Mr. Speaker, it is a pleasure to rise in the House today to speak to motion No. 16 standing in the name of the Secretary of State for Parliamentary Affairs, and I quote:
That this House take note of the Second Report of the Standing Committee on Industry ("Taking Care of Small Business").
I should point out that an analysis of the recommendations of this report and the dissenting report of the Bloc Quebecois to this committee provided an opportunity to ask some important questions about SMEs in general and SME funding in particular which is largely the key to economic development in Quebec and Canada.
I agree the report contains some much needed changes in the way SMEs are financed, to raise them to the level of productivity and competitiveness required as a result of globalization. In my opinion, the number of SMEs should continue to rise, and their production capacity and ability to diversify should be improved, all of which will not be possible unless SME financing helps them expand from a small to a medium sized business and, if possible, to a very big company.
Unfortunately, according to the statistics, between 1978 and 1986 only 1 per cent of Canadian small businesses graduated to the rank of medium-sized businesses, compared with 15 per cent, over the same period, in the United States.
It is very important to find an explanation for the unsatisfactory growth of our businesses, but in the short term, for many regional businesses, financing is often the problem.
This report contains some positive reports concerning SMEs and SME financing, but I feel that some recommendations lack real substance and innovative spirit.
I would support the committee's recommendation that the Federal Development Bank be confirmed in its role as complementary lender to small and medium-sized businesses. However, it must be understood that this role should be redefined so as to avoid duplication and overlap, since all provincial governments have their own government policies. The Government of Quebec is no exception, with its new policy for regionalizing development programs.
Instead of changing the name of the Federal Development Bank, which would mean spending a lot of money with no direct benefit, the federal government would be better advised to give this agency a new philosophy, that is, let it act as a complementary lender of venture capital to businesses, the role formerly played by the Federal Office of Regional Development, which has seen its mandate crumble as a result of the absence of budget allocations.
While on the subject of funding and risk capital, I would like to say a few words about the Small Business Loans Act my Bloc Quebecois colleagues referred to in their dissenting report. I would have liked the committee to show more vision, more understanding in its consideration of small and medium sized business funding. Small business loans are very popular tools among small and medium sized businesses and essential ones too, resolving a number of problems in terms of productivity, market strategy, job creation, by making the necessary funds available.
To be eligible to funds under the Small Businesses Loans Act, SMEs must perform well in management and other areas considered important. These are the conditions essential to their success.
In the committee proceedings, we note that the Liberal members of the committee completely disregard or do not understand the first thing about the basic needs of Quebec and Canadian entrepreneurs desperately seeking a way out of the slump.
This government is proposing that small business groups be divided up in categories based on economic priorities. The Liberals want a new short range program to be put in place to support small business working capital financing just for export businesses.
We can see once again that Liberal lobbyists have successfully looked after their own interests at the expense of other SMEs who also need financial assistance to increase their productivity
in order to become more competitive, and they too are exporting.
Innovative ideas are often required. To boost the economic growth in regions such as Abitibi-Témiscamingue, in my riding like every other riding in the region, small businessmen have to be able to rely on regional development funds created by local investors, for local investments, with the input and/or assistance of both levels of government naturally.
The report deals with similar ideas and I hope that they will be considered by the ministers.
By establishing a regional fund, we could avoid unfortunate situations like that of a woman who came to see me in my office after she was refused a $15,000 bank loan for working capital under the SBLA to start her business. The reasons given for the refusal were her lack of experience and the risky nature of the business, when she herself had already invested nearly $45,000 in equipment. This money had come from her family to help her start her business and create jobs.
By cutting funds for small businesses, the banks prevent them from investing and facing the globalization of the economy. One may wonder whether the small-business programs benefit only the banks, because they have rigid discretionary criteria for funding small businesses, as in the case I just mentioned. They only lend to low risk enterprises, although their mission should be much broader. If these banks cannot do the job, then we should find a government agency such as the Federal Business Development Bank which could do it.
We should all know that if some of the committee's policies were reflected in the government's next budget, small businesses would unfortunately decline considerably, especially in Quebec but also in the rest of Canada. Testimony heard by this committee would seem to justify the Bloc Quebecois's apprehensions.
It is harder and harder for some small businesses to obtain loans because the present government favours those that export. This shows beyond any doubt that the government has no job-creation policy that applies to all small and medium-sized businesses. It has not kept the promise that it made in its red book to help all small and medium-sized businesses. It was supposed to promote employment and its slogan was "jobs, jobs, jobs", but the reality for many small businesses now sounds more like "bankruptcy, bankruptcy, bankruptcy".
The policies of this government are disgusting. The Liberals have the nerve to tell us they will create jobs when in fact they provoke the closure of businesses which did not get the financing they desperately needed, this after being told they would get it. Without access to adequate capital, even the most gifted managers and the best commercial strategies can fail.
I want to give an example, from my riding, where federal support helped promote the development of a business. If the government would only continue to provide this kind of support, we would be in a position to create jobs instead of changing policies. The company I am referring to is called Préci-Bois, in the small village of Barraute. New technology would allow the use of trees with a diameter of less than four inches to make small wooden blades, which are sold and exported to the United States.
The owner personally invested over $500,000, was able to borrow one million dollars from a chartered bank but still had to find $500,000 in risk capital, for a total of $2 million. The Federal Office of Regional Development took eight months, almost a year, to make a favourable decision, but after a lot of representations and explanations federal officials probably realized this was an excellent project. Consequently, more than 30 jobs will be created, which means that the same number of people will leave the welfare or unemployment rolls.
This is a good example where, instead of having the government spending money, jobs are being created for the benefit of the whole country.
Unfortunately, many other projects did not get sufficient funding. This government had promised financing sources to the residents of these communities-I named one village, but representatives from many other ones came to see me because they have developed projects but will not have the necessary funds to complete them-so that they would be able to implement projects which enjoyed unanimous support in their communities and which would have created new jobs.
These people were willing to take the risk and to create companies to diversify local economies. By changing its policies, the government broke its promises without offering any alternative financing. For its part, the Bloc Quebecois wishes to broaden the application of the Small Business Loans Act to include businesses' working capital for all SMEs, because this often makes the difference between success and failure for a given project, whether for export or for the local market.
To implement this financing of SMEs' working capital, the Bloc proposes concrete and realistic solutions in its dissenting report, Appendix F of the report. I agree, of course, that the government should gauge all suggestions in the context of fiscal responsibility, and weigh the costs and benefits of all loan applications. SMEs must assume part of the technical responsibilities, that is to say they should have well structured, profitable and sustainable plans.
Clearly, if the government accepts the suggestion of the Bloc Quebecois or any other positive suggestion on small business capital financing, there will be social and economic benefits, in particular in remote areas like my riding of Abitibi, in Quebec.
In 1988, the FBDB, a major agent of development in our regions, gave more than $8.9 million to 86 manufacturing projects in Abitibi-Témiscamingue. The money was allocated under the Enterprise Development Program-Industrial, the EDP-I. This program allowed a number of businesses to acquire equipment and to upgrade their facilities, thereby improving
their productivity and preparing themselves for an economic recovery.
I could mention a number of examples of companies who benefited from this financing and have, today, the means to export wood byproducts from our area. Presently, with a budget of $ 1.5 million last year instead of eight million which could drop to zero, FORD-Q is targetting small and medium-sized businesses with, as I mentioned before, a strong export potential, which is not bad per se, but other small and medium-sized businesses in the tourism industry, for instance, should not be neglected. More importantly, new services provided by FORD-Q will no longer be in terms of investment but in terms of technical support, that is to say feasibility studies review and so on.
With such a small budget, it is going to be difficult for small and medium sized businesses in the Abitibi area to find funding in order to diversify their production since they depend mainly on mining and forestry as a source of funds for regional development. It is urgent to establish secondary industries in the region, which will result in more jobs, lower unemployment insurance expenses and, therefore, lower government expenditures and higher revenues.
The facts speak for themselves. Given the new orientation, the $1.6 million investment by FORD-Q in a tourism project in Val-d'Or will be the last one of this size. I do hope that with respect to the recommendations of the Standing Committee on Industry, budgets will be sufficient to stimulate all small and medium-sized businesses, without any discrimination.
To conclude, I would like to quote Mr. Alain Garneau, president of the Northwest Quebec prospectors association, Val-d'Or sector. It should be noted that, in our community, mining is one of the most important economic sectors. He said: "-most jobs are created by small and medium-sized businesses. They train most of the people employed in their own sector. They are economically and socially extremely important, a fact which is unfortunately too often forgotten by our governments-".