Finance Committee on Oct. 27th, 2016

[Benoit Daignault, President and Chief Executive Officer, Export Development Canada]

Mr. Chair and honourable members of the committee, thank you for inviting Export Development Canada to appear before this committee. We appreciate your interest in EDC's work with Canadian exporters and our perspective on helping Canadian companies to expand into international markets.

EDC is a crown corporation, mandated to help Canadian companies go, grow and succeed internationally by providing financial, insurance or expert advice as they seek to grow their business. EDC is an arms-length crown corporation and does not receive annual funding from the Government of Canada.

Since we were founded in 1944, we have helped Canadian companies of all sizes undertake more than $1.3 trillion in exports and foreign investments. We started here in Ottawa, but have since grown to establish 18 offices across Canada and 18 international representations. Most of these locations are in high-growth emerging markets.

In 2015, almost 7,500 Canadian companies used EDC services to undertake more than $104 billion in international business. This included roughly 6,000 Canadian small and medium-sized enterprises that were helped by EDC to conduct more than $15 billion in export trade and foreign investments.

Although EDC is an arm's-length organization, we share with the government's commitment to grow Canada's footprint in emerging markets. This includes helping more Canadian companies to become leaders in innovation-focused sectors, like clean technology. For example, in the past five years EDC has supported 128 clean-technology companies doing $2 billion in exports.

More broadly, EDC partners with companies across all sectors: light manufacturing, information technology, infrastructure, clean technology, natural resources, oil and gas, and transportation.

As the global economy continues to be influenced by globalization and fluctuating trade dynamics, we need to do more than ever to ensure that Canadian companies can compete and that we can continue to create an attractive investment climate.

No two companies are alike, and that means adjusting our offerings to the specific needs of trying to break into new markets. However, recent research conducted by EDC found that 65% of Canadian exporters start by exporting to the United States. The U.S. market is similar and presents lower risks. Twenty-two per cent of companies take their first international step in non-U.S. markets and others are simply born global. Approximately 13% of companies we spoke with enter multiple global markets at once.

This variety of experiences presents EDC an opportunity to help companies across all stages of their exporter journey. This includes offering economic analysis and market data, assisting with market access, or helping them to meet their corporate responsibility obligations alongside providing our traditional financing and insurance products.

This also means that EDC partners with other Government of Canada organizations, like BDC, to ensure that the entirety of a company's needs are being met. Since the signing of our formal partnership with BDC five years ago, there have been over 1,000 cross-referrals between our organizations.

EDC participates in other government-wide partnerships, like the accelerated growth service, which brings together Global Affairs, NRCan, ISED, BDC and many others in order to help high-performing, high-potential companies leverage the full benefit of government services.

Additionally, EDC works closely with Global Affairs Canada and the Canadian Trade Commissioner Service to introduce foreign buyers to qualified Canadian suppliers through matchmaking missions, trade shows, and one-on-one meetings.

EDC works hard to build relationships with large multinationals interested in doing business with Canadian companies, or those who have a large footprint and supply chain network in Canada. An example of this would be General Electric or India's Tata Group.

Once EDC's team has a detailed understanding of a company's supply chain and business goals, we can set up introductions to qualified Canadian companies with well-matched offers.

In 2015, EDC led 26 matchmaking events. These resulted in over 1,000 introductions between 133 foreign buyers and 450 Canadian suppliers, the vast majority of which were small and medium-sized enterprises.

When speaking to our staff spread around the globe, I am fortunate to hear incredible stories of Canadian companies of all sizes working to grow their business, secure contracts, or fulfill a once-in-a-lifetime growth opportunity.

EDC considers it a privilege to work with Canadian businesses that constantly impress us with their innovation and determination to grow to new international markets.

There is more to the EDC story, but I will stop here, and I look forward to engaging with you on any questions you might have.

Merci beaucoup.

[The Chair, Liberal, Wayne Easter]

Thank you both. We'll go to six-minute rounds, instead of seven, so we can fit everyone in.

Mr. Ouellette.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

Thank you very much for coming here today. I very much appreciate it.

We recently heard from Mr. Barton, of the advisory council on economic growth, that there is around $13 trillion that is having negative yields. Some of these investment companies and investment funds from around the world are looking for ways to make money

Are there enough funds for companies, such as medium-sized and small businesses in the Canadian marketplace, to create successful businesses?

[Michael Denham]

Let me give you a two-part answer to that question. One relates to venture capital. As many of you know, we're highly involved in venture capital. We're administering the venture capital action plan on behalf of the government. Then we have two parts of the venture capital business. First, we have three funds. We're investing directly in clean tech, information technology, and life sciences. Second, we have a fund-of-funds business. We're investing in other venture capital funds.

The asset class, over the years, has not been high performing. I continue to believe that there is a need for continued focus to ensure adequate funding to the venture capital ecosystem in the early stage and later stage. It's something that Canada has made quite good progress on over the past few years.

When I look at the quality of ideas, the quality of people, the quality of start-ups, and the quality of incubators, Canada is producing a lot of really good start-ups. I think it is important that we stay focused on making sure that enough capital is brought to bear to support them.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

You just announced, I believe it was in July, that you would be making available another $1 billion to Alberta companies through the ATB, the Alberta Treasury Branches, and the BDC.

You're doing that for Alberta, but what's the total amount for loans you have out currently for all of Canada?

[Michael Denham]

We have about $23 billion in term loans, outstanding to—

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

You made almost half a billion dollars in 2015 in profit.

[Michael Denham]

Correct.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

If you had another $10 billion, would there be capacity in the marketplace to make additional profit for the Canadian government?

[Michael Denham]

It's always a question of balance. We play a complementary role. We're not there to compete with private sector banks. That's just not right; it's just not fair, and it's not our mandate. We're here to make sure that Canadian businesses, and typically those that are a higher risk for the banking sector, have access to capital.

I can't answer right now whether $10 billion.... I think $10 billion would have a disruptive effect rather than a positive effect. I do think, over time, that entrepreneurs would benefit from us doing more by making capital available.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

In Alberta, you're probably headed into an economy that has a low level of confidence and one into which banks probably aren't willing to go. You've obviously taken up the slack a bit. The private sector is either unwilling or unable to do that. You're trying to do something that will lead to the creation of more jobs and longer-term growth.

[Michael Denham]

Exactly.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

I was wondering how Export Development Canada, EDC, and BDC work together. You were talking about how we need to develop more exports for Canadians, and that means more manufacturing, more exporting of our goods, and more services, as well. I was wondering how you worked together in order to do that.

[Michael Denham]

We work closely together. It's clear that for many Canadian companies to succeed and achieve their full potential, they need to be successful at exporting. It's been well said that that exporting could be to the U.S. or to emerging markets.

We have complementary skills and a localized footprint. We're close to small businesses. EDC has a whole host of great relationships and mechanisms set up to help Canadian companies export. The goal for us is to make sure that we're as seamless as we can be in connecting small businesses, which should be exporting and which can be exporting, into the extensive network with the skills that EDC has to help them go to market and succeed.

We signed an MOU a few years ago to bring that about. There are hundreds of examples of referrals. One thing I've been advising our clients is that when they start, on day one they should make sure they have a meeting with BDC, EDC, and their commercial bank. Have all your financial partners together from day one to help you grow and succeed internationally.

[Benoit Daignault]

The only thing I would add to this is that if you are at the receiving end, if you are a client, and you meet with an EDC or BDC person, those individuals will have knowledge about the offering of BDC or EDC. At the end of the day, it's about being able to put the most competitive and best offer for that client to make sure they have as much success as possible.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

This is not a criticism, but why do companies have difficulty exporting? Why are we not seeing growth in our manufacturing base with the low Canadian dollar?

[Benoit Daignault]

This is a very complex topic, and there are many reasons for that.

I will highlight that the biggest issue for exporters, issue number one, is not financing. Issue number one is to understand the opportunities and to find the right partners or the right contacts in the markets.

If you look at the various needs, you'll see that the financing piece is number three. First, if they don't have a sense of the opportunity, and they don't know how to talk or who to talk to in the given market, it's very difficult for them to even understand their financial needs.

From that perspective, this is why from EDC's standpoint and from GAC's standpoint, and working with the trade commissioners, there is a lot of work being done in the markets to understand who's who, and to understand which companies have a potential interest in doing business with Canadian companies. By making that connection, you end up defining the opportunity and defining the financial needs.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you both for being here today.

I'm going to start with Mr. Denham.

Mr. Denham, obviously politicians, and Canadians generally, sometimes have varying perceptions of BDC, because your bank is so often in the background. In my area of the Okanagan, Brian Kemp is one of your representatives. He is at all the networking events, so he's constantly trying to get the name out there.

I think one of your challenges, though, is that people have a perception. For example, in my small business I made contact with BDC, and the programs and services offered at the time didn't match what I needed. However, things change. I think that's one of the biggest challenges; people don't recognize that your program changes.

How do you get it out there that BDC is available to help small entrepreneurs?

[Michael Denham]

It's something we're always focused on. My perspective is that there is an awful lot of benefit we can provide to entrepreneurs. The key challenge for us is to get the word out so that they understand it.

We do a number of things. We've recently started to advertise just to create more awareness as to what the BDC is.

I made a bit of a joke the other day, that just for a couple of games, as an experiment, we had the BDC logo behind the net here in Ottawa. When Auston Matthews got his four goals, they were all in front of the BDC logo, so unaided, awareness spiked up in southern Ontario big time that week.

Second, we have a very well-visited website, BDC.ca, with about three million visitors per year. That's constantly being refreshed and updated. It's very catchy, and it tries to show a range of what we do. In the context of our new branding, I think it's a lot clearer than it was.

More importantly, to your question, we take a lot of steps locally to get word out. We're active with chambers of commerce across the country, and we're very active with the accountants, the lawyers, and the advisory network. We're constantly having open houses and things in our neighbourhoods, and the hope is that through the Rotary and Lions Clubs, etc., we're staying in touch with entrepreneurs so that we hear what matters to them, and we can refresh them with respect to the services we provide.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I actually have an example that is the exact opposite of Mr. Ouellette's. Many of the credit unions in my area—and I've heard from some banks as well— often do more business now because your BDC will join in and take a certain amount where the traditional banks or credit unions aren't willing to invest. That co-operative approach, I think, ends up seeing a lot more products funded, so I would encourage you to continue that.

Again, I know it's always a bit dicey when you're talking about working with or against the banks; there's always a balance between the two.

You mentioned venture capital. A number of us visited Israel, and we heard from a gentleman who is renowned in Israel. He actually visits Canada quite often. He said something that stuck in my mind: “I would love to do something in Canada, but you guys make it so difficult.”

Is it because each province has its own set of rules when it comes to capital and those kinds of investments, which makes Canada's new venture capital ecosystem so difficult? When we're talking about attracting foreign direct investment, when we say “Canada”, it's a much different brand from, let's say, New Brunswick or British Columbia, etc.

Do you have any thoughts on some of these barriers to having people come in and invest in Canada?

[Michael Denham]

Did he elaborate on what makes it difficult? What were some of the reasons he cited?

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

He just said he'd love to come and do things in Canada, but it just seems like we aren't interested in facilitating that. He simply said there are just too many rules among provinces and areas. It's too complex. He'd much rather go to some place where he would go to one shop and then they would start doing business. It works in the United States. Their framework is different from ours.

[Michael Denham]

Right. I can't answer that. I know we get a lot of—in some cases too much—investment coming in from the U.S. to invest in both Canadian funds and Canadian start-ups through our network of accelerators and incubators. There's no issue with U.S. money coming to Canada. I can't comment on what the impediments are with respect to Israel, but I will look into it, though.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay, I appreciate that. I didn't give you enough context maybe, but it's a question of the ecosystem with regard to venture capital.

Mr. Daignault, I have a quick question. In the United States, your equivalent of EDC has had a lot of trouble in the last year or two with funding and with being able to continue its operations. I love my American friends and I have family who live in the United States, but are we capitalizing on that? Are we trying to say, listen, come to Canada where you can work with us and we'll be able to help you carry on your business?