INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, May 5, 1999

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[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order, please.

Pursuant to the order of reference of the House dated March 1, 1999, main estimates for the fiscal year ending March 31, 2000, Industry votes 20, 25, 55, 60, and 65.

I'm very pleased to have with us this afternoon the Honourable Martin Cauchon, Secretary of State (Economic Development Agency of Canada for the Regions of Quebec), and several witnesses from the Economic Development Agency of Canada for the Regions of Quebec. We have Monsieur Caron, the deputy minister; Mr. Jacques, the assistant deputy minister, strategy and liaison; and Mr. Jean-Guy Saint-Martin, assistant deputy minister, strategy and liaison.

I'll turn it over to the minister.

[Translation]

The Hon. Martin Cauchon (Secretary of State, Economic Development Agency of Canada for the Regions of Quebec): Madam Chair and committee members, before I begin my statement, I would like to thank all of you for the work you are doing in this committee. You do painstakingly detailed work, which is highly technical, and your work is very important for all members in the Department of Industry portfolio. I would like to spend a few minutes in my opening statement briefly discussing the role of the Canada Economic Development Agency in the province of Quebec.

Allow me, as the Chair has done, to introduce the Deputy Minister of the Canada Economic Development Agency, Mr. Renaud Caron; Mr. Jocelyn Jacques, Assistant Deputy Minister, Operations; Mr. Guy St-Martin, Assistant Deputy Minister, Strategy and Liaison; and Mr. Pierre Bordeleau, Director General, Human Resources Management, Finance and Administration, who is accompanied by Mr. Jean-Pierre Thibault, Director General, Communications, who is not seated at the table with us due to lack of space.

[English]

First of all, Madam Chairperson, I would like to discuss for a few moments the question of the mandate of Canada Economic Development. The mandate of Canada Economic Development is to promote the economic development of the regions of the province of Quebec. More specifically, this means that we foster the creation of sustainable employment by encouraging a business climate where SMEs can prosper and grow.

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In this regard, we are completely in line with the major economic concerns of the Government of Canada, which are focused on guiding Canadian businesses into the new millennium. The key factors in the new economy—involving globalization, enhanced innovation capability, and productivity performance—thus form the basis of our activities.

[Translation]

Madam Chair, our primary role is to promote this aspect of economic development, in the context of partnerships. Our partners are not only the other federal departments and agencies, but also local economic stakeholders. Canada Economic Development assumes a leadership role for regional development within the broad Canadian family, and this is a growing role.

We promote and disseminate the economic programs and services provided by all federal departments and organizations, specifically those that serve small-and medium-sized businesses. The dissemination is conducted largely through the 54 Community Futures Development Corporations.

Canada Economic Development has been given special mandates to meet the needs of the regions. For example, in recent years, these have consisted of management of the Canada-Quebec Infrastructure Works Program, coordination of the Canadian Action Strategy for Greater Montreal, establishment of Federal Liaison Offices for regions affected by the torrential rains in the Saguenay-Lac Saint- Jean region, implementation of the Economic Recovery Assistance Programs for SMEs affected by the ice storm and creation of the Coastal Quebec Program.

[English]

With reference to the special mandate I just mentioned, I would like to draw the attention of this committee to three examples that clearly illustrate the impact of Canadian economic development activities in terms of jobs and investment generated.

The first example is that since its inception, the Canada-Quebec infrastructure works program has enabled us to support nearly 3,250 projects, to provide a federal contribution of over $6 million, and of course, to generate investment of nearly $2.7 billion. In terms of job creation or safeguards, we're talking about over 35,000 jobs that have been due to the Canada-Quebec infrastructure program.

The second example that I would like to draw your attention to is the Canadian action strategy for Greater Montreal, which was established and set up in February 1996. The federal departments have worked together with their partners in Greater Montreal in order to achieve better development of this area. We have achieved over 1,700 projects. The investment is nearly $3.5 billion. Canada Economic Development's involvement is in the amount of $785 million. The federal contributions to that investment are over $1 billion since 1996. Our strategies altogether have contributed to the safeguarding of over 30,000 jobs in the Greater Montreal area.

[Translation]

As a third example of the special project that has achieved concrete results, I could refer to the Coastal Quebec Program, a strategy that we implemented to deal with the groundfish crisis. The record, as of March 31, 1999, shows that we have supported 220 projects with contributions totalling over $1.3 million. This has enabled 835 jobs to be created and maintained.

Our activities are developed within the context of major national priorities. That is why we created what we call the Industry Portfolio, which includes the three agencies so as to ensure better strategic coordination for economic macro-development and for micro-development, namely within all the regions.

Nowadays, the emphasis is on communities, the new economy, globalization and exports. We want to ensure that all regions in Quebec will have an easy access to these new realities. For example, we have organized highly successful Conférences/Info- Fairs. In 1998, eight Conférences/Info-Fairs were held, attracting over 10,000 entrepreneurs in the regions of Quebec. In 1999, eight new Conférences/Info-Fairs are taking place in Quebec, four of them in March and in early May. Conferences have attracted some 1,675 people, while 4,353 have visited the fairs. Finally, about 1,855 people took part in one or other of the workshops held during these events.

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[English]

Another example of what we're doing to provide the region with better access to the new economy is the question of the Community Futures Development Corporation. In Quebec, it's quite an impressive network, actually. We're talking about 900 volunteers who are working in that structure. We have 300 permanent people working there. As I mentioned on numerous occasions, Madam Chairperson, it's a very independent body with its own plan of action, and the result we have is quite impressive.

The corporation, with the 54 Community Futures—in French it's SADC—that we have, brings to the communities across the province of Quebec expertise, of course, but at the same time, it brings an investment fund that creates a major impact in our communities. Altogether, the 54 Community Futures represent an investment fund of about $100 million. At the same time, we want to make sure the relationship we have, not only as Canada Economic Development but as the Canadian government, will keep growing in order to provide the community with much better information about the marketplace, the economy as a whole, and to a certain extent, about our services.

[Translation]

We would like the CFDCs to be flexible organizations, like our regional development promotion strategy. The Youth Strategy, which we implemented for people between the ages of 18 and 35, has enabled 807 entrepreneurs in 671 enterprises to receive funding. One component of the Youth Strategy aims at entrepreneurship; another focusses on student employment. Since we initiated the Student Employment component of the Youth Strategy, in conjunction with the CFDCs, 341 people have been assisted to find jobs.

Still in the context of enabling the regions to have access to the new economy, I would briefly like to draw the committee's attention to our regular programs.

[English]

Of course, our very first program that was established after a program review was the IDEA-SME program for commercialization in the international marketplace, which is there to help the corporations involved in the knowledge-based economy prosper in the regions of the province of Quebec. The IDEA-SME program has had some results that are quite impressive. For example, Madam Chairperson,

[Translation]

between April 1, 1997 and March 31, 1999, the IDEA-SME program was used to support 1,449 projects resulting in an overall investment of nearly $457 million, with financial support from Canada Economic Development totalling about $146 million.

[English]

If we talk about the components of IDEA-SME, between April 1, 1998 and March 31, 1999, Canada Economic Development granted contributions totalling $29.6 million under the innovation, research, and development component. Through this, we've been able to make successful about 272 technology projects across the province of Quebec.

[Translation]

Just over a year ago, we created a new economic development tool: Regional Strategic Initiatives. This program provides a special focus on the Quebec regions, and we have already announced a good number of initiatives that we are supporting in conjunction with various economic development stakeholders to ensure that our areas of activity respond effectively to the realities of each of the regions.

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The RSIs focus on four main areas of activity: the development of technological capability; tourism development; support for the attraction capability and international visibility of the regions of Quebec; and support for the adjustment capability of the regions in the context of globalization.

We could give you a long dissertation on Canada Economic Development's mandate activities. Allow me to conclude the core of this presentation by speaking to you about our work, which focusses not only on regional renewal, but also on conquering export markets. Indeed, we are supporting their marketing and international trade missions. We also developed the NEXPRO training program in conjunction with the Federal Development Bank.

In conclusion, we have done of work in the Quebec regions, but we still have a lot to do. One of our challenges is to ensure that the regions are able to master economic information and information technologies, that they will be able to develop the necessary networks and that they will continue to emphasize getting connected, so as to improve the competitiveness and value-added component of all our businesses.

We are working very hard to change mind sets and get companies to work with new means. Obviously, we are increasingly interested in productivity, because we have to be competitive in international markets.

[English]

This is what I wanted to present, Madam Chairperson, as the opening statement. I wanted to be brief in order to turn it over to the floor, as you would like, I guess, for a question period, which will be of benefit for the committee as a whole and for the industry portfolio.

Thank you very much for your time.

[Translation]

Thank you for your attention.

[English]

The Chair: Thank you very much, Minister.

We'll now begin with questions.

[Translation]

Mr. Dubé, go ahead please.

Mr. Antoine Dubé (Lévis-et-Chutes-de-la-Chaudière, BQ): Welcome, Mr. Cauchon. We often have the opportunity to meet with Mr. Caron and Mr. Jacques. In fact, the latter is a former professor of mine. We haven't yet met Mr. Saint-Martin.

Last year, you changed your name to the Economic Development Agency of Canada for the Regions of Quebec. I noted that you also changed your role, and that the term “regional development” became less and less frequently used. Furthermore, we note that the words “federal-provincial agreements” do not appear this year in the Estimates document.

Should this lead us to conclude that the Quebec minister, Mr. Jolivet, wasted his time trying to conclude an agreement with you? Reading the document gives the impression that negotiating an agreement with Quebec is no longer one of your objectives. We have been waiting for a new agreement for a long time, because the former one has expired. Why are you not following the strategic plans adopted by the Quebec Regional Development Council? Why does your regional strategy only identify five Quebec regions, while there are 16?

[English]

Mr. Martin Cauchon: Madame Chairperson, how much time do we have to answer a question? There were at least three questions asked by the honourable member.

The Chair: Well, Minister, we try to stick to five minutes for questions and answers, but if you could try to answer his questions as best as you can in a brief amount of time, we would appreciate that. We have only until 4.30 p.m. We have another minister coming.

Mr. Martin Cauchon: Okay, five minutes per question means I have fifteen minutes.

The Chair: No, five minutes in total.

Mr. Martin Cauchon: The total, okay.

[Translation]

I shall try to be brief, but you will agree, Madam Chair, that I am being asked to answer a question that needs to be developed.

We were very proud to adopt a name that reflects a clearly articulated philosophy and vision. Each year, the OECD congratulates Canada for being recognized by other countries as a leader in regional development. In fact, we gained acceptance of the concept of regional development at the OECD.

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We recently made a change so that, henceforth, we refer to the economic development of the Quebec regions. In this way, we are helping to change attitudes, because today, when we speak of the new economy and globalization, we must not limit ourselves to doing business within our own region, but must be capable of competing on national and international markets.

The old name led us to believe that the emphasis was on work within our regions. When we refer to the economic development of the regions, it is understood that we can still remain within administrative barriers to manage regional economic issues, but when we are doing business and developing our businesses, we are aware that there are no longer any geographic barriers. This is main thrust of the message that we wanted to communicate when we decided to change our name.

You raised the issue of the strategic plan. Economic Development Canada's activities in Quebec are developed as an outcome of the wishes of all the regions and then more finely tuned in our 13 regional offices. If I include our virtual group, I should actually refer to 14 regional offices. Offices prepare their business plans on the basis of strategic plans. We don't work in the abstract, in space or in the universe, but on the very concrete ground of the province of Quebec. Each of our initiatives is adapted to the realities in the region. For example, the Strategic Regional Administrative Program, that we have just developed, could not more closely reflect the priorities of the strategic plan.

I am told that some regional offices in Quebec have contributed to these strategic plans, while some Community Futures Development Corporations worked almost exclusively to develop these plans. I think that everybody participated.

The strategic plans for all Quebec regions comprise 10 to 15 potential areas of activity in each of the regions. It is hard to miss.

The negotiation with Quebec started before the last referendum. You will recall that my colleague from the finance department, who was then responsible for Canada Economic Development, asked the Quebec government to negotiate an agreement to achieve better co-operation in regional development. At that time, the Quebec government refused for its own reasons.

After our program review, we changed our way of working and proposed directions that are more appropriate in the new economy and more closely correspond to the needs in the regions. When we speak of economic development, we are no longer talking only about investment, but also activities related to services and expertise and to international repercussions. As we are moving on, these elements are becoming increasingly important.

We have started discussions with my provincial counterpart, Mr. Jolivet, and we agreed at our meeting to discuss the possibility of a closer meshing of our activities, so as to achieve better co-operation. I cannot emphasize strongly enough that if the Quebec government is aiming for a merger of the Community Futures Development Corporations or wishes to have them transferred to the province, our answer will be an unequivocal no. But we are fully open to achieving a better meshing of activities, and this is what we are presently doing.

Mr. Caron met with representatives of Mr. Jolivet last week. Our discussions are continuing and appear to be on the right track. We are currently waiting for a document from the Province of Quebec that will set the parameters for intervention of a future agreement.

The Chair: Thank you, Mr. Dubé.

Mr. Bellemare, go head please.

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): Thank you, Madam Chair.

Mr. Minister, the estimates of the Economic Development Agency of Canada for the Regions of Quebec forecast a substantial cut in expenditures for 2000-2001. Does this reduction jeopardize Canada Economic Development's capacity to achieve its objectives?

Mr. Martin Cauchon: The member's question is very pertinent. If you look at Canada Economic Development's estimates in recent years, you will note that our financial envelop varies according to the Agency's Statuatory responsibilities or the exceptional projects that it caries out from year to year. The significant variation in its financial envelop is basically the result of the end of a certain number of special projects, including some infrastructure programs, programs linked to the old programs, and temporary economic reconstruction and the Special Quebec Coastal Fund. These are very specific programs that were only temporary. Nevertheless, the Department's A budget will grow continuously in the coming years because of the Agency's Refundable Contributions Programs which, by the way, is functioning very well.

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Mr. Eugène Bellemare: I would like to congratulate Economic Development for the Regions of Quebec for its efforts to make its clients aware of the Y2K problem. As you know, I am very interested in the Y2K problem. I would like to know whether, from the basis of your client survey and other awareness activities, you are worried about the ability of small-medium-size businesses in the Quebec regions to deal with the Y2K problems.

Mr. Martin Cauchon: Government Agencies must be worried about the Y2K bug, because it is a real problem. The Canadian Government has been working for some time now to reduce the impact of the Y2K transition. You know that my colleague, John Manley, created a task force that has tabled a report with recommendations for the private sector and Government Agencies in general.

As for us, we have made a certain number of proposals, including obliging the companies that receive contracts or contributions from us to ensure that their systems are Y2K ready. And naturally, the readiness required of the business also extends to the entire chain of its various suppliers..

We are also providing some experts advice to businesses in the conferences that we have organized in the conjunction with the Federal Development Bank. Some workshops have been organized by the CFDCs. In the Info-Fairs, we hold awareness workshops for small-medium-size businesses.

Mr. Eugène Bellemare: Thank you.

I have learned that businesses can now apply for funding on the Internet. Is there a large volume of requests made via the Internet? Do you have a profile of the businesses of have requested assistance over the Internet?

Mr. Martin Cauchon: Last year, on our Internet Site, we created what I call the 14th Canada Economic Development Office. This virtual office gives users access to front line information on departmental services. As the member just said, it provides forms to request financial assistance under our various programs, including the IDEA-SME.

Since the virtual office is relatively new, it is obviously used for only small number of applications at the present time. We have only received a few applications. However, many people are visiting the site to obtain information.

The Chair: Thank you, Mr. Bellemare.

Mr. Martin Cauchon: It is developing broadly.

The Chair: Mr. Harvey.

Mr. André Harvey (Chicoutimi, PC): Even though we are members of different political parties, Madam Chair, it is not immoral to be fair in politics.

Mr. Minister, I read in the newspapers on Friday that you had decided to designate aluminum, which, by the way, provides the various levels of government in the country with about $900 million in income, as a major industry for Canada's future, particularly with respect to job creation and technological development. I would like to know the major reasons that led you to this decision, and what they imply for development.

My second question deals with communications. In the greater Quebec City region and in the Saguenay-Lac-Saint-Jean region we know that communications usually precede development. A few years ago, the federal government decreed that highway 175, which links these two major regions, one of which has almost one million people, and our region, the Saguenay-Lac-Saint-Jean area, with almost 300,000 people, would be part of the national highway network. To ensure the development of these two regions, I would like to know whether you would agree to negotiate a bilateral agreement, or would we use modern methods of funding or would we rely on public and private consortia for the design, construction, financing and maintenance. This would constitute an extraordinary pilot project in Quebec.

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We have learned informally that the Quebec government has had a report for the past three weeks, that confirms the necessity of this road link for the development of these two regions. Our region is the only one in Quebec that is not linked to the other regions by a four-lane divided highway. I would like to know your philosophy for developing the highway system.

Mr. Martin Cauchon: With respect to your first question about the aluminum industry, development of the aluminum industry in the Saguenay-Lac-Saint-Jean region constitutes a priority for the intervention strategy of the Canadian government and, specifically, my department in Quebec. This is an important industry that has major spin-offs for Canada, as the honourable member said a little while ago. This industry is concentrated primarily in two provinces, but especially in the province of Quebec and, particularly, in the Saguenay-Lac-Saint-Jean area.

In January we announced a strategic regional initiative with a budget of close to $10 million in this region. Under this initiative we have developed a $6 million technological fund primarily for wood and aluminum.

We also recently announced a technological highway for aluminum, in conjunction with the NRC, in order to focus on the industry and ensure that there will be a logical development plan for the coming years so as to maximize not only production but also job creation. We export a great deal of aluminum, but re-import more than 400,000 metric tons as finished or semi-finished products. Therefore, we have a problem, and this is what we are going to try to address in the coming months. We will emphasize research and development, because our future is at stake.

As for Highway 175, this is not within my competence. Anything that I might say would be pure speculation. I would merely like to say that when we talk of a highway network in the province, this must be a provincial priority. Furthermore, my colleague from Transport Canada recently met, or will soon meet, with all of his provincial colleagues to discuss the highway system, not only for Quebec, but at the national level.

Mr. André Harvey: Mr. Minister, do you have any idea when you will have the results of the road map for the aluminum processing technologies?

Mr. Martin Cauchon: I would not like to be held to a date, but the NRC representative recently informed me that, although it usually takes from 12 to 15 months, we might have the results by the fall.

Mr. André Harvey: The announcement that the Secretary of State made on behalf of the Federal Government raised much hope in our region which has lost 8,000 jobs in the past 10 years, in the primary processing of aluminum. We export 2 million tons of aluminium bullion but, unfortunately, we import 500,000 tons of finished and semifinished products from other countries. This is tragic, Madam Chair.

I exhort the Minister to continue his constructive work in this important industrial sector for the future of our country and our region.

Mr. Martin Cauchon: I would like to thank the member, who works hard for his region and who has drawn our attention to an important subject.

[English]

The Chair: Thank you, Mr. Harvey.

[Translation]

Ms. Jennings, go ahead please.

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Mr. Minister. There is a lot of talk about productivity these days and the fact we are lagging behind our American neighbours. I have read reports showing that the investment of our companies, particularly SMEs in on-going occupational training, is below that of the United States and that our SMEs are investing far less than the Americans in equipment renewal.

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When we talk about economic development, we have to get some thought to productivity. Can you elaborate on how our programs and policies, including your 10 to 15 areas of intervention, could encourage SMEs to invest more in on-going occupational training and in equipment renewal so as to increase productivity and economic development? If you cannot answer me today, you could do so in writing.

My second question deals with the conferences and Info-Fairs. We have never attended one, but I've heard many comments and they are all, or almost all, very positive. I know that these fairs or conferences took place primarily in the urban regions until just recently. If this is the case, are you planning a change? Could these be held in less developed regions?

My third question deals with the CFDCs. You spoke of their mandate, particularly with respect to investment. As far as I know, there is a CFDC on the island of Montreal. Is there another agency with a mandate similar to that of the CFDC, and if so, what is it?

Mr. Martin Cauchon: I will start with the Info-Fairs, to take the easiest order.

Ms. Marlene Jennings: The most difficult first and the easiest last.

Mr. Martin Cauchon: Info-Fairs are a national strategy implemented by my colleague at Industry Canada, which is having excellent success in Quebec. A study has shown that the highest rate of recognition for the Info-Fairs, certainly in a percentage term, is in the province of Quebec.

We started the Info-Fairs in what I would consider semi-urban areas and we will also go in all of the regions. Last Saturday, I was at Saint-Félicien for a Info-Fair, and it went very well.

The CFDCs do not exist in cities; they have what we call Community Economic Development Corporations, the CEDCs. These corporations work in a very different way from the CFDCs. The CFDCs are partners that operate in direct line with the CED mandate, where as the CEDCs, until just recently, operated on the basis of their economic development priorities.

As of this year, the CEDCs are operating in the same way as the CFDCs, that is to say, on the basis of a mandate or an extension of an Industry Canada action plan. I think it's better that way, because we can better coordinate our intervention strategy.

Finally, productivity has always been a priority for the government of Canada. As we know, over the past years, Canada has made good progress in improving its productivity, but since economies are interdependent, we must not measure ourselves solely against our own performance. We have to measure our performance against that of the other countries, particularly the G-7 countries. A great deal of work still has to be done.

The labour force is a fundamental part of the whole issue of productivity. Responsibility for labour force training has been transferred to the province of Quebec, and now the province is responsible for handling that.

Other important aspects of productivity come under our jurisdiction, such as research and development and adaptivity, as well as what will soon emerge from our strategic regional initiative, in Montreal. There certainly will be initiatives that will help companies adapt more easily to the new economic realities stemming from technology, for example.

The community is also very important, and this is also an integral part of productivity. All Canada Economic Development programming is intended for these companies, with the CFDCs, in order to help new companies change attitude. The CEDCs could eventually receive the same tools.

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I would like to return to the issue of technology. You have raised an important point. When we compare ourselves to the other G-7 countries, we realize that Canada is lagging far behind in terms of companies that acquire five new technologies or more in the course of one year. It's a question of attitude. As for research and development, if we compare ourselves to the United States, we see that our companies with 500 employees or more compare favourably to American firms, but the problem is pretty bad for our companies with fewer than 500 employees, particularly those with less than 100 employees. Not a lot of research and development is being done. This takes me back to something I was saying in my opening remarks. We must work with the private sector to change attitudes. I can't overemphasize that point.

One example of an agency that is improving our productivity is the Biotechnology Research Institute in Montreal, which is doing an excellent job of raising awareness and is directly improving productivity.

[English]

The Chair: Merci, Madam Jennings.

Mr. Jaffer, please.

Mr. Rahim Jaffer (Edmonton—Strathcona, Ref.): Thank you, Madam Chair.

Last week I attended a conference in Jasper on western economic development. Your colleague, the Honourable Ron Duhamel, announced that an additional amount of funds are going to be donated to the community futures program, which has had quite a success in the west. I'm curious to know whether there is going to be an increased allocation of funds for the Quebec side of the community futures program.

Mr. Martin Cauchon: The answer to that question is that it has already been done at this point in time. The collectivity program, with which we're actually funding the community futures program in the province of Quebec, was transferred to Canada Economic Development some years ago. The total budget of the community futures program at that time was about $11.5 million, to the best of my recollection. I would like to draw the attention of the committee to the fact that since that time, there has been a huge increase in the budget of the community futures program. Lately, the total investment has been something around $27 million.

We're going to keep proceeding this way with the community futures program, because it is close to the philosophy we want to pursue as the Canadian government, which is to be close to the local community. They know very well the situation in the local community. They know what the needs are. Actually, their impact not only in terms of cooperation but in terms of job creation, which is the ultimate goal, is pretty amazing.

Mr. Rahim Jaffer: My other question is with regard to—

Mr. Martin Cauchon: If I may make just one more point, we do know that since 1995-96, if my memory is good, when it's a profitable organization, we're proceeding with a repayable contribution. The community futures program is acting in the same way.

Mr. Rahim Jaffer: The other question I have is with regard to the challenges listed under section 6 of your report, where you say:

The challenge for Quebec businesses, communities and regions is to cope with the emergence of an economy increasingly based on knowledge

This would be a high-tech, computer-based sector.

One of the things we are dealing with across the country—and I'm sure it's the same in Quebec—is the issue of the brain drain, especially in the high-tech sector, where a lot of our talent that's being trained and cultivated here is going to the U.S. or elsewhere. I believe the Minister of Industry said recently that we need to look at our tax levels in this country and make them comparable or at least move in the direction of U.S. levels to make it more competitive. I wonder whether or not you agree with that in trying to address the issue of keeping our talent and cultivating the high-tech sector in this country.

Mr. Martin Cauchon: With regard to the question about the brain drain, I'm sure you've heard my colleagues speak about it on numerous occasions. I do believe that in the near future the issue of the brain drain will be to the advantage of Canada. We're living in a knowledge-based economy. Those people are looking forward to establishing themselves in a country where it's good to live and where the quality of life is just super.

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If you have a look at the situation in Canada, with a government that has been able to control the deficit since 1993, we have a social safety net for which it is difficult to find a comparison across the world. Our safety net is the envy of many countries in the world. If you compare the payroll tax that corporations have here with that in other countries in the world, it's pretty low too. Of course, the issue of personal income tax is a concern.

But I do believe that to a very big extent we're going to win this situation due to the fact that the quality of life is there. More and more we're proceeding into the knowledge-based industry, and those international corporations will look for the quality of life we have here in Canada.

The situation we have in Quebec is quite interesting. We have a lot of corporations that are coming over to establish themselves in the Montreal area. I do believe that if we keep proceeding this way, we're going to be able to have a powerful attraction coming out of the regions of the province of Quebec too. Lately I've seen some conventions, for example, in Rivière-du-Loup, where there were young entrepreneurs. Those entrepreneurs wish to start corporations involved in the knowledge-based industry, and the site they're looking for to establish their corporation is not Montreal or the city of Quebec; it's a city like Rivière-du-Loup, Chicoutimi, or—

Mr. Rahim Jaffer: We've seen that in Alberta and Ontario, where tax rates are lower, we're still having problems keeping some of the high-tech talent, because it's so competitive in the U.S. With Quebec being one of the provinces with one of the higher levels of tax within this country and even in North America, I think it's going to be increasingly difficult to keep some of that talent in the short term. We train them here, and then, unfortunately, they go to the U.S. I think it causes some concern.

Mr. Martin Cauchon: But as I told you, the issue of personal income tax is of course of some concern, Madam Chairperson. But when a corporation tries to decide on a site to establish its company, they look at many factors. I mentioned them in my very first answer.

I have to share with you an experience I had. Not long ago I had the opportunity to visit a hospital in Montreal, and I sat with a doctor who was involved in basic research. That guy is from Gaspésie. He had a master's degree from Harvard University. He finished first. When he went out of there, of course a lot of corporations, not only from North America but from all over the world, were running after him in order to give him everything he wanted, including a big salary, a car, etc. But he decided to establish himself with his family here in Canada, specifically in Montreal, because of the quality of life.

We have to play that game. We have to think about it. If you go to the States, for example, you don't go downtown at night in Washington because it's too dangerous. Come to Montreal and talk with the people who would like to have a convention in downtown Montreal. The very first thing they're going to say you is, we've heard there is an underground life in Montreal. Is it dangerous? We don't have such a reaction in Montreal because the quality of life is there. I think that at the very end we're going to win the process.

Mr. Rahim Jaffer: I have one last quick question with regard to the—

Mr. Martin Cauchon: Even the BQ are proud of me there.

Some hon. members: Oh, oh!

Mr. Rahim Jaffer: With regard to the expansion of the economic development capabilities in the regions, which you refer to on page 15, one of the focuses is tourism development. I'm just wondering what it will mean in future if in fact Bill 75, I believe it is, where tourism is going to be transferred from Industry to become a crown corporation, goes through the House. Is that going to change Economic Development's role in tourism?

Mr. Martin Cauchon: Basically, on that issue there's a sort of common understanding with the Government of Quebec, to the effect that we're getting involved in tourism as far as the issue of international promotion is concerned. We've done it across the province of Quebec. We're going to keep proceeding with this. Bear in mind also that when we talk about tourism, we talk about the masterpiece in terms of economic development.

Two years ago la Commission canadienne du tourisme proceeded with a major study of 25 economic sectors that are, of course, very important: construction, cars, biotechnology, and so on. One of these sectors was tourism, and they ranked fifth out of 25 in terms of economic involvement, implication or importance, not only in Quebec but in Canada.

• 1620

Yes, we're going to keep proceeding with tourism, but as far as economic development is concerned it's a question of promotion.

The Chair: Thank you.

Mr. Bellemare, I know you had another question when I cut you off. Did someone else ask that question or do you still have that question?

Mr. Eugène Bellemare: No.

The Chair: I'm sorry. I just wasn't sure.

Mr. Dubé and then Mr. Harvey. We have about 10 minutes left.

[Translation]

Mr. Antoine Dubé: A few moments ago, we were talking about principles; now we are going to move to practical and applied policy. I notice that Canada Economic Development is the only one of the three agencies that includes the word "Canada" in Quebec; I don't know whether that's a coincidence or not.

Mr. Bellemare talked a bit about financial matters. I see in the Estimates that administrative costs were decreased by only 9%, yet the current budget for this year is down 34% from last year. Could the Minister explain why the funding for his agency in Quebec has dropped by 34% since last year?

On February 22, Francine Lalonde and I met with your Assistant Deputy Minister, and I reminded him that we required certain data. Finally, after insisting and insisting, I received the information I was asking for Monday evening last, after 5 p.m.. The information goes back to July 1st of last year.

So I somewhat understand the attitude of my colleague, Mr. Harvey. He is the only Conservative whose riding receives more than the average for the ridings that are represented by Liberals. No need to point out to you that ridings represented by the Bloc coming under the average.

I guess I had better be nice, otherwise I might be punished. Is it a coincidence that the ridings represented by Liberals receive 50 p. 100 more than the average of all ridings in Quebec, and the ridings represented by Opposition members receive less?

Mr. Martin Cauchon: Madam Chair, there are 13 regional offices that manage Economic Development according to the needs of each region. When I sign off on a project, it's in accordance with needs and not in accordance with political affiliation. The mere fact that you would hint at such a thing really exasperates me because I have always made it a point of honour to manage the funds of Canada Economic Development in an objective manner. We come here today with a great sense of pride. Our Agency is not like Mr. Dubé makes it out to be. It provides excellent service to everyone in Quebec.

As for the accusations he's just made, I would like to point out that every Wednesday morning, when the Quebec caucus meets, I hear exactly the same thing. I suppose that I must be managing the Agency in a very balanced way, somewhere, because both parties feel exactly the same way.

As for the question of the word "Canada" in the agency's name, I am going to respond with a question. What's the problem with having the word "Canada" in the agency's name. It's just a question.

As for the 34 p. 100 reduction, if you look at the Agency's Budget carefully, Mr. Dubé, you will see that over the years, the A-base Budget for my regular programs has been increasing. The overall budget has decreased because special programs have been cut back or cancelled, and old programs have been done away with.

[English]

The Chair: Thank you, Mr. Dubé.

Mr. Harvey.

[Translation]

Mr. André Harvey: Madam Chair, I would like to thank my colleague, the member for Lévis, for compiling my statistics; I appreciate that very much. I think that the important thing for a Secretary of State and for all members of Parliament, no matter what party they are from, is the higher interest of Quebec and our regions.

Mr. Cauchon, you are responsible for Quebec's Economic Development, and I think that responsibility affects all sectors. Let me quickly give you some background.

• 1625

Over the next five years, the Americans are going to invest—and they have already started—172 billion dollars in their highway system, and approximately 40 billion dollars for intermodal communications and so on. Canada won't have any choice. We will have to invest a great of money in our highway system by means of a number of progressive—I hope these mechanisms will also be conservative, but let call them progressive—funding mechanisms. These initiatives are taking shape throughout the country, Mr. Cauchon, except in Quebec. At present, 17 trade corridors have been officially defined in English Canada. I am particularly interested in the corridor between Windsor and Quebec City.

I have made an official request to the Federal Minister of Transport, but Mr. Cauchon, with all the people that you have working for you, Mr. Jacques, Mr. Caron and Mr. Saint-Martin, can you help me get this corridor extended? This is important, Antoine. These corridors that have been defined are practical things, and they will be part of future investments scenarios to enhance industry and trade. Our region is in no way part of this corridor; it stops at Quebec City. We certainly are fond of Quebec City, but we are even fonder of our own region. Could you officially support my request to extend the Windsor-Quebec corridor and turn it into the Windsor-Chicoutimi corridor? After all, Chicoutimi is a nice name.

Mr. Martin Cauchon: We are well aware that the mandate of the Economic Development Agency of Canada for the Regions of Quebec includes an advocacy role. Once an issue raised by Members of Parliament gains local support, and if it is in keeping with the realities and needs of the province that I represent, obviously we begin playing our advocacy role.

Mr. André Harvey: I thank the Minister, Madam Chair, and by the way, I would point out that a petition signed by 103,000 people was tabled in the Quebec National Assembly. So you can see this is an important issue. We really want to be on the list for future development plans, and I'm sure that the Secretary of State can help us. Thank you.

[English]

The Chair: Thank you.

Mr. Minister, we want to thank you for your presentation and for your time with us answering questions. We definitely appreciate your time.

We are going to suspend, as we change witnesses now, for about 60 seconds.

Minister.

Mr. Martin Cauchon: I would like to thank you very much, Madam Chairperson, for the time you have given me, and also the opportunity I had to discuss an important matter, the question of the economic development of the province of Quebec, with the members of the committee. Also, I would like to thank all those people who are here

[Translation]

and who helped work on this presentation so that we can provide you with the best information at our disposal. I would like to thank the entire team very much.

[English]

The Chair: Thank you very much again, Minister.

I'm going to let members know I've been summoned to a budget subcommittee meeting for all committees, so Mr. Bellemare will be taking over the chair. Also, I'm going to remind members that tomorrow—you received an amended notice in the morning—we have had a change of witnesses for tomorrow at 10 a.m., so from 9 a.m. to 10 a.m. we have estimates with Minister Duhamel, and then from 10 a.m. to 12 p.m. we have a meeting with the Department of Industry on productivity, and then in the afternoon we have Statistics Canada and the ethics counsellor.

I'm going to remind everyone that we're dealing with estimates tomorrow. There was some misinterpretation in the media and in Question Period today about what we'll be dealing with tomorrow afternoon, so I should clarify that for the committee.

As we're exchanging witnesses, I'm going to ask Mr. Bellemare to take over the chair.

• 1629

• 1633

The Vice-Chairman (Mr. Eugène Bellemare): The meeting will now reconvene for the second part of our afternoon session of the industry committee.

Appearing will be the Honourable Fred Mifflin, Minister of Veterans Affairs and Secretary of State, Atlantic Canada Opportunities Agency. Joining him will be Michael Horgan, president; Peter Estay, vice-president, finance and corporate services; and, I believe, Paul LeBlanc, eventually.

I have other names here: Rick Beaton, director of corporate affairs—he's somewhere here—and Gaetan Mercier, acting senior liaison officer.

Minister, we're awaiting with enthusiasm your presentation on ACOA.

Hon. Fred Mifflin (Minister of Veterans Affairs and Secretary of State (Atlantic Canada Opportunities Agency), Lib.): Thank you very much, Mr. Chairman. Let me congratulate you on your elevation to the chair.

I look forward to the next hour or so to talk about a subject that is very important to Atlantic Canada.

My colleagues, mesdames and messieurs, I'm once again delighted to have this opportunity to appear before this committee to share with you ACOA's progress with respect to economic development in Atlantic Canada.

A year ago, sitting here, I indicated that ACOA's approach to regional economic development had produced many significant and measurable results for individuals, for businesses, industries and, indeed, communities in the Atlantic provinces. Since then we have had the occasion to collate and submit our second five-year report covering the period 1993 to 1998 and our 1998 departmental performance report. I'm happy to say these documents support and confirm the success and effectiveness of ACOA's activity in the region over the past several years. And they clearly point to the fact that, as an agency of the federal government specifically mandated to help create new jobs and to raise earned incomes, we are on the right track.

• 1635

I would ask you, colleagues, to consider these results: the creation of 14,000 jobs in Atlantic Canada last year, 1998-99, raising the total to 78,000 since 1993; a survival rate of ACOA-assisted businesses that has shown to be twice that of Atlantic firms generally; a $5 increase in Atlantic GDP for every ACOA dollar invested; and what is very important to us in Atlantic Canada, a regional unemployment rate that is estimated to be 2.8% lower than it would have been without ACOA programming. And consider this: between 1988 and 1997, ACOA activities have generated tax revenues in Atlantic Canada of $3.9 billion, hundreds of millions of dollars greater than the agency's expenditures.

But you don't have to take our word for it. All of these results are based on independent evaluations and analyses by recognized external experts. The bottom line is that ACOA has worked and is working well.

[Translation]

ACOA has done a good job and continues to do so.

[English]

You know, when you look back, I think we can say that, not just for ACOA but I suppose in many economic development areas, the past 10 years have seen many changes. These changes, of course, have not missed Atlantic Canada. If I could be specific toward Atlantic Canada, if you look at our traditional industries, they are literally being remade under tremendous pressure to remain competitive. I suppose the most outstanding one is that the explosion of information technology has challenged us, tested us, and indeed inspired us.

Trade has never been more important as we get involved in the global economy and this is more closely connected to our economic well-being. One of the big businesses we are in is the business of entrepreneurship, particularly the new generation of home-grown entrepreneurs in Atlantic Canada. It is the belief of ACOA now that this has never been more important. These are the realities that define and, I would go further to say, even refine ACOA's fundamental objectives for economical development in Atlantic Canada.

In plain talk, we are here to support the real needs of small and medium-sized firms. That, we all know, is the engine of job creation in the region and indeed right across Canada. And we are here to develop an economic environment that nourishes and enables entrepreneurial start-ups and growth in all of the most promising forms and varieties in our region.

If you look at the mandate of ACOA, it hasn't really changed over the years, but the way we do business has. The way we try to fulfil our objectives continues to evolve. We like to think of ACOA as a dynamic organization, a dynamic agency that's continually looking inward and looking outward to ensure that we give Atlantic Canadians and Canadian taxpayers the best bang for their buck. We strive to stay ahead of the shifting trends in the economy, including those positive ones for which we and our colleagues in government and industry are directly responsible.

At ACOA we take a partnership approach to economic development, and partnership is a very big thing today. Partnership, in my mind, is powerful. That means we not only work directly with small and medium-sized businesses, we also seek and forge new partnerships with provincial government, community organizations, and industry groups, to tap into their in-ground knowledge and their experience. We do that in order to improve the conditions for economic growth and productivity and to help create the circumstances that will accelerate the development of new and emerging industries.

• 1640

I'd like to give you a few examples. We assess and coordinate the development of economically important sectors through federal-provincial cost-shared programs, and the best example I can give is one that I'm familiar with in personal involvement. It's the Atlantic Canada Tourism Partnership, and this is a pan-Atlantic umbrella organization that employs the skills, the experiences, and the talents of many in the public and private sectors, designed to turn what is a promising industry into a real focus for new entrepreneurial opportunities and, most importantly, new jobs. And it's working. In fiscal 1997-98, Tourism Atlantic activities helped generate an additional $16 million in revenue for the industry in the region, and that is important when you consider that the total worth in the Atlantic region last year was $2.8 billion.

At ACOA, we focus on entrepreneurial development in Atlantic Canada. Why? Because entrepreneurs are the lifeblood of the economy. As a case in point, working with our partners in the provincial governments as well as the academic community, in the past year we have had 110,000 students in the region, from kindergarten to grade 12, and we are exposing them to entrepreneurial concepts as a result of our investments in entrepreneurial curriculum development. That's 110,000. There are only 414,000 children in schools in Atlantic Canada, so our penetration rate is actually 27% and we're hoping to improve on that.

At ACOA, we focus on management practice skills, because we know that these increase business survival, growth, and productivity rates. Working with our partners in government and in industry, we support a wide variety of programs that enhance the abilities of business owners.

At ACOA, we focus on innovation and technology, because they are critical to competitiveness and to business growth, particularly for the small and medium-sized businesses that may not have access to those capabilities in the routine course of their operations. So we are actively engaged in supporting public and private sector alliances and technology transfer programs that facilitate the expansion of commercially viable knowledge-based activities in the region. We take the term “knowledge-based economy” very seriously. Atlantic Canada now leads the rest of the country in the growth of advanced manufacturing technology use, especially among the smaller-sized businesses.

At ACOA we focus on trade and export, because expanded trade means more jobs. Working with our partners in government and industry, we helped 90 small and medium-sized businesses start exporting in fiscal 1997-98, and we provided export-readiness training to nearly 100 companies in Atlantic Canada.

At ACOA we focus on community-based economic development, because Atlantic Canada is distinctly rural and it's a region where half our residents live in small towns and villages. If I could use my own case, I have 300 towns and villages in my riding, and the largest has a population of just under 8,000. This means, then, that we have to work closely with the communities, and we want to work closely with the communities and the community economic development organizations to provide the key business development tools more easily available to urban dwellers.

One important initiative along these lines has been the expansion of our Canada Business Service Centre network into a local delivery site in rural areas in the region. In cooperation with our partners in the provincial government, ACOA is helping to get crucial business information, market intelligence, and counselling services into the small communities where they are most often lacking and often most needed. The Atlantic Canada Business Service Centre now handles more than 100,000 inquiries a year, with an 87% satisfaction rate. In fact, if I could bring you up to date on that—I last checked on it a couple of days ago—it was 136,000 inquiries last year alone.

At ACOA we provide Atlantic entrepreneurs with greater access to investment capital. In 1998-99, ACOA invested $119 million in loans to Atlantic businesses. While direct loans are not our major activity, they are important because it's difficult for small and medium-sized businesses to acquire the financial resources they need to develop.

• 1645

We also understand how important it is to invest in businesses operating in high-risk sectors. Those are the sectors we operate in, sectors such as innovative high technology and research and development. The development of these emerging sectors is ultimately more important than any immediate return on investment. At the same time, ACOA has a policy of full repayability on commercial investments since 1995. This represented a very significant and, many would argue, responsible shift in our operations from the general past practice of non-repayable grants. Over the past three years, close to $50 million has been repaid, which has then been reinvested to help other small and medium-sized businesses start up, expand, and in the final run succeed.

Full repayability is fairly new to ACOA, and colleagues will recall that I committed last year to review ACOA's repayability practices. I'm pleased to report that we have followed through on that commitment. The agency has tightened its repayment terms, improved its tracking of payments and adopted some aspects of commercial lending practices without abandoning its economic development mandate. I'm confident that these and other measures will permit the agency in the months and the years to come to recover more and more of our outstanding loans, thereby generating additional income to help other small and medium businesses to start and to succeed.

I would say that loan repayability is just one indicator of success for a development agency like ACOA. It is an important one, but it isn't the only one. A true picture of success has to take into consideration the degree to which the agency has helped increase earned incomes, increase the GDP, increase productivity, increase exports or increase survival rates for SMEs in the region. When you really think of it, it also has to take into consideration the degree to which the agency has, in the long run, fostered economic development in particular sectors and generally diversified the Atlantic economy. Above all, a true picture of success must take into account the number of jobs created. In all these areas we think—and it will be, I'm sure, the subject of debate here this afternoon—that ACOA has been an unqualified success.

I don't want to leave the impression that everything is perfect, that nothing ever goes wrong. We've had our bad days, like many. After all, clearly not all our investments are successful. It's difficult that they would all be in a high-risk area. By its very nature, economic development is a risky undertaking. While ACOA provides capital for business start-ups, expansions and new technologies, the inherent risks of these investments are carefully calculated and evaluated.

But at ACOA we don't rest of our laurels and we have strength in our ability to evaluate the failures and to apply the lessons learned to ensure even greater success in the future. If we don't win them all, fortunately we do win the great majority of them. Indeed, and this is something that I will stress once again: ACOA-assisted companies are twice as likely to succeed as non-ACOA-assisted companies, including those assisted by the banks.

So, my colleagues, you have my view of ACOA and our progress in the last year. Essentially, by focusing on entrepreneurship, trade, innovation and technology; by recognizing the inherent strength in our cultural and our social diversity; and by supporting the development of promising sectors such as tourism and by working in partnership with others in the public and the private sector, we are building a strong Atlantic Canada to participate in a strong Canada.

[Translation]

In the years to come, ACOA will continue to promote the creation and expansion of small-and medium-sized companies, help create jobs throughout the entire region and streamline and simplify procedures to obtain... [Editor's note: Inaudible] business, capital and investment.

[English]

I am very proud to sit here in front of you with my officials and say that ACOA has made and continues to make such a positive difference in the performance and the productivity of the Atlantic economy.

Thank you, my colleagues.

[Translation]

Thank you.

[English]

The Vice-Chairman (Mr. Eugène Bellemare): Thank you very much, Minister.

I must observe that your French has improved a great deal from last time.

[Translation]

Mr. Fred Mifflin: At your insistence, Mr. Chairman.

The Vice-Chairman (Mr. Eugène Bellemare): We will now begin questions. Mr. Jaffer.

Mr. Rahim Jaffer: Thank you very much.

• 1650

[English]

My question regarding ACOA is in light of what we recently discussed in the House—I believe it was on Monday—on the whole shipbuilding industry, which is something I think would definitely be of interest to ACOA. I recall the minister pretty much saying during the debate that he doesn't feel anything can be done for the shipbuilding industry. When you look, you see that in some cases in Atlantic Canada the capacity of the shipbuilding industry is as low as 2%.

My question to you specifically is, does ACOA have a plan to look at the shipbuilding industry a little more closely or see what it can do to foster growth? There were many suggestions being made during the course of the debate, a few of them being subsidies, tax cuts, trade liberalization and fairness, tariffs, and R and D tax credits. I'm curious as to whether you and the ACOA program have an actual plan in place for shipbuilding, unlike the minister.

Mr. Fred Mifflin: First of all, Mr. Chairman, if I may, I don't accept that the Minister of Industry—I presume you're referring to the Minister of Industry—doesn't have a plan in place, and I'm not going to consume your time by talking about the export development and the loan for foreign shipping. I presume you're aware of what the present policy is.

Let me tell you what ACOA is doing in that regard. You can start in many places, but I suppose more recently my colleague, Madam Bradshaw, the regional minister for New Brunswick, has taken under contract a Mr. Gaudet, Ted Gaudet, who is a consultant, and she has asked him to look into this particular sector. I've met with Madam Bradshaw and I've agreed to assist the fact-finding to see where we are. I think from the ACOA viewpoint—and I think this is consistent with everything the Minister of Industry has said—we need to take stock on where we are. The shipbuilding organizations in the world...I think a lot of people are aware that there are large shipbuilding organizations. I remember reading something in the National Post, I think about three or four weeks ago, that talked about the layout of vast numbers in Scotland and Norway.

So I think what we need to do, from my perspective as the minister responsible for economic development in Atlantic Canada, is take stock on where we are and to present the situation with respect to the prospects of this being an economic development factor. It's something I can't restrict to Atlantic Canada, because I think it's Canada-wide. With my background in marine industry and in the navy, I'm very much aware of the success of these programs in the past, but I'm also very much aware of the diminished demand for ships, both merchant ships and warships. This is my impression—and these are the facts that we're going to gather—of the apparent downturn in this industry.

But I think my brief answer, if I could summarize, is that ACOA will help Mr. Gaudet, the consultant, take stock of where we are, and leave this as a backdrop against maybe further discussions in this sector.

The Vice-Chairman (Mr. Eugène Bellemare): Last question.

Mr. Rahim Jaffer: Yes. It's the last question I have. It's a more general question, and I appreciate your identifying the issue of demand when it comes to the shipbuilding industry.

I know one of the things that in general...when you look at regional development programs, and especially ACOA, there's been much criticism in the past of basically regional development programs creating almost a false sense of hope for many people by not creating sustainable growth but unfortunately looking at ways to look at high-risk projects that give people a false sense of hope. I think DEVCO is a perfect example of that, in the case where over $1 billion of Canadian taxpayers' money went into a mine; people had great hopes, and unfortunately that didn't materialize.

I'm curious, when you look at—I appreciate your identifying both the successes and the failures, because I think that's important—trying to create an economy based on demand, based on economic principles, do you see that many of the regional development programs, and especially ACOA, almost work in reverse of that in creating false economies, a false sense of hope, and in the end, unfortunately, not sustainable growth as we would like?

Mr. Fred Mifflin: I think you know what my answer is going to be to that. But let me say first and foremost that, no, as I stated in my opening remarks, I firmly believe—and I believed it even in the days when I was in opposition—that ACOA has been a great engine of growth for Atlantic Canada. I do appreciate the point you're making, and those who are against economic development make the point that people would be better off without it. I don't get much satisfaction in Atlantic Canada for that argument, quite frankly, and I'll tell you why.

• 1655

I've thrown out figures. They've come from a reliable source. We haven't generated them. I grew up in a small town when you could sit in your window on Sunday and look at somebody going by, and I remember my grandfather saying, “That man has a job.” I represent a region, quite frankly, where a job is a status symbol. Anybody who has a full-time job, and I'm talking about a teller at a bank, or somebody who's the manager of a general store.... And in the town that I grew up in, like many of the towns in Atlantic Canada, there aren't many people who have full-time jobs. It's a status symbol. If one job is a status symbol, and you can look out the window and say, “That man has a job”, you can imagine what 13,000 jobs in Atlantic Canada means.

There may be downsides, but to me, that's a big upside. Would people do better without it? No. The other thing is that of course I have a charter that tells me I have to do this. It's the 1982 Constitution that gives the raison d'être for the ACOAs of the world and the other economic developments, so constitutionally I'm very secure in this. But practically, I believe—and I firmly believe—I'm not saying it because I represent an agency that is economic development; I am passionate about economic development and I'm passionate about ACOA.

We can improve on what we're doing, and if I could be permitted a few more seconds here, I'll explain. If you take ACOA from when it was first set up in 1987, under its charter, I think the improvements that have been made have been good ones, they've been positive ones, and they have caused some pressure from the other side. I have people saying to me, why does it take so long to get ACOA grants approved? Why can't we do it faster? The reason we can't is that we are more vigilant. We want that success rate to be higher than it is right now, and a lot of the activities I do are programmed to make that happen.

The Vice-Chairman (Mr. Eugene Bellemare): Thank you, Mr. Jaffer.

Mr. Shepherd.

Mr. Alex Shepherd (Durham, Lib.): I'm fascinated by some of the problems that are occurring in Cape Breton these days with the DEVCO plant closure there. I'm wondering, what sort of programs do you have within your department, within ACOA or the Cape Breton enterprise fund, I believe it's called, to deal with that?

Mr. Fred Mifflin: Thank you. On the DEVCO file, as you know, Mr. Goodale, our colleague, is responsible for the overall file, and I could...but I would feel more comfortable if he looked at the overall situation.

Specifically, in the remediation, if I can use that term, for the future of DEVCO, amongst the moneys that are set aside, is $68 million for economic development. That's one area and I'll come back to it if I could.

The Enterprise Cape Breton Corporation was set up some time ago, basically to recognize the difficulty in one part of Atlantic Canada. It is the only specialized agency in addition to ACOA. It's a crown corporation and it has been, in my opinion, very successful. It has identified and addressed, mostly successfully, the difficulties we have had in Cape Breton. As to how much they spend a year, it's variable. Last year I think it was in the vicinity of $65 million or thereabouts.

Cape Breton, like many other parts of Atlantic Canada, is going through a very difficult period right now. I think all of us, from all sides of the House, are very sensitive not just to the economic change but to the grieving process that is going on. I can understand that because I grew up in what is arguably, and nobody has ever argued against this, the largest fishing riding in Canada, where the mainstay disappeared literally over two or three years. It wasn't just the economy, it wasn't just the fact that the main source of income was gone; it was the business of waking up in the morning for the people who fished and really had nothing to do. In many cases there was some income, because I think everybody's familiar at least with the principles of the TAGS program. So there's a great sensitivity for what is happening in Cape Breton.

• 1700

The $68 million will eventually be used to ameliorate, mollify and try to cushion the blow of the DEVCO future. Where's that now? We are consulting with the province, but it's very important that how that money is spent is a grassroots decision; the people of Cape Breton in the Sydney area will decide how they want that money to be spent, hopefully in the principle of economic diversification we are getting better at.

I hope that essentially addresses the question.

Mr. Alex Shepherd: Just to look at that process a little further, does that mean various groups within the community will sit on some kind of board, agency or consultative device to pinpoint areas where they think they could be competitive, both within a domestic economy and a world economy, and match those with the skill sets that are available in Cape Breton now, or build on some of the skill sets they'll need to be competitive?

Mr. Fred Mifflin: That's generally the idea. We haven't actually put the machinery together yet, if I can use that expression. But the principle is that it will be grassroots. The decisions will be made in Cape Breton by Cape Bretoners on how this money will be spent. As time goes by, I'm sure we will have regional input into these boards—municipal input from the grassroots level.

If I can just move on to a general principle in ACOA, we're getting better at this. We didn't do it that way before. We used to believe economic development was perhaps better if it came, not quite from the top down, but maybe from somewhere in the middle. That works, but it doesn't work as well as a community group coming up and saying “We believe these are the options you can use for economic diversification”. When I say economic development in this instance, we are looking at economic diversification, whether it's tourism information technology or whatever.

I will use one example I'm very proud of, and I know my colleague Mr. Tobin is too. In the last few years information technology in Newfoundland—and I'll stick with Newfoundland because I happen to know it—has boomed. We had a conference called Softworld '98 last September. The Prime Minister visited, and 750 people attended from something like 35 countries. I had the opportunity to spend the day there. It was fantastic.

Where I'm coming from is that we started with a not quite zero base, and as a result of this grassroots and the involvement of economic development agencies, including ACOA and other industrial research and development programs, we now have 6,500 people and somewhere in the vicinity of 220 companies. But more importantly, the growth rate of the information technology industry in Newfoundland is around 12%. Nobody would have envisaged that.

I'm not sure this overlay would work for Cape Breton, but something like it might. It isn't for me to suggest what is going to work, because that would decry the principle of grassroots. There are others in this room who have a better feel for when the time will be right, but I think in time there will be this machinery.

One model you suggested, which I think would roughly be that kind of model, would include federal, provincial, municipal and even sub-municipal community futures groups working on this problem to get a solution that would be acceptable to the people who are going to live with it.

[Translation]

The Vice-Chairman (Mr. Eugène Bellemare): Thank you, Mr. Shepherd. We will now move on to Mr. Dubé.

Mr. Antoine Dubé: Mr. Mifflin, I was here last year when you presented your report. First of all, I'd like to pay you a compliment; I think your report is better than last year's, first of all in terms of the form, and then because this year we see results.

• 1705

You can rely on a report when it is interesting and when it contains figures. A recent article in the Daily News reveals that your agency did not respond to nearly 30% of all requests for access to information. Why does your agency have one of the lowest response rates of all the government departments and agencies in Canada? I'm not necessarily casting doubt on your figures, but after the reporter did some research, he pointed out in the article that the information provided contained many errors.

Before we talk about your report, I would like you to reassure me about this access to information problem and the errors that were found.

[English]

Mr. Fred Mifflin: Thank you, Mr. Chair.

In response, I'd have to look at the specifics, but I'm certainly familiar with the articles to which you refer.

Let me start by saying I would invite all members to look at the nature....and these are not excuses, these are facts. We are involved very much in competition, in third-party disclosures. Almost 60% of the requests we get are from other businesses inquiring about other businesses. I think you were in business yourself at one time, so you can imagine the sensitivity of complying with that kind of request.

ACOA can't make that decision. We have to go to the third party and say “This is the information that is being requested. Is this okay?” I've never been personally involved in dealing with third parties, but I suspect they would say “We're not happy with this”. So this takes time. This is one of the reasons for the difficulty in complying, in the sense of time.

There are other factors as well. In the last few years—I'm looking at five years—the volume request has increased by 276% for ACOA. We can cope with that, but we've had difficulty coping with it in the time and with the compliance, which I've discussed with you.

You might find it interesting that last year we didn't have one complaint. That doesn't mean we're perfect; it means we need some work to be done. As I talked about last year, I have asked my department, my officials, to continue to cooperate with ATIP, but more in keeping with the spirit of the law, which essentially is to get back as soon as you can.

I don't know whether we will have to make special accommodations, if that's possible, in the spirit and the letter of law, but we are faced with almost a 300% increase over the last few years. We are faced with the continuing difficulty of third-party information. In addition to the number of requests increasing to close to 300%, the volume has gone from something like 30,000 pages to 100,000 pages.

We don't have a lot going for us in complying, but notwithstanding, I hope to be able to improve our performance. I've put measures into effect, and hopefully when I'm here next year we'll be able to judge the efficacy of those measures.

[Translation]

The Vice-Chairman (Mr. Eugène Bellemare): Do you have another question, Mr. Dubé?

Mr. Antoine Dubé: I have a question from my colleague from the Reform Party concerning Mr. Gaudet, who was hired by Ms. Bradshaw. I know that he used to work for your agency, and I would like to know if you know who is paying him. Is Ms. Bradshaw, the Minister of Labour, paying him? Is your agency going to be making a financial contribution to this study?

I am from Lévis, where a large shipyard is located, the Davie shipyard. So I would like this study to be national in scope. Why isn't the industry department handling this study? I have made several requests about this matter, and today, the Minister told me again that everything was fine, that there was no problem and that his policy was good. And yet, the shipyards are operating at only 40% of their capacity. You are from an Atlantic province, so I'm sure that you would like to see the government intervene and solve this very critical problem.

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[English]

Mr. Fred Mifflin: I would address your question by saying, first of all, that in my remarks I did say that this was not just an Atlantic Canada problem. It is a problem for all of Canada to look at this. Regrettably, my authority stops at the New Brunswick border, so it isn't within my authority to go beyond.

But I have said to you that we are cooperating, certainly, with Mr. Gaudet with respect to Atlantic Canada on the studies we have and the information we have, and I suppose one of the things we would look at is what is the demand for shipbuilding, what are the facts? You say they're operating at 40%. Is that what the industry supports? In a free market we have to look at that. I don't know the answer to that. I suppose if the demand were higher, the shipyards would be producing more—and I know where you're coming from. I've been in that shipyard often. It's not an easy situation

As for whether it's going to be Canada-wide, I want to start with Atlantic Canada and see where we are, and to move ahead and see what is involved. I'm optimistic that we'll be able to get the facts. I'm optimistic that we'll be able to have a dispassionate, non-political look at it, and where we go from there depends on what we find out.

[Translation]

The Vice-Chairman (Mr. Eugène Bellemare): Mr. Murray.

[English]

Mr. Ian Murray (Lanark—Carleton, Lib.): Thank you, Mr. Chairman.

Minister, it's good to have you with us.

I was struck by one of the comments you made to the effect that ACOA-assisted businesses are twice as likely to succeed as non-ACOA-assisted businesses. I'd be interested in knowing over what timeframe. But also, is that because—and I'm not suggesting this is the case, I'm asking if this is a possible reason—the banks tend to direct budding entrepreneurs to ACOA? I've often accused the banks of not really wanting to be in the business of financing small business. Are these people who have knocked on the doors of banks and been directed to ACOA, and therefore they would otherwise have been helped by banks?

It's interesting. ACOA is doing due diligence on these loans, as the banks do, so I'm interested in why ACOA's due diligence would be that much better, say, than the bank's, if that's a fair comment.

Mr. Fred Mifflin: Thank you very much, Mr. Chairman.

I don't want to go around blaming the banks, but I tried to make the point that we are attractive in access to capital in more risky ventures. In some cases I'm supposing that a prospective client may have gone to the bank, and the bank, which likes to operate within a certain margin of repayability, would have said, no, we're uncomfortable with that. I believe this is when people would come to see us. I'm supposing that; I don't have evidence, but it makes a lot of sense.

You ask whether the due diligence is related to that. I think it is, very much so, and we've improved on that in the last couple of years, specifically in the last year that I'm familiar with. We check a number of things that you would be familiar with: management expertise, project financing, where the money is coming from, where the market is, what the labour market is—and normally the labour market is not a problem, because there are lots of people out there who can do the work—the facilities, the operation, what sort of competition.

Competition is a big thing. It's very difficult to tell somebody, you have a great plan, a good business plan, and everything is looking good. The only trouble is we don't think the competition is going to help you, in the sense that we don't think you can make a go of it here because there is too much competition, or you would provide competition for areas that would be inappropriate.

Essentially, what we look at as well is what the economic benefit is to the region, because that's the business we're in. Something that we have tightened up in the last two years is, after all is said and done and after we've gone through our business plans—this and others—in due diligence, we have our account managers keep a very close eye on what's happening. We've strengthened the monitoring, and we find that has been helpful.

You asked me what period. It's just over three to four years. Now, after that, we haven't been tracking it. I would like to be able to; I'm not sure we can.

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There is an element I think of accuracy in what you say, but I think it's mostly that we get into high-risk projects, particularly in the information technology innovation, and our account managers keep a pretty close eye on the projects after they have been approved. There are other areas as well, but I think that essentially addresses your question, Mr. Chairman.

[Translation]

The Vice-Chairman (Mr. Eugène Bellemare): One last question, Mr. Murray?

[English]

Mr. Ian Murray: When you look at Atlantic Canada—and we've talked about brain drain in Canada generally—it must be a real concern in Atlantic Canada, when you look at some of the kinds of body blows that regions in Atlantic Canada have taken—Cape Breton, Newfoundland.

I would think that a big part of the problem is trying to keep optimism alive in the region, particularly for young people, to encourage corporate head hunters from the Atlantic region to look at Atlantic universities and colleges when they're doing their head hunting and keep people in the region. It strikes me that you almost need to have ACOA acting as a cheerleader for the region in a way perhaps it didn't have to before, just because I would hate to see a sense of malaise become a self-fulfilling prophecy and have people give up on large chunks of the region.

Now, I'm not really sure what my question is here. I think maybe rather than succeeding one entrepreneur at a time, perhaps there's a role for ACOA to play in the immediate and medium-term future of just trying to shore up the brain power that resides there and the opportunities that reside there and let people know there's light at the end of the tunnel. I don't know if you have any programs at all that way, but I'd be interested in knowing if there are some initiatives.

Mr. Fred Mifflin: We do. There are a number of...I'll try to keep it focused. First of all, we have been concentrating in the last few years on the business of training entrepreneurs in Atlantic Canada. It's not a well-known program and I'm really just going to try to publicize it this morning.

Consider that 110,000 students, one-quarter of the population of high school children, have courses in entrepreneurship starting in kindergarten. It's a little early to say how that's going to pay off, but we are talking about entrepreneurship in Atlantic Canada. This is what you can do in Atlantic Canada. These are the kinds of skills we need. These are the kinds of things you can do. Now, we need to match that with other things. I'm very proud of that.

The second area—we have a SEED program, a 1-800 number for young entrepreneurs. They can actually call and say, look, we want to start a business. If you go to the bank, they say come back 10 years from now. In the last two years we have granted 750 young entrepreneurs grants to start businesses. It's difficult to use names, but there is one young entrepreneur in St. John's, Newfoundland, who started a few years ago—he's not 30 yet—making handmade guitars, one at a time, and now he makes some of the best-quality guitars in the world. He has five companies and he's only 27 years old. He's a product of this system.

We do other things as well. One of the things I didn't talk about, because I didn't want to buy up a lot of time with a lot of words, is that we do a lot of market studies and research studies. You may be familiar with the KPMG studies of the last two years that basically say Atlantic Canada is a good place to do business. Last year the KPMG study looked essentially at 27 cities, including 4 that were outside of Canada and the United States, and it said that of those 27 cities, the 4 leading cities in which to do business, using I think 9 sectors and 10 criteria, were St. John's, Newfoundland; Moncton, New Brunswick; Charlottetown; and Halifax.

This year the study has gone wider and it's gone to the G-7 countries. We have included 42 cities. St. John's is number two by half a point, Sherbrooke being number one.

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So those are the kinds of things we make sure people are aware of. Then we try to match young entrepreneurs with the grassroots economic development programs. They are, if I can use that term, a focus, a target for us, because we want to keep them there. Now, that's long-term. When we'll be able to measure the effectiveness, I don't know.

[Translation]

The Vice-Chairman (Mr. Eugène Bellemare): Thank you, Mr. Murray.

Mr. Mancini.

[English]

Mr. Peter Mancini (Sydney—Victoria, NDP): Thank you, Mr. Chairman.

I'm glad to hear the concerns raised about Cape Breton around the table, and I want to start by saying, Minister, I'm a supporter of ACOA and particularly a supporter of the Enterprise Cape Breton Corporation. I see first-hand the work they do in my community.

That being said, I would make one suggestion about your report, and it is that when it's prepared perhaps Cape Breton would have its own section. I say that only because when one reads the statistics for Nova Scotia they don't reflect I think the reality of the other economy in Nova Scotia, which is the Cape Breton economy. I look at the reduction of unemployment to 10.7% compared to 12.2% in 1997, which is true for mainland Nova Scotia, and in fact it's considerably lower, but if we look at the Cape Breton portion of the province the unemployment rate is 20% and has remained constant in that range, within 2% or 3%, over the last year. I don't blame anybody for that, but I think it would give a more accurate reflection, and of the need for the Enterprise Cape Breton Corporation to particularly address the Cape Breton economy.

Having said that I support it, I do have some questions. One is about—and we've spoken about this, Minister—the divestiture of assets by Enterprise Cape Breton Corporation, particularly the Sydport Industrial Park. I would ask for an undertaking from one of your officials so that I could obtain from you—because I've been unable to obtain it, it may be my own fault—the conflict of interest guidelines for the board of directors of the Enterprise Cape Breton Corporation. Do they exist? I'm sure they must, and if they do, could I get a copy of them? Can anybody answer that for me?

Mr. Fred Mifflin: I know where you're heading with this. I'll have to check that out.

As I say, I know where you're heading with this. I'm not sure what the answer is. I know there are guidelines and I know they have been used. And I know in the case of Sydport, I have a statement that the conflict of interest has been addressed and the people who addressed it say it has been addressed properly. And with respect to the divestiture of assets from ECBC, that will not be an impediment.

Mr. Peter Mancini: My only question on that is...and I accept the report, I don't question the report that there hasn't been a conflict. I know all of the individuals in that, but I do think it's important that we see those conflict of interest guidelines ,because it is a crown corporation funded by taxpayers.

On the divestiture of those properties, Minister, you've received letters from the Municipality of Cape Breton requesting a delay in the divestiture of the assets pending a study by Transport Canada, and we've again had some discussion on this. After we had some discussions, I believe you received more correspondence from the corporation and other interested parties. When do we expect that divestiture to take place? Will it be delayed pending the Transport Canada study?

Mr. Fred Mifflin: Thank you, Mr. Chairman.

I think there are a number of aspects we have to look at here. It's more than a theoretical question, but technically I don't have the problem yet because the corporate plan has not yet gone through the system. I'm thinking out loud here, but there are a number of things that concern me.

You're looking at 204 hectares of good property, with a wharf and roughly 20 businesses or so there. The question that has to be asked is, who is best able to maximize the value of this very, in my mind, choice piece of real estate? Purely from the economic development side, I have to take politics out of it.

Is it the Enterprise Cape Breton Corporation? They don't have any money to do this. They're very good at economic development, but are they best geared to take Sydport and make it work better? That's what we're looking at, making it work better, and having more jobs, more business, and more economic development in the area. Or is the regional municipality best geared to do it? Or are a group of business people, who after all are in the business of business, best geared to do it? I have to ask myself that question, because ultimately the decision will be mine.

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I'm not sure what the Transport study is going to do. I haven't seen the parameters of it, and I'd have to look at that. I don't think the parameters of the study have been put together. If I could say so, not flippantly but from having been involved in government studies, about the only thing that is sure is that if the study says it is going to take three months, it will probably take six months. And my concern, in the final analysis, is whether it is right for me to deprive Cape Breton of six months of opportunity that would be missed and may be very important.

The other aspect—I have to mention it, and I don't know what the answer is because I have never worked with the business involved—is how long are the business people going to put their investment prospects on the line? At what point will they come to me and say forget it; this is another delay?

Now, having said that, you know the regional municipality...the media report of the vote was 19 out of 21. I think you were at the meeting. I was told that may not have been quite the case. I don't know. You can help me there.

Mr. Peter Mancini: That was the case. The vote was 19 in favour of holding off on the divestiture.

Mr. Fred Mifflin: On the other hand, if I could use this expression, I'm very sensitive.... As a Maritimer, as an Atlantic Canadian, as somebody who understands, I believe, Cape Breton—I've met with the miners, met with their families—I am very sensitive to the need to respect the views of municipalities. I don't want to say we're going to go ahead with this and I'm not going to say we're going to delay. But I think I'm going to have to balance all these factors, and when the corporate plan is approved, we need to look at what kind of study Transport is doing. Maybe the regional municipality of the Sydney area would want to look at this again, when we look at that. There's no such thing as never. I think reasonable people can look at a course of action and decide what's best.

I have only one thing in mind, Mr. Chairman, and that is the well-being of Cape Breton, and to make sure that the future of Sydport, when it is finally decided, will bring in the maximum economic development to assist Cape Breton in the shortest time possible.

The Vice-Chairman (Mr. Eugène Bellemare): Thank you, Mr. Mancini.

We now have a very short question, and the very last question, from Mr. Jaffer.

Mr. Rahim Jaffer: Thank you, Mr. Chairman.

I just want to follow up on a quick question that Mr. Murray raised when he talked about ACOA becoming a cheerleader for Atlantic Canada. I guess I'm like the next guy, I love cheerleaders myself, but I don't know whether or not it's going to work to create the economic growth that is so badly needed in Atlantic Canada.

My question, I guess, is this. You've talked about the importance of regional development programs. Recently, the industry minister said that one of the problems we have in this country is obviously the issue of tax rates. Specifically in Atlantic Canada, Canadians are punished with some of the highest tax rates in all of North America. My concern is that if we do subscribe to regional development programs, as you have, the issue of competition and sustainability is something I think we have to also address. The industry minister has said that. Would you agree that we need to look, especially in regions like Atlantic Canada, to reduce these tax rates so they can work in balance with regional development programs?

Mr. Fred Mifflin: I think this is both a provincial concern and a federal concern, and I'm going to let Mr. Martin address the overall business of taxation. I have discovered, from being a witness in front of your committee, Mr. Chairman, and not too long ago on that side of the house, that if you stick to your own knitting you always do much better.

[Translation]

The Vice-Chairman (Mr. Eugène Bellemare): Mr. Minister, I would like to thank you for your excellent presentation, your patience and the information that you have provided us with. Please also pass on our thanks to your officials.

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[English]

Before we adjourn the meeting, I'd like to remind the committee that we need a quorum tomorrow at the end of the day, because of a concurrence on the main estimates and reporting back to the House. It's absolutely essential that we have a quorum at the end of the day.

[Translation]

The meeting is adjourned.