INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 28, 1998

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[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order, pursuant to the order of reference of the House dated February 26, 1998, the main estimates for the fiscal year ending March 31, 1999, Industry, votes 1, 5, L10, L15, 20, 25, 30, 35, 40, 45, 50, 55, 60, 65, 70, 75, 80, 85, 90, 95, 100, 105, 110, 115 and 120.

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We have appearing before us today the Honourable Martin Cauchon, Secretary of State responsible for the Economic Development Agency of Canada for the regions of Quebec. With the minister, there are a number of individuals: Mr. Renaud Caron, the deputy minister; Guy McKenzie, the assistant deputy minister; Pierre Bordeleau, the director general; and Jocelyn Jacques, assistant deputy minister, strategy and liaison.

The minister has an opening statement. Hopefully everyone will listen attentively, and then we'll go to questions.

Minister, whenever you're ready.

[Translation]

The Hon. Martin Cauchon (Secretary of State (Economic Development Agency of Canada for the Regions of Quebec), Lib.): Thank you very much, Madam Chairperson.

My dear colleagues of the House of Commons, I am particularly proud to be here with you today to outline for you the role of Canada Economic Development in the province of Quebec. I would like to familiarize you with the mandate of Canada Economic Development in Quebec, which is to foster economic development, with emphasis on small and medium-sized enterprises, and facilitate the transition to the new economy.

Before I start, I would like to thank all members of the committee for their painstaking and meticulous work, which is very much appreciated by all those involved in the industry portfolio.

Before I get to the content of my presentation, I would like to introduce the members of my team: Mr. Renaud Caron, Deputy Minister of Canada Economic Development; Mr. Jocelyn Jacques, Assistant Deputy Minister, Strategy and Liaison; Mr. Guy McKenzie, Assistant Deputy Minister, Operations; Mr. Pierre Bordeleau, Director General, Resource Management; and Mr. Jean-Pierre Thibault, Director General, Communications.

[English]

Madam Chairperson, if I may, I will start with an opening statement. I am quite sorry, but it's a pretty long opening statement and will take maybe 20 or 25 minutes. Let me start, please, with the question of the name of the agency.

The last time I appeared in front of this committee, the name of the agency was FORD-Q, Federal Office for Regional Development, Quebec. Over the past few months we've changed our name to Economic Development Canada or Canada Economic Development.

In a world of brand-new economies, the marketplace is in constant evolution and is changing. The private sector also has to face new challenges. As well, the Canadian government has to proceed with a sort of evolution. And establishing a new name referring to “economy” instead of “regional” was, in our minds, the best way to make sure that people of the province of Quebec will get into what we call the “brand new economy”. And indeed when we talk about information technology, which is of prime importance today, it brings the regions of Quebec closer not only to each other but to the rest of the world.

[Translation]

Madam Chair, the mandate of Canada Economic Development is primarily to promote initiatives for economic development across Quebec, in all regions, but with emphasis, since 1995, on small and medium-sized enterprises, which we feel are by far the most active players in economic development.

We obviously provide reimbursable funds, but also use tools that enable us to enhance, create and stimulate entrepreneurship in all regions.

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Of course, we help SMEs by creating an environment that attracts investment and that enables us to help develop our economic structures, that is by investing in structural projects. The ultimate goal is clearly to promote the creation of quality businesses in keeping with the realities of the various regions. The government's ultimate aim is to create sustainable jobs.

I would like to point out that over the last few years we have worked horizontally with all the other federal departments in order to maximize the impact of our government's efforts.

Obviously, in talking about horizontal action and partnership, you first have to talk about the structure that was set up, called the industry portfolio, since the agencies are part of the Industry department. By setting up this portfolio, we have been able to target all development priorities of the government. We can also better coordinate all our policies and target the priorities of Science and Technology and the Youth Employment Strategy, which are the priority development areas of both Industry Canada and our agency.

Last year, when we appeared before you, we spoke of the new program that had been set up, the IDEA-SME. We mentioned that in order to be able to promote economic development in all regions, it was essential to be able to design programs that were constantly tailored to reality. Last year, then, we were already talking about what is now known as the ongoing adjustment process, which means that programs must evolve to adapt to changes in economic realities and regional realities.

Last fall, I went to the various regions of Quebec. To meet the needs of business, one has to listen to the people involved in business. One has to listen to what they have to say about the programs set up since 1995. You will recall that in 1995, the focus was shifted to SMEs. The IDEA-SME program was set up, but a major streamlining of programs took place. We had started with about 40 programs; to day we have two, basically, that are available to all of Quebec through our department and the Canada Economic Development Agency.

What we wanted to do, through our fall trip, was to be able to put the idea of ongoing adaptation out there and to be able to better target our activity niches. There are four areas or activity niches that we are working to develop in co-operation with the public and that were at the root of our ongoing adaptation idea. These categories relate to the continuous improvement of our services and our support for the growth of SMEs.

We also used the trip to talk about support for the development of local entrepreneurship and job creation, the strengthening of partnerships and, of course, the creation of new initiatives.

Let us talk about the first aspect, that is the continuous improvement of our services to SMEs.

[English]

Therefore, Madam Chairperson, in regard to the improvement of SME services, of course, as you know—and we mentioned it last time—we've developed a program that we call IDEA-SME. First of all, in continuing to improve our services we wanted to maintain the IDEA-SME program and three areas of activity: market development; innovation, research and development and design; entrepreneurship and business climate.

Madam Chairperson, between April 1, 1997, and March 31, 1998, the IDEA-SME program was used to support 828 projects across the province of Quebec; 200 of them involved technological innovation, 389 were market development projects and 239 were in the area of entrepreneurship and the development of business climate.

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These projects involve an overall investment of some $232 million and receive a total of about $80 million in financial support from Canada Economic Development. About 55% of it is repayable.

The IDEA-SME program has been a great success. Since it was created in 1995, this program alone has enabled some 8,500 jobs to be created or safeguarded in the regions of the province of Quebec. We wanted to maintain this momentum, and in order to ensure the best results we have made the program more flexible and reshaped it so that it truly responds to today's needs in the region.

[Translation]

With respect to the IDEA-SME program, we followed up on last fall's consultations by broadening the scope of the innovation component, so that we could in fact adjust to the needs of all regions and export markets. One of our goals was to provide support over the next three years, still through the IDEA-SME program, for about 250 projects in the area of innovation marketing.

In our opinion, an emphasis on the new economy is fundamental. In fact, this support will involve an investment of about $95 million by business. At the same time, we want to facilitate the start-up of 30 to 50 firms in technology incubators.

As a result of our fall consultations, we adjusted another component of the ongoing adaptation, the Youth Employment Strategy. Over the past few years, we have focussed on youth and we will continue to do so. We are going to develop entrepreneurship while keeping young people in their regions, not only in Quebec but across Canada, as the other agencies are doing, I imagine.

To do this, initiatives were put in place over the past year. For example, there are youth entrepreneurship centres in universities, which we will continue to develop. There are also student entrepreneur clubs in cegeps. There are over 30 of these clubs now and we want to establish about ten more over the next few years, Madam Chair.

Still on the topic of adaptation, and the follow-up from our fall trip, we expanded our export preparation tools. As you know, we have made reimbursable subsidies and various programs available to help business people compete in export markets. One might also mention the next program. We felt it was important to consult, however, especially given the government's objective of doubling exports by year 2000.

Doubling our export capacity is a challenge for Canada Economic Development. What is this challenge? It is to familiarize 200 enterprises per year over the next three years with the realities of exporting, for a total of 600 enterprises spread across all regions of Quebec.

Again through the IDEA-SME program, we intend to enable 560 market development projects to be carried out for each of the three years between 1998 and 2001. These projects will generate overall investments, we hope, of nearly $110 million.

[English]

Also, Madam Chair, talking about brand-new economies, following our consultation process of last fall we've decided to proceed with what we call now the virtual office. We have actually in the province of Quebec 13 offices across the province. Now we have one brand-new one that is a virtual office. Continuous improvement of our services and our support for the growth of SMEs extends now, as I just mentioned, to the Internet. In March 1998, Canada Economic Development set up a virtual office. This tool, accessible directly from Canada Economic Development's website, enables enterprises and the organizations that support them to communicate directly with SME advisers to access strategic information and business networks.

In addition, the virtual office has applied for financial assistance under the IDEA-SME program. Last, it allows people to send in their observations, suggestions, and opinions on programming or any other subject related to the growth of enterprises or economic development in the region directly to the Secretary of State or the adviser.

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[Translation]

We decided to play a role in helping enterprises plug into the new economy and use the Internet. I will take this opportunity to mention that we ourselves put into practice what we were recommending to the private sector: since it is important to use the Internet, we adapted to that reality by setting up a virtual office.

A new component this year is ISO certification for the Agency. I should point out that it is thanks to the tenacity of Deputy Minister Renaud Caron, who is here with me, that we succeeded in obtaining this certification. It is the first time such an initiative has been taken by a public agency the size of Canada Economic Development.

We thus have ISO 9002 certification. The head office and nine of our offices have been ISO certified. However, there's still work to do. Over the next few years, we hope that all the other offices will also obtain ISO certification. We also want Canada Economic Development to integrate a continuous improvement process, in keeping with the ISO philosophy.

The second component of our adaptation approach is to make adjustments to local entrepreneurship development and, in particular, to job creation at the local level. The tool we are using, Madam Chair, and that is found across Canada, is Community Futures Development Corporations, which have been fine-tuned this year to be more in line with the Agency's mandate but also with government priorities.

There are 54 CFDCs, as they are known, in Quebec. The network involves 900 volunteers, of whom 275 are full-time. The CFDCs manage a total of $90 million. They thus play a key economic role that is based on our programming and our vision but that is managed first and foremost by the public.

In fact, by continuing our efforts with the CFDCs, we have been able to invest over $24 million in nearly 800 projects in Quebec. These projects are expected to generate overall investments of about $132 million for Quebec communities. Translated into jobs created, the contribution of the CFDCs, with the 800 projects that I just mentioned, will total 6,500 jobs each year.

Again in order to update our programming, following consultation with business people and communities, we decided to adjust the geographic coverage of the CFDCs. Over the next year, we will analyze the map of the coverage in order to better provide our services to all regions in Quebec.

Other components have been proposed. All of them contribute to our objective of continuous improvement. Working with the public, we have created the Youth Fund with the CFDCs. This $6 million fund was announced last December. It has been a remarkable success. Over the next two years, we expect to create or maintain... The Youth Fund alone is expected to create 1,450 jobs and will be renewed.

There was also the idea of the government playing a greater role in the future through its partnerships.

[English]

Madam Chairperson, when we talk about partnership, I would now like to say a few words about the third element in the updating of our strategy, this partnership that we've created over the past two years. I cannot, of course, overemphasize the crucial economic development role played by partnerships, and this is true for enterprises, for support organizations such as research centres, and for the government as well.

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Although this may appear to be simplistic, I would say that these days no one gets very far alone. In any case, in today's new, constantly changing global society there is little room for hermits. On the contrary, we must join together and pool our resources to lead the attack of competition and of course competitiveness. Canada Economic Development has more than a hundred productive partnerships to its credit, with a variety of local, regional, and provincial organizations. We would mention that the five major financial institutions intend to make $150 million available in funding available to new economy firms, those that very likely best represent our future but often have trouble ensuring growth.

[Translation]

Focussing on partnerships is one of the priorities we have developed over the past few years, and that we are going to maintain over the next two years.

Another important component of our consultation last September was discussions with community members of special initiatives that have been launched over the past few years and that have enabled Canada Economic Development to make a specific contribution in keeping with the circumstances in a given community. Such new initiatives include the 1997-98 coastal Quebec program that was set up to respond to the groundfish crisis. The results speak for themselves. There were 61 projects, with government funding of $2.3 million and the diversification of 215 jobs. In these communities, economic diversification is a major component.

Our specific contributions and new initiatives include the program set up by the federal government after the ice storm. We were also active in the Saguenay—Lac-Saint-Jean region. The ice storm created problems for all of Quebec. We set up a $100 million program to help enterprises cover 50% of the fixed costs incurred over a period of eight days or more. I can now say, Madam Chair, that 400 enterprises benefited from government assistance and that more than 1,000 applications are still pending.

Since the labour market and the economy are evolving, departments also have to evolve. Over the past year, we set up a new form of assistance and adopted a new way of seeing things called the Regional Strategic Initiatives Program. This Program has become a major component of the Agency, enabling us to contribute to all regions, though on a more macroeconomic basis. We are fostering development with a broader vision of all the regions and using components that provide tools to help SMEs directly in a given region.

Across the various regions of Quebec, the government will target objectives, areas of activity and niches that are in line with its jurisdiction and expertise. These niches will also correspond to the realities of the regions as a whole. We will focus on those niches and work with the communities, a little like we did when we established the Federal Action Strategy for Greater Montreal, where we targeted five areas of activity and worked with all departments. Since 1996, the Canadian government has invested $1 billion in that Strategy, which has been leveraged into a total investment of over $3 billion.

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The Federal Action Strategy for Greater Montreal has been responsible for creating or maintaining some 23,000 jobs. Since our effort has been successful in the Montreal region, we would like to promote the same growth in all the regions of Quebec, especially in Montreal. In the next three years, Canada Economic Development alone would like to inject $20 to $30 million a year to help launch enterprises in niches that we have targeted. This pace of investment, in partnership with the private sector, could generate investments of $180 to $270 million.

As another example of this new way of working and this approach of staying tuned-in to all communities and being able to explain our programming well, I would like to speak very briefly of the Conferences/Info-Fairs for small and medium-sized enterprises. These conferences, which began last year, were promoted by Industry Minister John Manley and they have been a clear success. In 1997, 18,000 entrepreneurs visited the Conferences/Info-Fairs, and in 1998, eight of these events are planned to be held in Quebec alone. Four have already been held and attracted 3,200 visitors.

Another of our initiatives has been to set up an SME inventory to enable us to identify emerging trends, either social or economic, that have an impact on the regions and on small and medium-sized enterprises, so that Canada Economic Development can react rapidly.

[English]

Very briefly, Madam Chairperson, in conclusion, what we said last time was that the changing view of our department back in 1995 was really to support the SMEs, and especially the SMEs involved in the brand-new economy, the knowledge-based economy, helping SMEs in order to better develop them in the regions of the province of Quebec, but also to make sure that those SMEs will be able to have access to the global marketplace. That is to say, to be able to export.

I do believe that over the past few months we've been pretty active in focusing on those elements. Over the next two years we would just like to keep going with the same target, a target that is shared with the other members of the industry portfolio.

[Translation]

Thank you for your patience.

[English]

The Chair: Thank you very much, Minister. We appreciate those opening comments.

We'll now begin with questions from Mr. Schmidt.

I would remind all members that with shorter questions and shorter answers we'll ensure everyone has adequate time.

Mr. Schmidt.

Mr. Werner Schmidt (Kelowna, Ref.): Thank you, Madam Chair.

The whole concept behind the regional economic development process is one of, in your words, to develop in particular small-business enterprises. I'm wondering, when the government intervenes in the marketplace.... And I'm not sure whether you used the word “intervention”in the same way that other people would use the term, but are you not, by intervening in the marketplace, actually determining who wins and who loses? And ought that to be the role of government to decide, yes, you win, you get money, you can do something, but you, no, I'm sorry, you can't play because there isn't enough money? How do you answer that?

Mr. Martin Cauchon: The question is pretty well put, and this is one of our concerns, actually, with Economic Development Canada in the province of Quebec.

Obviously the Canadian government, back in 1993, decided to reform the involvement of the Canadian government in the economy, especially with SMEs. And as government we've decided to focus mostly with the knowledge-based economy, which is a brand-new one.

I do believe sincerely, Madam Chairperson, that those corporations involved in high-technology and the knowledge-based economy really need government help in order to be able to better develop themselves, but also in order to be able to compete within the international market. The competition in those fields is quite strong, and I think government should keep supporting those enterprises, but of course there are other areas of our economy in which the Canadian government has to be very supportive too.

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That's why in Economic Development Canada we have 13 offices across the province of Quebec. Those offices have the responsibility to develop their own business plan. We believe and we know that innovation in the city of Montreal hasn't the same meaning as innovation in the Gaspé area, for example. The sense of innovation or the will of having innovation in the Gaspé area is simply not there because the economic net of the Gaspé area is not the same. We have to respect the reality and the forces of all the regions, so the percentage is pretty well put.

As for ourselves, of course we're getting involved mostly with SMEs regarding the knowledge-based industry, but a lot of involvement of the Canadian government through the agency is with traditional industry.

For example, two weeks ago I was in Rivière-du-Loup for what we call an info fair, and I chatted there with people of the business community who received help from the agency. One of them was involved in beauty products that are made with components from the sea. It's amazing to be able to develop such a nice product, which is pretty high-tech actually in its components, and with that product they will be able to compete not only in the national marketplace but in the international marketplace as well. That involvement is there in order to meet your concerns.

Mr. Werner Schmidt: The concentration seems to be on SMEs, and yet I notice on page 19 of the English notes that you refer to many projects with support in promising sectors. You name here Bombardier, Canadair, CAE Electronics, and Pratt & Whitney. These are not exactly small-business enterprises. These are pretty big organizations. In fact they have hundreds of millions of dollars in net profit for one company alone. Surely that's not an SME, and yet given the context of your paper, you have been contributing money to those projects. Is that true?

Mr. Martin Cauchon: The question here is interesting, because we're not talking about what we call the Montreal strategy, actually. We've made our position quite clear when it comes time to talk about Montreal. Not only one department will be in charge of Montreal, but the Canadian government as a whole will be in charge of the area of Montreal.

When you talk about Bombardier and all those big corporations, the involvement of our government has been made possible through Technology Partnerships Canada, which is a repayable fund, as you know. Our involvement in the Montreal area is basically through SMEs because this is our goal. This is part of my mandate. If it's not with SMEs or within one of the acts we've decided to target, it is mostly with research centres that are there in order to assist SMEs.

Mr. Werner Schmidt: I'm really puzzled. I get two kinds of messages, it seems to me. They seem to be either complementary or contradictory, I'm not sure. It depends on what you're trying to achieve.

On the one hand you seem to be talking about the Economic Development Agency of Canada, which is the big umbrella to develop all of Canada and could include the coordination of TPC, the innovation funds, the infrastructure program, and all of these other things. That would be one kind of thing. As the Quebec settlement, are you really putting all of these together under one, like Community Futures and so on? Is that all your area, or are you separating these out and letting the Minister of Industry decide in those areas? Which is going on here?

Mr. Martin Cauchon: I think the position is quite clear, actually. When you talk about Economic Development Canada, it's a regional agency, because our mandate is there just for the province of Quebec as far as we are concerned.

You talk about Technology Partnerships Canada, you talk about le Conseil national de recherches, you talk about being involved with SMEs with our own program. We decided back in 1995 to have one-door access for the SME. People in the field, when they want to know exactly what's available for an SME, no matter which sector they're working on, whether it's in traditional industry or high technology, they will knock, first of all, at one door. Of course most of the people are coming over to our offices. And then after, if the demand falls within our mandate, we're taking care of the demand. If the demand falls within the mandate of Industry Canada, which is John Manley's, we're just referring the demand.

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Sometimes we will manage to take care of the file and help the people, because our aim and goal, first of all, is to give very good services to people from SMEs, people in the field. But when it's not part of our mandate, we just refer it to the ministry involved and concerned.

The Chair: Thank you very much, Mr. Schmidt.

Madam Jennings, please.

[Translation]

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you very much, Minister. That was very interesting. I would also like to thank you for Canada Economic Development's assistance for the Lachine canal revitalization project, a large part of which is in my riding. That project will certainly stimulate local economic development.

As you know, my riding was hit hard, as was yours, by the ice storm. The storm affected not only SMEs, but also self-employed workers. What is Canada Economic Development doing to help those people?

Mr. Martin Cauchon: First of all, when we decided to provide assistance after the ice storm that hit Quebec, we did so at the request of the business community, following long consultation and after we pressed for a partnership with the Quebec government, which unfortunately did not happen.

Given the insistence of the business community, the need and the specific assistance involved, we responded and met their request by helping with fixed costs, depending on their needs. We also set up the assistance program to rebuild in regions that were affected. The program is a bold step since, for the first time, a government is covering fixed costs and working with retail stores and the whole industry. The program is also very innovative in that it is being analyzed and delivered by the accountants who are members of professional bodies in Quebec. Working through the accountants' association gives us one-stop shopping.

We set up this program, Ms. Jennings, with the public in order to meet its real needs. We have carried out regular monitoring. As you know, we met with people and first focussed on retail businesses. As you touched on in your question, we also provide assistance to self-employed workers, who are also covered.

Moreover, in recent meetings and in my numerous visits to the various regions that were affected, people have asked us to take into account other aspects. We are being asked to cover professionals. The program already covers them with respect to the commercial component and in an overall way, as I discussed with my Ontario colleagues.

Ms. Marlene Jennings: Thank you.

The Chair: This will be your last question, Ms. Jennings.

Ms. Marlene Jennings: Yes, Madam Chair. You talked about the real added value that the Canadian government wants to bring to the regions. I have taken business courses and I know about the concept of added value. I would like you to tell us more about what real added value the Canadian government can bring to the economic development of the regions.

Mr. Martin Cauchon: There are a number of examples. The first is no doubt the express networks that have been created through a partnership with a group of business leaders to help people gain very quick access to all Canadian government services.

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A second example would be our 13 offices, where you can meet with people and have access to a great deal of information through the Internet. Once need only think of the Strategis commercial site, which represents true added value.

We can also take the example of a company in the Gaspé region that wants to export and that comes to see us. We can set up a program called NEXPRO, the new exporters program. We teach the company about exporting and then, at Canada Economic Development, we help the company learn about how the international market works. The company gets to know about the network of consulates and embassies around the world, and then we facilitate contact with the embassies in the countries the company wishes to visit and export to. We can provide a great many services. That is important.

Your question is an excellent one, and you say that you knew about added value. Formerly, regional economic development was thought of as meaning only financial assistance or—if you will allow me—pocket money. Now, the government increasingly offers assistance, expertise, partnerships and a window on the world. There are a great many ways in which we can play a role. An obvious example is the Canadian Technology Network, which was set up in co- operation with our partners.

I can give you another wonderful example: the Info- Entrepreneurs Network or the Business Development Centre. We established two of these in Quebec and two in Ontario, if I remember rightly. It is really a sort of one-stop shop for frontline services. All this translates into added value for the SME.

The Chair: Thank you.

Mr. Dubé, please.

[English]

Perhaps I could remind everyone to ask shorter questions and give shorter answers. We only have until 4.30 with the minister.

[Translation]

Mr. Antoine Dubé (Lévis, BQ): Madam Chair, before asking three or four short questions, I'd like to make a comment. First of all I'd like to greet Mr. Cauchon.

Listening to him, you would think that everything is going well. But if you look at page 12 of the department's internal performance report, to which we have access, you see that the situation in Quebec is not at all rosy. It's terrible: in 1996-97, economic growth in Quebec was worse than anywhere else except for the Atlantic region; growth in terms of jobs amounted to only 7,000 as opposed to 129,000 for Canada; the unemployment rate was 11.8% although it has gone down since, 2% higher than elsewhere. We could go on with this litany. We're also the weakest region with respect to capital investments. Why is our level of aid not proportionate? If the situation is so bad, you should increase our budget for regional development over the coming years. But the opposite is taking place, madame Chair: our level is going down from $408 million to $224 million in the year 2000-2001, that amounts to almost a 50% decrease. At the same time, administration expenditures are increasing. There is even a particular category whose numbers will be doubling. It's a fine state of affairs.

I'd like to know when there will be a response to the request for an agreement with Quebec, the agreement has been expired since 1994, that is one year after you came to power. When do you intend to follow up on this?

Reference was also made to the ice storm in your performance report. It's fine and dandy to talk about aid but according to our reports, 80% of the applications have been turned down.

You also talk about a youth strategy. There are already services provided by Quebec. Why do you not operate within the framework of the strategic agreements with the various regions of Quebec? These strategic agreements are in place. You talk about a strategy for youth and the need for targeting programs but they would be targeted by you and not necessarily in keeping with the strategic plans of the regions.

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Mr. Martin Cauchon: Madam Chair, I'd like to know first of all what the question is. My deputy minister and I have counted six of them.

Mr. Antoine Dubé: Good enough.

Mr. Martin Cauchon: Which one would you like me to answer?

Mr. Antoine Dubé: All six of them.

Mr. Martin Cauchon: All six. Well then we can start with the economic situation in Quebec.

It is a fact that over the past several years economic growth in Quebec has been slower than in the rest of Canada. At the same time, we must realize that the Quebec economy, just like the economy of Canada as a whole and that of other industrialized countries, is undergoing a transition. In the province of Quebec, this transition amounts to repositioning our economy in several key areas, the new economy, high-tech, export, all those elements.

As far as the traditional sectors are concerned, the soft sectors, they have been a little less dynamic in Quebec than in most of the other provinces.

Now that this change of direction has been made, I can tell you that for Quebec as a whole, economic growth is taking place along with the creation of jobs. I'm particularly pleased to note that the most successful sectors over the past two years, namely space, aerospace, biotechnology, geomatics and informatics have always been the priority sectors of the Canadian government. All this has gone hand in hand with an aggressive export policy. That is what we are doing with economic development in Canada and I am proud to see that the recovery noted in Montreal is taking place in the niches that we ourselves have targeted. It would be throwing in the sponge a bit too hastily to claim that this isn't working.

It's obvious that if there is no desire for any positive change but only the status quo, it's difficult to have a department as dynamic as Economic Development Canada. That is understandable.

Mr. Antoine Dubé: On page 12 of your report...

Mr. Martin Cauchon: I'd now like to refer to—I'm serious as well—Mr. Chevrette's letter. But before that I'd like to say something about the supposed actions of the Canadian government that are not in keeping with the requirements of the different regions.

Let me come back to this point and mention that most of our interventions are developed in cooperation and in partnership with local stakeholders and very often with the government of Quebec. A large number of our interventions are carried out with the government of Quebec.

As a matter of fact, we go along with I call the Bernard Landry policy. Bernard Landry, the Quebec Finance Minister, said at the time when the Canada-Quebec industry agreement was to be renewed, that he would not renew an agreement on an industry that he saw as anachronistic and even archaic. He wanted to develop his own program and thought that he could this in partnership with the Government of Canada if required. He developed his own program FAIRE, it works very well, I can assure you of that. We are regularly involved, Mr. Landry and I, in partnership projects.

Let me now return to Mr. Chevrette's letter. Would you like me to stop? I was asked a question, Madam Chair, and I could take two days giving you all the details, but I'll be brief.

In 1994, we were to contact the Government of Quebec concerning the renewal of the regional development agreement. We did of course want to renew this agreement so that there could be harmonization and joint action and so that we could work together constructively in developing all our regions.

We met with a refusal on two occasions. We then began negotiations with the Quebec government and they led to a further meeting between Mr. Chevrette and myself before Christmas. At the time, Mr. Chevrette said that he would explain to me how he saw things and at the end of March, if my memory serves me right, I received a letter from Mr. Chevrette setting out his vision. It goes without saying that his vision is very similar to a way that things have been seen in Quebec for the past 30 years. I gather that they are now in the process of putting order into the various structures existing in the province of Quebec.

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This is something we did in 1994. They set up what they refer to as CLDs that in all likelihood will not be able to become single service stops because many of the local stakeholders wish to remain autonomous and independent. But this effort in setting up CLDs did enable the Quebec government to put some order in its structures and to provide people with better access to programs.

We want to work together with Quebec for greater harmonization, increasing our interventions and maximizing our performance with the population. I should note that in the past few weeks I had the opportunity to meet Mr. Cliche and Mr. Bertrand on tourism. We work together regularly and we agree on the need to avoid politicizing the debate. We've discussed the way in which we can come to an agreement so that both governments can complement each other. That is the cause that I am defending.

The Chair: Thank you. Mr. Bellemare, please.

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): I intend to stick strictly to the subject of our meeting, contrary to others. The agenda specifies that we are dealing with the estimates. I'd like to have a general overview, ask a few questions with answers as short as possible. A yes or no would suffice.

On page 9 of your Estimates, reference is made to net program spending. By net spending, do you mean gross expenditures? What is the difference between growth expenditures and net spending in your terminology?

Mr. Martin Cauchon: What are you referring to?

Mr. Eugène Bellemare: Page 9. My question deals solely with the Estimates. That is the subject of our meeting. I'd like to limit myself to the Estimates. I'll tell you what page the item is on and I would like to have a short answer.

Mr. Martin Cauchon: I cannot answer very specific questions relating to figures.

Mr. Pierre Bordeleau (Director General, Resources Management, Economic Development Agency of Canada for the regions of Quebec): I'll attempt to give you an answer. As far as growth expenditures are concerned, generally speaking, we deduct certain income and as far as net spending is concerned, we do not make this deduction. Speaking from memory, sir, that would be the difference.

Mr. Eugène Bellemare: What bothers me is on the same page you have “net program spending”. It seems to me that spending would have been enough or growth expenditures. According to you answer, there is “less revenue” four lines down. How many times are you going to be indicating “less”?

Mr. Pierre Bordeleau: I see.

Mr. Eugène Bellemare: I don't understand you presentation in this book.

Mr. Pierre Bordeleau: This is a standard presentation for the Estimates. I'll take a look at it and discuss it with our colleagues from Treasury Board.

Mr. Eugène Bellemare: On page 16, the second paragraph notes that following a year of limited growth in 1996, the Quebec GDP should increase by nearly 3% in 1997 and 2.5% in 1998 and 1999. Were these GDP forecasts obtained from Statistics Canada? Where exactly does this information come from? Secondly, how does it compare with Ontario and the rest of Canada?

[English]

Mr. Martin Cauchon: Madam Chairperson, if I may, those questions are obviously very technical questions, so what we could do is, after the committee, the member could send his questions to the department.

[Translation]

Mr. Eugène Bellemare: No, it isn't clear enough.

[English]

Mr. Martin Cauchon: As I said, they're very technical questions, and we would like to provide the committee with the best answers possible. So if you could provide us with the questions afterward—

[Translation]

Mr. Eugène Bellemare: Madam Chair...

[English]

Mr. Martin Cauchon: —we'll send to the committee all the various answers he needs.

The Chair: Mr. Cauchon, if the officials you have with you would like to try to answer and then later reply in writing, that's fine, but we would prefer it if they would try to answer the questions. That's why we allowed you to bring the officials with you today. If this is about the estimates, we're here to discuss the technical estimates. That's why we're here today. So the officials should be able to do this.

[Translation]

Mr. Eugène Bellemare: I agree, Madam Chair. The purpose of our meeting here today is to discuss the agenda. The agenda deals essentially with the Estimates. I have the Estimates book and my questions are very specific, they are not at all technical. So I would like these specialists or officials to give me a quick yes or no answer.

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[English]

The Chair: I'm not sure. Perhaps someone can answer Mr. Bellemare's question about whether or not the statistics you're using on page 16 are coming from within your own department or from Statistics Canada.

[Translation]

Mr. Martin Cauchon: Normally in matters such as this, Statistics Canada and the Department of Finance provide the data for our analysis.

Mr. Eugène Bellemare: On page 35.

Mr. Martin Cauchon: Page 35.

Mr. Eugène Bellemare: “Goods and services”, fifth line. For the item “Purchases repair and maintenance, 1997-98”, a figure of 275 is shown. I don't know whether it is $275 million or $275,000.

Mr. Renaud Caron (Deputy Minister, Economic Development Agency of Canada for the regions of Quebec): It is $275,000, Mr. Bellemare.

Mr. Eugène Bellemare: Thousand.

Mr. Renaud Caron: If it were $275 million, it would exceed the total budget.

Mr. Eugène Bellemare: Yes.

Mr. Martin Cauchon: It would blow up the Estimates.

Mr. Eugène Bellemare: So, in 1998-1999, the figure would be $170,000 and for 1999, $157,000. Is there any reason for this estimated decrease in purchases, repair and maintenance when the general trend of the government is to contract out?

Mr. Pierre Bordeleau: Yes. This refers to the repair and maintenance of equipment. We had equipment that was in need of repair, the work was done and we do not expect to have the same requirements for the next two years. That is the explanation.

Mr. Martin Cauchon: There's perhaps an additional point to be made here. The trend is in favour of renting equipment with service and this means that after three years, we pay for the cost of the equipment less the maintenance.

Mr. Eugène Bellemare: Bravo! Let's turn now to page 37.

Mr. Martin Cauchon: So this is an instance of added value for the government.

[English]

Mr. Werner Schmidt: Keep on going; you're doing well.

[Translation]

Mr. Eugène Bellemare: On page 37 “Grants and contributions”.

Mr. Martin Cauchon: Yes.

Mr. Eugène Bellemare: I was under the impression that we were making less and less use of grants and contributions. As I understand it, contributions are accountable. I thought we were more inclined to make investment type loans, as in the case of the Bombardier airplane.

Mr. Martin Cauchon: Yes, it's a PTC.

Mr. Eugène Bellemare: Research was required and there was a window of opportunity since the government considered that investment in this technology was worthwhile and would give us a yield on our investments once the company began producing airplanes and making a profit. So this heading of grants and contributions is rather confusing since I thought the new policy was in favour of loans and investment loans.

Mr. Martin Cauchon: It is indeed the new policy. Since the new program came into effect, we now have a system of refundable contributions.

The documents, however, refer to grants and contributions. When we talk about grants, there are two elements involved. First of all, in the figures you have, there are elements relating to the former program under which grants were made, contrary to our present practice. In the case of commercial undertakings, our action is mainly in the form of refundable contributions. We also step in with non refundable contributions, in the case of not for profit organizations. An example of this is the BRI, the Biotechnology Research Institute in Montreal, it is a real asset for the business community and for the Montreal area and allows us to maintain our competitiveness. It is a not-for-profit research centre where government action takes the form of non refundable contributions. I can assure you that our policy as far as business is concerned is to provide refundable contributions.

I'd like to make another important point. For the fiscal year that has just ended, 55% of the contributions were refundable and for next year, 60% of them will be refundable. So this trend is increasing with the disappearance of the former program.

The Chair: Thank you, Mr. Bellemare. Mr. Harvey.

Mr. André Harvey (Chicoutimi, PC): I don't think we can reproach the minister with not doing his utmost to help the economic development of Quebec, particularly in the regions. I hope that he isn't harbouring any plans to run in the beautiful Saguenay—Lac-Saint-Jean region. We see him often and we're happy to do so and he has many requests to come.

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I'd also like to ask him whether the new territorial division of SADCs will include towns between 50,000 and 100,000 inhabitants. That is my first question.

Second, I'd like to ask him whether he intends to go along with what is apparently the wish of the Quebec government, and allow for the integration of the SADCs which, I might mention in passing, are very much appreciated by local intervenors, with the new provincial CLEs.

Mr. Martin Cauchon: In response with the first question, my answer is no, I do not intend to run in the Saguenay—Lac-Saint- Jean region although it is a beautiful one. The second question dealt with...

Mr. André Harvey: The SADCs.

Mr. Martin Cauchon: Yes, as part of our policy update and review, we announced that we intend to review the map of SADCs, as I mentioned in my statement.

When the SADCs were created, they came under Human Resources Development Canada. They had more of a social and community mandate. It was part of what was known as the Communities Development Program. Since all this has been transferred to Economic Development Canada, we've been trying to focus the mandate more on the mandate of Economic Development Canada with greater emphasis on SMEs.

Because of this change in direction, we were required to rethink our geographic breakdown because certain regions did not fulfill the community development program criteria. In any case, these criteria did not really mean much for us in our department. To give you a more precise answer to your question, I would say that we intend to analyze in the coming years whether we might intervene in urban areas as is now done in Montreal at the CDEC level.

Mr. André Harvey: Let me emphasize that this would be very much appreciated by the large municipalities in our region.

I have one last question. Is it reasonable to assume that the Regional Strategic Initiatives Program might result in certain development niches that have traditionally proven to be advantageous? For example, the national parks in Western Canada have definitely benefited from the federal government input as far as infrastructure is concerned.

I'd be interested in knowing, Minister, whether some thought has been given to returning to investments in capital works projects relating to tourism. It's not always easy for promoters, particularly in rural communities, as is the case for the Saguenay—St. Lawrence Park, to provide an attractive level of infrastructure as far as tourism is concerned.

I'd also like to discuss other agreements that are apparently being discussed in the very slow negotiations with the government of Quebec, including highways and research and development. I'd like to know whether there is an analysis in your department of different possibilities of intervention in these sectors which, in the past, have given interesting results.

Mr. Martin Cauchon: One of the aims of the RSI program has been to shape a policy for the large regions in keeping with their particular economic forces. As far as your region is concerned, the Saguenay—Lac-Saint-Jean area, there is no doubt that tourism will be targeted as part of the strategy.

I must be careful when I talk about tourism because in the last speech from the Throne, the government announced that there would be a withdrawal from tourism at the intra-provincial level. we are involved in promoting tourism at the international level in providing assistance for promotion of the regions or in development mega-projects with an enormous impact, such as the Mont Tremblant project.

In conjunction with David Cliche, the Quebec Minister of Tourism, we decide where we will intervene without interfering with each other. We recognize the strengths and weaknesses of each of the governments and together we attempt to form a good team for helping the tourism sector develop.

We will not intervene in capital expenditures with Economic Development Canada. That is why the Canada Development Bank does have a special tourism fund of $50 million. I'd like to stress this point, there is a common misapprehension that the CDB tourism fund is only open to tourist mega businesses when this is far from being the truth. The fund was set up to help small tourist businesses with regard to infrastructure projects.

Mr. André Harvey: It seems to me...

Mr. Martin Cauchon: That was its original intent.

Mr. André Harvey: Sir, I have one last question if the Chair allows.

[English]

The Chair: No, Mr. Harvey, you already said that was your last question when you were speaking, and you've now gone over your time. The minister was scheduled to leave at 4.30, and I would like to allow Madame Lalonde one brief question before the minister goes.

• 1635

[Translation]

Ms. Francine Lalonde (Mercier, BQ): I'd like to know, Madam Chair, if we can have the Minister come back because it is an important question.

Mr. Antoine Dubé: Besides, I only received an answer to half of my questions.

[English]

The Chair: We will do our best to try to have the minister back before the estimate time is finished. However, Madame Lalonde, we do have a pretty hectic schedule from now until the end of May. We will see what we can do; I appreciate your concerns.

As you can tell, Minister, this session could go on for probably several hours, maybe days. It has been very interesting, and we want to thank you for taking the time to be with us.

Do you have a closing comment for us?

[Translation]

Mr. Martin Cauchon: Before concluding, I would like to say that it is possible for us to deal with infrastructure as part of the RSI program but it would have to be a mega project like the Mont Tremblant one. But that is not the general trend.

Mr. André Harvey: I am always available for meetings.

Mr. Martin Cauchon: Even if it is not a mega project, it has to be something that has a significant impact on a region, something that makes it stand out.

[English]

Thank you very much for your time and your understanding of the situation. Thanks for your questions also.

Madam Chairperson, it's up to your discretion, but if I can't come back, if members have any questions, you can address your questions to the department and we'd be more than pleased to answer you.

The Chair: Okay. Thank you very much.

Mr. Martin Cauchon: Thank you very much for your time.

The Chair: I want to thank the officials for joining us as well today.

We're going to suspend the sitting for about three minutes to allow the room to clear, because we're going to be going in camera to discuss our report.

[Proceedings continue in camera]