Industry Committee on Dec. 2nd, 2009

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

John, why don't you fill in on that?

[John Connell, Director General, Small Business and Tourism Branch, Department of Industry]

Personally, I'd say that we're well aware...and we stay in close contact with the Canadian Venture Capital Association on this file. It's a very complex file. Their single greatest barrier to increased venture capital investment right now is the fact that the industry has not generated sufficient returns to draw investors into that asset class. Depending on the time horizon over which the return is measured, we can even see negative returns from venture capital.

A group of institutional investors and others have essentially exited the asset class, so they're having trouble getting money in from private sector investors. In that respect, governments have taken over and done a lot of the heavy lifting, if you will, on the investment side. So we have seen investments, such as the $190 million Ontario Venture Capital Fund, the $750 million Teralys Capital Fund in Quebec. The governments of British Columbia and Alberta have also been active in the field. Since the spring, investments have been announced for the Business Development Bank of Canada, and that included a $350 million announcement over three years, $90 million of which is for investment in specialized funds in syndication with other venture investors, and $290 million in the direct venture capital operations of the Business Development Bank of Canada itself.

Again, we kind of share the concern, but it's a question of whether there is a structural market flaw here of some kind, that the market itself is not delivering the money that these innovative businesses require. In that case, government is stepping in and trying to do what it can do. A lot of our effort has been focused on the early stage of the investment, where we think market gaps are the most acute. Private sector investors don't tend to go in at that stage because it could take up to 10 years to commercialize a company. It's a question of maybe getting the right incentives back in place and in some way finding a way through which government can partner again.

In the meantime, the BDC remains the preferred investment vehicle for the federal government to intervene.

[The Vice-Chair, Liberal, Anthony Rota]

Thank you, Mr. Connell.

I'm looking at the time and it's 4:30. We have a couple more questioners on the list. With the consensus of the witnesses and the committee, if we can take two more questions, I'll leave it open. Do we have consensus?

I guess I'll ask the witnesses first if they have time.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Yes. I'm happy to make myself available to the committee if the committee wishes.

[The Vice-Chair, Liberal, Anthony Rota]

Okay. Would it be okay for two more questions?

[Some hon. members]

Agreed.

[The Vice-Chair, Liberal, Anthony Rota]

Okay. Very good.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Just out of curiosity, Mr. Chair, whose rounds are next then?

[The Vice-Chair, Liberal, Anthony Rota]

We have Mr. Brown, and then Mr. Bouchard.

Mr. Brown.

[Gord Brown, Conservative, Leeds—Grenville, ON]

Thank you very much, Mr. Chairman, and I'd like to thank the minister for coming.

I know, Minister, you won't be surprised that I focus on tourism. As you may know, I have a background both in the public sector and the private sector in tourism. The riding I represent, Leeds—Grenville, happens to be on the southern boundary along the U.S. border. We have the Thousand Islands and the Rideau Lakes. I'm happy to get my little plug in there.

As you know, over the last few years we've had a number of issues surrounding the border and the passport requirement to go to the United States. We've had high fuel prices. We've had a number of issues that have led to the downturn in visitation to Canada, especially from the United States. Maybe you could talk a little bit about what the government has been doing to help continue to attract visitors from the United States and what may have been going on in terms of the border.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

I appreciate you raising that. Mr. Masse had mentioned some of those issues as well.

We have been very active in all the areas you mentioned on border issues. As you know, in the U.S., security trumps all, so access to the border has been an issue for visitors both to and from our country.

We have made some progress with our counterparts in the U.S., and the Minister of International Trade and the Minister of Public Safety have taken the lead on that. They've built some good bridges and are working on a number of issues, including alternative documents to passports, and more infrastructure has been put on the border to provide more space to move visitors back and forth more quickly.

With respect to attracting visitors from the U.S., I think we have to be cognizant of the fact that the U.S. was hit by the global downturn to perhaps an even greater extent than other countries, so that has had an impact to some degree on their travel decisions. But the Canadian Tourism Commission was given $40 million, over two years, in the economic action plan, and they have stepped up their promotional activities in the U.S. We see that there have been some positive results from that.

By the way, the Canadian Tourism Commission's advertising campaigns have garnered significant kudos right across the world. In fact, their latest campaign, “Locals Know”, has been rated by Forbes as one of the 10 best promotional campaigns. So they've been a real asset to us in the tourism industry.

At the same time, our tourism industry itself, as you know, colleague, has really stepped up to the plate and has been determined to compete at the top of its class. So it is refreshing its products, animating its products. A number of communities are using community adjustment funds to scrub up their tourism image and products and make themselves a real compelling destination for the world.

I think it's going to take action by a whole group of players in order to move this industry forward, but I do see that action happening, including, of course, our own federal government becoming more coordinated and focused with the federal PRISM strategy.

[Gord Brown, Conservative, Leeds—Grenville, ON]

Thank you, Minister.

In my area, there has been significant investment from the federal government in tourism through the community development corporations and also through the Building Canada fund tourism component. Maybe you can tell a little more about what the government is doing to invest in tourism infrastructure.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

The Building Canada fund, which was a $33 billion fund over seven years, the community adjustment fund, and the community development agencies are all increasingly looking at their investments through the tourism lens, recognizing that building the visitor economy is not only good business, creating jobs in the communities, but is a real source of wealth and economic activity for the country. So we're pleased to see that. We want to encourage that to continue.

Community adjustment funds, in times past, had not been as focused on tourism—you probably saw that yourself—but we see increasingly that they are looking at tourism opportunities as economic investments for local development.

[Gord Brown, Conservative, Leeds—Grenville, ON]

Thank you.

[The Vice-Chair, Liberal, Anthony Rota]

Thank you, Mr. Brown.

Nous allons maintenant poursuivre. C'est le tour de M. Bouchard.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chair.

Thank you also to the minister and her officials for being here this afternoon.

When we looked at the forestry industry last spring, small companies told us that they were facing a very important problem of access to credit. In other words, small and medium-sized companies cannot get any credit at all or find it is very difficult to get.

Are you considering setting up a program of loan guarantees especially for small and medium-sized businesses in the forestry industry?

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Thank you, Mr. Chairman and colleagues.

This has been an area of real concern for the Minister of Natural Resources and for some other ministries.

We in the small business and tourism sector have been liaising with them on those kinds of issues through the community adjustment fund, for example. We hope the forestry industry is just taking a bit of a break globally and that its products will be in much more demand a little bit down the road, but we've been working on that.

There have been a number of programs to help transition the forestry industry to the products of the future, because we see a change in demand for forestry products. As I mentioned to your colleague, we really have been working on these programs to help the sector, lift the sector, and move the sector through this difficult period of time, and we'll continue to do that.

If you have suggestions along that line, I know you'll be bringing them forward, because we need to work together to make sure this adjustment time is as well supported as possible.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Madam Minister, allow me to make a suggestion. Set up a program of loan guarantees for small and medium-sized businesses in the forestry industry because we hear new announcements every day from companies closing down, laying off staff and cancelling jobs.

Since you have opened the door, I would like to make the following suggestion. Try to convince your government to set up a program of loan guarantees for the forestry industry because its access to credit is completely shut off. During our week off, I met with several representatives of that industry and that is what they want the government to do. Nothing you said about your programs has any impact on the ground. Access to credit is completely shut off at this time. Whenever a company goes to a bank, the answer is always no. Those companies have been red-lettered and cannot get any credit at all.

Let me change topics. Small companies that have appeared, still in the forestry industry, have also raised the issue of research and development tax credits. They have told us that they do not have enough staff and that they are too small to claim R and D tax credits because the forms are too complicated and the paperburden is to heavy. When they receive such forms, they just put them aside even if they regularly carry out R and D activities. Because of the overwhelming bureaucratic requirements, they just do not bother. It is too complicated and they do not have enough resources to fill those forms.

Since this is the responsibility of the Minister of National Revenue or of the Minister of Finance—I believe it comes under both of them—have you talked to them to make sure that something simpler is set up especially for small and medium-sized enterprises, so that they be able to claim those R and D tax credits?

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Mr. Chair and colleagues, I appreciate your raising that. That's exactly what we want to do--reduce the paper burden for small business across all sectors--and I appreciate your making sure that I am aware of this particular issue. Perhaps we can talk further about some of the specifics.

[The Vice-Chair, Liberal, Anthony Rota]

Thank you. You have 30 seconds.

[Robert Vincent, Bloc, Shefford, QC]

We were talking about the CANtex program a while ago. Would it be possible for you to speak to the Minister of Finance, who manages this program, or to the Minister of Industry, to know if the program will be renewed or not?

Could you talk to them and provide us with the answer?

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Which program are you speaking about, colleague?

[Robert Vincent, Bloc, Shefford, QC]

I am referring to the CANtex program set up for the textile industry. Could you get an answer for us?

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

I was still back at forestry, so that's why I wanted it clarified.

I can have those discussions, but to be honest with you, I wouldn't be able to disclose what might or might not be in the budget, so it might not be helpful to you in the short term.

[The Vice-Chair, Liberal, Anthony Rota]

Thank you, Minister.

Before we shut down, Mr. Sweet assures me that he has a 15-second point.