INST Committee Meeting

Notices of Meeting include information about the subject matter to be examined by the committee and date, time and place of the meeting, as well as a list of any witnesses scheduled to appear. The Evidence is the edited and revised transcript of what is said before a committee. The Minutes of Proceedings are the official record of the business conducted by the committee at a sitting.

For an advanced search, use Publication Search tool.

If you have any questions or comments regarding the accessibility of this publication, please contact us at accessible@parl.gc.ca.

Previous day publication Next day publication

37th PARLIAMENT, 2nd SESSION

Standing Committee on Industry, Science and Technology

EVIDENCE

CONTENTS

Thursday, May 29, 2003

0930

The Chair (Mr. Walt Lastewka (St. Catharines, Lib.))

The Honourable Gerry Byrne (Minister of State (Atlantic Canada Opportunities Agency))

0935

0940

The Chair

Mr. Brian Fitzpatrick (Prince Albert, Canadian Alliance)

0945

Mr. Gerry Byrne

Mr. Brian Fitzpatrick

Mr. Gerry Byrne

0950

The Chair

Mr. Andy Savoy (Tobique—Mactaquac, Lib.)

Mr. Gerry Byrne

0955

The Chair

Mr. Andy Savoy

Mr. Gerry Byrne

The Chair

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance)

1000

Mr. Gerry Byrne

Mr. Peter Estey (Vice-President, Finance and Corporate Services, Atlantic Canada Opportunities Agency)

Mr. James Rajotte

Mr. Peter Estey

Mr. James Rajotte

Mr. Peter Estey

Mr. James Rajotte

Mr. Peter Estey

The Chair

Mr. James Rajotte

Mr. Gerry Byrne

Mr. James Rajotte

Mr. Gerry Byrne

Mr. James Rajotte

Mr. Gerry Byrne

The Chair

Mr. Gerry Byrne

1005

The Chair

Mr. James Rajotte

Mr. Gerry Byrne

Mr. James Rajotte

Mr. Gerry Byrne

Mr. James Rajotte

The Chair

Mr. Gilbert Normand (Bellechasse—Etchemins—Montmagny—L'Islet, Lib.)

1010

Mr. Gerry Byrne

The Chair

1015

Mr. Gerry Byrne

The Chair

Mr. Gilbert Normand

Mr. Gerry Byrne

The Chair

Mr. Brian Fitzpatrick

Mr. Gerry Byrne

Mr. Brian Fitzpatrick

Mr. Gerry Byrne

Mr. Brian Fitzpatrick

Mr. Gerry Byrne

Mr. Brian Fitzpatrick

The Chair

Mr. Brian Fitzpatrick

Mr. Gerry Byrne

Mr. Brian Fitzpatrick

1020

The Chair

Mr. Brian Fitzpatrick

Mr. Gerry Byrne

Mr. Brian Fitzpatrick

Mr. Gerry Byrne

Mr. Brian Fitzpatrick

The Chair

Mr. Gerry Byrne

The Chair

Mr. Brian Fitzpatrick

Mr. Gerry Byrne

Mr. Brian Fitzpatrick

The Chair

Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)

1025

Mr. Gerry Byrne

Mr. Brent St. Denis

Mr. Gerry Byrne

Mr. Brent St. Denis

Mr. Gerry Byrne

1030

Mr. Brent St. Denis

The Chair

Mr. Gerry Byrne

The Chair

Mr. Serge Marcil (Beauharnois—Salaberry, Lib.)

Mr. Peter Estey

Mr. Serge Marcil

1035

The Chair

Mr. Larry Bagnell (Yukon, Lib.)

The Chair

Mr. Peter Estey

Mr. Larry Bagnell

Mr. Peter Estey

Mr. Larry Bagnell

Mr. Peter Estey

The Chair

CANADA

Standing Committee on Industry, Science and Technology

NUMBER 048

2nd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, May 29, 2003

[Recorded by Electronic Apparatus]

¿ (0930)

[English]

The Chair (Mr. Walt Lastewka (St. Catharines, Lib.)): The order of the day is, pursuant to the order of reference of the House dated February 26, 2003, the main estimates for the fiscal year ending March 31, 2004, votes 20 and 25, under Industry.

Appearing today is the Honourable Gerry Byrne, Minister of State for the Atlantic Canada Opportunities Agency. With him will be Paul LeBlanc, vice-president of Policy and Programs, and Peter Estey, vice-president of Finance and Corporate Services.

Good morning, Minister. Welcome to the industry committee. We'll begin with your opening remarks and then we'll turn it over for questioning.

The Honourable Gerry Byrne (Minister of State (Atlantic Canada Opportunities Agency)): Thank you very much to the committee members.

I know it's 9:30. Mr. Chair, you're right off the mark, and I'm sure we'll be joined by other committee members as we go.

What I'll do is, I'll keep my opening remarks relatively brief so we can maximize the questioning time because I'm appearing before cabinet at 10:30; I have an item on the agenda. I'm going to have to leave, if that's okay with the committee, because of that commitment.

Obviously, you've read in detail the main estimates documents, including the reports on plans and priorities. I'll just re-highlight a couple of things about ACOA.

We're very proud of the fact that we bring a local perspective to local development issues, and we're committed to that principle. It's a grassroots approach, and we build on an existing network of community, provincial, and federal departments and agencies and/or other organizations.

Despite its strong entrepreneurial spirit and the growth of new and emerging sectors in the Atlantic Canadian economy, we do recognize that the region still faces some skills, innovation, and productivity gaps relative to the rest of Canada. That's why there is an Atlantic Canada Opportunities Agency, to narrow out those gaps and actually come to a point where we're at par with the rest of Canada or even out-competing with them. ACOA provides a strong federal presence in the region through an extensive rural and urban network of ACOA offices as well as through our partner offices.

In Atlantic Canada small and medium-size enterprise start-ups create up to 70% of all jobs created. I would like to strongly emphasize that in my opinion, tax cuts are not as helpful as assisting start-ups in gaining access to capital in their formation and are of little use during a firm's first five years of life, when profits are minimal. I'm anticipating some of the questions that may come from committee members will be on the role of tax cuts versus access to capital in terms of small and medium-size enterprise start-ups, and I'd be more than happy to provide you with my perspectives on that.

Last year $81.1 million in direct financial assistance in the form of interest-free, unsecured loans was provided to 500 small and medium-size enterprises in support of job creation. Then, $3.7 million in loans was provided to 357 young entrepreneurs, which resulted in the creation of 543 jobs for young entrepreneurs. That's the future backbone of our economy.

A total of 79 companies entered the export market, while approximately 510 existing exporters were provided with export readiness and skills development training.

ACOA is able to achieve an incredible return on investment for the Canadian people. Every dollar invested in ACOA results in a substantial increase in the Atlantic GDP. On average, ACOA program spending generates significant tax revenues for every dollar invested in business start-ups and expansions.

Statistics Canada shows that the five-year survival rate of ACOA-assisted start-ups is quite significantly higher than that of new businesses not receiving assistance. Job creation impacts are very substantial. Over the last five years ACOA has invested in close to 7,900 projects throughout Atlantic Canada.

Statistics Canada data says that the Atlantic unemployment rate is 2.8% lower than it would have been without ACOA activity. I'm sure some members may want to probe deeper into that, and I would be happy to do so with the assistance of Statistics Canada, because of course those are their figures.

I'd like to just remark generally about loan performance. Full repayability of ACOA assistance to commercial projects has been in effect since February of 1995. Many people still think the Atlantic Canada Opportunities Agency still provides grants to businesses for business opportunities when in fact, for the ACOA assistance that's most often provided, our priority is for fully repayable commercial paper.

It's important to note that since February of 1995 over $163 million has already been repaid to ACOA from business development program loans, money that has been reinvested in other small and medium-size enterprise start-ups and expansions. A loan portfolio of over $300 million has also been established.

¿ (0935)

In terms of export readiness, Atlantic firms have increased exports by 165% since 1993, going from $6.8 billion to over $18 billion in 2001. Exports create one out of every three jobs in the Atlantic region. Over the last five years ACOA has helped 427 small and medium-size enterprises begin exporting and provided another 1,708 companies with export readiness and skills development training.

One of the highlights, one of the priorities of ACOA, is innovation and technology development. No fewer than 47 projects were approved for funding under the first round of the $300 million Atlantic Innovation Fund, representing a federal investment of up to $150 million toward projects valued at some $360 million. That's quite a bit of leverage.

The second round of the AIF is well underway, and I expect to announce the remaining funds going toward another excellent group of leading-edge R and D projects later on in 2003. I would suspect approximately the same timing as for what occurred last year. This much-needed fund is helping to increase Atlantic Canada's capacity to carry out leading-edge R and D.

Something that is of great personal interest to me is youth and entrepreneurship education. Since 1997 ACOA has approved over 2,500 low-interest loans to young entrepreneurs, loans that have helped to create over 3,000 new jobs in businesses run by young entrepreneurs.

In terms of tourism, each dollar invested in promotional activities in the U.S. has generated almost $9 in tourism spending in Atlantic Canada through ACOA working in conjunction with our federal and provincial industry partners. That's a significant amount of money, and that's why tourism is also an important priority for the Atlantic Canada Opportunities Agency. The ACOA-sponsored Atlantic Canada tourism partnership is a consumer campaign that generated $84.6 million in U.S. visitor spending for Atlantic Canada between 2000 and 2003. That's a significant amount of investment and resources available to entrepreneurs in the Atlantic region as a result of tourism activity.

One of the strongest tools we have in community economic development is of course the strategic community investment fund. Since the $135 million SCIF program was launched in June of 2001, ACOA has approved $54 million in contributions for 147 community projects. This assistance has leveraged an additional $82 million, with total project costs estimated at $136 million. An additional $30 million will be invested in Atlantic Canada over the next several years to support community-based economic development initiatives that provide employment opportunities for individuals most affected by the cod fishery closure.

Continuing on with community economic development, which is a strategic priority for ACOA, we see that during the last fiscal year we contributed $17.6 million to the network of 41 Community Business Development Corporations in Atlantic Canada. In turn, these local CBDCs issued 1,030 loans totalling $33.3 million in support of business establishments and expansions. This in turn will help create or maintain an estimated 3,000 jobs.

I'd like to congratulate the group of community leaders from the Community Business Development Corporations who are assembling from across Canada in St. John's this weekend for their annual convention. I will be there to participate in those proceedings.

Another element of the Atlantic Canada Opportunities Agency that is not often highlighted but is incredibly valuable is the access we provide to business information. The ACOA-administered Canada Business Service Centres provide one-stop access to business information for entrepreneurs. In 2002 and 2003 these Canada Business Service Centres in Atlantic Canada helped out over 465,000 clients, a 29% increase over the previous year.

¿ (0940)

When we get into advocacy or other elements of the Atlantic Canada Opportunities Agency, you can see an organization that is incredibly vibrant, that is forward-thinking, and that is today making an incredibly positive impact on the future of Atlantic Canada. We operate, of course, in this environment with a clear set of interconnected strategic priorities, which are entrepreneurship and business skills development; trade; tourism; investment; innovation; access to capital and information; community economic development; and policy, advocacy, and coordination.

With that, Mr. Chair, I will certainly be open to questions.

Let me say on behalf of all the staff, the team at the Atlantic Canada Opportunities Agency, we are incredibly proud of the work we do in Atlantic Canada and we're looking forward to working with members of Parliament in continuing on with that process.

The Chair: Thank you very much.

Mr. Fitzpatrick.

Mr. Brian Fitzpatrick (Prince Albert, Canadian Alliance): Thank you.

Mr. Secretary, there are a lot of conflicting arguments about the proper approach to helping areas that have economic difficulty and that haven't been kept up to the mean or the average. I've come across a study that looks at success stories, and Ireland and Georgia are two examples. I could be corrected on it, but we were at two and a half times Ireland's per capita income in 1986 or something along that line. Today they have a per capita income higher than Canada's. Their unemployment rate went from something like Newfoundland's rate of 17% or 18% to 5% or 6%.

When I look at the policies that were initiated in that country--one of the candidates for leadership refers to Canada becoming a tiger like Ireland--I see they had a substantial reduction in business taxes and personal income tax rates, creating a really positive environment for private sector investment and growth. They basically got government out of the way; government was an impediment.

Another area that has a real success story is the state of Georgia. In the 1970s they had 70% of the U.S. average for income. Atlanta, Georgia, was much smaller than even Birmingham, Alabama, but Georgia today is at 12% above the American average. Atlanta, Georgia, has become one of the great economic hubs in the United States for growth, investment, job creation, and so on. My understanding is, they've basically followed the same approach Ireland has but in their own way.

Now, if I look at Atlantic Canada, we've had these regional development authorities going back, I think, to when Pierre Trudeau showed up. The argument was to narrow the gap. Well, I'm old enough to know, sir, that a lot of the gaps and problems that existed in Atlantic Canada are still with us. I would have much preferred to have the sort of results I've seen occur in Ireland or Georgia, but I don't see that in Atlantic Canada.

You talk about a lot of government programs and a lot of government spending, but I'm looking for results, and I'm not exactly sure I see any. Even some of your own people from that area, like former Premier McKenna, have acknowledged that in a lot of ways these programs aren't working. Mr. Crosbie, who helped to create ACOA, has publicly acknowledged that he has real reservations about whether it works. Candidates for leadership in parties are questioning it. In fact, I even suggest the heir apparent to the Prime Minister may be rethinking this whole approach to regional development.

What do you say to that sort of thing? Why don't we get the same results in Atlantic Canada that Ireland and Georgia have achieved?

¿ (0945)

Mr. Gerry Byrne: Thank you very much for the question.

I somewhat anticipated it would be the leadoff question. It has been something that's been kicking around as a matter of discussion and debate for the last couple of years, namely the Irish tiger, economic development, and what the best mix is.

I think what you're alluding to is that in successful areas where there's been a rapid economic turnaround, it's been based solely on tax cuts and tax cuts alone, cuts to corporate income tax. In fact, one of the leadership candidates for the PC Party, a fellow from Atlantic Canada, has indicated that he feels a complete corporate holiday for Atlantic Canada would be the solution; do away with all regional economic development investment and simply do that.

I would disagree with the premise of your statement, that there is widespread agreement to such an approach, and in fact you mention that it would be good to get Atlantic Canadians to voice their point of view; well, they have in the past and they've said that not everyone is completely comfortable.

I had an opportunity to speak with Frank McKenna myself, and the point of view you've brought forward, which you indicated was expressed by Frank McKenna, is not actually a sound paraphrase of what he said. In fact, Mr. McKenna is a strong supporter of the targeted, strategic regional economic development that occurs in Atlantic Canada. However, he's always advocating, let's put a sharp edge and a good, strong focus on it, and I think that's always been his point.

That's why I highlighted to members of the committee that this is exactly what we are doing. We're targeting innovation, targeting research development of commercial technologies in their infancy, and bringing that forward in the new age economy, and we intend, actually, to keep doing it.

We'll talk a little bit about the economic miracle of Ireland, that Irish tiger you referred to. You mention that this can be done through a competitive tax environment and--

Mr. Brian Fitzpatrick: There was more than just tax cuts.

Mr. Gerry Byrne: You're quite right when you say that, because when Ireland joined the European Union, the European Union had established structural and cohesion funds to be used as regional transfers to help those countries whose development was lagging. One of the things we know about the Irish model is that transfers to Ireland under the EU structural and cohesion funds over the period of 1994 to 1999 amounted to the equivalent of $12.2 billion Canadian.

The cohesion fund, which was valued at $2.5 billion, assists projects in the field of environment and transport infrastructure. The structural funds amounted to $9.7 billion and supported initiatives under the following priorities: the productive sector, industrial development, agriculture, forestry and rural development, fisheries, and tourism. Another sector, one $9.7 billion in economic development went into, was called economic infrastructure, which included transport infrastructure and environmental services.

Another $9.7 billion went into human resources, including the enhancement of education, skill, and training levels. And of course, there were also local, urban, and rural development initiatives that enabled local communities to increase their involvement in the development.

You know, it's interesting to note that the OECD, the Organisation for Economic Co-operation and Development, uses the ACOA model; it's been published that it uses the ACOA model as an international best practice model.

When you look at the state of Georgia, you'll also find that Georgia has very specific business incentives they use, and they're not unique to the state of Georgia. In fact, I remember being down in New York not too long ago. I was meeting with some city officials, and I was amazed to hear that the taxpayers of New York actually subsidize downtown Manhattan rents for companies in order to keep companies in the downtown core. For example, if an average rent is $90 a square foot, taxpayers from the city of New York actually subsidize businesses to the tune of approximately $30 a square foot in many cases, sometimes even more.

I think the point we take away from all of this is that while we may want to sometimes cherry-pick examples of where things have gone right and say, that's all based purely on tax cuts and that's why it happened, we have to look very inclusively as to exactly what is going on there. That's why ACOA is interested in the Irish model and in other models.

But I also highlight to you that the Atlantic Canadian provinces are now leading the country in GDP growth. Maybe that has a lot to do with ACOA as well, acting in partnership with the provincial governments and working with those entrepreneurs to create a very strong economy in those areas.

¿ (0950)

The Chair: Mr. Fitzpatrick, I will be back to you.

Mr. Savoy.

Mr. Andy Savoy (Tobique—Mactaquac, Lib.): Thank you very much, Mr. Chair.

Mr. Minister, welcome.

I'd like to speak to the AIF and to R and D for a moment. First of all, the Atlantic Innovationt Fund focuses, as we know, on research and development. I initially had questions regarding the merits of AIF and the necessity for AIF in Atlantic Canada, and one that came about was this. Atlantic Canada represents roughly 7% of the population, and in looking at Government of Canada R and D spending across Canada and per region, I saw that Atlantic Canada had been in a deficit for a long time in that regard. What I was looking for from you was, how much of a deficit did that represent?

Now here's a second slant, a second approach to the AIF. In Atlantic Canada a lot of the industries are in the resource-based sector, and in order to promote economic development--and I am a fan of value added, as I think most people around the table are--how does AIF strategically look at the issue of value adding in R and D?

So those are the two questions, basically. What is the deficit in Atlantic Canada R and D in terms of Government of Canada spending on R and D? And second, with respect to value added and a strategic approach to value added as we do the R and D, what's ACOA's approach?

Mr. Gerry Byrne: Thank you very much, Andy.

On the issue of the deficit, you're quite right, the Atlantic region does lag the rest of the country in terms of research and development funding, not only from the commercial sector but from the public sector as well. That's one of the main reasons we established the AIF, so this statistical fact does not have to be repeated.

In order to do that we have to establish a capacity, a kernel of capability, to participate as full partners in national activities but as well in research and development programs that are really structured for us domestically.

One of the reasons R and D activities lags in Atlantic Canada is because there are not as many clusters of corporate head offices located in Atlantic Canada. We know that where corporate head offices are located is often the centre for research and development activity for a particular company, whether it be a national or a multinational.

What we are also finding is that we are under-represented in the national granting councils; that's a pretty good indicator.

I'll try to answer the question as specifically as possible, but to answer it and to be fulsome about it, you have to take into account a number of different considerations and parameters. For example, in Atlantic Canada the private sector carries out less than 20% of the region's R and D while universities do in excess of 50%. In other parts of Canada that trend is actually reversed; it's the other way around.

What we know is that industry leverages 26% of its R and D funding from other sources nationally, while Atlantic firms have only been able to leverage 6% of their R and D funding this way. What we also know is that on a population basis we represent approximately 9% of the national population, but in terms of the national granting councils, our uptake of those programs is often as low as 3%, for example with NSERC. IRAP is an anomaly; we actually represent about 12% of the uptake of IRAP funding.

But generally speaking you're right. We aren't able to obtain on a per capita basis our proportional share of national granting council assistance, and that pretty well explains, Andy, why our R and D activity is occurring the way it is. We're not up to the national level, and that's why we established the Atlantic Innovation Fund, so we create that capacity and so one day--and I think sooner rather than later with the success we've had to date--we're really going to be in a situation where we won't need an AIF. Our companies, our universities, and our partnerships will be able to participate that way.

The second question you raised was, how do we create value added? That's one of the unique things about the AIF. It is local, it is Atlantic Canadian-driven, and it's driven by the needs, priorities, and imperatives of the Atlantic Canadian economy. Researchers from the region have an opportunity to develop and style projects that have a competitive advantage in the Atlantic region, whether they be resource-based or information-based.

We have an incredible pool of natural resources found in our intellectual capacity, the pronounced intelligence and wisdom of Atlantic Canadians being found across the stage not only in North America but internationally. Having a fund that allows them to leverage additional funds through the national granting councils in conjunction with the AIF means that we can target activities such as seafood and marine products for value added. We can develop the technology, commercialize it, and create extra value added, whether it be out of our seafood and marine products, our wood products, or a whole range of things.

I really want to emphasize that while we're a resource-based economy now, we're making that transition to an information-based economy, a value-added economy, whether it be in geomatics, geosciences, marine dynamics, pharmaceuticals, nutraceuticals, informatics--and I could go on.

¿ (0955)

Atlantic Canada has an incredible core of competence and market savvy when it comes to emerging technologies and emerging sectors, and you're really making a huge difference to the Atlantic Canadian economy. That extra leverage that's provided through the Atlantic Innovation Fund is really making that happen.

The Chair: You can have one short question with a short answer.

Mr. Andy Savoy: Thank you very much.

On the issue mentioned previously, tax cuts for businesses instead of loans, we were previously looking at a granting situation with ACOA--not strictly granting, but a large percentage would be granting. In terms of your present outstanding loans, let's say, how does that compare to what you have in terms of grants still out there and what has been out there in the past? What I'm basically saying is, take the present scenario of loans versus very little grants as compared to, say, the situation five years ago; what's the ratio now?

Mr. Gerry Byrne: I was just reminded by Paul that we don't do grants to businesses except for young entrepreneurs. We have about $2 million in grants to businesses, which are directed at many things such as export development.

What we have right now is, since 1995 the business development program has made over 5,000 repayable contributions and has an accumulated default rate of just 12.9%. Banks take very little risk, but we're in the risk business. Otherwise, we basically say and you could argue, ACOA would be just a bank.

Banks are of course fully secured and generally lose less than 1% per year because they are risk-averse. On an annual rate basis the BDP loses approximately 4.3%, so we are in the risk business. We invest in activities that quite often banks won't necessarily invest in, but we also partner with banks to leverage that risk to make sure entrepreneurial activity occurs.

One of the things about this is, because you mentioned tax cuts versus--

The Chair: I'm going to have to move on. I'm sure you can add what you were going to say onto another response.

Mr. Rajotte.

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance): Thank you, Mr. Chairman. Thank you, Mr. Minister, for being with us here today.

I do want to touch on a couple of statistics and get to some of the underlying bases for the statistics. Obviously, proponents of ACOA point to the job creation or job maintenance aspects of ACOA, and we hear different figures. If you could, just identify for us these two figures. Since its inception, what are the figures for the number of jobs ACOA has created and for the number of jobs ACOA has maintained?

À (1000)

Mr. Gerry Byrne: Peter, since you've been with the organization since its inception--or quite close to it--perhaps you could respond.

Mr. Peter Estey (Vice-President, Finance and Corporate Services, Atlantic Canada Opportunities Agency): The current average is a little under 12,000 jobs created and maintained per year, and that is based largely on follow-up with the individual firms to whom we have loaned money and then on periodic sampling by Statistics Canada in their longitudinal analysis of firms. We pay Statistics Canada and they do tracking on the job creation within those firms.

It might be 13,000 and it might be 11,000, but with 95% confidence statistically, 19 times out of 20 it's within that ballpark.

Mr. James Rajotte: You're saying 12,000 each year on average since 1987?

Mr. Peter Estey: Yes.

Mr. James Rajotte: Now, you're lumping together jobs created and jobs maintained in the 12,000 figure; is that correct?

Mr. Peter Estey: That's correct.

Mr. James Rajotte: This is one of the things I've asked the other ministers who have come before us. It's quite easy to state job figures. For TPC, Allan Rock says there are 38,000 jobs created.

Now, I just asked a simple question. Can you tell me where and when those jobs were created? Can you provide some substantive background information for us as a parliamentary committee overseeing the expenditure of taxpayer dollars that these companies created these jobs in these time periods so we have some reference other than a number, 12,000 on average per year? Do you have any background information you could provide to the committee that would substantiate this number?

Mr. Peter Estey: As I say, we track individual firms, and then we have statistical sampling and individual firm tracking done by Statistics Canada.

There is a technical annex to our five-year report to Parliament, which was tabled four years ago, and we'd be pleased to provide you with a copy of that. We've refined that methodology, based on input from the Auditor General. The Auditor General says we've moved the yardsticks on measuring job creation. It's an inexact science, but the Auditor General says that we've done well, that we've refined that. I'm sure the minister would be pleased to provide the committee with full technical details on the methodology.

The Chair: If you give that to the clerk, we'll have it circulated.

Mr. James Rajotte: Could you just point to, say, five companies that have created jobs or maintained jobs, ones you're especially proud of, that we can reference and source. I'm sure you have three or four or five examples.

Mr. Gerry Byrne: I don't follow the question.

Mr. James Rajotte: Can you tell us about companies that have created or maintained jobs in Atlantic Canada and that show the benefits of ACOA so the parliamentary committee can actually see that in fact ACOA has created or maintained jobs? Can you give us even one example of one company that has created or maintained jobs since 1987?

Mr. Gerry Byrne: We have Consilient Technologies and Micro Optics in Moncton, and there's Northstar Technologies. If you want, I can probably provide you with a list of more than five.

Mr. James Rajotte: Actually, I'd like the entire list; that's what I would like from each minister. If I could get an entire list with each company, the number of jobs, when and where they were created, and whether they were created or maintained, that would be excellent.

Mr. Gerry Byrne: Certainly.

The Chair: There's been some interest in the committee to understand what each of the development agencies is doing and to get examples. Some of us who travelled during the summer months would like to go and see it.

Mr. Gerry Byrne: I think the companies themselves would be extremely interested in your visit. One of the things I've noticed is that they, especially our high-tech companies in Atlantic Canada, are always looking for ambassadors for the products and services they provide. Whenever parliamentarians come and do site visits at companies and see first-hand the expertise, the technology, and the capabilities they have, it provides them with a great deal of confidence that they have ambassadors who will go forward and assist them in marketing their products.

À (1005)

The Chair: Mr. Rajotte.

Mr. James Rajotte: I appreciate that and I look forward to that information.

The second point I want to touch on is the annual write-offs each year by ACOA. It was in response to an order paper question I did, and it breaks it down by province. Again, if we could just get some more information, that's what we're seeking.

The basic question is, what are the top 50 annual write-offs for each body or program for all the regional agencies since 1993? I can provide this document for you or you can look at Order Paper question 184, section e. For instance, if you take the year 2000-2001 for New Brunswick, it was about $14 million; Newfoundland, over $3 million; Nova Scotia, over $10 million; and it was zero for Prince Edward Island.

Can you just provide details or maybe have details provided to the committee on what it is exactly you are writing off. You say you don't do loans to companies--

Mr. Gerry Byrne: We do make loans to companies. We don't make non-repayable contributions.

Mr. James Rajotte: You don't do non-repayable, so these are repayable contributions that are being written off.

Now, there's no public accounts information for the last fiscal year, but could you provide even for 2001-02 information as to which companies' loans are being written off and what the reasons for this are.

Mr. Gerry Byrne: I don't think that would be a problem at all, and we can supply it to the clerk. I beg the indulgence of the committee; although I don't think we have that information readily at hand, I don't think it will take very much to put it together fairly quickly.

I wonder if it's on the website. We put a lot of this information there, a lot of our statistical profiles, and in terms of full accountability, our website is actually quite fulsome in terms of the information it provides about the Atlantic Canada Opportunities Agency, the repayability, and the whole program generally speaking.

But we will capture that specific data and provide it to the committee.

Mr. James Rajotte: Thank you.

The Chair: Monsieur Normand.

Mr. Gilbert Normand (Bellechasse—Etchemins—Montmagny—L'Islet, Lib.): Monsieur le ministre, are we speaking French? We can if you want.

I am very surprised that you have nothing targeted except tourists.

[Translation]

I notice that for the three year period covered in your forecast, we find nothing but generalities. No particular sector seems to have been targeted. At a time when almost all the fishermen of the Atlantic provinces are grounded of necessity, I see nothing that targets any particular sector. I was thinking, amongst other things, of the fishermen.

We should bear in mind that fishermen are hunters. A hundred years ago, in the West, you had five million head of buffalo. Today, there are 10 million head of cattle. The people out there were hunters. They became cowboys and are now farmers. You cannot take a fisherman and turn him into a computer specialist overnight.

In the Atlantic provinces, aquaculture is where you have the greatest number of opportunities. I believe that you should set up a specific program in order to develop marine products. Whether it is an aquaculture program or some other kind of program that would enable all the people who used to go out to sea to develop normal and scientific activities in connection with that.

Do not rely on the Department of Fisheries and Oceans.

[English]

This is the worst administration in all the government.

À (1010)

[Translation]

When I became Secretary of State in 1997, of the 9,000 people working for DPO, only six worked in aquaculture. Il you rely on the Department to develop aquaculture, you will simply be wasting your time. The people of DPO are policemen, not developers. That is why I would urge you to target some innovative sectors in your development program.

Wind generators is another field which offers numerous opportunities. In my riding you will find people who go Prince Edward Island to test wind generators.

I am very surprised to see that your development program offers nothing but generalities. You have not targeted any sector of activity likely to create interesting development opportunities adapted to the needs of the people in the various provinces of the Atlantic region.

[English]

Mr. Gerry Byrne: I think your comments, albeit somewhat provocative, are probably very true.

I know your own expertise in and commitment to aquaculture in Canada and the service you've provided to the aquaculture industry have been absolutely unprecedented and very successful in highlighting the opportunities this industry holds not only for Atlantic Canada but for all of Canada.

Aquaculture is a very diverse field. We do invest heavily in aquaculture. In fact, stakeholders in the Atlantic region feel as though the Atlantic Canada Opportunities Agency is really the organization that takes their industry most to heart and understands not only its growing pains but also its incredible opportunities.

Gilbert, in the plans and priorities document we don't specify exactly which industry sectors we're targeting or investing in although we do have programs of somewhat general application that are very much applicable to aquaculture and to wind production, for example. While I'll say we don't target specific funding amounts to specific industry sectors, that doesn't mean we're not very much in tune with those emerging technologies or are not ready and willing to respond and adapt to them.

We have provided significant investments in aquaculture, and this is paying huge dividends. We have invested in wind power technology in Atlantic Canada; that's a high-risk initiative. It's something that hasn't fully proven out in terms of its current commercial context, but we're very confident it will. With the hard work of entrepreneurs, people on the ground, and with collaboration across the country on wind generation and wind technology and hybrid systems in particular as the technology relates to rural communities, we really have a great opportunity there.

Other fields in Atlantic Canada that show incredible promise include, as I stated earlier, geomatics and marine technologies. These are things we have a natural, inherent competitive advantage in. That's why the Atlantic Innovation Fund, for example, is there. It's able to provide support on a wide spectrum of industry sectors. But also we have the business development program, which supports commercial and non-commercial activities, industry sectors, industry organizations--which are proponents of this--but as well, through the loan portfolio, specific commercial initiatives as well.

So your questioning is right on the money. Do we need to go forward into the future by targeting specific sectors? I think we do, but we also have to keep our minds open and our eyes open to new and emerging initiatives.

Aquaculture, in my opinion, is something in which I would love to have the Atlantic Canada Opportunities Agency take an even stronger role in terms of coordination of those types of activities for Atlantic Canada because it would be quite valuable.

You mentioned seafood marketing, and Agriculture Canada currently has the lead role in seafood marketing across the country.

The Chair: We will have to go to the next question because if we don't, well, your answers are a bit too long--

À (1015)

Mr. Gerry Byrne: I could talk about aquaculture all day, Mr. Chair.

The Chair: We understand that, but we are pressed for time. I would ask that the question be direct and that the answer be direct, or I'm going to have to stop one or both of you.

Mr. Gilbert Normand: As you know, the resource program in DFO for aquaculture will finish this year, a program of three years and $72 million. AquaNet is in St. John's along with 17 universities across the country. We would be very satisfied if we could see something specifically in this area inside your program. As I said before, you have to inform fishermen and educate fishermen. You must keep these people in their field of activities. You cannot change the minds and the social customs of these people.

That is my comment.

Mr. Gerry Byrne: One closing comment about that is that you're very right to target aquaculture. As wild fisheries collapse across the face of this planet, aquaculture will take a more dominant role in terms of protein production. Currently the Atlantic Canada Opportunities Agency has about 5.5% of all of its BDP contracts targeted directly at aquaculture, and we can see that actually growing in the future.

The Chair: Thank you very much.

Mr. Fitzpatrick.

Mr. Brian Fitzpatrick: I'm going to try to ask specific questions, and if I could have specific answers, that would be appreciated.

I've been given to understand the pulp and paper industry has an overcapacity problem, and plants are reducing their capacity or in some cases even closing. I understand New Brunswick has a fair involvement in the pulp and paper industry. Are you aware of any difficulties in the pulp and paper industry in New Brunswick? And if you are, could you describe what those problems are.

Mr. Gerry Byrne: I'm generally aware. I have a large pulp and paper mill in my hometown of Corner Brook, Newfoundland, so I'm very aware of the pulp and paper industry. The strength of the Canadian dollar is providing some challenges of late, there are some capacity issues, and there are also technology and modernization issues.

Mr. Brian Fitzpatrick: Are you aware of any reductions or closures in New Brunswick or of any possible announcements on that?

Mr. Gerry Byrne: I'm not aware of any, no, and nobody has communicated to me about any possible closures.

Mr. Brian Fitzpatrick: Given that environment, it wouldn't be good policy for the government to be subsidizing the opening of new pulp and paper mills or reopening pulp and paper mills that have been closed down and getting them started. Would you think that would be a good policy?

Mr. Gerry Byrne: I'm not sure if I can answer a hypothetical question because--

Mr. Brian Fitzpatrick: Well, it's not going to be hypothetical.

The Chair: Could you be specific.

Mr. Brian Fitzpatrick: That's exactly what's happened with your counterpart for the Quebec regions in the Chandler, Quebec, area. We have a pulp and paper mill that's been give $80 million in grants, contributions, non-repayable contributions, conditional repayable contributions, or whatever you want to call them, but that plant has reopened.

I have a pulp and paper mill in my riding too, and I'm concerned about jobs there. Isn't the government going against the grain by subsidizing the opening of pulp and paper plants when the industry is having problems?

Mr. Gerry Byrne: Well, I think all agencies across the government are always concerned about competitive impacts on existing operators and on existing establishments in the industry at large, and they take that into consideration before any decision is made. I'm not aware of any negative impacts that have occurred as a result of the example in New Brunswick you've provided. I guess the best indication I have is that I'm not aware of any closures or any reductions.

Mr. Brian Fitzpatrick: Just for information, an industry official told me that he figured there was 20% overcapacity in North America in the pulp and paper sector. To me that means they're going to downsize the sector to meet the demand requirements, and to me it just seems rather strange, if that's the environment we have, that government is in the business of trying to increase the supply of pulp and paper at the same time.

À (1020)

The Chair: Let's try to be specific to ACOA.

Mr. Fitzpatrick, maybe you want to ask another direct question.

Mr. Brian Fitzpatrick: With respect to the job fairs Mr. Rajotte referred to, I calculate that over the 14-year period there were something like 150,000 to 160,000 jobs involved if there were 12,000 a year. I understand that about half of those jobs were from maintaining existing jobs, so if you strip away existing jobs that are being maintained, the real job creation figure is actually only half of the figure you're talking about. Maintaining jobs isn't creating new jobs--unless I'm missing something in the English language--so those figures should really be sliced approximately in half.

Mr. Gerry Byrne: A job that provides a benefit to the local economy is of course what's important. One of the things we take into consideration in labelling or describing a job as being maintained is our own analysis that without the assistance the job would be lost. In other words, the activity that would produce the job itself could not be conducted and maintained within the region. I think that's fairly valuable to the economy.

Mr. Brian Fitzpatrick: I understand that. My only point was, when you say it's a new job, I disagree with you; it's not a new job. You haven't created a new job. I understand what you're saying about maintaining it, but I'm saying we're playing games with the truth when you describe those figures as reflecting new job creation.

Mr. Gerry Byrne: No, I wouldn't agree with your categorization that we're playing games with the truth. It's fairly clear that when you maintain a job that would normally have been lost, one that in all proper assessment would not otherwise exist today, that's an incredibly valuable component of the economy and production.

Mr. Brian Fitzpatrick: I'm not disagreeing with that. My only point, sir, is that when you describe that as creating a new job, that is not a correct description of the scenario; it's maintaining an existing job. When I read some figure saying we've created all these new jobs and you lump maintaining jobs into those figures, there's something wrong with that message.

The Chair: Many times when we get information, we want to make sure that we understand what is new and what is maintained and that we're not on the slippery slope between the two. I think that was Mr. Fitzpatrick's request.

Mr. Gerry Byrne: Mr. Chair, we're only discussing the distinction between the two because the records we maintain actually hold the distinction. We separate “maintained” versus “new”, and that's why we're actually able to provide you with that information. We do make that distinction.

The Chair: Do you have another short question, one right to the point?

Mr. Brian Fitzpatrick: I just have one further question on this. I do have a report by an economist here who has done a study on the region. He says that over ACOA's 14-year period the region has lagged behind the rest of the country in terms of economic growth by 5% and that its job creation rate is 20% lower than the national average. Now, those are his findings, and there are other people who have taken this point of view as well.

I'm just throwing it out. You throw out all these numbers, you have your arguments, and you have your Stats Canada figures, but there are other people who are in serious disagreement with your conclusions.

Mr. Gerry Byrne: Well, one of the things this administration can be exceptionally proud of is that we've made some significant changes to the Atlantic Canada Opportunities Agency portfolio in programs and services. Since coming into office we've directed them at specific activities and put a sharp focus, a sharp edge, to what it is we do.

In fact, that same economist, I'm sure, would agree that Atlantic Canada's economy has outperformed the country's in recent years. In fact, Statistics Canada says of my own home province of Newfoundland and Labrador that we're going to experience over a 13.5% growth rate. That's quite something.

Mr. Brian Fitzpatrick: I hope you can sustain that for 15 to 20 years.

The Chair: Thank you very much.

Mr. St. Denis.

Mr. Brent St. Denis (Algoma—Manitoulin, Lib.): Thank you, Mr. Chair. Thank you, Mr. Minister, for being here with your officials.

As you know, I represent a riding in northern Ontario. We are served there by your organization FedNor, and they do a great job, as does your organization in Atlantic Canada.

One of the things that's of continuing interest for us is the rollout of broadband. Northern Ontario is very much like Atlantic Canada. It has its vast regions like Labrador, and it has its rural areas close to cities such as what you can see around Sudbury and Sault Ste. Marie. But distance matters.

I believe your agency was the lead agency in delivering broadband to Atlantic Canada. I'm wondering if you could share with us any experiences from your region that might have some relevance for us in northern Ontario, because we do need to learn from each other. I'm wondering if you have any thoughts on broadband.

À (1025)

Mr. Gerry Byrne: No, the Atlantic Canada Opportunities Agency is not the lead agency in terms of the implementation of broadband. That's Industry Canada, through partnerships in the broadband pilot program for rural and northern development. But ACOA does take advantage of opportunities for broadband development because of the importance it has in many instances for giving rural or remote communities access to modern, state-of-the-art information technology infrastructure.

To augment the rural broadband pilot program, ACOA often partners with communities that have been successful applicants. We assist the smart communities initiative and are continuous advocates of developing broadband throughout not just urban Canada but rural Canada as well so we can all become equal partners in the opportunities it creates. We'll keep our eye on it, and wherever we can assist to keep this technology rolling out and to have it accessible to all Canadians, we'll certainly do so.

Mr. Brent St. Denis: Thank you.

Continuing again with a comparison, I know in Ontario, in northern Ontario in particular, there is a network of local Community Futures or Community Business Development Corporations. I believe that pattern is replicated throughout Canada as well.

We depend greatly on local volunteers to make up the boards of directors of these small, local secretariats or economic development agencies, which receive through FedNor or ACOA, I assume, Industry Canada moneys. I know how important the volunteers have been to these boards in the smaller regions in bringing to the table a knowledge of the area, knowledge an official in Toronto, Ottawa, Halifax, or St. John's could never bring--certainly not as well, anyway.

So I'm wondering if you have any thoughts on how important the volunteers are to bringing that local piece to the important task of economic development in our regions. Possibly there's an agency--probably several--in your own riding with whom you meet as the MP. What would your experiences be?

Mr. Gerry Byrne: These organizations are incredibly important. ACOA has a very strong partnership with the Community Business Development Corporations or Community Futures, as they're known in other parts of the country. In fact, in St. John's, Newfoundland and Labrador, those organizations are assembling for their annual general meeting this weekend.

Mr. Brent St. Denis: That's the regional association?

Mr. Gerry Byrne: It's the national group; the pan-Canadian organization is meeting in St. John's. I'll be there and I'll actually be opening that conference.

In Atlantic Canada in particular there are 41 Community Business Development Corporations, and they provide an incredible resource to entrepreneurs and to the local economy of our region. That's why ACOA partners with them not only by financing their loan portfolios, we also invest in those volunteers and their activities.

We just recently provided a major investment, an upgrade of computer technology, so those loan managers and the boards of directors would have access to state-of-the art equipment. We also provide them with access to training programs and training assistance so those volunteers can upgrade their skills, because the better those volunteers are at their job sitting on the boards of directors of these corporations, the more empowered they are and the more effective they are in the local community.

So you're right on the money. This is providing grassroots, bottom-up economic development initiatives, where the Government of Canada, through in this case the Atlantic Canada Opportunities Agency and FedNor in northern Ontario, really provide a strong basis of support.

But we let them do their job, and they do it exceptionally well. In Atlantic Canada there are over 8,400 business loans totalling $220 million that have been written, mostly in rural communities, so it's quite substantial.

À (1030)

Mr. Brent St. Denis: If I could, I'll just close with a quick comment. Inasmuch as the minister is attending their conference this weekend, you may want to comment on it.

My understanding is that it's very rare, if ever, for these local CFDCs or CBDCs for their funds to actually diminish. They have a small capital fund of a couple of million dollars, but over time they don't lose those dollars. They regain in interest and loan payments sufficient funds to allow the maintenance of that capital base and allow it then to be rolled over for other loans.

They have done a tremendous job in being the trustees of a couple of million dollars of federal capital dollars. In so doing, they have allowed a loss rate higher than the banks' because you have to with higher risk, yet even allowing for a higher loss rate, they have still been able to maintain those funds. I think it's a real credit to them.

The Chair: I know, Mr. Minister, you want to leave to go to cabinet. I would ask that your officials stay because we have a number of questions still unanswered.

I would like to request, because we've had some difficulty in scheduling over the last two years, that we plan next year's schedule for the week of May 10 to include a good two-hour discussion, because we have a lot of questions the members would like to ask that we don't seem to have time to do.

I appreciate you coming today. Could you advise your staff, and I'll have the clerk advise the Minister of Industry, that we would like to meet you during the week of May 10 next year.

Mr. Gerry Byrne: That is advanced planning.

Thank you very much, Mr. Chair. I appreciate it very much.

The Chair: Mr. Marcil.

[Translation]

Mr. Serge Marcil (Beauharnois—Salaberry, Lib.): Thank you, Mr. Chair.

Minister, you mentioned several programs. These are essentially loan programs, but you also have subsidy programs to assist small emerging businesses. Would you tell us what kind of subsidy you are able to give them. A subsidy is a gift; it is not the same as a repayable loan. What type of subsidies do you give out under these various programs? To what sort of businesses? In the course of this past year, how much did you hand out in subsidies to these small businesses? Do you also have a capital investment program to help businesses expand or start up?

[English]

Mr. Peter Estey: I will take the second question, if I could, to start off with. The short answer is no, we do not invest in retail businesses nor in real estate. So the answer to the second one is no, none.

As far as the grants are concerned, the amount we spent on grants in the last fiscal year would be less than $2 million out of a total budget of some $400 million. Some of those grants were holdovers from the early nineties, and the bulk of them would have been in cultural industries. There was a specific program we had in cooperation with the province of Newfoundland, a joint program to further cultural industries, and individual artists and cultural activities were supported with those grants.

There were very small numbers of dollars. Less than $15,000 each, I believe, was the maximum on that, and several artists and emerging cultural artisans were supported by those. It was a very small amount.

[Translation]

Mr. Serge Marcil: Thank you.

A final comment, if I may, because I believe that what Mr. Fitzpatrick said may have been a little misleading. The money given to the pulp and paper mill in Gaspésie was in the nature of a repayable loan, not a subsidy.

That’s all, Mr. Chair.

À (1035)

[English]

The Chair: Thank you very much.

Mr. Bagnell, did you have a comment?

Mr. Larry Bagnell (Yukon, Lib.): I have two questions from this side of the House, seeing as I am the only one here.

One of the objectives is to assist rural development in your area. What types of things have you done specifically for rural communities of, say, less than 5,000 people?

The Chair: In response to some concerns, I should point out that we do not need to have a vote on each line of the main estimates. If we do not vote on it, it is automatically deemed reported to the House. There are no motions and we will just carry on with the last few questions.

Mr. Estey, did you get the question? I apologize for the interference.

Mr. Peter Estey: Certainly. We would not have a program that is specifically targeted to communities of less than 10,000 or communities of less than 5,000. There would not be an arbitrary number put on that.

We do have through the Community Business Development Corporations, as the minister said earlier on, 100% universal rural coverage within Atlantic Canada. Fully 64% of our contracts and slightly higher than that of our clients are in rural communities. We target those principally by having our account managers and development officers throughout the region. We have 75 points of contact throughout the region, and our account managers and development officers work specifically with those communities, business groups, and businesses in those areas.

Mr. Larry Bagnell: Could you tell me what might be unique, exceptional, or different about ACOA vis-à-vis the other regional development agencies, such as western diversification or FedNor. Are there some unique things you've come up with that are interesting and good?

Mr. Peter Estey: There's the Atlantic Innovation Fund, part of the Atlantic investment partnership, which the minister talked about earlier on in his opening remarks and referred to a couple of times during the questioning. That's a $700 million program, focusing on research and development in partnership with the private sector in both businesses and universities. The entrepreneurship and business skills development is something ACOA has been working on for 10 years, as the minister mentioned, and it has produced some pretty phenomenal results. It is an international model, one some of the other regional development agencies are starting to pick up on.

Mr. Larry Bagnell: And my last question from this side of the House is this. There was a proposal related to tax cuts being a better way to spend money in Atlantic Canada. Have you done any analysis on the effectiveness of tax cuts in improving the economy as opposed to what ACOA is investing in?

Mr. Peter Estey: Yes, certainly we have. Mr. Chair, I think the minister addressed that previously. Would you like me to go through it again from a different perspective?

The Chair: I'm sure he can read it in the blues.

Thank you very much. I want to thank you for being with us today.

I want to remind you, we've always had troubling scheduling ACOA for the last two years, and we want to make sure you're available--probably--May 12, 2004, at 3:30 for two hours; the clerk will confirm that. So we will have the minister and yourselves present for the full time.

Thank you very much.

This meeting is adjourned.

[Proceedings continue in camera]