:
I'd like to call to order meeting 63 of the Standing Committee on International Trade.
Before we get to the business before the committee today, there is an issue that requires our immediate attention, I believe. I was asked by several members of the committee to deal with this at the start of the meeting today.
You all know there's been a motion of non-confidence proposed by Mr. Julian. I know there's been some discussion, both among the committee members and in the press, regarding my actions at committee on Thursday, May 10. I'd like to take a few minutes to explain my actions and lay out the procedural groundwork for them.
Section 117 of the standing orders reads as follows:
The Chair of a standing, special or legislative committee shall maintain order in that committee, deciding all questions of order subject to an appeal to the committee, but disorder in a committee can only be censured by the House, on receiving a report thereof.
You will also find on pages 827, 856, and 858 of the English version of Marleau and Montpetit the relevant sections dealing with the chair's role in maintaining order. Page 858 states:
In the event of disorder, the Chair may suspend the meeting until order can be restored or, if the situation is considered to be so serious as to prevent the committee from continuing with its work, the meeting may be adjourned.
During the meeting the witness, Mr. Laxer, spoke on a subject that was not relevant to the agreed-upon topic of the security and prosperity partnership. He was instructed on several occasions to tie his argument into the subject at hand, which in my opinion he did not do.
I was repeatedly challenged by both members and the witness, all of whom were speaking out of order. I tried to regain control around the table; however, opposition members and the witness himself would not allow for this. As well, I was overruled for the second time in as many meetings on procedural rulings that were clearly within the Standing Orders. At that time, and as is within my authority as the chair, I decided that I'd lost control of the committee meeting and adjourned.
I will remind the committee of the events of meeting 61 on Tuesday, May 8, 2007. I will read from the official minutes of the meeting:
Peter Julian moved, -- That the question be now put.
The Chair ruled that according to the Procedure and Practice of the House of Commons the question cannot be put.
Whereupon Guy André appealed the ruling of the Chair.
The question: “Shall the decision of the Chair be sustained?” was put and the decision was overruled.
I'll also read from the minutes of our last meeting, meeting 62, on May 10, 2007:
Gordon Laxer made an opening statement.
The Chair ruled that the statement was not relevant to the Order of the Day.
Whereupon Peter Julian appealed the ruling of the chair.
The question, “Shall the decision of the chair be sustained?” was put and the decision was overruled.
Committee members can read on page 786 of the English version of Marleau and Montpetit that putting the question or, as it is also known, the previous question, is clearly out of order within the committee structure.
I will also cite Standing Order 11(2), which says:
The Speaker or the Chair of Committees of the Whole, after having called the attention of the House, or of the Committee, to the conduct of a Member who persists in irrelevance, or repetition, may direct the Member to discontinue his or her speech, and if then the Member still continues to speak, the Speaker shall name the Member or, if in Committee of the Whole, the Chair shall report the Member to the House.
Members can find the application of this standing order to the committee on page 857 of the English version in Marleau and Montpetit, which reads:
The Chair may, at his or her discretion, interrupt a member whose remarks or questions are repetitious, or not relevant to the matter before the committee. If a member's comments continue to be repetitious or irrelevant, the Chair may recognize another member. If the offending member refuses to yield the floor and continues speaking, the Chair may suspend or adjourn the meeting. A point of order calling attention to a departure from the Standing Orders or from the customary manner in which a committee has conducted its proceedings may be raised at any time, by any member of the committee. In doubtful or unprovided cases, the Chair may reserve his or her decision.
I would also invite committee members to remember that shortly after 11:30 at meeting 62 last Thursday, I called to order Mr. Menzies, who had proceeded with a line of questioning that was not relevant on the topic of the day.
That same courtesy was granted to Mr. Laxer. I cautioned Mr. Laxer that he needed to establish a connection between his opening statement and the topic at hand. I provided him the opportunity to respond to my concerns, I even allowed him to continue his statement. He did not draw a connection between his opening statement on energy security to the security and prosperity partnership. He made no reference to the impact of greater regulatory synchronization between Canada and the United States. Instead, he made numerous references to foreign countries and was in the process of talking about Russian imports of natural gas when I cut him off for the final time.
If committee members are not going to follow the Standing Orders, then I, as chair, will not be able to ensure that this committee is able to fulfill the mandate the House has granted us. As a committee, we cannot pick and choose what Standing Orders we wish to follow on a selective basis. The Standing Orders exist as they do because they've been proven to ensure that Parliament functions properly. Exceptions may arise from time to time that require us to step outside the Standing Orders, but those times should be exceptional in nature.
Both of these recent cases where I was overruled clearly do not require the exceptional response of overruling the Standing Orders. As a direct result of the failure of this committee to uphold the Standing Orders and the prevailing disorder at the committee, I decided that I could no longer claim to have control over the proceedings of this committee. Therefore, I did the only thing that I have recourse to do, which is to adjourn the meeting.
Now Mr. Julian has introduced a motion of non-confidence in me as a result, and I am fully answerable for my actions. I do not hesitate to stand behind them for the previously mentioned reasons.
I believe that until this question of confidence is settled, the committee cannot proceed to other business, as it would be foolish while there is a question of confidence hanging over us.
Therefore, I would ask, Mr. Julian, if you would move your motion now so that we can deal with this issue and put it behind us. Mr. Julian.
I wanted to allude to the extensive report that was provided by the Library of Parliament to all members, and it was at the request of this committee to bring this forward. It's the 33 pages that Mr. Johansen had prepared in February 2001, revised in 2002, and then there was an additional revision in May 2007, talking about bulk water removals and Canadian legislation.
It exemplifies even more clearly in my mind why this whole motion is out of order, in the sense that we're going beyond the scope of this committee, for one. I guess the most egregious part of the motion is where it asks the government to open up talks on water.
I think it has been clearly stated that the government isn't interested in opening up negotiations on water. We've had the 1993 statement that has been clarified by the three leaders of the Canadian, U.S., and Mexican governments, the senior levels of government. We have the International Boundary Waters Treaty, which has been clearly indicated, and Monsieur Cardin has had an opportunity to review that. I have record of those questions in the House that Mr. Cardin has asked Minister Emerson, and Mr. Emerson has clearly stated that Canadian law has built into NAFTA that water in its natural state is not covered by NAFTA--full stop. It's not covered. We heard from witnesses it isn't covered.
The most interesting part for me from Monsieur Cardin is that he wants the federal government to negotiate Quebec's and other provinces' rights to protect their water when those rights are already assured in the International Boundary Waters Treaty Act.
I guess I'm even more concerned that urging the government to open up negotiations on water will put our water at risk. I can say this is something that our government is simply not prepared to do.
Finally, I find it ironic that the member from the Bloc would want the federal government to take away provincial powers from his own authority, which is looking for sovereignty within the province. It just doesn't make sense, and I won't be supporting the motion.
Thank you, Mr. Chair.
The Library of Parliament report very clearly indicates what has been the concern all along. If the members of the Conservative Party had actually listened to the witnesses, they would have understood what the problem was.
On page 7, there's a quotation from The North American Free Trade Agreement: A Comprehensive Guide that indicates what the problem is. The final sentence reads: “Once a resource is exploited by being extracted or collected, it becomes a product and is subject to these and other NAFTA provisions.
So essentially water is not a good, now, until bulk exports begin. Once bulk exports begin, then it is subject to NAFTA. That is what has been very clear from testimony all along. Hopefully members of the Conservative party will now understand what the dynamic is. It is not protected by NAFTA. If it becomes a product, essentially a resource that is extracted or collected, it would then fall under the NAFTA agreement.
[Translation]
So, when this comes down to a question of Quebec jurisdiction, the problem...If another province, like Newfoundland and Labrador or British Columbia, decided to export water, it would have an effect on all other provinces. This is why I believe that Mr. Cardin's motion is very useful for the Canadian federation as a whole. If we export water, water becomes a commodity under NAFTA. This is why I think that this motion is valuable and important. A few little improvements have been added, and I hope that it will have the support of all four parties at this table, at least those parties that understand the dynamics and the repercussions that are to be expected once exports begin.
In the report prepared for us by the Library of Parliament, one element is clear, and jumps off the page. We worry for several reasons. Several reasons because we have proof that we cannot be absolutely sure that water cannot become a commercial product, and therefore come under NAFTA.
When we say that water is excluded from this agreement, we are talking about water in its natural state. But water in its natural state is moving water, water we find in our water sources. That is clear. But when it is no longer there, it is no longer water in its natural state. So all the possibilities of forced export now arise. In the last line of the report's conclusion, we read:
The debate concerning bulk water removals, water exports and the NAFTA continues. Neither the public nor a number of credible organizations are certain that water will not end up as a commodity that can be traded, and that, as a result, will come under the NAFTA.
If government members are so sure that no problem exists, why not then ask for water to be formally excluded from NAFTA?
You will also see that this is spelled out in the motion. The recommendation to the government is to:
[...] begin talks with its American and Mexican counterparts to exclude water from the scope of NAFTA [...]
The text specifies “water”and not “water in its natural state” because that makes all the difference. We cannot allow ourselves to be one day forced to export water. Water is more than a natural resource, it is an essential resource. One day, perhaps it will provide us with the opportunity to save lives, but without being forced to export it in any shape or form. Of course, we cannot export water in its natural state. But once it has left the watershed, it becomes an exportable commodity.
Regarding boundary waters, I agree that is different, but only boundary waters. The water my motion refers to is all the water in our territory, not just boundary waters. Boundary waters are one thing, all the water in Canada and Quebec is another thing.
I would like to reply to Mr. Cannan. At the moment, it is Canada that participates in NAFTA discussions. But when we have a sovereign Quebec, we will protect our resources ourselves. Meanwhile, I feel that it is wise to protect them in the interests of the entire population of Canada.
Mr. Chair, let us now proceed to vote on the motion. Thank you.
:
Now, if we could have the witnesses come forward, please, we will deal with the business before us.
We still have an hour with the witnesses. It's not much time, but we certainly look forward to their presentations.
We will continue with our study on the machinery of government and the implementation of Canada's trade policy, looking at the various departments and agencies and so on, that deal with trade in the Government of Canada.
We have as witnesses, from Export Development Canada, Eric Siegel, president and chief executive officer, international trade; from the Canadian Commercial Corporation, John McBride, president, and Marc Whittingham, vice-president, strategy and organizational development; from the Business Development Bank of Canada, Edmée Métivier, executive vice-president, financing and consulting, and Jacques Simoneau, executive vice-president, investments.
We will have the presentations by each group in the order listed, starting with Export Development Canada.
You have up to eight minutes, Mr. Siegel. We're looking forward to your presentation today.
:
Thank you very much, Mr. Chair. I am happy to appear before the committee again.
[English]
The committee is examining how the machinery of government is delivering on trade and investment services for Canadian business. I must say, I'm glad to have this opportunity to share my views on where we are today and where we expect to be tomorrow. I'm also looking forward to your comments and your findings and to be able to integrate them into our own research and planning.
If there is one position that I think all committee members share, it is that trade is key to the continuing prosperity of Canada. EDC plays an important role in sustaining the health of Canada's trade. To be effective, we have to be strongly connected to our partners within the international trade portfolio, and more specifically, International Trade Canada, both at home and abroad, as well as the sister corporations, the Canadian Commercial Corporation and the Business Development Bank of Canada, which share our interest.
If I could, I'd like to recap briefly our 2006 performance. Last year, our combined insurance and financing volumes topped $66 billion. We work with over 6,000 Canadian companies of every size, from every industry sector and from every corner of the country. We work with them in over 184 markets around the world, and almost one-quarter of that business, some $15.2 billion, is in emerging markets. Those are the opportunity-rich but riskier markets where Canadian business knows it has to increase its presence if it is to remain competitive.
EDC now participates in 30% of Canada's trade with emerging markets, and we expect that to continue to grow as Canada's interest in those markets continues to grow. Markets like Brazil, Russia, India, China, and Mexico are the priority emerging markets for Canadian companies because of their growth rates, their importance to supply chains, and the alignment of their markets with Canadian strengths.
EDC's business volumes in these key markets totalled more than $6.8 billion last year, up 26% from the year before. Growth was particularly notable in Mexico, with a 60% increase to $2.6 billion; in Russia, a 50% increase to $750 million; and in India, where business nearly doubled in 2006, to $730 million. Overall, transactions facilitated by EDC in 2006 are estimated to have generated $44.6 billion of Canada's GDP, or about 3.9% of the total. All of that activity is also associated with sustaining some 546,000 jobs.
EDC is a key element within the government's international trade portfolio. We provide finance and risk management services to Canadian exporters and investors and complement the trade promotion activities of International Trade Canada and other trade players. Our responsibility in financial services is heightened because the market for trade finance in Canada is much weaker than in many of our competitors. This simply reflects the size of our economy and the limited number of Canadian transnationals. Smaller companies, particularly those intent on growing their business in riskier markets, have comparatively fewer financial institutions available to them than their foreign competitors.
As a public agency, we have to bridge that gap to provide Canadian companies with the breadth of financial services that is internationally competitive. This is particularly the case for SMEs, for young high-growth firms, for firms that do not have a long-standing relationship with their financial institution, and for business that carries a higher risk profile, like emerging markets. To reach that group, we have to work closely with other government partners to raise awareness and increase access to those services among all companies that could use them to succeed abroad.
Within government, we have to share information with each other so we collectively better identify the needs of Canadian exporters. We at EDC can then use that information to not only improve our own services, but understand how and when they can be leveraged with those of others to better meet exporters' needs. Given our public mandate, it is vital that EDC's activities and planning are solidly aligned with and support the government's global commerce strategy. We work closely with DFAIT and other agencies to ensure our objectives match government goals, our strategies work effectively with theirs, and that contact at both operational and leadership levels is constant.
EDC regularly consults and exchanges information with all levels of government, from the working level to the ministerial level, as required formally by the provisions of the Export Development Act and the Financial Administration Act. It is the informal day-in, day-out contact, however, that deepens those relationships and generates the understanding that makes those partnerships work.
In Ottawa, we constantly share market information. The country desks of International Trade Canada are well connected to our own international business development teams. Our group that assesses market and political risk relies on the most up-to-date reports and information that are available from Canadian missions abroad. We work together not only through our headquarters in Ottawa, but also in the 12 other cities across Canada where EDC has offices.
That connection continues overseas in 10 key centres in strategically important markets where we have permanent EDC representation. All of our representatives are co-located with Canada's Trade Commissioner Service in Canadian embassies, high commissions, or consulates. This has proven particularly effective in those key strategic markets I mentioned earlier, the BRICM countries. What we have found is that our financial relationships with key buyers and borrowers combined with the experience and knowledge of the Trade Commissioner Service has enabled both of us to better match buyers' needs to the best products and technology that Canada has to offer. This in fact creates new opportunities.
In Brazil and Mexico, our work with Canada's trade team in those countries has led to an EDC business development plan that is completely aligned on the priority sectors in those markets for Canadian involvement. Joint research with DFAIT has also enabled us to take our strategies to a new level. In Mexico, for example, we have just jointly funded a study focusing on the needs of Mexican affiliates of Canadian companies that are engaged in manufacturing. The results will enable us to move beyond broad economic and trade statistics to specific strategies to help Canadian companies grow their business in that market.
In Russia, our collaboration with DFAIT and with CERBA, the Canada Eurasia Russia Business Association, directly led to that 50% growth in EDC business that I referenced earlier. It also led to our posting of our first permanent representative in Moscow in January of this year, and has led to some very specific programs targeting Russian agriculture, mining, energy, and telecom needs.
EDC is also a key participant in the government's global online services committee, which has been mandated to determine how the government's online trade and investment services can be better leveraged to enhance productivity and improve Canada's competitiveness. EDC has some unique capabilities in government. Close working relationships mean that they can be fully utilized when fast-breaking events occur.
An excellent example is EDC's role in managing the softwood lumber duty deposit refund process for the government last fall. Once the Canada-U.S. Softwood Lumber Agreement became into effect, the government wanted refunds paid out as fast as possible. EDC had the contractual expertise, the experience in making disbursements, and the ability to manage a complex program within strict costs and do so quickly. We stepped up to the plate, providing an accelerated payment process that fast-tracked refunds. The process handled nearly 900,000 transactions involving 829 companies, with a total disbursed value of $3.1 billion. Canadian producers and sawmills began to receive those refunds just three weeks after the agreement took effect, and 99% of those refunds had been effected by the end of the year, more than half of them just within the first month.
You cannot anticipate these sorts of requirements, but it's an excellent example of how knowledge, content, and relationships can lead to original thinking and overcome complex problems and deliver results when needs arise.
Let met then conclude by briefly outlining some of our future plans.
We have adopted a very ambitious business strategy that focuses on responding quickly to the evolving needs of Canadian companies. The strategy has three basic pillars: connecting with Canadian exporters and investors, facilitating integrative trade, and leveraging the organization. This strategy also supports the key initiatives set forth by the, which are to actively support Canadian direct investments abroad and facilitate equity investments, to work in partnership with the private and public sectors, to increase representation abroad, and to focus on how EDC can enhance Canada's position in the United States and in emerging markets. We will continue to strengthen our links within government.
I'm pleased to advise you that we are about to sign a memorandum of understanding with the Department of Foreign Affairs and International Trade and the Canadian Commercial Corporation. The objective of this agreement is to develop systematic means for the exchange of market sector and company knowledge.
In closing, section 24 of the Export Development Act requires that the in consultation with the initiate periodic independent reviews of EDC's mandate. The next review must be initiated in 2008 and will involve consultations with an extensive number of stakeholders, including Parliament, government departments, Canadian business and their associations, financial institutions, academia, and civil society.
We at EDC look forward to working with more financial partners in more creative ways to meet our clients' needs. We also look forward to working with the government to fulfill our mandate and to increase our contribution to growing Canada's trade.
[Translation]
Mr. Chair, I am at your disposal to answer any questions.
Thank you.
:
Good afternoon. I thank the members of the committee for inviting my colleague Marc Whittingham and myself.
[English]
I understand that you've received a copy of our corporate plan, which was tabled in Parliament two weeks ago, on May 1, and it amplifies many of the comments that I'll make today.
At CCC, since we are a smaller crown corporation employing only 100 people, the interrelationships between us and other government departments and agencies are paramount to our success. Before I speak about these linkages, let me tell you a bit about CCC and how it helps Canadian exporters.
The Canadian Commercial Corporation's focus is to increase trade by helping foreign governments to benefit from Canada's export capabilities through CCC's procurement and contracting expertise. It works in areas where there is a clear role for government intervention in the procurement and contracting process. In practice, this means CCC focuses on two main markets. The first is defence, which comprises approximately 75% of the contract billings of the corporation, or about $1 billion a year. The sensitive nature of defence products and the significant role played by governments in this market necessitate a government-to-government contracting mechanism to inter-mediate trade.
The second business line for CCC is emerging and developing country markets. In particular, the corporation works with countries that do not have the capacity to undertake effective contracting and procurement efforts on their own. This latter part has been part of CCC's focus since it was created in 1946 to assist with the reconstruction of Europe after World War II by connecting Canada's export capabilities to European needs after the war. To enable its work, CCC was given broad legislative powers to develop trade between nations by exporting or importing.
[Translation]
Now I am going to compare the two main business lines, government-to-government contracting and supply officer services. In government-to-government contracting, the CCC signs a contract with a foreign government buyer and another contract with a Canadian exporter. As the middle man, the CCC makes sure that the contract with the exporter is carried out in accordance with the terms of the contract reached with the international buyer.
We transfer the contractual obligations to the Canadian exporter. This results in a secure government-to-government contract reached under the best of conditions for all parties. As well, the CCC manages the payment cycle between the foreign government buyer and the Canadian exporter. This allows a predictable and regular schedule of payments to be established and maintained.
As regards the supply officer services, the CCC accesses goods or services on behalf of public buyers or a multilateral organization for final use abroad, and manages both the contracting process and the purchasing cycle. In 2006-2007, the CCC worked with almost 200 Canadian exporters in 25 countries and conducted business worth in excess of $1 billion.
[English]
Let me talk a bit more about CCC's defence business line.
Since 1956, CCC has been responsible for helping Canada meet its commitments under the Defence Production Sharing Agreement. The DPSA is an important part of the Canada-U.S. relationship. For Canadian companies, the agreement has ensured that they are able to compete on equal footing with American defence companies when bidding on American military contracts. For the U.S. and Canadian governments, the DPSA has ensured a strong North American defence industrial base. It remains the single largest element for the corporation, and between $650 million and $750 million of business with the U.S. DOD annually.
In addition, CCC facilitates procurement for NASA from Canadian sources, in a similar type of arrangement as that under the DPSA. While it remains optional for NASA to work with Canadian exporters through CCC, over 90% of all NASA work from Canadian sources is managed through the CCC, demonstrating the corporation's value to NASA and Canadian exporters.
Going forward, CCC will continue to strengthen the relationship with the U.S. government and examine other ways to work together to achieve a strong North American defence industrial base.
CCC has also leveraged its relationship with Canada's Department of National Defence. This has two distinctive elements.
First, the corporation leverages the Canadian Forces' traditional relationship with other militaries to learn about opportunities for Canadian suppliers in markets abroad.
Second, CCC leverages domestic equipment procurement internationally to the benefit of Canadian exporters. As Canada and our allies consider purchasing or upgrading equipment, changes in military operations require highly sophisticated capability and quality over quantity.
The cost of acquisition for highly complex equipment in very small quantities is often prohibitive for many militaries. CCC is well placed to provide to like-minded countries the ability to join with Canada in programs that DND has initiated or is considering. The combination of two or three buyers has the potential to provide economies of scale and make a program more affordable for both Canada and allied forces.
Let me talk a little bit about CCC's work in emerging and developing country markets. In these countries, where there is often insufficient capacity within local government to conduct efficient and transparent contracting activities, this can be an impediment for Canadian exporters and for achieving effective international development results. CCC employs unique relationships and contracting expertise to address these issues and generate benefits for both parties. CCC's government-to-government contracting and procurement services offer a valuable competitive advantage to Canadian companies operating in these complex public sector markets.
CCC contracts with a foreign government in an emerging or developing country to ensure due diligence and a fair and reasonable transparent proposal from Canadian exporters.
CCC also works with international funding and financing institutions to provide transparency in contracting and procurement in order for them to deliver their official development assistance programs.
On average, CCC's work in emerging and developing countries and markets represents about 25% of our business, or $250 million to $350 million per year.
I'm also very proud of CCC's contribution to wider Government of Canada policy goals, which have made a real difference to Canadian exporters and help foreign governments access Canadian solutions. For example, because of CCC's excellence in contracting and procurement, we were brought on board to Action Canada's contribution to promoting peace in the Sudan.
CCC is also making a tangible contribution to stabilization and reconstruction efforts in Afghanistan, for example, through our organizing and executing delivery of equipment for the Afghan National Police force. The dedication and professionalism of CCC personnel has made this possible.
With the Canadian International Development Agency, CCC is well positioned to work with companies that use CIDA Inc., a cost-sharing program that provides financial support to Canadian companies to carry out feasibility studies or provide implementation support in developing countries. With CIDA Inc.'s financial support at project inception and completion, CCC's role as a final contractor fits squarely in the middle and acts as a complement to CIDA Inc. to support Canadian firms wishing to undertake development infrastructure projects.
With EDC, the focus has been on connecting CCC's government-to-government contracting and procurement service options with EDC's finance and insurance offerings for the benefit of Canadian exporters. Joint EDC-CCC missions to Asia, Africa, and the Caribbean have proven to be valued tools for Canadian exporters wishing to advance and secure contracts in emerging and developing country markets.
Finally, CCC was recognized by the Treasury Board Secretariat with the award of excellence for outstanding teamwork in developing online client-centric service. Specifically, the award commended the electronic client relationship management and the virtual trade commissioner services created through a partnership with CCC, DFAIT, EDC and Agriculture and Agri-Food Canada. This initiative underlines the collaborative approach that exists throughout the federal government to better coordinate service offerings to Canadian exporters through a single point of entry.
As Ken Sunquist, the assistant deputy minister for global operations and Canada's chief trade commissioner, mentioned when he was here to speak to you last week, CCC has recently signed an MOU with DFAIT to implement a pilot project in Montreal. Officers in the regions will do the front-line work of promoting and counselling for the corporation. CCC will also sign an MOU with EDC and DFAIT to enhance business development and information-sharing activities.
[Translation]
In summary, the CCC works in collaboration with several departments and federal government agencies. This year, our goal, as our business plan shows, will be to work even more closely with the Department of Foreign Affairs and International Trade, Export Development Canada, the Department of National Defence, and the Canadian International Development Agency to develop more sophisticated partnerships in order to better serve Canadian exporters and to increase Canada's international trade.
Thank you for the time that you have kindly granted me and I am at your disposal to answer all your questions.
:
Mr. Chairman, thank you very much. This is the first opportunity BDC has had to meet the members of this committee formally.
An hon. member: How are we looking so far?
Mrs. Edmée Métivier: It's pleasant. So thank you for allowing us a few minutes, actually, to share our story with all of you.
We welcome your examination of the roles and responsibilities of the departments, agencies, and crown corporations that deliver our government support for entrepreneurs. We welcome any discussion and all ideas that will help us continue to meet our one goal: to make the most relevant, helpful contribution we can to the health of Canada's small and medium-sized businesses in Canada.
Our president and CEO, Jean-René Halde, could not be here today. He sends his regrets. Respectful of prior engagements, he is visiting our operation and clients in B.C. and Alberta. Jacques, my colleague, will answer any questions on venture capital later on, as it is his area of responsibility.
On behalf of BDC, we would like to share with you who we are and what we do to help entrepreneurs meet the competitive challenges of globalization. BDC has been helping SME exporters since 1944. We have much to offer, and l trust that you will find our contribution helpful to your work.
As you know, BDC is a business development bank. Parliament created us to support entrepreneurs and to promote entrepreneurship. We do this by offering financing, consulting, and venture capital services to SMEs. We offer these services on a pan-Canadian basis. Our employees work from 92 offices across the country, from St. John's to Vancouver, from Rimouski to Whitehorse.
We use partnerships to reach entrepreneurs who do not live in cities and towns. The best example of this would be our work with Community Futures development corporations, a network of more than 200 centres in mostly rural areas. Every day, about 600 BDC employees visit hundreds of SMEs. This direct access places BDC in a privileged position with SMEs.
At present, more than 27,000 Canadian entrepreneurs are BDC clients. To support them, we have invested over $10 billion in committed financing and venture capital. We have close to 200 companies in our venture capital portfolio, and through our investment in 17 funds, we have an equity position in more than 65 other companies. In total we have $770 million committed to about 250 companies in Canada.
Last year alone we also provided more than 2,400 business consultations. These were in areas like strategic planning, productivity improvement, and so forth. Of our 27,000 clients, more than 6,000 are exporters. In value, this is almost 40% of our portfolio, or a little over $4 billion.
As you know, BDC is commercially viable. The main thing to remember about our ability to be profitable is that this dictates the mode of operation that makes us constantly anticipate and meet SME needs. As the needs of SMEs evolve, so do our services. Indeed, we resemble SMEs ourselves in that we have to stay relevant to be profitable.
If we do not evolve with them, we will not be able to attract them as clients. It is as simple as that. Relevance is the key to our success. One has to remember that we succeed even though we price our loans at a higher interest rate than do other financial institutions to compensate for the greater risk we take.
In recent years we have been actively looking for ways to help SMEs deal with globalization and constant changes triggered by new market forces. The key to competitiveness is adaptation. Simply put, SMEs have to change to sidestep threats and seize opportunities.
[Translation]
To show the support provided by the BDC in assisting entrepreneurs to achieve success in global markets, I am now going to give you two examples of BDC clients. The first is a traditional client, a manufacturer who adapted, and the second is quite a different client, one who understood globalization from the beginning and who is transforming an innovation into a product and service successfully sold around the world.
Client One is a company that produces slate roofing tiles. Its manufacturing processes are rooted in the traditions of European master quarry workers. But in a global market, its competitors are not the ones in the next quarry. They are in Spain, in Brazil and in China. Wishing to remain competitive, this company has invested in research and development in order to improve its productivity and the quality of its products. At the same time, it clearly realizes that reaching new markets needs excellent preparatory work.
So its owners came to BDC for help in developing a strategic plan for the company's future growth. Our consulting services helped them to objectively analyze the strengths and weaknesses of their company, with a view to identifying a successful structure. Today, the company exports its products to Europe, to the United States and to Australia. It has increased its production twentyfold, and it now employs 300 people.
[English]
Client two is different. It sprung from the results of almost a decade of research and development in welding, metallurgy, and artificial intelligence. This R and D produces a niche product, that is, highly specialized high-tech robots that do sophisticated welding on production lines. Ninety percent of client two sales are exported to the United States, Europe, and Asia. To most firms, this percentage would be astonishingly high, at least for an SME. To our client, it is all they have ever known.
You will not be surprised to hear that these entrepreneurs were also global in outlook when they decided to open branches. They did so in Asia and the United States. This is in part because their competitors are as globalized as their clients: a handful of specific companies in England, Germany, the U.S., and Japan.
As I said, client two is a special breed of entrepreneur that deserves close attention for a minute. These entrepreneurs are the ones who are trying to create the globally competitive companies that must be part of Canada's long-term recipe for prosperity. When they succeed, Canadian society benefits.
In the case of client two, our support will help build operational and management capacity here in Canada. Three-quarters of their employees are highly qualified engineers, software specialists, and physicists. The company's annual revenues are in the range of $4 million. I think it's important to remember that this breed of entrepreneur embraces a degree of risk and complexity that most people would actually shun or flee.
To turn a new idea or innovation into a globally successful company takes several years and a range of separate sophisticated skills. Every step of the growth cycle requires learning and financing. There's no simple recipe here. Supporting venture capital clients takes great skill and patience. These are qualities that BDC has developed over its 30 years of experience in the venture capital sector. Increasingly, supporting them also requires support of a more aggressive kind, such as trade missions to Asia for the companies into which we invest, to help them break into these new markets.
So if we start with the premise that globalization is pushing our SMEs into a more knowledge-based, innovation-driven economy, forcing them to climb up the value chain, it follows that part of Canada' s response to globalization must be support to SMEs. I would suggest that BDC, a cross-country, flexible instrument of public policy, with a hard-wired focus on SME needs, six decades of experience with exporters, and three decades of experience in venture capital, is an important part of that response.
To remain relevant and of value to our customer, we will have to support a rising number of clients facing a rising number of tough challenges. Part of our strategy to do so is to find or create collaborative partnerships that can increase our impact and that of our peers. For example, we are working to get closer to NSERC and the National Research Council. We give NRC employees training sessions on venture capital, how it works and what the rules of the game are. Indeed, we also have some of its employees positioned in some of our offices. We have begun discussions with the international trade department about stepping up our support to SMEs and about how to help finance foreign direct investment in Canada. We have also started discussions with EDC to see how we might bring our existing cooperation to the next level.
With this partnership-seeking mode in mind, the question is, how do we ensure that departments, agencies, and crown corporations that support Canada's interests in international trade provide the most effective and collective contribution? We think a good start would be to leverage rather than replicate each others' trends. That is why we are here. BDC has deep knowledge of SMEs, and expertise in venture capital and other types of financing, and we are happy and willing to contribute within our means and our mandate.
We welcome your deliberation, Mr. Chairman, and we look forward to your report.
Thank you.
Thank you, madam, gentlemen. I would particularly like to greet Mr. Simoneau, whom I got to know in Sherbrooke when he ran the Société Innovatech du sud du Québec. I would like to congratulate him for the work he has done.
I will be brief, because we are unfortunately short on time.
You have 27,000 clients, of whom 6,000 are exporters and make up 40% of your portfolio of $10 billion, I believe. Among your exporter clients, there are categories, as you say. You mentioned innovation, knowledge, research and development. I do not think that I am wrong in saying that this is the foundation we need if we want to be competitive on a global scale.
But this takes two business directions; either companies must develop a product, a niche, something special, that therefore becomes easily exportable around the world, or they have to increase productivity tremendously in order to be as globally competitive.
How does this break down in your portfolio among the companies with whom you work? Perhaps there are others, but those are the ones that I can see most clearly.
:
That is an excellent question. In fact, the question has two parts.
First of all, we have 600 people in the field, people who visit SMEs every day. Local people of influence work with us. At BDC, we do a lot of community work. We have 92 community offices. We work with people on-site. In places where EDC also has a presence, we often visit SMEs together.
As for targeted activities, this is a very good question because, of course, globalization is a concern for us too. Manufacturing makes up a third of our portfolio. That is quite significant.
Our Canadian manufacturers are important, and they must change course. To do so, we realized that we needed two distinct approaches. One is a little more general, to raise awareness of globalization and what it means for our SMEs in Canada. The other is more individual, one on one. So we are working on two strategies at once. One targets a selection of growing manufacturers who are encountering challenges but who, in our opinion, have the potential to make the course correction relatively quickly. Since the beginning of April, we have been meeting with these people one on one, to see what their needs are and how we can help them align their strategic thinking with what they have to do to be more competitive on a global scale.
Our second approach is more general in the sense that we bring SMEs together in their own communities. We did it recently in Longueuil and we will be doing it in two other places very soon. We bring together 50 or 60 businesspeople who are working on a somewhat smaller scale, and we brief them on the reality of emerging markets like China, Vietnam or India. We have an on-the-spot discussion with them that takes a couple of hours, and afterwards, we meet them individually. Then our consultants sit down with those who decide that they are ready, and who want to have, for example, a discussion in greater depth to examine their strategic plan. First of all, we want to know whether they have one, what it means, where the weaknesses are, and if their present business model is competitive.
We have a third approach that is also very focussed. We are currently taking a look at our own portfolio. With 27,000 clients, we have a significant sample, we can do good work. We are looking at the SMEs' business models, the way in which they are structured to achieve global success. I feel that we will end up with three or four, or perhaps four or five different business models that a manufacturer could implement. Once that is done, our consulting involvement will be even more specific. We are trying to learn along with our clients, and to identify successes that we can pass on to those who are having a harder time. That is what we are doing.
:
Thank you very much for the question. I appreciate that.
CCC is contracting and procurement. BDC is financing and risk products; we're contracting and procurement.
We work for foreign governments to help them buy things in Canada by either acting on behalf of Canadian exporters to sell products to foreign governments or helping advise foreign governments on how best to procure things in Canada.
Sometimes I say we're like the international Public Works. Public Works contracts for the Canadian government when it's buying things; we work with foreign governments to help them contract and procure. We do that in very specific markets, because in general exporters should be able to do contracting and foreign governments should be able to do contracting and procurement themselves.
Of our two focuses, one is defence, because the nature of the business and the nature of the product is very government dominated, very sensitive kinds of products. We work in defence, government-to-government defence contracting, and in developing countries. And I really mean developing countries, countries that don't have the capacity to undertake complex procurements.
Maybe it's best to illustrate it through an example: we're currently contracting on behalf of Acon, a Canadian supplier, to build an airport in Quito, Ecuador. We're the contractor. We subcontract with Acon. We have a relationship with the Government of Ecuador to secure that contracting. EDC is providing part of the financing to the project and providing many of the risk products. They're providing risk products for the export transaction, they're providing financing for the export transaction, and we provide the contracting and procurement mechanism where necessary. We fit in very specifically in contracting and procurement.