's it for me.

[The Chair, Liberal, Wayne Easter]

That's noted. Thank you very much.

Mr. Caron, you have five minutes.

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

Thank you very much, Mr. Chair.

My thanks to the witnesses for their presentation.

I like to look at the plans and priorities before the presentations. As I'm looking at the ones for FedDev Ontario, I am wondering how you are coping with the changes in the various budgets allocated to you.

For instance, under the various components for technological innovation, in 2013-14, the expenditures—which are part of the budget—of about $56 million went down to $10 million for the year 2014-15. Then they went up to about $70 million for 2015-16, and then to $81 million. Those are substantial changes to the budgets for technological innovation.

There are also quite significant changes to the budget for community economic development, which are largely because of the Canada 150 community infrastructure program, CIP 150.

What is the reason for the overall variations, particularly for innovation? How is FedDev Ontario dealing with those significant fluctuations?

[Alain Beaudoin]

Thank you for the question.

I would like to provide the following explanation about the fluctuations that you mentioned.

Those fluctuations are also a representation of the funding that the agency received. In her remarks, the president mentioned at the outset that we are now halfway through our second five-year mandate. The 2013-14 reference year is the last year of our first five-year mandate. At the end of the mandate, the expenditures for technology and innovation were higher.

As for 2014-15, the amounts you are referring to further reflect that it was the first year of our second five-year mandate. In addition, we had launched new programs with a stronger focus on innovation. At the time, our programs had been recalibrated following the consultations that we held with the various stakeholders. So we are referring to the amounts disbursed, rather than the amounts earmarked for various organizations and businesses.

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

Please correct me if I'm wrong. When you transition from one mandate to another, ultimately, a large part of the agency's mandate starts from scratch and there is not much overlap between the contributions, commitments and projects that are funded between two mandates?

[Alain Beaudoin]

Thank you for the question.

In this case, it was a reflection of the fact that most of our programs had changed. In our first mandate, we had programs geared toward prosperity, for instance, but in the second mandate, following our consultations, many programs were changed. In that case, the reset button had to be pushed to start over and launch a call for proposals to stakeholders, so that they could submit an application in keeping with the terms, conditions and objectives of the programs we had in place, which were different from the ones in the first mandate.