Thank you Mr. Chairman, and thank you to the members of the committee for the opportunity to speak with you today. Your study is timely given the challenges currently being faced by Canadian companies across ail sectors.
I would like to divide my remarks into two parts. First, I would like to take a moment to briefly describe Export Development Canada and how we work with Canadian companies. Second, I will share how, from EDC's perspective, the current economic environment is affecting companies in a number of Canada's leading industrial sectors.
As a Crown corporation, EDC plays an important role in helping Canadian companies access credit and protect themselves against a variety of risks. What does EDC do? Briefly, we provide commercial financing and risk management solutions to Canadian companies and their partners.
This includes granting loans to foreign businesses wishing to buy products and services from Canadian companies; we grant working capital credits enabling businesses to meet their export contracts; we grant loans and insurance to assist businesses in investing abroad; we offer guarantees to the banks, which enables them to lend money more easily to their clients; we offer insurance protecting businesses from a broad range of risks, including risk of non-payment; we offer security services assisting business in guaranteeing performance of their contracts, as well as a program for capital investment in businesses in certain sectors.
We offer all these solutions directly or in partnership with Canadian and foreign financial institutions. And we always do it on commercial conditions, like BDC, without any annual funding from Parliament.
In 2008, EDC facilitated trade and investment for Canada worth more than $85 billion, supporting 8,000 Canadian businesses in virtually all sectors of our economy: $27 billion in the extractive sector, including mining, oil and gas; $18 billion in the infrastructure and environment sector; $16 billion in the resources sector; $10 billion in the transportation sector; $7 billion for information and communications technology; and $5 billion in the light manufacturing sector.
Now the challenges that Canadian companies faced last year have grown more pronounced as we move through 2009. Credit and risk mitigation is often difficult to affordably access. And demand for many Canadian goods and services has fallen in this recessionary environment.
That's the newspaper headline story, and one with which we are all familiar. What does it really mean for companies in Canada's major industrial sectors? Let me provide a bit of colour to this story by describing what EDC is seeing.
In the extractive sector, two factors are at play. The first is the sudden and dramatic fall in commodity prices. Lower prices mean lower earnings. It also means falling spending on capital expenditures as companies look to preserve their liquidity. As these companies spend less, their suppliers begin to feel the pressure as well. Of course, all this is amplified by tightening liquidity. At the same time as these companies are earning less, their ability to access capital is also limited. The resources sector, and particularly the forestry sector, is another area where companies are struggling. Lumber markets are depressed, as demand from the U.S. housing market has fallen considerably. Pulp markets are in decline and global consumption of newsprint is falling.
All this is resulting in scaled-back production, layoffs, and facilities being closed, often in remote communities. In addition to dealing with falling demand, companies are finding it difficult to access affordable receivables insurance. This presents two challenges: first, without insurance, they are being exposed to greater risks; and second, companies have typically used this insurance to obtain additional working capital from their banks. Without coverage, their ability to access this financing becomes even more limited. The aerospace sector is another sector where Canada, despite having a world-class industry, is seeing difficulty. Financing is difficult to obtain for the buyers of our aerospace products. Airlines are seeing demand fall and their credit position deteriorate, while private market financing for products such as business jets is tight. As a result, production in Canada is falling, affecting not just the producers but the suppliers as well.
The last sector I will highlight is the light manufacturing sector. This sector accounts for about 40% of the total Canadian exporter population, the majority of whom are small and medium-sized companies. The story in the sector is a familiar one. In recent years companies have had to deal with the rising and now fluctuating Canadian dollar, rising input costs, aging production facilities, and increased competition from lower-cost foreign sources. These persistent challenges are now being amplified by the credit crunch. First, these companies cannot always access sufficient credit to finance their operations. Second, their customers, 85% of whom are in the U.S., cannot access the credit needed to buy their products. Where possible, companies are trying to invest in new technologies to improve efficiency and lower their costs. They're also looking to invest abroad and at offshore operations, again to lower cost and more efficiently serve foreign markets. These are the right steps to take.
Where does Canada go from here? Let me outline what we see as four credible priorities for Canadian companies looking to compete in the global economy.
First, our companies need to think internationally. An exporting company is a more efficient and competitive company. Companies need to identify opportunities to market their goods and services to the world.
Second, we need to think beyond the U.S. market. While Canada has benefited from its proximity to the U.S., there is a wealth of opportunity and high-growth emerging markets we should be pursuing.
Third, companies must continue to invest in new technologies and processes. These investments can improve productivity and enhance a company's competitiveness.
Fourth, our companies need to participate in regional and global supply chains. In today's global economy, larger companies are building their own supply chains and smaller companies are competing to find their link or niche along existing chains. Canadian companies must follow suit.
Of course, tying all this together is the need to access credit and risk mitigation. This is EDC's role and it is one that has been expanded through budget 2009. The measures introduced in the budget provide us with greater flexibility to get credit in the hands of Canadian companies that are active in areas related to EDC's core competencies, and where EDC can add value in a manner complementary to the services provided by the private sector.
As we move through 2009 and confront these challenges, I would conclude with one observation: at EDC we find that as the world learns about Canada and what our companies can offer, opportunities follow. As a country we develop, produce, and export goods and services that are valued in countries around the world. The challenges our companies face today are steep, but they are no different from the challenges being faced by their competitors. By helping viable Canadian companies access credit and risk mitigation, we can position them not only to survive but to compete and succeed.
Thank you.