I would like to thank the Standing Committee on Finance for this invitation to testify before you today.
I am a professor of economics at the Université du Québec à Trois-Rivières. I specialize in regional economic development.
My remarks will focus on public funding for regional development. Here's the problem: Both Canada and Quebec lag behind the United States in productivity. Quebec is also lagging behind Ontario. The pace of business transformation is slower than we would like, whether in terms of the digital transition, automation or the use of artificial intelligence, among other things.
Our companies are not innovative enough to develop innovative processes and products. The same is true for market diversification: Our companies aren't doing enough for exports outside the United States. There is nonetheless a very broad range of government programs to support productivity, innovation and market diversification, both federally and provincially, as well as at the Business Development Bank of Canada, Canada Economic Development, Investissement Québec and other organizations. We're talking about tax credits, direct support, grants, low-interest loans and so forth.
Yet many companies are not responding to these financial incentives. Why? In the vast majority of small and medium-sized businesses, the problem is not project funding. So what's the problem? Every business and every business project involves a degree of risk and uncertainty. How can that be properly assessed? The more information the company gets, the better able it is to properly assess and manage risk, the less uncertainty there is.
Business leaders don't know everything, though. Owing to a lack of information, they often tend to overestimate the risk and the level of difficulty. So the company's project remains at the idea stage or is postponed. At the Institut de recherche sur les PME, that is one of the main barriers to the development of small and medium-sized businesses.
I often ask companies that export to the United States why they don't go to Europe. They say it's much more complicated. Why are they not adopting new technologies? They say they don't even know where to start, who to call first and what technology to adopt because things are changing so quickly. So you can imagine that a public servant waiting in his office for those companies to come and apply for those programs will never see them, because the project remains at the idea stage.
That's why I'm proposing a much more proactive approach on the ground, which would involve visiting companies and analyzing their ability to carry out various development projects. So we want to encourage projects that would not otherwise move forward, based on the companies' ability and the assurance that the company will then be able to count on a range of support. That's what I call extreme upstream action. It comes along when the project is just a tentative idea, when the company CEO is just vaguely thinking of it. The goal is to create a breakthrough, to trigger an activation process.
Companies could also be invited to join communities of practice, co-development cohorts or regional sector tables to promote the sharing of information and best practices, self-promotion or mutual support in particular. For example, they could get together to develop a market in Europe or to adopt an integrated management package in a business. That way, they can share the costs and help each other.
My question is this: Who is responsible for organizing these events in the regions? That kind of proactive approach on the ground is part of organizing economic development in the area, commonly known as orgware. This concept is hard to explain in the time I have, but I can summarize its three components: coordinated and consistent strategies; mobilized socio-economic factors, including businesses; and businesses working together. Everything is orchestrated by moderators and leaders in the regional ecosystem, but who is responsible for that in the regions?
It is also very difficult to fund projects of that kind. There are a lot of programs that support an individual business or community, particularly in terms of infrastructure. In the case of collective projects carried out independently by a number of businesses and stakeholders, it's more difficult. We're told that it doesn't meet the program criteria, tick the boxes. So greater flexibility is needed in defining and implementing programs. We also need to encourage those kinds of structural and collective projects.
With that, I thank you for your attention.