Industry Committee on April 19th, 2016

[The Chair, Liberal, Dan Ruimy]

Thank you, all, for coming today.

Our apologies for being late. We had votes in the House.

Welcome, everyone, to meeting number nine of the Standing Committee on Industry, Science and Technology.

Today we have witnesses from the Department of Western Economic Diversification. Welcome, Daphne Meredith, deputy minister; and Cathy McLean, executive director, finance and corporate management.

We have from Canada Economic Development, Pierre-Marc Mongeau, acting deputy minister/president; and Marc Lemieux, chief financial officer, and acting vice-president of operations.

Finally, we have Atlantic Canada Opportunities Agency, Denise Frenette, vice-president, finance and corporate services; as well as Janice Nishikawa, director general, enterprise development.

Welcome, everybody. Thank you for coming.

We're going to get right into it. As with other meetings we've had, we'll let everybody do their introductions and then we'll start on our line of questioning.

Ms. Meredith.

[Daphne Meredith, Deputy Minister, Department of Western Economic Diversification]

Thank you, Mr. Chairman.

For over 25 years, Western Economic Diversification Canada, or WD, has supported the diversification of the western Canadian economy through business development, innovation, and community development.

WD's roles, like those of other regional development agencies, focus on providing regional intelligence and strategic advice, convening regional stakeholders to expand business opportunities and develop regionally sensitive development strategies, pathfinding to sources of business and community support, co-investing in innovation and other federal priorities, and acting as a quick and agile delivery agent for federal programs.

I will speak first to the programs Western Economic Diversification Canada offers and how they are delivered. I will then comment on our priorities going forward, as part of the innovation, science and economic development portfolio.

I should first note that WD is headquartered in Edmonton and has some 287 employees in offices in Vancouver, Edmonton, Calgary, Saskatoon, Winnipeg, and Ottawa.

Focusing on our plans for the coming year, Parliament has approved $173.4 million in the 2016-17 main estimates to support innovation, indigenous economic growth, trade and investment, and small and medium-sized enterprises in defence procurement.

WD also has funds for the delivery of the Canada 150 infrastructure program, for which we will be seeking an additional $23.1 million, as announced in budget 2016.

WD has the following programs: first, the western diversification program for not-for-profit organizations; second, the western innovation, WINN, initiative targeting SME commercialization; and third, the Canada 150 infrastructure program to improve existing community and cultural infrastructure.

WD also provides indirect funding for business through the Western Canada business service network of organizations that offer loans and other resources to create and build small businesses across the west. WD funding to this network supports more than 100 points of service in rural and urban communities across western Canada.

In 2013, WD changed its approach to administering its investment program, moving from a continuous intake approach to a call for proposals application process. Under this new approach, WD does extensive outreach to stakeholders prior to a call, including conducting face-to-face sessions to ensure the funding criteria, for example, regarding eligibility, funding priorities, and leveraging, are well understood by stakeholders. Those seeking support can apply within a fixed period, after which WD assesses the proposals on a comparative basis.

To date, the department has managed two intakes for both programs. The experience has been positive. Both programs are oversubscribed. We receive six applications for each one we're able to fund under our not-for-profit program and more than 11 applications for each one funded under our for-profit, or WINN, program.

In total, since 2013, under the WINN and the not-for-profit program, WD has approved some 162 projects, with $178 million in WD funding, leveraging an additional $268 million in support of our priorities.

These programs are expected to have a significant impact, including the creation or expansion of more than 1,000 businesses, the employment of more than 4,500 newly skilled workers, $800 million generated in sales of newly commercialized technologies, and $500 million generated in international sales.

WD is also focusing on ways to support the needs of the west through our pathfinding and convening activities.

Western Economic Diversification Canada is partnering with other organizations with our portfolio as well as other departments to respond to ways to respond to investment needs of western stakeholders.

Beyond making strategic investments in projects, WD takes pride in its role as a partner, pathfinder, and advocate and will continue its work by promoting innovation through support to areas important to the ISED, innovation, science, and economic development, portfolio, including to high-growth firms, clean technologies, business innovation, and cluster support.

WD's focus on regional networks positions it to bring together stakeholders to collaborate on economic priorities and opportunities in western Canada. For example, the department has convened western innovation fora in the past two years to connect western Canadian industry with innovation-driven investment, partnership, and business opportunities. The fora include presentations and panel discussions and, perhaps more important, more than 250 business-to-business and business-to-government meetings, as well as providing an innovation marketplace.

I will now turn to how WD is supporting initiatives announced in the 2016 federal budget. To celebrate the 150th anniversary of Canada's Confederation, budget 2016 provided regional development agencies with funds to deliver investments that will support projects to renovate, expand, and improve existing community infrastructure and cultural infrastructure.

Over the next two years, subject to parliamentary approval, WD will deliver an additional $46.2 million in Canada 150 infrastructure program investments across western Canada, as committed to in the budget.

Budget 2016 also highlighted the Government of Canada's priority on increasing support for clean technology activities in all regions of Canada and is looking to regional development agencies to substantially increase clean technology investments in the regions we serve.

Recent data from 2013 indicates that there are over 300 clean technology companies in western Canada.

Western Canada also has a strong research network. It includes 10 universities that conduct 1.9 billion dollars' worth of clean technology research annually. WD will be focusing on advancing the clean tech sector in western Canada through its program investments and activities associated with our other service offerings, such as pathfinding and convening activities.

For another budget 2016 initiative, helping high-impact firms to scale up, WD, with its RDA colleagues as well as other federal departments and agencies, will coordinate and tailor their services to help firms grow and become more competitive internationally.

WD is also well positioned to support the Government of Canada's priority to support economic development and create jobs for indigenous peoples. WD will be seeking to invest in projects that promote wealth creation opportunities, increase the number of indigenous entrepreneurs and businesses, improve labour market participation, and ensure that indigenous communities in western Canada are well positioned to capitalize on significant economic opportunities.

In closing, Western Economic Diversification Canada is in strong alignment with government priorities.

WD and other regional development agencies have an important role to play in delivering on national priorities like clean technology at the regional level. The integration of RDAs into a single portfolio under a single minister will ensure our alignment with national priorities and better enable our federal government partners to capitalize on our networks, our local knowledge, and our reach.

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We will now move to Canada Economic Development.

[Pierre-Marc Mongeau, Acting Deputy Minister and President, Canada Economic Development]

[Inaudible—Editor] and come back to you afterwards. Sorry, Mr. Chair.

[The Chair, Liberal, Dan Ruimy]

We'll jump from the west to the Atlantic.

Go ahead, Ms. Frenette.

[Denise Frenette, Vice-President, Finance and Corporate Services, Atlantic Canada Opportunities Agency]

Mr. Chair and committee members, good afternoon.

As vice-president of finance and corporate services at the Atlantic Canada Opportunities Agency, I'm here to talk to you about ACOA's strategic efforts to help build a competitive economy in Atlantic Canada. I am joined today by ACOA's director general of enterprise development, Janice Nishikawa.

Since its creation in 1987, ACOA has played an important role in developing and implementing a broad suite of policies and programs that strengthen Atlantic Canada's economy. The agency's policies and program tools have evolved since its inception, but the overall goal remains constant. ACOA is dedicated to helping the Atlantic region realize its full economic potential in terms of innovation, growth, productivity and competitiveness.

This is achieved by direct, proactive engagement with communities and businesses in the region and through a nimble and flexible approach to respond swiftly to economic changes and emerging opportunities.

The agency has a strong presence in the Atlantic region. It is headquartered in Moncton, New Brunswick, with a regional office located in each of the provincial capitals and 23 local field offices throughout the Atlantic region. ACOA also has a small office here in Ottawa.

ACOA, like the other regional development agencies, is a member of the portfolio of the Minister of Innovation, Science and Economic Development.

Our focus is on continuing to provide relevant programs and services to entrepreneurs and communities that support the government's innovation, economic development and diversification objectives, and that ultimately help the Atlantic economy grow and prosper. Given our agency's powerful track record and strong ties to the region, we are well equipped to translate the government's economic development priorities into tangible outcomes in Atlantic Canada.

ACOA works with a variety of partners throughout the region to help businesses grow, innovate, and export so they can create quality jobs in vibrant and robust communities. The agency uses an adaptable, multi-pronged approach to deliver on this strategy through three core programs.

ACOA's business development program, BDP, assists businesses at every stage and helps them improve their competitiveness, with an emphasis on developing innovative ideas and improving productivity.

The Atlantic innovation fund, AIF, encourages partnerships among the private sector, universities, colleges, and other research institutions to develop and commercialize products and services.

The innovative communities fund, ICF, invests in strategic projects that build on the strengths of Atlantic communities and provides the tools needed to identify opportunities available for their sustainable economic growth.

ACOA is now working to ensure that its existing programming is even better aligned than it has been with the government's commitments on innovation, high-growth firms, clean tech and inclusive economic development.

When it comes to innovation, our programming tools will allow us to respond quickly to the commitments outlined in Budget 2016.

In 2014-15, the agency invested over $105 million to help businesses bring new products and technologies to market, become more productive and competitive, and access support through incubators, accelerators, and commercialization networks.

Moving forward, ACOA will also target its investment to companies that demonstrate a strong potential for growth through investments that help small and medium-sized enterprises with innovation, productivity, and growth initiatives. ACOA is also an early partner in developing the high-impact firm initiative announced in budget 2016, and we are working with our partners to ensure Atlantic firms participate in and benefit from this pilot.

To support the clean growth shift, ACOA is developing a strategy to guide its work on this new key national priority. Starting in 2016-17, the agency will contribute to the goal of doubling investments by regional development agencies in clean technologies from $50 million to $100 million.

Indigenous businesses will also be a clear focus for ACOA. Over the past five years, the agency has invested over $22 million in 103 indigenous projects and has built and maintained networks with the indigenous community. Furthermore, ACOA is committed to implementing the Government of Canada infrastructure programs in our region until March 2018, including the Canada 150 community infrastructure program. As of March 31, 43 projects representing more than $8.7 million have been announced throughout the four Atlantic provinces.

Members of the committee, as you can see, ACOA plays many roles in helping to build and promote Atlantic Canada's economy.

Like other parts of the country, our region does face some challenges such as productivity gaps, lower oil prices, and a shortage of skilled labour. The agency is tackling these issues by continuing to work closely, on the ground, with its partners, communities and businesses to develop solutions and opportunities, and to build economic capacity in our region.

The agency has a long-standing commitment to collaborating with various partners, such as 17 universities and numerous community colleges in the region, other levels of government, as well as businesses to ensure that the federal programs that support innovation and commercialization, scientific research, and entrepreneurship are creating lasting and meaningful impacts in our economy.

Our record shows that the agency is successful. In fact, Statistics Canada data show that the business survival rate for ACOA-assisted firms stands at 76% after the crucial fifth year following start-up, and this is for the period of 2002 to 2012, which is 9% higher than unassisted firms. Additionally, our data indicate that each dollar invested directly into businesses through ACOA from 2008 to 2013 resulted in over $5.40 in gains to Atlantic Canada's gross domestic product, GDP. These are results that we are very proud of, that point to the positive outcome of our agency's activity.

Thank you again for your time today, Mr. Chair.

Janice Nishikawa and I will be pleased to take your questions.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Now we will go to Canada Economic Development, Monsieur Mongeau.

[Pierre-Marc Mongeau]

Thank you, Mr. Chair.

Members of the committee, thank you for inviting me here today. It's with great pleasure that we are with you today to speak about Canada Economic Development for Quebec Regions, or simply CED.

I would also like to thank my colleagues at Western Economic Diversification Canada and Atlantic Canada Opportunities Agency for their presentations.

In the next few minutes, I will be giving a brief description of CED's activities before answering your questions.

CED's mission is to promote the long-term economic development of the regions of Quebec by giving special attention to those where slow economic growth is prevalent or opportunities for productive employment are inadequate. To do so, CED works with Quebec businesses and communities, contributing to projects that generate significant economic returns for Quebec as well as Canada.

CED carries out its operations through various programs. First, there is the program to help businesses, the Quebec economic development program, or QEDP. Second, there is the community futures program, or CFP, a national program delivered by CED in Quebec. Last, we develop ad hoc and targeted initiatives, such as the economic recovery initiative for Lac-Mégantic and the Canada 150 community infrastructure program, which my colleagues spoke about.

I would like to demonstrate the impact of our activities by sharing some examples with you.

In 2014-15, CED approved 724 projects, for a total investment of $317 million.

Still in 2014-15, more than 9,800 businesses received support from CED or an organization that CED supports. Through leveraging, every dollar paid out by CED generated an average additional investment of $2.88 by promoters and other financial partners.

More than 3,400 of the businesses we supported received funding for marketing and export projects.

Again in 2014-15, 32% of the approved assistance was provided for businesses targeting communities with low growth potential. These communities make up 21% of Quebec's total population.

When it comes to business start-up and succession, CED clients have a survival rate of 67%, versus 50% for other businesses.

In terms of productivity, businesses supported by CED saw, on average, a 72% increase in sales, compared to 47% among other SMEs.

And lastly, according to the most recent information available from our Office of Client Satisfaction, 94% of our clients are satisfied with CED's programs and program delivery.

In addition, CED has a rigorous project analysis and approval process. In accordance with grant and contribution management legislation and policy, the process includes documented criteria and procedures for file processing.

CED's new priorities for the coming year are aligned with those of the government.

We will continue to help Canadian businesses expand, innovate and export their products to enable them to create quality jobs and ensure the prosperity of Quebeckers and Canadians.

We will continue to build close partnerships with businesses and industries to support efforts to boost productivity and innovation.

We will also contribute to supporting transition and diversification in communities that, in the past, have been economically reliant on a single industry.

To do so, CED is targeting three major priorities. First, it supports business expansion, innovation, clean technologies and exports. This is followed by supporting the economic diversification and transition of communities, including indigenous communities, by building on their competitive advantages. Finally, it focuses on building on CED's innovation culture to boost performance.

In order to better understand economic and regional development issues and challenges, in January 2016, CED launched its Dialogue on the economic development of Quebec's regions. This dialogue with the public began with a call for ideas on the Web—a first for CED—which received responses from 624 people and organizations from diverse backgrounds and all of Quebec's regions.

Since mid-March, CED has been confirming and supplementing this information by holding roundtable discussions on seven regional economic development themes. They bring together hundreds of key economic development players from all of Quebec's regions, including businesses, universities, municipalities and varied organizations, as well as within the Government of Quebec. The outcomes of these dialogues will be used to develop the new CED 2016-21 strategic framework.

In conclusion, I would like to mention that, as indicated in the Main Estimates, 2016-17, CED's total for grants, contributions and operations expenditures was $303 million. Of that amount, $260 million is to be invested in contributions for economic development projects for our regions.

Thank you for your time. We will be happy to answer your questions now.

[The Chair, Liberal, Dan Ruimy]

Thank you very much for your presentations.

If we keep everything tight, we should have enough time to do one complete round.

We'll start with Mr. Arseneault.

You have seven minutes.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Thank you, Mr. Chair.

I would like to thank all the witnesses. What fine presentations, what a fine bunch. We find it stimulating and encouraging. Good economic development is coming to our country.

Since I'm from New Brunswick, you might guess that my first question is for Ms. Frenette and Ms. Nishikawa of the Atlantic Canada Opportunities Agency, or ACOA.

Ms. Frenette, in your opinion, what are the main challenges to economic development in the Atlantic provinces?

[Denise Frenette]

It's important to understand that Atlantic Canada is mainly a rural region. It depends greatly on SMEs to grow its economy. Because of globalization, global competition puts pressure on our businesses. In fact, foreign businesses offer solutions at very low cost. Therefore, it's difficult for manufacturers, especially, and businesses in the resources industry to be competitive in such an environment. Prices are another challenge. The Atlantic region needs to focus on work to improve its productivity and competitiveness.

I would add that, in addition to the challenges I mentioned, Atlantic Canada also has an aging population. We have to get ready to deal with the new conditions better. Innovation will certainly be the key to success for us. We also need to take care of marketing and improving processes within businesses. Skills development will be extremely important to prepare our businesses to face the challenges. Market diversification is also very important.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

The aging population is a sensitive topic in Atlantic Canada. A lot of industries are seasonal, since they involve natural resources like forestry, fishing and maple syrup. It may seem insignificant, but maple syrup brings in several million dollars in my region. In terms of tapholes, the largest maple sugar operations in North America are in Saint-Quentin.

How can ACOA provide particular assistance in the context of all these challenges, including those facing industries that exploit what we call seasonal natural resources?

[Denise Frenette]

The seasonal aspect is certainly another challenge.

Having said that, we are working closely with the businesses to improve their productivity and to create products. We need to be innovative when making choices. We need to think about added-value products, which might lengthen our seasons and improve our revenue during production periods.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Thank you for addressing that.

We often hear that manufactured materials are our biggest shortcoming. We have excellent raw materials in Canada, and lots of them, but we send them elsewhere. Take wood, for example. We buy tables made in China. I'm giving wood as an example, but it could be another industry.

Has the agency held programs or conducted studies to encourage this seasonal industry to get into manufacturing? It could be primary or secondary manufacturing of products from the seasonal industry.

[Denise Frenette]

We are working with every main sector in the Atlantic region. We are working with the industries in these sectors to learn more about possible challenges and opportunities. We want to focus on more innovative approaches, which represent more value-added and might help us face these challenges.

Perhaps my colleague would like to add something.

[Janice Nishikawa, Director General, Enterprise Development, Atlantic Canada Opportunities Agency]

One of the most important areas is in the area of innovation. We have worked with our partners and with our universities to look at ways of adding value.

In the resource industry we have seen a lot of collaboration and a lot of working together to try to add that value. It's about transformation even in our research sectors, and how we get the most out of those resource sectors.

Definitely through innovation through the Atlantic innovation fund we can help small businesses establish and grow their businesses. We can help them with skills development through strategic management initiatives. We can help bring the right person at the right time in the management area to help them elaborate on their plans. We take companies to market. We spend about $15 million on missions trying to expose these companies to the whole global marketplace, which eventually will make them much more competitive.

We can have programs that go from start to exporting, innovation, and that whole virtuous circle that we find. When companies innovate, they export. When they export, they compete. It's about intervening at all different times and at the appropriate times when it comes to helping businesses, but also in collaboration with our research institutes. We have a—

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Universities, colleges.

[Janice Nishikawa]

Right. We have the Wood Science and Technology Centre at the University of New Brunswick. They directly work with businesses to try to add value.

It's a collaborative effort and full engagement across the whole spectrum of players.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Thanks.

[The Chair, Liberal, Dan Ruimy]

You still have 30 seconds. Make it quick.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Very quick.

Have you seen any shortcomings that affect the four Atlantic provinces and that should really be addressed to ensure the economic development of the region?

[Denise Frenette]

I'm not sure we can target one shortcoming in particular. However, I'd like to come back to the fact that it really is possible to capitalize on our resources, our know-how and our networks to benefit from innovation and manufacturing opportunities that are on our doorstep in the Atlantic region.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Mr. Godin, you have seven minutes.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Ladies and gentlemen, thank you for taking part in this exercise.

I listened to your presentations, and I can tell you that the structures put in place are working well. We can be proud of them. I think they provide good support to economic development, which is very important in our region.

Last October, there was a change in government. But where there's a change in government, there's a different direction. Has the mission been changed?

Since last October, what written, clear and specific instructions have you received from the minister regarding the agencies?

[Pierre-Marc Mongeau]

The issues being raised here almost all have to do with green technology. We were already covering this area, but we are going to push this activity even further. We are also considering how we can grow our organizations and the companies we oversee.

I would say that there is also a change in our governance. As mentioned earlier, we are now all under the same umbrella, which improves the integration of our roles, our responsibilities and our outcomes. Now that we are together, we probably speak more.

I'll stop there to give my colleagues a chance to speak.