Industry Committee on May 3rd, 2016

[Jérôme Nycz]

Yes, we can make those available.

Roughly, the ICT sector is the bulk of the sector in Canada, so that is roughly about 65% of the investment. Then the rest is spread out. That is in line with the fund we support, as well.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

I will move on to the Space Agency.

My riding is Pierrefonds—Dollard. It is on the western island of Montreal, so obviously this is a hub for space and aerospace. MDA is there, and I have met with them. They have underlined to me that Canada is falling behind in its position in space development. Would you say that is correct?

[Sylvain Laporte]

It is hard to categorize such a statement without the context.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

They had statistics saying that our economic footprint was, say, third in the world and now I think they mentioned it's down in the twenties or something. Their critique was that the government was not investing enough and did not have a cohesive plan for the space industry. Can you speak to that?

[Sylvain Laporte]

The CSA, like many other departments, has had to go through quite a number of economic updates and reviews of its budget. Our A-base went from $300 million down to $260 million, so there has been less money with respect to spending on space. That is something we have seen in other countries as well.

However, we do see some patterns now where quite a number of countries are investing more heavily in their space programs. Canada is not quite there yet with respect to that.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

We would be falling behind those other countries now. Is that correct?

[Sylvain Laporte]

With respect to the standings of three to whatever, we would have to look at exactly what they are claiming, in terms of third on what scale. Generally speaking, if we are talking about similar types of scales, going from top five to 10 or 12—depending on the ranking there—would be something I would be comfortable in saying would be some lost ground. If that was their perspective, that we are falling behind, then yes.

When the government is one of your key customers, any budget cuts to a space agency will result in less business. That is a fact. Our budget was cut. If that was their premise, then I would agree with that statement.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We go over to Mr. Nuttall for seven minutes.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Thank you, Mr. Chair.

Perhaps I can pick up with BDC where Mr. Baylis left off. In talking about the new economy—we were speaking previously about the sharing economy—one of the things we have seen is entrepreneurs leaving Canada because they haven't had the access to needed capital. One of the co-founders of Uber did that. I am using a large example. There are others, and maybe it is not fair to critique the market in this way. We also have securities commissions that are set up independently across the country.

Has BDC had any interaction either with those organizations or with FINTRAC, or whoever is putting the policies together regarding investments through equity crowdsourcing? Right now, in some places in the country it's $1,500 maximum per person, per company, per year, and a maximum for the company of $1.5 million. We know that's not a heck of a lot today. Has there been any discussion on your front? That may alleviate some of the stresses you go through in terms of your venture capital money.

[Michael Denham]

That is an excellent point, and this leads to the whole topic around fin tech, financial technology.

We are highly focused on doing whatever we can to increase options, liquidity, and access for small business, so we are looking at lending and providing some liquidity to some of these fin-tech lenders. We are looking at peer-to-peer lending. We are looking at equity crowdsourcing. We are frankly quite supportive of anything that will represent more liquidity, more options for small business.

I can't comment on the FINTRAC discussion, per se, but as a theme it is something we are focused on, to use our liquidity to help get the ball rolling and then also to just provide some advice and the perspectives that we have in different jurisdictions to help advance some of these options.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Could I request a meeting with whoever is responsible within your organization for that, just to get more information on it?

[Michael Denham]

I look forward to it.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Thank you.

The last item I want to discuss is something I was able to discuss with your organization behind closed doors. I brought it up in this committee before, and now I want to go back and go over it a little bit.

I've had some concern in the past, as I look at the goal of BDC, when it comes to their entrance into the marketplace. My belief is that BDC is there to get the companies they're supporting, whom they're providing capital to, to the point at which the marketplace enters the discussion. One point brought forward was that you have to push up against where the charter banks and other lenders are in order, first, to push them to do better, but second, because you don't want to have a space in between.

Have any studies been done with the Competition Bureau to determine where we can do better in terms of getting out of that space, to leave it to the marketplace? Is that something you would consider doing?

I even heard last week of specific examples in which BDC is competing directly with lenders. Yes, you work very collaboratively with institutions, but there are also those times when the market can take over and BDC is still lending the money. I'd rather take those millions of dollars and put them into a company that doesn't have access to capital from banks.

[Michael Denham]

We're in 100% agreement with that role for BDC to play because it isn't appropriate for a crown corporation to compete with the head of the private sector, and as you say, it's inefficient use of resources to put resources, investments, loans to a certain place where the private sector can exist.

It's something we're always looking out for, both on a day-to-day basis as well as strategically. We make about 12,000 loans per year, so there will be some that frankly cross that line, if you will, in terms of being competitive rather than complementary. It's something we look out for. We have an ombudsman. We have quality assurance in place to restrict it.

The market is constantly moving. These financing options, especially with fin tech, are constantly changing. We're constantly looking at the marketplace and our role to make sure that we stay focused on being complementary and help by providing access where access doesn't exist.

[Alex Nuttall, Conservative, Barrie—Springwater—Oro-Medonte, ON]

Here is one piece of feedback I would give you, in terms of the ombudsman. If I'm a banker and I am lending money and running into BDC and there's competition taking place, it takes a pretty shady banker, if you ask me, to then report on their potential client with BDC and destroy the deal on the other side. Also, you're not going to have the client report on themselves to that ombudsman, when they're getting a better deal. They wouldn't destroy the competition to lower their price or to extend their terms or whatever it is.

I don't know how often you guys do this, but that's why I think a review and audit internally of those items makes a lot more sense. But I understand why the ombudsman is there and how they do their job.

Thank you for the presentation and thank you for answering the questions.

Finally, let me ask the CSA this. In the late eighties and early nineties we had some amazing programs: Canadarm, the Canada hand, Spar Aerospace at the time, then MDA robotics, etc. How do you see us, going forward, matching that type of innovation, which put us on the map throughout the world? We were still selling aggregates based on the original research and development of that product.

How do you see us getting back into that position, because it doesn't feel as though we're in that place anymore. It's not a five-year issue. It isn't a 10-year issue. It's probably 15 years since we've been at the forefront.

[The Chair, Liberal, Dan Ruimy]

Give a very quick answer, please.

[Sylvain Laporte]

I actually think that Canada is still very well positioned. We're still doing a tremendous amount of work out there, both through our industry and through academia, and we have maintained our international profile as one of the go-to countries for space. The future looks fantastic. We're very well positioned to keep if not grow our presence in space.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Mr. Masse, you have seven minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you again for being here.

I see it a little different than Mr. Nuttall does. I think BDC exists because the private sector doesn't do its job. That's the way I view things. One of the concerns I have is that we're taking on high-interest loans. For any complaints I have about equity, most of it comes from getting to a bank, and to a credit union, and finding there are no options because you can't go any further.

In terms of your operations, do you charge service fees or similar fees to what the other institutions are doing? Is that part of it? Just go through the process and then.... Let's say a client does fail in terms of an application to the BDC, what do you provide the client at that particular point as they exit, when it's not workable for whatever reason?

[Paul Buron]

We do charge fees. We do tend to do what the market does. We do charge fees we believe are reasonable. We're dealing with on average small clients, so we do take that into consideration in everything we do. As we go, we apply the same practices as any other financial institutions in that regard.

[Brian Masse, NDP, Windsor West, ON]

Is there any other referral you provide to somebody that cannot acquire BDC support for whatever reason? I'm not going to get into the hypothetical. What do you say to people, or where do you send them, or do you not send them anywhere? I'm curious as to what we should do. We do run into people who say they've tried different institutions, and we don't know where to send them at that particular point.

[Michael Denham]

We always try to help.

On the venture capital side, often the investments are too small for us, so we refer them to a local angel network for investment opportunities. On the lending side, if it's a small-scale loan, there may be some work the CFDC organizations can do. As these fin-tech lenders emerge, they tend to lend amounts of money to higher-risk propositions and higher-risk clients. We'll refer some of these clients to some of these new emerging lenders. We do our best to help rather than just say no.

To go back to your previous question, you had asked us about how many clients we have in the Windsor area, and I said 47. That's in Windsor west. I can get back to you if you'd like with—

[Brian Masse, NDP, Windsor West, ON]

Thank you very much. I appreciate that. I'd like to see that. It would be nice to get either every half year, or every year, a quick local summary, and also if you can disclose who you're helping already. At any rate, it's helpful. I get the confidentiality agreements and so forth. That even happens when people walk into our door about different issues and feeling discomfort about public, or not public, and so forth. There are many reasons for that. I would appreciate that because it would be helpful to relay that on to other people during these questions that we get.

Moving over to the Space Agency—

How much time do I have, Chair?

[The Chair, Liberal, Dan Ruimy]

You have two minutes and thirty seconds.

[Brian Masse, NDP, Windsor West, ON]

I'm going to be quick, so I can give back some of the time I got earlier. I have a quick question for the Space Agency in regard to some of your opportunities and challenges, and it focuses around the quote, “key niche technology in areas as a trusted and valued partner”.

I don't like the term niche; it could be something else. At any rate, is there any chance of escaping that and having a more significant role, and what would that take?