Finance Committee on Oct. 27th, 2016

[Benoit Daignault]

Thank you for your question. I'm just going to provide a very tangible example.

There was an announcement of a new plant in Welland, Ontario, a new investment by General Electric. Essentially, General Electric looked at Canada specifically because of EDC's support for their international sales. With large corporations like GE, we actually look at their Canadian footprint. Providing their footprint is substantial and there is a commitment to do more with Canada, we essentially enter into a protocol under which we will provide EDC's capacity for their business around the world, and the capacity that EDC will deploy will be a function of their commitment to Canada. Of course, in the context of U.S. EXIM, and their lack of ability to operate, we have been able, on a proactive basis, to put more capacity in front of GE, and that actually triggered the actual process for GE to look at Canada for the investment.

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

Is this a one-off, or is this a strategy that you will continue to build on? Because, again, it's an important way to help build our economy, and really if the Americans can't figure it out, then we should.

[Benoit Daignault]

It is a strategy that we pursue. We're actually looking at major buyers around the world, and more specifically in the U.S. Where our value proposition is very interesting is when the corporation in the U.S. needs buyer financing for its own international sales. This is where it becomes extremely relevant.

[The Chair, Liberal, Wayne Easter]

Mr. Caron.

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

Thank you very much, Mr. Chair.

Thank you very much to the witnesses for joining us today.

I know more about the Business Development Bank of Canada and less about Export Development Canada. But I am somewhat aware of the work that the organization does.

I do not have a lot of questions for Mr. Denham because, as I said, I know the bank quite well; there is one in Rimouski, in my constituency. The BDC has an excellent reputation among business people. The bank is not in competition with other types of investments. It actually works in synergy with different groups, such as Canada Economic Development and Investissement Québec. I don’t have a lot to say to you except to congratulate you for your work and to hope that it continues.

My first question goes to Mr. Daignault and is about the new mandate that EDC received in budget 2015.

You did not talk about it a lot in your presentation. The mandate covers the work done in international development. In international development, we know that Canada has frozen its budgets for direct aid, for example, the aid intended for the Canadian International Development Agency, or CIDA.

However, there was an announcement about an initiative that will provide about $300 million in coming years, in order to establish a financial development institution that is supposed to help with investments in developing countries. I'd like to know your opinion on the integration of this new mandate with the one that EDC already has.

[Benoit Daignault]

Thank you for the question.

First, as for the initiative you mentioned, our mandate has been modified in order to allow us to become involved in that development activity. However, the activity is not yet operational. We are essentially waiting for guidelines from the government about it.

As for the activity eventually being integrated into EDC’s mandate, we view that very positively. Internally, we already have a lot of the skills that will allow us to bring that financial institution into operation effectively, to accelerate its impact and to carry out transactions more quickly than if the government tried to create an institution from scratch. We believe that it is excellent. In addition, it will allow for coordination between the different stages of the process within countries, which will be positive, in my view.

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

You are saying that it is not operational yet. However, $300 million over five years were announced in budget 2015.

[Benoit Daignault]

Yes.

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

Has any of that money been spent yet?

[Benoit Daignault]

The answer to that is no.

As for the processes in place, a recommendation has been made about what I would call “the machinery”. It deals with how to make the institution operational, but the final decision has not been made and EDC has not yet received the green light to create the institution.

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

With the way things are going, do you see this institution’s role as being a complement to, or a replacement for, a large part of CIDA’s former mandate?

[Benoit Daignault]

International trade and international development are being coordinated. The notion of a financial institution focused on development is completely complementary to the development mandate. It is quite a small space, a niche. If you look at other similar institutions elsewhere in the world—such as the CDC group in England—you see that their goal is to invest money in projects that will involve the private sector in companies that will be financially viable. Basically, institutions of that kind are managed with quite a commercial outlook.

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

That is why I would say that there is a major change in Export Development Canada's role compared to its previous one. EDC once definitely assisted with exports; it guaranteed the goods and that they were paid for. Your work helped to get products through customs. That has changed to the extent that you are now investing directly in certain projects and certain export initiatives.

[Benoit Daignault]

You have to consider two factors, actually.

The creation of the financial institution focused on development is an additional mandate and an initiative that is going to go on completely outside EDC. The goal is to ensure that the two mandates are different and there is no confusion between the two. So, the activities of the financial institution for development will not bear EDC’s name; it will have a different name.

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

The administration is still EDC’s, in both cases. Am I correct?

[Benoit Daignault]

According to the project that we submitted but that has not been accepted yet, the financial institution for development will have access to EDC’s expertise so that it can move forward with its activities and its operations.

[The Chair, Liberal, Wayne Easter]

This is your last question, Guy.

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

I am a little surprised and I am probably going to need more answers about this.

When this was established, after the budget in April 2015, a comment appeared quite often in the media. I will read it in English:

“The government will invest $200 million over five years and the profit-driven financial lending institution will be housed within Export Development Canada.”

[Benoit Daignault]

The model under consideration looks at establishing an independent affiliate that would manage the financial institution for development.

But if you have other questions, we can also provide you with more information about it.

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

Thank you.

[The Chair, Liberal, Wayne Easter]

Mr. MacKinnon.

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you very much, Mr. Denham and Mr. Daignault.

Mr. Denham, I had the opportunity to visit the Centre d'affaires de Gatineau business centre, where I met with many people who work there. Congratulations. Not only are these people very dynamic, but they are very enthusiastic, too. They provided some good observations about the economy.

Mr. Daignault, we are also familiar with EDC's services. I'd like to ask you both quite simply what you are seeing.

We have heard from some Canadian economic development agencies, and I think we had the feeling that what would I call deal flow was slowing down. Is that how you see it?

[Michael Denham]

It's hard for me to comment. I don't have any perspective or facts on that. However, I do know we are working with the RDAs in the context of this accelerated-growth service initiative. So it's us, the RDAs, SDTC, IRAP, EDC, and so on. The level of collaboration is very good. I know they're bringing a lot of clients there close to these discussions, and I think the clients are deriving some benefit from them. We've begun to work more closely with them. I'm afraid I can't comment on deal flow one way or the other.

[Benoit Daignault]

I don't have more information than Mr. Denham about this.

[Steven MacKinnon, Liberal, Gatineau, QC]

More generally speaking, are you seeing increased traffic or stagnation of the transactions and services you provide as part of your mandate?