International Trade Committee on May 15th, 2007

[Eric Siegel]

Yes. When I said “complete”, I meant we have made the disbursements and we have subsequently got back the reimbursements. We have remitted those funds to the Government of Canada. We have also completed all costs that we have incurred. It was under budget from what we had initially anticipated. It is now complete, save for the Auditor General completing, in their normal course, the Canada Account audit.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

You say “costs incurred”, so I assume that's bridge financing or some sort of financing.

[Eric Siegel]

No.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

What kind of costs are you talking about? Could you elaborate?

[Eric Siegel]

Mr. Chairman, the costs I'm talking about are just the costs of EDC to actually administer the program. We had to set up a call centre. We had staff at that call centre. We had to develop legal documentation, because we were actually purchasing the right that the exporter had to receive the refund, paying them out, and then ultimately taking that right and collecting from the U.S. government. So we had a number of administrative-related costs to operate that program. Ultimately the rebates themselves then had some interest earning on them, because they bore interest until such time as the U.S. government liquidated them. So the net of those two would be the cost that was incurred for the program itself.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

What was the time span from when you disbursed the amounts to the companies and when you received the funds from the U.S. government? What was the time period, roughly, or the difference between the two?

[Eric Siegel]

Roughly, the U.S. government started to liquidate the rebates within about three to four weeks of the actual agreement coming into force. They were doing a certain number per week.

This is why it was very important for us to ensure in all cases—which we did—that those who chose to participate in the program received their money faster through EDC than they would have had they waited for the rebate from the U.S. government. So we were very concerned that we could do that, and we were able to accomplish that.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Why would certain companies decide not to get involved in this particular process? It does seem to be very efficient, in your viewpoint, and a timely transaction, as you illustrated. Why would they decide to deal directly with the U.S. government? Why would they not participate in this program? What feedback did you receive from those companies?

[Eric Siegel]

It was just a choice some companies made. Some companies obviously were very concerned about receiving the funds immediately, or before their year-end. Other companies were not as concerned. There were some very large rebates associated with large companies. They each made their own business decision on whether or not to participate in the program.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

What will the timeline be, in your opinion, for when they receive the funds if they decide not to go through EDC?

[Eric Siegel]

I don't know exactly, but I would expect that the majority, if not all, of those players who didn't participate have now received their rebate from the U.S., if they were entitled to receive one.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

How am I doing with time?

[The Chair, Conservative, Leon Benoit]

You have a minute, Mr. Bains.

I am questioning the relevance of a lot of your questions. Perhaps you could get to the business at hand.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Sure, Mr. Chair.

Just to reiterate, this is the machinery of government. When government develops policy, I ask questions about implementation. So I feel this is completely relevant because it has to do with the implementation of a very important policy. Is that...?

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Bains.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Again, the reason I ask is that some of these concerns have been brought to me. And as you've indicated, this is something that is going to be audited, as well.

Is there any timeline for when that audit will take place?

[Eric Siegel]

The Auditor General does a normal Canada Account audit in the course.... I don't have the exact expected date, but we could provide the chair with it.

It's not a special audit; it's a normal course audit that they would do of Canada Account, since this was administered through that program. So I can provide that information.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Bains.

Monsieur Cardin, for seven minutes.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chair.

Thank you, madam, gentlemen. I would particularly like to greet Mr. Simoneau, whom I got to know in Sherbrooke when he ran the Société Innovatech du sud du Québec. I would like to congratulate him for the work he has done.

I will be brief, because we are unfortunately short on time.

You have 27,000 clients, of whom 6,000 are exporters and make up 40% of your portfolio of $10 billion, I believe. Among your exporter clients, there are categories, as you say. You mentioned innovation, knowledge, research and development. I do not think that I am wrong in saying that this is the foundation we need if we want to be competitive on a global scale.

But this takes two business directions; either companies must develop a product, a niche, something special, that therefore becomes easily exportable around the world, or they have to increase productivity tremendously in order to be as globally competitive.

How does this break down in your portfolio among the companies with whom you work? Perhaps there are others, but those are the ones that I can see most clearly.

[Edmée Métivier]

I will answer the first part of your question, and I will let Jacques answer the second part because the two business directions are very different.

The venture capital companies in Jacques' group operate globally, for all intents and purposes, on the day they are formed. In our 6,000 companies -- of course, the number changes each year because we have new companies who leave us for all kinds of reasons -- we find a little of everything. We have many manufacturers in the export business, service companies, and self-starting companies with an interest in global markets. The more traditional of these companies require a little more attention these days, especially those in manufacturing.

A company that wants to start investing in global markets overnight must do a number of things. It must invest in its equipment in order to become more productive and it must invest in its know-how. So we help these companies with management consulting, as well as by providing them with working capital with which they can research new markets and products. In fact, we support them throughout this period. This is what BDC does best. We are the only financial institution in Canada whose only clients are SMEs.

About a third of our 6,000 rapidly growing companies have the potential to become even bigger. We are following them closely.

[Jacques Simoneau, Exectutive Vice President, Investments, Business Development Bank of Canada]

In the venture capital portfolio, the nature of the investment means that they are all high-tech companies that are in the process of building technological platforms and products that they will then sell. Sometimes they have started selling them already, sometimes the sales come later.

These are global companies from the outset. Their competition is global, but so is their potential to attract customers. These are the companies to which, as Edmée said earlier, we have committed $770 million.

They are divided into four large groups: life sciences, information technology, telecommunications, and another group that we call advanced technologies, including the environment, energy, and all kinds of other areas that are perhaps a little more industrial than the others.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you.

I am going to share my time with my colleague.

[The Chair, Conservative, Leon Benoit]

Go ahead, Monsieur André.

[Guy André, Bloc, Berthier—Maskinongé, QC]

In the climate of globalization and wider and wider commercial relationships, some sectors in Quebec and in Canada are being undermined by competition from Asia, as you well know. The job losses in these areas are enormous. They have to change course and improve their technology and their production. I am one who believes that manufacturing still has a place in Quebec and in Canada.

I would like to know what your business relationships and work relationships are with local organizations out in the regions. Do you have targeted, strategic approaches to support and develop sectors that are being weakened by global influences?

[Edmée Métivier]

That is an excellent question. In fact, the question has two parts.

First of all, we have 600 people in the field, people who visit SMEs every day. Local people of influence work with us. At BDC, we do a lot of community work. We have 92 community offices. We work with people on-site. In places where EDC also has a presence, we often visit SMEs together.

As for targeted activities, this is a very good question because, of course, globalization is a concern for us too. Manufacturing makes up a third of our portfolio. That is quite significant.

Our Canadian manufacturers are important, and they must change course. To do so, we realized that we needed two distinct approaches. One is a little more general, to raise awareness of globalization and what it means for our SMEs in Canada. The other is more individual, one on one. So we are working on two strategies at once. One targets a selection of growing manufacturers who are encountering challenges but who, in our opinion, have the potential to make the course correction relatively quickly. Since the beginning of April, we have been meeting with these people one on one, to see what their needs are and how we can help them align their strategic thinking with what they have to do to be more competitive on a global scale.

Our second approach is more general in the sense that we bring SMEs together in their own communities. We did it recently in Longueuil and we will be doing it in two other places very soon. We bring together 50 or 60 businesspeople who are working on a somewhat smaller scale, and we brief them on the reality of emerging markets like China, Vietnam or India. We have an on-the-spot discussion with them that takes a couple of hours, and afterwards, we meet them individually. Then our consultants sit down with those who decide that they are ready, and who want to have, for example, a discussion in greater depth to examine their strategic plan. First of all, we want to know whether they have one, what it means, where the weaknesses are, and if their present business model is competitive.

We have a third approach that is also very focussed. We are currently taking a look at our own portfolio. With 27,000 clients, we have a significant sample, we can do good work. We are looking at the SMEs' business models, the way in which they are structured to achieve global success. I feel that we will end up with three or four, or perhaps four or five different business models that a manufacturer could implement. Once that is done, our consulting involvement will be even more specific. We are trying to learn along with our clients, and to identify successes that we can pass on to those who are having a harder time. That is what we are doing.