Industry Committee on Nov. 20th, 2014

[Julia Deans]

In terms of the amendments?

[Joe Daniel, Conservative, Don Valley East, ON]

Yes.

[Julia Deans]

We think we have a pretty good process—we're always improving it—in helping young entrepreneurs succeed, and my team and I have some ideas about how to do even more. This will allow us to help many more people. We figure that right now we're reaching somewhere between 10% and 15% of the potential market of young people who want to open businesses. Being able to access private sector loan capital will allow us to expand our numbers.

Last year, we helped launch over 800 businesses across Canada. By March 31, it will be close to 1,000, and we would like to increase by 10% every year. We can't look to government to be funding all of that, and the private sector donations only get you so far. This unlocks private sector capital in a way that every other organization like ours around the world, I can tell you, is looking at very hard, and they're saying, “If you can figure out how to do this, we can do it in South Africa”, or Brazil or wherever. It's pretty huge, what it can do for us.

[Joe Daniel, Conservative, Don Valley East, ON]

Why are amendments being made to the BDC to help businesses grow beyond the domestic market given that we have the EDC, etc.? Maybe one of you gentlemen would like to tackle that.

[Martin Lavoie]

My understanding is that it's the amount of the loan. The EDC would leave anything under $1 million, I think, to the BDC. That's the reason. As you know, the EDC finances exports; well, one thing they are supposed to do is finance your customers to buy your product. In the case of the BDC, they would help with real estate acquisitions being made overseas, for example, when they're too small to be financed by the EDC.

I think there's a rationale behind it. Last year, the BDC did a very good study about the fact that most Canadian businesses did not grow. We're good at setting up businesses, but what they found is that very few businesses actually grow from small to medium to large, and that's a problem. We don't want SMEs to be SMEs forever. The idea, I think, is that in the Canadian market they're limited in growth because we're only 35 million people, I guess, and if you want to grow, you have to go somewhere else. I think that's the philosophy behind it.

[Joe Daniel, Conservative, Don Valley East, ON]

How will these changes help to provide even more flexibility to SMEs that wish to grow beyond our borders?

[Martin Lavoie]

As I said, because the EDC will not finance under a certain threshold, and because I think it's sometimes difficult for Canadian banks to finance a business subsidiary in another country, probably you would find the same gap for a Canadian subsidiary in another country that you would find in the domestic market.

I think that's how they will become more flexible. The company will have an alternative. Before that, maybe the only alternative was a local bank somewhere else where they're not really comfortable doing.... All countries have different financial systems, right?

[Joe Daniel, Conservative, Don Valley East, ON]

Given all of that and the wonderful work that our government has been doing on international trade, do you think this will help to improve our trade with other countries, such as the EU countries and others?

[Martin Lavoie]

Yes, absolutely. I think the contacts are there, especially with the European market opening up. Yes, there are probably a lot of export possibilities, but I think that even more that, there are acquisitions. For SMEs to grow and have a presence on the European market, especially if you work in the fields of government procurement, transportation, and so many sectors that tend to be local by nature, you want to have a local presence. I think the BDC, from that perspective, would be very helpful.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Lavoie and Mr. Daniel.

We will now move on to the next member.

Mr. Nantel, you have five minutes.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Thank you, Mr. Chair.

I would like to begin by thanking everyone for coming to testify before this committee. I also want to thank the committee for having me.

As I am really not an expert in financial matters, I won't have any questions for you, Mr. Hodgson.

But Mr. Lavoie, we spent many hours in the same rooms on October 22, and it was, of course, a special experience. But yesterday I had a much more pleasant experience with Mrs. Deans. We were at the—

[Some hon. members]

Oh, oh!

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

I always bring some fun in a meeting. Souvenirs, souvenirs. Not too much....

Mrs. Deans, yesterday it was great to be with your young entrepreneurs. There were something like 20 entrepreneurs there. It was very exciting to see these new ideas coming up. My first reaction to your initiative, the way you're doing business and the way you are supporting new ventures, is that you've found a niche to adapt to the new needs and the new nature of entrepreneurs who are rising up.

I just saw the business card of one of your agents, Maryse Gingras, who's installed on Avenue de Gaspé. This is very meaningful, right in the middle of these new entrepreneurs.

Do you feel that we in the government should insist on having more agencies of that nature, to make the system lighter and more flexible to adjust to new realities? I'm thinking about so many technological changes we've been through. When we all got elected in 2011 in this Parliament, almost no one had an iPad, and now we all have an iPad, and it changed everything. Do you think we are doing enough of these initiatives to acclimatize to the new changes?

[Julia Deans]

Thank you so much for coming to the reception yesterday evening. I understand there were about seven votes in the House, so we lost a lot of people who were going to come. The young entrepreneurs had a fantastic time and really loved seeing one another. Hopefully, you can come next year.

In terms of being where the entrepreneurs are and being available to them—how they need us—using technology is obviously very key, as well as having a presence on the street.

I think the one thing I would also want you to be thinking about, for those of us who come from places like Vancouver, Toronto, or Montreal, is that there are a lot of people on the ground. There are lots of avenues for young people wanting to start businesses. But that's not the case across the country. An organization like ours, where we're available to people in Yellowknife—I'm going to Prince Rupert right after this meeting— there are a lot of places where people have no resources at all. There's no accelerator in Saskatchewan that I'm aware of, so we need to think about how to make sure young people, wherever they are in Canada, can access these services.

In Quebec, the government's done quite a lot to make that available. It's not the case in other places, so I think all of us who care about young entrepreneurs and having vibrant communities right across the country should be thinking about whether those people are going to be able to get these services, particularly in light of retiring business owners. I'm sure all of you are very aware that we're going to have 60% of our small business owners retiring in the next few years, and there are communities that are going to lose their dry cleaners and their HVAC technicians and so on. If we don't have services there to help them get set up, they will leave.

[Pierre Nantel, NDP, Longueuil—Pierre-Boucher, QC]

Thank you, Ms. Deans.

I now yield the floor to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Tonight we're studying several amendments to the Industrial Design Act, Radiocommunication, Investment Canada Act, Broadcasting Act, Telecommunications Act, and Business Development Bank of Canada Act. I'm a little bit concerned about the process we're going through. Witnesses from the previous committee meeting on Tuesday had these things to say, “...full impact remains to be seen...appears...good faith...devil's in the details...lack of guidance...real risk...chilling...key stuff left to regulations...put this in the mix early on is problematic...courts will have to explain in detail...devil's in the details...uncertain how they might be implemented...destroy...insufficient...very difficult to advise...Canadian business susceptible...go to court”.

My concern is that we're going to have to go to court with these amendments. Do you think there a possibility that these amendments might eventually end up in court?

[Martin Lavoie]

For the BDC amendment, I wouldn't know. I wouldn't think so, but I haven't looked at the others. I'm not sure if the other members have....

[The Chair, Conservative, David Sweet]

We are way over time. I gave a little bit of latitude for one response, but we will now go to Mr. Warawa for five minutes.

[Mark Warawa, Conservative, Langley, BC]

Thank you, Chair.

My opening comments are maybe going to address the NDP focus on process instead of the content of the changes.

Those quotes we heard from Tuesday, again, were concerns about the process.

For clarity, witnesses, there is an opportunity for recommendations. If there are recommended changes, you can make those and those changes could be passed on by this committee. That's the process, and it works.

I think, generally, we heard very positive responses on Tuesday, and now today, on those changes. They mean a healthier economy; they mean healthier opportunities for young entrepreneurs, expanding our market beyond the domestic one; and they mean jobs. They mean a stronger Canadian economy. I think that's what we're hearing. I'm very optimistic, and I would hope the NDP would realize the opportunities that Canada and entrepreneurs have.

I want to focus on maybe one concern that I have, which is with the definition of young person or young entrepreneur. To benefit Mr. Regan and me, maybe that definition could be expanded from 33 to closer to 70 for Mr. Regan.

[Some hon. members]

Oh, oh!

[Mark Warawa, Conservative, Langley, BC]

I want to ask about the mentors. You've said that these are volunteer mentors. Making a two-year commitment to mentor a young entrepreneur is admirable. How do you keep a bank of volunteer mentors to help these young volunteers?

[Julia Deans]

We've had close to 3,000 volunteer mentors, and I have yet to meet one I wouldn't want as my own mentor. They're really wonderful. The new head of Purolator moved from Vancouver to Toronto and he said, “I was one of your mentors in Toronto and I can't wait to start again”, and he has started. These are really great people, and the fact that young people have access to them is huge.

We have a reputation for mentoring around the world. Organizations look to us for how to develop their own mentoring programs. We train our mentors. We don't give a young person their money until they've met their mentor. They do an online orientation together, which we designed, actually, with the help of Lavalife. It says, “What do I need to know about you?”, “How are we going to work together?”, and all of those sorts of things. They get this really good foundation for working together, and the mentors love it. They often say that they get more out of it than the young entrepreneurs do.

By word of mouth we're able to attract mentors, and then we work with chambers of commerce. Often large companies will recruit their staff who want to be helping in the community. It's a great way to use their skills and expose them to young entrepreneurs who have these crazy ideas and to spark them in their own lives. But obviously we need to recruit more mentors, and that's part of my job. Part of having a more distinctive name is to recruit more mentors. It's not been an issue for us and they seem to love doing it. In fact, they tell us they want to become better mentors, so we've developed a program to help them. It's called the art of mentorship, and we did it with Ryerson University, so mentors can actually improve their own skills.

[Mark Warawa, Conservative, Langley, BC]

Could you comment on our low corporate tax rate and how that is helping grow business in Canada?

[Glen Hodgson]

I guess that falls to me.

Clearly we're in a competition for capital around the world. We're trying to attract head offices, and we're trying to attain investment within Canada. It's really important that we try to create the most competitive tax regime possible within the country. The unfortunate reality—and I said this to a crowd in Calgary yesterday—is that we're actually forecasting that private investment will contract marginally this year, because even though nominal investment is growing, with the dollar going down 10%, we're actually seeing the cost of importing new technology, for example, falling. It's hard to find the hard evidence right now that a lower corporate tax rate is actually converting into stronger investment. The trouble with that is we don't have a counterfactual. The world could have been even worse off. Looking at the entire suite of policies over the last number of years, I think a variety of things have been done by the federal government and by provincial governments to create a more competitive tax regime, and corporate taxes are part of that.

[Martin Lavoie]

I would add that where we've missed the boat a little bit with regard to corporate taxation is that the provinces haven't followed the federal lead in many cases. The reasons we're not having as much investment as we would expect is that: first, our combined corporate income tax rate in Canada is about 25% on average, if you combine the federal and provincial rates. Compared to the OECD countries, that is not even in the top 10. It's in the middle of the ranking.

Second, in the last three or four years, there have been a lot of other countries reducing their rate.