INST Committee Meeting

37th PARLIAMENT, 1st SESSION

Standing Committee on Industry, Science and Technology

EVIDENCE

CONTENTS

Wednesday, May 8, 2002

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1540

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

Hon. Stephen Owen (Secretary of State (Western Economic Diversification))

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1545

¹

1550

¹

1555

º

1600

The Chair

Mr. Brian Fitzpatrick (Prince Albert, Canadian Alliance)

Mr. Stephen Owen

Mr. Brian Fitzpatrick

Mr. Stephen Owen

Mr. Brian Fitzpatrick

Mr. Stephen Owen

Mr. Brian Fitzpatrick

Mr. Stephen Owen

Mr. Brian Fitzpatrick

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1605

Mr. Stephen Owen

Mr. Brian Fitzpatrick

Mr. Stephen Owen

Mr. Brian Fitzpatrick

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1610

Mr. Stephen Owen

The Chair

Mr. Larry Bagnell (Yukon, Lib.)

Mr. Stephen Owen

Mr. Larry Bagnell

Mr. Stephen Owen

Ms. Oryssia Lennie (Deputy Minister, Western Economic Diversification)

Mr. Stephen Owen

Mr. Larry Bagnell

Mr. Stephen Owen

Mr. Larry Bagnell

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1615

Mr. Stephen Owen

Mr. Larry Bagnell

Mr. Stephen Owen

Mr. Larry Bagnell

Mr. Stephen Owen

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1620

The Chair

Mr. Rajotte

Mr. Stephen Owen

Mr. James Rajotte

Mr. Stephen Owen

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1625

Mr. James Rajotte

Mr. Stephen Owen

Mr. James Rajotte

Mr. Stephen Owen

Mr. James Rajotte

Mr. Stephen Owen

Mr. James Rajotte

Mr. Stephen Owen

Mr. James Rajotte

Mr. Stephen Owen

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1630

Mr. James Rajotte

Mr. Stephen Owen

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1635

The Chair

Mr. Dan McTeague (Pickering--Ajax--Uxbridge, Lib.)

Mr. Stephen Owen

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1640

Mr. Dan McTeague

Mr. Stephen Owen

Mr. Dan McTeague

Mr. Stephen Owen

The Chair

Mr. Brian Fitzpatrick

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1645

Mr. Stephen Owen

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1650

Mr. Brian Fitzpatrick

Mr. Stephen Owen

Mr. Brian Fitzpatrick

Mr. Stephen Owen

Mr. Brian Fitzpatrick

Mr. Stephen Owen

The Chair

Mr. Larry Bagnell

Mr. Stephen Owen

The Chair

Mr. Larry Bagnell

Mr. Stephen Owen

Mr. Larry Bagnell

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1655

Mr. Stephen Owen

Mr. Larry Bagnell

Mr. Stephen Owen

Mr. Larry Bagnell

Mr. Stephen Owen

Mr. Larry Bagnell

Mr. Stephen Owen

The Chair

Ms. Oryssia Lennie

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1700

The Chair

Ms. Lennie Oryssia

The Chair

Ms. Lennie Oryssia

The Chair

Mr. Stephen Owen

The Chair

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CANADA

Standing Committee on Industry, Science and Technology

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NUMBER 081

l

1st SESSION

l

37th PARLIAMENT

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EVIDENCE

Wednesday, May 8, 2002

[Recorded by Electronic Apparatus]

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[English]

    The Chair (Mr. Walt Lastewka (St. Catharines, Lib.)): I call this meeting to order, pursuant to the order of reference of the House dated February 28, 2002, the main estimates for the fiscal year ending March 31, 2003, votes 120 and 125 under Industry.

    Today we have the Honourable Stephen Owen, Secretary of State for Western Economic Diversification. We'll have some introductory remarks and then we'll go to questions.

    Thank you very much, Minister, for being here.

    Hon. Stephen Owen (Secretary of State (Western Economic Diversification)): Thank you, Mr. Chair, colleagues, and members of the committee.

    With me at the table is Oryssia Lennie, my deputy minister, who heads up our head office in Edmonton. I believe we're the only full department of government that's actually located in western Canada. Ms. Lennie is a seasoned administrator. She was deputy minister of intergovernmental affairs in Alberta for some nine years before coming to western diversification, so we're lucky to have her. She's immensely knowledgeable about the west and about intergovernmental relations, which is of course an important part of making sure our work is effective.

[Translation]

    Mr. Chairman, colleagues, we are very fortunate to live in Canada.

[English]

    In fact, in the west we know we make up 30% of the country, 30% of the population, 30% of the jobs, and 31% of the gross domestic product. We, as westerners, are of course immensely important, but also proud Canadians. A recent poll made it very clear that in the western provinces, when people were asked how they first associated themselves, by a very large majority they associated themselves as Canadians before more regional identification. It was interesting to note that in B.C. and Alberta, there were very large majorities, above the national average--I think ranking second and third of provinces in the country--that identified themselves as Canadians first. Of course, we're all very proud of being members of our own provinces, and immensely proud of being westerners.

[Translation]

    Mr. Chairman, I am pleased to be here to discuss the plans and priorities of Western Economic Diversification Canada for the new fiscal year.

[English]

    This is my first appearance, Mr. Chair, before you as secretary of state; it's an opportunity for me to comment on our current plans and on where I see the department going in the next two or three years.

    In the few months since I was appointed, I've had a chance to travel and talk to Canadians in many communities and sectors in every province in the west. I was impressed by their commitment to building a stronger west and a secure future for their families. And I was gratified by the extent to which WD is known and recognized for helping them achieve their goals. Our programs are valued, the efforts of WD staff are appreciated, and people want us to continue our work in and for the west. We remain relevant to the needs of the west because of the way we approach our job: we are locally based, we are forming partnerships, and we are mobilizing all levels of government and community stakeholders and concentrating on solutions to economic growth through skills development, innovation, and productivity, university and private sector research, and small business support. We work with people closest to the action, the people most affected by economic downturn and economic opportunity who can be assisted to find local solutions to local challenges. This is one of the strengths.

    WD has recently been recognized for its valuable contribution in leading federal activities to assist coastal communities to adjust to the impacts of restructuring within the Pacific salmon fishery. The community economic adjustment initiative, CEAI, is now a model that may well be applied to the forest communities throughout British Columbia.

    Healthy regional economies contribute to a strong national economy. The fundamentals of the Government of Canada's economic policy are sound: debt reduction, stable growth, low interest rates, and prudent expenditures that have created several years of surplus budgets. But this good governance must include a targeted approach to regional economic development.

    WD and other regional development agencies play a strong role in addressing regional and national economic concerns. These include the need to make a transition to the knowledge-based and innovation economy; the need to maintain a skilled, globally competitive and entrepreneurial small business sector; the need to respond to the decline of rural economies and build sustainable communities that are able to adjust to economic shocks and capitalize on new opportunities to sustain their economic growth and quality of life.

    Thanks to the hard work and resolve of westerners, we have weathered the recent economic slowdown relatively well. Once again, Alberta led the country in economic growth last year and Manitoba was ahead of the national average. But these national statistics and even western statistics mask several real economic problems. British Columbia and Saskatchewan have been hard hit by the softwood lumber dispute and by drought, among other difficulties.

    Western businesses need to become more productive. Persistent unemployment and poverty among aboriginal communities must be eradicated. WD can respond to these issues by being a catalyst for change. We can tap into all orders of government, federal, provincial, and municipal, to find and fund partnerships for economic development that may also include industry, universities, and communities. I believe the department is respected because it consistently works for the public good. It is concerned about people, about sharing knowledge, and generating opportunity.

    WD adheres to the high standards of modern comptrollership. We are accountable for our actions both in a fiscal sense by achieving value for money and in a policy sense in the way that we deliver the federal and industry portfolio agendas to respond to the economic challenges and opportunities in the western provinces.

    Mr. Chair, let me briefly address innovation, entrepreneurship, and sustainable communities as three of the main objectives of WD.

    First, innovation has been our top priority for some time because we recognize how vitally important it is to our standard of living. Canada's new innovation strategy, released by my colleagues Allan Rock and Jane Stewart in February, makes the problem perfectly clear. In comparison to the United States, Canadians' real income per capita has been steadily falling over much of the last 20 years. This income gap has narrowed somewhat in the past couple of years, suggesting that nationally we are moving in the right direction. But if Canada does not narrow the gap further, we risk an outflow of talent and capital, which could contribute to a decline in our standard of living and eventually in our ability to maintain our quality of life.

    And of course that distinction is often made between standard of living and merely, Mr. Chair, colleagues, concentrating on economic elements of standard of living. But of course quality of life can be something quite different, and yet they are interdependent. We must maintain a requisite standard of living in order to build the quality of life and maintain the quality of life we have in this abundant country.

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    The gap with the U.S. is almost entirely due to our lower level of productivity. Becoming more productive means we must be more inventive. We must sharpen and broaden our skills and find new and better ways of doing things. Fifty-nine percent of all of WD's grants and contributions approved in 2001-02 was directed to innovation. Slightly more than half our innovation funding goes to health sciences, and health care is the number one priority of Canadians. Essentially, our investments aim to close the gap between the discovery of new ideas and processes on the one hand, and the marketing of new products and services on the other.

    For instance, we promote the commercialization of technology. WD recently contributed $10 million over four years to support research labs at TRLabs, Canada's largest and most successful not-for-profit information and communications technology research consortium, with labs in Edmonton, Calgary, Saskatoon, Regina, and Winnipeg. Funding partners include the provinces of Alberta, Saskatchewan, and Manitoba as well as industry and university sponsors.

    Over the next five years, TRLabs will offer placements to over 450 students; provide services to more than 150 small and medium-sized enterprises; generate over 400 new technologies, of which more than 125 are expected to be commercialized; and hold 30 conferences over the prairie provinces. And we lever new funding to increase research and development in significant industries such as alternative energy, genomics, new media, and tele-health.

    Fuel cells, for instance, possess vast potential as an energy source in the 21st century and are a means of reducing greenhouse gas emissions. Over 10 years ago, WD was an early supporter of B.C.'s Ballard Power Systems in the fuel cell research stage. Since then WD has provided $6.5 million for fuel cell investment, matched by the province under the Canada-B.C. Western Economic Partnership Agreement, funding which helped to establish Fuel Cells Canada, a non-profit organization created by public and private sector partners. It also funded demonstration projects, such as testing the next generation of fuel cell bus engines. This will enable the B.C. Transit Authority to buy three prototype engines from XCELLSIS Fuel Cell Engines, a joint venture by DaimlerChrylser, Ballard Power, and Ford.

    By 2020 the estimated potential market for fuel cells will be $145 billion worldwide, creating 15,000 jobs for every billion dollars in demand. This, Mr. Chair and colleagues, is an immense opportunity for us in Canada, and we are at the international forefront of this endeavour.

    We actively bring together companies from the private sector, provincial government, and academic and research communities to work on joint projects. At the University of Calgary's medical facilities, we collaborated with the provincial government, the university, the regional health district, two corporate supporters, and a community foundation to fund the Seaman Centre for Imaging, the Bioinformatics Centre, and leading-edge research on neurorobotics--the application in neurosurgery of space robotics based on Canadarm technology developed by our partner MacDonald Dettwiler. WD's investment was $4.95 million.

    Mr. Chair, colleagues, it was an extraordinary event when these advances were proclaimed. I had an opportunity to be at the University of Calgary at the time with MacDonald Dettwiler while the Canadarm on the space shuttle was fixing the Hubble space telescope. They were actually miniaturizing that Canadian-developed robotic technology to be used in a robotic way in neurosurgery--an absolutely extraordinary demonstration of Canadian ingenuity and research, and now both commercial as well as public service contribution.

    In addition, WD supports innovation clusters in key sectors of the western economy--all the components needed to grow and sustain a knowledge-based industry from R and D centres to manufacturing plants and their suppliers. In Manitoba, WD and the province will contribute to the functional foods and nutraceuticals centre, a $25 million R and D centre at the University of Manitoba's SMART Park in Winnipeg. The centre will house researchers working on food safety, new product development, processing techniques, and marketing. WD will provide $6 million to that $25 million initiative.

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    In Saskatchewan we contributed over $20 million to the Canadian Light Source, CLS, synchrotron, Canada's biggest scientific project in over three decades. WD was a catalyst for project funding with three orders of government, major industry contributors, and 18 universities. More than 300 Canadian researchers will use this super-microscope when completed in 2004, and the facility will also employ 200 first-ranked scientists, technicians, and staff. Estimates show that the CLS could attract $35 million annually in commercial research and development spending.

    Mr. Chairman, there are dozens of other examples of WD's very practical contribution to innovation in the west and to Canada's knowledge-based economy. Highlights of these in each region are included in your information kits.

    Let me turn to entrepreneurship, Mr. Chair. Small and medium-sized businesses, those employing up to 300 people, are Canada's engine of economic growth in the west and throughout the country. In 2000 about 5 million, or 41%, of Canadian employees on payroll worked for firms that employed fewer than 100 employees, and 38% of the private sector labour force worked for small businesses with fewer than 50 employees. This is where the energy for the future comes from. And these figures don't include the 2.3 million self-employed people, a third of them women.

    WD supports the willingness of entrepreneurs to take risks, devise new products and services, and create jobs. In British Columbia alone, WD and our partners provide services to more than 400,000 small business clients each year, a clear demonstration of the demand from our clients for the kinds of information and assistance we provide.

    We concentrate on helping small businesses and new entrepreneurs to access the capital and information they need to be globally competitive. The focus is on improving small business management, assistance with business plans, and advice on e-business and international trade. We help companies to hire graduates for international marketing and advanced technology projects.

    Our loan investment fund program fills a gap in financing between traditional bank lending and venture capital. Since 1995 these partnerships with independent financial institutions have provided about 1,500 loans to small and medium-sized enterprises totalling $145 million, leveraged with only $21 million from WD.

    Our western Canada business service network, with over 100 points of service across the west, is a unique delivery network that lets us reach every part of the west.

    Across the four provinces, 90 community futures development corporations, or CFDCs, take a grassroots approach to economic development. Funded by WD, they are volunteer-led, non-profit organizations bringing local business people together to focus on job creation outside of major urban areas. Over the past seven years CFDCs have made loans totalling $316 million to over 13,000 western entrepreneurs, creating or sustaining about 38,000 jobs. That $316 million leveraged a further $473 million.

    WD's partnership network is also designed to respond to the needs of western women and French-speaking and aboriginal entrepreneurs. Our women's enterprise centres in each province help overcome barriers women may face in starting up businesses. Since 1994 WD's women's enterprise initiative has provided about 750 loans worth $18.6 million to assist women in starting or growing a business. This $18 million levered a further $50 million from private investment.

    We have supported the development of francophone economic development organizations in each western province to provide business services, information, counselling, and access to financing.

    Aboriginal economic development services are increasing the number, size, and markets of aboriginal businesses. WD works with a number of aboriginal organizations and CFDCs in the west to help them deliver business counselling and advisory services and to strengthen their capacity to respond to the business development needs of aboriginal people. We have made approximately $25 million in new capital available for aboriginal entrepreneurs.

    Let me turn finally, Mr. Chair, to sustainable communities, another key objective of WD. The key to sustainable communities is partnerships: tripartite urban development agreements; federal-provincial western economic development agreements; national programs delivered in the west through WD, such as the infrastructure Canada program; and the partnership service network mentioned previously.

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    WD plays a strategic role in mobilizing all levels of government and community stakeholders to capitalize on local priorities for sustainable community economic development.

    Our urban development strategy takes advantage of opportunities to link infrastructure, information technology, and labour force skills to support the development and growth of knowledge industries. This is one side of the equation. Equally important are efforts to generate community growth and renewal that combat critical issues of high unemployment, poverty, homelessness, and hopelessness.

    The Winnipeg development agreement, which generated shared funding of $75 million over five years, resulted in projects such as the Aboriginal Centre of Winnipeg, and numerous community building and safety projects. The Vancouver agreement is a five-year collaboration involving 12 federal departments, as well as the province and the City of Vancouver. WD coordinates the federal role of these 12 federal departments.

    WD funds projects that link social and economic imperatives in Vancouver's downtown eastside, one of the poorest urban communities in Canada. They include a storefront office to help residents, non-profit organizations, and businesses access government funding; historic markers and site restoration, street safety and beautification, and community planning; a community dental clinic; and a low-cost housing project, among others.

    Sustainable communities are healthy communities socially, economically, and environmentally. A number of WD initiatives, such as the fuel cell technology centre at UBC and the petroleum research centre in Regina, combine economic and environmental goals that will also protect our quality of life. But healthy communities can only come about through inclusive opportunity for the people living in those communities.

    I believe my other role, as Secretary of State for Indian Affairs and Northern Development, is closely tied to the work of Western Economic Diversification. After all, 63% of Canada's aboriginal peoples live in the west. The majority live off-reserve. The future economies of the western provinces will be significantly affected by the social and economic status of the aboriginal population.

    It's estimated that over 200,000 jobs across the west will be needed within the next 15 years to meet the demands of a growing aboriginal population. In Saskatchewan, for instance, 25% of the province's labour force will be aboriginal within ten years. If ever there was a critical challenge for the department, this is it.

    Last year, WD provided about $8 million in specific aboriginal projects, mainly to improve aboriginal participation in the mainstream economy. Now we need to create opportunities for strategic partnerships with the provinces, the private sector, and aboriginal groups. The most successful initiatives, so far, link the large developments going on in the west and the very real labour shortage in the trades with the need to address the high aboriginal unemployment rate.

    We have the sad fact of the growing need for employment for the large group of 60% of aboriginal people on-reserve across this country who are youth. That age bubble is growing and these people are looking for jobs. But we also have a huge need, particularly in these large-scale projects, for a trained workforce that has to be renewed and expanded.

    Over the past year, WD has worked with the Alberta aboriginal apprentice committee and the aboriginal human resources development council to help put together an $18.5 million, five-year awareness program that will help remove barriers to aboriginal entry into trades and create a multi-party employment support model.

    PCL Construction Management Ltd., Syncrude, Honeywell, and ATCO Electric are among the private sector companies involved as either employers or project advisers. Syncrude Canada is an industry leader in employing aboriginal young people and people entering the workforce. Currently, an average of 13% of their workforce is of aboriginal heritage. That equals the population around the Fort McMurray area.

    They're investing in training these young people to be a stable, local, partnered workforce. They're also contracting with first nations businesses for sourcing out materials to provide construction assistance and such. This is an important partnership. WD will contribute $1 million to this initiative of linking large-scale development projects with aboriginal employment.

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    This kind of incremental success across the west will lead to sustainable economic growth that benefits aboriginal people, inner-city neighbourhoods, rural communities, and Canadians generally. Finding new ways to address long-standing issues and spread prosperity is what innovation is all about. Innovation is all of our business.

    I plan to actively champion the Government of Canada's innovation agenda in the west, to ensure that the views of western Canadians are heard in the federal consultation process, and to work closely with all stakeholders to bring together the public, private, academic, and community partners who are so crucial to making our innovation agenda a success. In fact, Mr. Chair, that is the very partnership that WD, since 1987, has built its success upon.

    As we have learned from recent global upheavals and events in the U.S., the economic well-being of western Canada and the Canadian economy remain vulnerable to broader influences. We must work harder to ensure that we have an economic structure and business sector that is innovative, globally competitive, and looks to the future. We must ensure that our citizens, communities, and industries can adjust to the ever-changing dynamics of the new global environment. Even more important, the future must provide all our citizens with the opportunity to enjoy economic prosperity and a better quality of life.

    Thank you, Mr. Chair, colleagues. I look forward to your questions and comments.

    The Chair: Thank you very much.

    I'll now begin with questions.

    Mr. Fitzpatrick.

    Mr. Brian Fitzpatrick (Prince Albert, Canadian Alliance): Thank you, Mr. Owen. I hope we don't get too rough on you here. You look like you're under the weather with your neck situation.

    Mr. Stephen Owen: No, this is armour, Mr. Fitzpatrick.

    Voices: Oh, oh!

    Mr. Brian Fitzpatrick: Okay. That being the case, maybe I'll get into some more difficult questions then.

    The regional development agencies spend money. The message that a lot of people get there is that this is free money. I just want to clarify that point, because I know small business people struggle to make a profit. They pay accountants a lot of money to pay their taxes, and get them to the government, and so on. I know the bureaucracies involved, on the revenue collection side, on the distribution side, and in between, are quite massive. These people get salaries and so on.

    Has your department done any analysis on what the cost is of a dollar distributed out of your economic authorities?

    Mr. Stephen Owen: Perhaps I can approach the question in this way, Mr. Fitzpatrick. The leveraged amounts of the money spent are considerable across all of the programs.

    Mr. Brian Fitzpatrick: I understand that. But I want to know if you've analysed the actual cost per dollar when you distribute funding. I understand your leverage argument.

    Mr. Stephen Owen: You're talking about operating costs?

    Mr. Brian Fitzpatrick: How much does it cost the government to collect a dollar and distribute it out to people?

    Mr. Stephen Owen: The collection costs of the taxation system in Canada are beyond my expertise. You're quite right that these are important, valuable tax dollars being spent in western Canada to stimulate business opportunity and research--and the commercialization of that research.

    In becoming familiar with WD over the last few months, the real test to me has been the enthusiasm and the wide range of partners. They take the lead of an investment by WD, to invest further monies, and, most importantly, to develop further partnerships. We're bringing together research institutions--many at universities--large corporations, and new entrepreneurs--

    Mr. Brian Fitzpatrick: I understand that argument. I was just raising it from the other end.

    I want to put something on the table, and maybe your department can look at it. There was a professional economist at the industry committee last week who referred to a study from an Oxford professor who received the Nobel Prize in economics. Basically, using that analysis, he said that consumption taxes cost us 17%; the income tax system costs us 53%; and capital taxes on dividends and capital gains--taxes for being in business in this country--cost us 154%.

    If this person's analysis is correct, we certainly aren't talking about free money when WD gets their money and starts passing it on to other people. There's a high cost involved. It's incumbent on these agencies to measure this. If there's a Nobel Prize winner out there who has won an award on this, and can measure this sort of thing, we should be measuring it. To work from the standpoint that it's free money, and that we're getting all these benefits, just isn't correct.

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    Mr. Stephen Owen: No, no, I quite agree with you; I don't think that is the perspective we should take from it. And that's an interesting approach of type of economic analysis. I'd like to learn more about it. Maybe we could look into it.

    Mr. Brian Fitzpatrick: I want to raise another cost, and I think this is a more knowable cost. It doesn't get into the Nobel Prize. The market system reacts to market signals. In the technology sector right now, in the information and knowledge economy thing, all you have to do is read the financial pages to know what's been happening--500,000 job losses, mergers, downsizing, Nortel, Cisco, different companies having real problems providing guidance. We don't know where the bottom of the market is. We see government investing heavily through agencies in this sector. They seem to be going the opposite way to the government.

    I have a particular example I want to throw at you. I've talked to people involved in the pulp and paper business out west, and they tell me that the North American economy has gone overcapacity in the pulp and paper thing and they've reacted to that. They've given their workers longer maintenance periods, they've closed their plants for different times. They're buying up smaller companies, too, to try to control this problem so they don't have massive layoffs.

    But if I understand the CED in Quebec, actually contrary to what's happening in the market, it pumped something like $80 million into a pulp and paper mill in Quebec. To me, this is a sure sign.... I mean, the Russians had this experience, Cuba still works with it, where state planners make decisions that are out of contact with reality. This is a problem that bothers me, because I have a pulp and paper mill right in my riding and there are lots of people employed in that operation. Here's the government subsidizing an operation to create more overcapacity when we have overcapacity in the system.

    This is a concern I have with these sorts of agencies, and I think a real problem with it. I'd like your comment about how the government can go off in its own direction, contrary to clear market signals.

    Mr. Stephen Owen: I think the general answer is that government doesn't go off on its own. Certainly through WD we work through partnerships with the most competitive of companies and with commercial rates. I won't speak for the Quebec regional development agency, but with WD, since 1995 we have been almost entirely out of direct loans to business. We're going through CFDCs in rural communities. We're going through volunteer business-led local committees that do their own due diligence and support local initiatives to diversify economy in the pulp and paper and forest products industry generally.

    This is to get small entrepreneurs in value-added businesses and diversify businesses, perhaps, out of commodity products, to give them better protection because they have wider profit margins from swings in international commodity prices. Certainly WD, as I say, since 1995 is out of that business and is into specific partnerships.

    Mr. Brian Fitzpatrick: Thank you.

    I note, too, that under the mandate and so on, one of the objectives of WD is to try to enhance and get more foreign investment in Canada. I want to raise an issue here, and I'm thinking mainly of Alberta on that front, because you're really doing a good job, Mr. Owen, in this area.

    A few years back, on the TSE oil index, there were 54 oil and gas companies that were Canadian-owned with their head offices and operations in this country. It's now down to 11 and getting smaller. So I would say that the government is doing a very good job at attracting foreign investment into this country, but ultimately, if this thing carries on with the low dollar and so on, we're not going to have any Canadian-owned oil and gas companies on the Toronto TSE 300. I'm curious to know what this strategy of foreign investment is that you're talking about.

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    Mr. Stephen Owen: Well, we're looking at growing the Canadian economy. There are different ways to look at direct foreign investment. If it leads to domination of foreign firms in our industry, we as a country have to watch very carefully that it's to the benefit of Canadians. You'll get economists arguing across the spectrum on that point.

    WD's involvement is overwhelmingly with small and medium-sized businesses, start-up businesses. For instance, one of the investments over a 26-month period that we've just initiated in British Columbia is to fund new immigrant entrepreneurs from Asia to get into the import-export business and become, quickly and effectively and profitably for all, new entrepreneurs in this country and build on the immigrant roots they have in Asia.

    So that's the level WD is working at. They're small and medium-sized businesses; they're innovative; they're business services that help people who otherwise wouldn't be able to make that leap successfully into entrepreneurship. It helps them with business advice and services, which gets them successfully launched.

    The Chair: Thank you very much.

    We'll now go to Mr. Bagnell.

    Mr. Larry Bagnell (Yukon, Lib.): Thank you, and thank you for coming, Mr. Owen.

    The money that does go to the private sector mostly sounds like research and innovation for small entrepreneurs. I assume that's money that they would not likely, at least in your opinion, be able to afford themselves, or that it's an activity or a new start-up that wouldn't have occurred without western diversification.

    Mr. Stephen Owen: I think in many cases that's true, but I also think it's important to look at exactly why that's so. The reasoning, to take the community futures development corporations....

    We're involved in a volunteer group of local business people to rigorously analyse, in a way that financial institutions often can't or won't do, and with very explicit due diligence, the opportunities for a small business entrepreneur. We'll provide some funding through their direction, which will allow them to raise more private funds and commercial financing. So they put in their own money and they get commercial financing, but it's because of the confidence and the due diligence that's done by these locally run committees that they're able to actually get into a business that, you're right, they otherwise wouldn't be able to get into.

    Mr. Larry Bagnell: Would it be safe to say that you never give 100% to a company, that there's always either a partner or the company's own money in an activity?

    Mr. Stephen Owen: I think that's so.

    Ms. Oryssia Lennie (Deputy Minister, Western Economic Diversification): Yes. For the most part, yes.

    Mr. Stephen Owen: I think one of the areas where there may be an exception to that.... There are two programs; one is called First Jobs in Science and Technology and the other is an international entrepreneurial step. This is where funds are given to a company to partly pay for the hiring of new, highly skilled people in high-tech areas. That's partnership as well.

    Mr. Larry Bagnell: You said that a lot of the money that goes to the companies goes for research and innovation. I'm sure the most conservative person understands that may not be financed by the company itself, but what percentage--roughly, not exactly--goes to things other than research or innovation activities, to the private sector?

    Mr. Stephen Owen: We certainly have categories of these first jobs in high technology supports. I'm not sure this gets directly at your question, but the entrepreneurship section is 19%; the partnership funding is 19%; economic research, which is really looking into broader business opportunities, is 3%; and innovation broadly, as you've described it, is 59%.

    Mr. Larry Bagnell: I think it was under innovation that you said there were roughly 38,000 jobs, innovation and research. Whatever the number is, given the amount of money the other leading nations of the world put in.... Of course, for our committee, related to research grants, it's been made clear that we're definitely not leading the world in that area. If other modern economies are putting much more into WD type of support for research and innovation, I assume this means a number of those jobs wouldn't exist and Canada would be less competitive. We'd be falling behind these other modern economies if there was not such an organization as WD.

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    Mr. Stephen Owen: I think WD has had a good record in creating jobs in high-tech, both in research and in the commercialization stage. Part of the new innovation agenda is to take us from fifteenth place, where we are in terms of private and public investment in R and D in the world now, into the top five by 2010. That's one of the targets that's being set.

    As this strategy gets developed--and WD will be very much in the lead of that strategy as it plays out in the west--then we'll get much more specific indicators and targets along the way.

    And you're absolutely right; the standard of living in Canada is directly related to the amount of investment, private and public, in research and development. It's not just the research, it's a question of actually getting a thing into development so we can get those goods and services to market.

    Our standard of living is directly correlated to the amount we spend. The innovation strategy is to take what has proved to be successful with WD at a very small and usually local level and amplify it across the country. We have to challenge businesses to invest more, partnering with them on strategic relationships, linking them with universities and other research centres, and ensuring that the high degree of research that's done through the incredible national treasure of our public universities is actually commercialized in an effective way. That's one of the biggest growth areas in catalytic agencies like this.

    We're trying to take these small lessons and make them part of the national policy.

    Mr. Larry Bagnell: You said you help mostly small and medium-sized businesses. What do the large businesses you don't help think about the whole concept of western diversification?

    Mr. Stephen Owen: Certainly, my experience in the last few months has been that their involvement and their support has been highly enthusiastic. MacDonald Dettwiler, one of the premier engineering firms in the country--in the world, in fact--is an enthusiastic partner in our scientific and research projects, both by bringing in their research expertise but also by involving small start-up businesses that can take advantage of the new technology that's being developed. They may be outsourcing or they may be contracting for services or specific components.

    There seems to be a very healthy relationship between large corporations and small and medium-sized enterprises. This is becoming generally more and more evident in our economy.

    Mr. Larry Bagnell: What's the difference between ACOA and Western Economic Diversification?

    Mr. Stephen Owen: Other than geography? WD, which I'm of course much more familiar with than ACOA, has been focused very largely on stimulating research partnerships with other levels of government and with business and research centres. As well, working to diversify in the rural economy through these community futures development corporations is to me, particularly as someone coming from British Columbia, immensely important.

    We from British Columbia are known across the country as having very robust local politics, which have been quite polarized throughout our modern history. In my view, the main cause of that polarization in politics--and it's true in many parts of the country--comes from the differences between rural and urban economies.

    In some ways those differences are increasing. Through innovation we actually have the potential to bring them together into one economy. Yes, we're looking into information and communications technology, biogenetics, and all sorts of exotic new industries to research, fund, and develop.

    We also have our resource-based economy, which does not consist of sunset industries. Forestry, fishing, and mining are economies of the future if we can create one economy through innovation, value-added and knowledge-based strategies, continuous learning, and the use of high technology.

    My hope, frankly--and I think agencies like WD can be helpful at it--is that we will develop one economy in Canada. Greater unity in our economy should heal some of the divisions in the country, whether west versus central or urban versus rural.

º  (1620)  

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

    Mr. Rajotte.

    Mr. James Rajotte (Edmonton Southwest, Canadian Alliance): Thank you, Mr. Chairman, and thank you very much, Mr. Owen and Ms. Lennie, for coming here today. Welcome to the committee.

    I want to ask a specific question, first of all, about tourism funding within WD. I have some information here from the Tourism Alliance for Western and Northern Canada. I'd like to quote from their statement and allow you to respond:

    

Federal support of western Canadian tourism partnership initiatives will be discontinued as of April 1, 2002, due to the reduction of federal resources allocated to WED and its programs.

    Then they point out that the other agencies, like ACOA, CED, and FedNor, still do provide financial support for tourism initiatives, but, in their words, because of funding cuts to WD, it no longer does.

    I want to give you the opportunity to respond to that.

    Mr. Stephen Owen: Thank you. I appreciate the question, because it gives me the opportunity to express the need for longer-term, sustainable funding for WD.

    We are in the process of having our funding reviewed and renewed, and, we hope, multiple-year funding. But that process is under way.

    The Tourism Alliance for Western and Northern Canada is an alliance of the six governments--two western northern territories and the four western provinces--who come together and work with us. They've received about $14 million, I think, over the last four or five years from WD to help sustain their initiatives to promote northern and western tourism.

    Their funding was project funding. It wasn't to be permanent. It was to have ended a year and a bit ago. Because of September 11 and the impact on tourism and because of the continuing need, that funding was extended for an extra year, ending March 31 this year, with about $2 million.

    We at WD are certainly looking for support, and we're getting it from the four western provinces with whom we deal directly, for an expanded or extended western economic partnership agreement that allows us to partner with the provinces and for these types of tourism initiatives. But that's very much in flux.

    There is great support in the provinces, as well as at the municipal level, for increased, sustained, and longer-term guaranteed funding for WD so that we can actually develop stronger partnerships and leverage more money, if we can cast it out further into the future.

    So I would say very definitively--and we'll have some announcements in the future that I think will demonstrate this--that the WD is not out of the support for tourism business. We may be looking at different ways to partner, at a municipal, a provincial, and a regional level. But the statement you have from that alliance is correct, that there isn't continued funding in this fiscal year for that particular alliance.

    Mr. James Rajotte: But you said the project is completed, and then you mentioned having longer-term, more stable funding. Reviewing the estimates from 2001-02 until 2002-03, if I read these correctly, there's an increase from $284 million to $338 million. If I'm correct on that, why would tourism not receive any money in this fiscal year, even if there is an ending of a project?

    Mr. Stephen Owen: When it looks like we're getting increased funding in the estimates, I wish it was as evident or as true as it seems.

    The fluctuations come for a number of reasons, but mostly because of our management of national programs. So the infrastructure works program is managed by WD in partnership with provinces and municipalities. It's a multi-year program, so in each province there is different phasing of when the total amount will be drawn down. So we see fluctuations over years that look like increases, but actually aren't, in terms of our core grants and contributions that we have available on which to enter into direct partnerships.

º  (1625)  

    Mr. James Rajotte: But the grants and contributions under here go from $223 million to $271 million. So perhaps I'm missing the explanation for this.

    Mr. Stephen Owen: That includes infrastructure.

    Mr. James Rajotte: It includes infrastructure. What is the infrastructure portion of both respective fiscal years?

    Mr. Stephen Owen: For this fiscal year, $152 million out of the total of $317 million.

    Mr. James Rajotte: What was it last year then?

    Mr. Stephen Owen: Last year, it was $34.4 million--

    Mr. James Rajotte: I see.

    Mr. Stephen Owen: --and that would reflect the fact that the infrastructure program was getting ramped up. It's multiple-year funding and it's not evenly distributed across the three or four years of the program.

    Mr. James Rajotte: Thank you for that answer.

    I want to move onto a very general question. Obviously I think you know where the Canadian Alliance is coming from on WD, but I want to actually read a quote from a federal Liberal member of Parliament. He, Reg Alcock, stated last year that the federal WD department is a barrier to growth in the west and should be dismantled. He's the first Liberal MP to call for an end to the regional economic development program. Mr. Alcock said Ottawa has poured $2.3 billion into the west through this agency since 1987 with little to show for it in terms of creating a dynamic and diversified economy, particularly in the provinces of Manitoba and Saskatchewan. I quote:

It has not proved to be terribly effective. They don't do a whole lot and we spend an enormous amount of money on them and they don't actually do a lot.

    I would like to give you an opportunity to respond to one of your own colleagues really challenging the existence of this entire program.

    Mr. Stephen Owen: Sure, thanks for the opportunity.

    The short answer is, I don't agree with him. From all the evidence I've seen in the three months I've been involved in WD, they contribute a tremendous amount to the western economy. It's widely appreciated at all levels of government and across the spectrum from large to small corporations, to universities and research centres, to voluntary organizations. One of the figures I quoted in my opening remarks was the 400,000 contacts for business services in British Columbia alone over the last year.

    I've now been to two of these business fairs where thousands of people, clients as we call them, come looking for assistance in start-up businesses or expansion of businesses, for help with building business plans, help with linking to commercial financing, help with getting import-export licences and assistance, and help with using e-business. These are immensely popular and supported programs. That's among small and medium-sized business entrepreneurs.

    But we're getting the same enthusiastic response from research institutions at universities and from partnering with large corporations like MacDonald Dettwiler, like Telus, like IBM. Working with the very small amount we bring, but assisted by the organizational, catalytic role we play, they are looking at new media and looking at telecommunications research.

    The third dimension is the other levels of government, and they're governments from across the political spectrum, whether it's the NDP in Manitoba or the conservative Liberal government in British Columbia. These are enthusiastic partners across the political spectrum in this type of expenditure and willing partners on a cost-shared basis of these initiatives.

    So with all due respect to the person you quote, the opinion he's reached is contrary to the evidence I've seen, looking quite carefully over these last few months at these projects.

º  (1630)  

    Mr. James Rajotte: Can I respond? In terms of you saying it's a very positive program with the people you're talking to, an article at about the same time from the Vancouver Sun stated that this federal agency, WD, has “spent $2.4 billion since 1987 to diversify Western Canada's economy”, and yet it is “virtually unknown despite aggressive political salesmanship and an ad campaign that costs more than $600,000 a year”.

    It goes on to say, “Only one in 10 owners of small western businesses surveyed could identify Western Economic Diversification Canada, which has a $284 million budget, as Ottawa's agency responsible for the region's economy.”

I think I would take that into consideration in terms of the popularity of the program.

    Secondly, I would like to pose a question to you. I think where Mr. Alcock was going...and he was a very valued member of this committee for years. He said that he was very strong on research and development and developing the west, but he felt that this agency should be folded into Industry Canada; researchers and western Canadians would rather deal with a larger industry department. I confess, I have to agree with him.

    When I go through your remarks and look at the examples you provide, it puzzles me as to why Industry Canada could not do this through the National Research Council, through the Canada Foundation for Innovation. You talk about the commercialization of technology. Why is that not through the National Research Council? You talk about levering new funding, about genomics. Why is that not done through Genome Canada? Why is that not done through the NRC? You talk about supporting innovation clusters. One of Dr. Cardy's main points is innovation clusters. Why is it not done through the NRC? The synchrotron in Saskatoon--I toured that a couple of weeks ago. I think it's a fantastic facility, and yet it seems to me that the NRC should be the agency primarily responsible for that. What I heard from the researchers was that they would rather deal with one agency rather than two government agencies. It simplifies their lives.

    In terms of the loan investment fund program, it fills a gap in financing between traditional bank lending and venture capital. That sounds very similar to the BDC representatives we had a couple of weeks ago. Women's enterprise centres, again, the BDC, aboriginal economic development--it seems BDC covers that.

    Following up on Reg's point, it seems to me logical that I, as a researcher, would rather deal with fewer government agencies and departments. Why not fold WD into Industry Canada and allow NRC, CFI, and BDC to deal with these issues?

    Mr. Stephen Owen: There are a few reasons, I think, that have been evident to me in coming to know more about WD and its work.

    One of the reasons it's not broadly known is that we deliver national programs at a regional and local level. Infrastructure Canada, for instance, gets associated with Industry Canada, even though it may be that all of the due diligence, all of the partnership arrangements, the management committees, the decision-making is done through WD on behalf of the federal government at a local level. In many of the programs, people just don't identify with WD, they identify with Industry Canada, but it's actually handled by WD.

    The importance of its being handled on a regional and western basis is the very acuity you can bring to decision-making. These are local relationships. We're partnering with local institutions, with local businesses, working very largely in rural communities. Having small and medium-sized enterprises deal with a national institute or foundation or research council is immensely difficult. It's distant; it's not going to be as sensitive to local needs and circumstances as is an agency that's on the ground and well known. That's the philosophy behind it.

    To me, it seems to be working as an idea that is simply reflective of local needs, on the ground--working more as a catalyst than anything else. We're not putting large amounts of money in, compared with the cost of some of these enterprises. We're providing managerial assistance.

    In the Vancouver agreement, the 12 federal agencies that would deal with the city and the provincial levels of government are all coordinated by WD. It runs the management committee and provides the link to the other levels of government. It's working with them anyway on infrastructure programs, on economic partnership agreements. It has a specialized local knowledge.

    As well, many of the people in the 400,000 hits I mentioned involving clients in British Columbia are people looking for a place to go that can be one-stop shopping. I take your point that we have to make it simple, but actually WD does make it simple. It's one place they can go to get access to a whole range of government programs. That's what we're working towards.

    I'm sure we need to have the profile greater, so that people aren't failing to take advantage of this efficiency. You've mentioned the $600,000 expenditure. Very largely, that's simply advertising our services to those hundreds of thousands of clients who use it. I think $400,000 goes to general business services advertising, and about $200,000 goes to the national program, such as Infrastructure Canada advertising.

    We do need to be better known, but I think it actually provides the very service you're concerned about being provided, and that is a one-stop opportunity to enter a whole range of other government services.

º  (1635)  

    The Chair: Thank you very much.

    Mr. McTeague.

    Mr. Dan McTeague (Pickering--Ajax--Uxbridge, Lib.): Thank you, Mr. Chair.

    Minister, welcome to the committee. I'm glad to see you're on the mend.

    Mr. Stephen Owen: Thank you.

    Mr. Dan McTeague: I'll have a couple of questions, I suspect.

    First of all, I'm really delighted to hear consternation and concern from my Alliance friends about the oil and gas industry being rendered into the hands of foreign control. It seems to me that's almost analogous to an argument some predecessors in the Liberal Party made many years ago that got us into a lot of trouble in the west. Perhaps there are opportunities now, as a result of some of those statements, that we can look into.

    Yes, Mr. Chair, I will get to the question.

    There are a number of investments made by this agency that really are of a non-commercial essence. I'm wondering if there is a way in which you can measure the benefits that are derived from those, given that many of those investments don't really have a relative market you can measure. How do you benchmark to ensure that the funds and grants being given have the kind of benefit that exceeds the very grants we have in place?

    Mr. Stephen Owen: That's a very important point. As I go along I'm learning more about how we measure that.

    Let's take the synchrotron, perhaps, which is the major investment in research in Canada in three decades. One way of measuring it is to consider that, because we're only a small investor in a large consortium, we're benefiting from the expertise, the due diligence, and the determined need or value of the other partners. These may be levels of government, or industry, or parts of the research community. So we benefit from that.

    Another way is to develop results-based management, which is something I think other areas and levels of government could learn from. With it the due diligence done at the outset is done against a realistic assessment of what you want to achieve, and your capacity to achieve it by this route. This has to be done rigorously from the outset. We have to know where we're going; we have to have measuring points along the way; we have to do the evaluations as we go along; and we have to put these evaluations and audits on our website. This is being done, so that they're out there for the public, partners, and for everyone to share.

    But what you point out is a common challenge of basic research. It is sometimes the most expensive research, and doesn't have an immediate and obvious application or link to commercialization. In that we partner with the people who know best and are the experts in their field. That's the built-in protection.

º  (1640)  

    Mr. Dan McTeague: Minister, I was looking at the brochure you have here on diversification, Working With the West, which cites a number of very well-known business examples and owners. It refers to Genome Canada, and to Dr. Henry Friesen. There are also comments in both it and your presentation on Ballard.

    Yesterday we were interested in the issue of drug patents. But I want to talk more generally about patents. Through the years of investments, have there been a number of applications made to patent ideas and products? And if so, how many of those patents have been granted as a result of the efforts of your agency?

    Mr. Stephen Owen: Perhaps, Mr. Chair, we may respond to the committee in writing on that.

    Certainly there is an expectation in terms of the objectives of synchrotron.... I think I gave some examples of the number of patented research products that were expected out of a certain number of projects. So these are clearly estimates, but they're the targets to keep our eye on.

    We'll get that general information for you.

    Mr. Dan McTeague: Finally, and this is a very short question, do you find there are greater challenges on your agency now that there is the usual ebb and flow of certain resource-based industries in some parts of the west? I'm thinking, for instance, of agriculture, where there may be a tremendous hit in days to come as a result of subsidies by the American government.

    Is the agency contemplating looking down the road to the future, thinking it knows that all those in the business may not survive without a concomitant subsidy from the Canadian government? If that is not the case, what contingencies have you discussed or will you think about with respect to what might be dire times for that particular sector of the economy?

    Mr. Stephen Owen: I think I can answer that in two ways.

    First--and I think this is true of the forestry industry in British Columbia and other parts of the west, including of course the agriculture industry, which is suffering from the threat of major additional American subsidies--WD isn't in the subsidy business; quite the contrary. Where I think we are most effective in looking at resource economies in the future is not in providing subsidies, but investment assistance, business assistance, and partnership or catalytic assistance. These can help those commodity-based industries--which have very narrow profit margins--become the high-tech industries of the future, through greater value added, the application of higher technology, and diversification of people working in them into areas less vulnerable to swings of international commodity prices and the assault of foreign subsidies, which directly compete with us.

    So the two ways that WD can assist is to help people diversify, and to support research in those industries, so that they can become more value-added and high-tech.

    The Chair: Thank you.

    Mr. Fitzpatrick.

    Mr. Brian Fitzpatrick: It's not only Mr. Alcock who has made that comment. I think the former premier of New Brunswick has said that your sister organization, ACOA in Atlantic Canada, just doesn't work. It has created a region of dependency, and they have to find a new path, a new road. As well, he says, competitive corporate tax rates and really doing something with a very heavy government burden is what's required in that region to get on the new path.

    I grew up with these problems in some of these regions and they're still here, so I wonder about the results of them. I just raise that point to reinforce what my friend said about Mr. Alcock's observation on WD.

    I want to clarify the point Mr. McTeague raised, too. We're experiencing a decline in our economy. That's what's happening in this country. Thousands and thousands of highly trained people from out west are leaving our country. If you fly on a plane to London, or if you go to Silicon Valley or Los Angeles or Seattle, it's not hard to find them. There are thousands and thousands of them. And what are we trying to do? We're trying to replace the people who are leaving by finding people from other countries.

    I would really like to see an economy where our people would see a future in our country, opportunities here, not be leaving our country. I just wanted to raise that point, because you mentioned immigration and recruiting people here. I think a big challenge for this country is retaining the people we have.

    We produce hundreds of medical graduates in Saskatchewan and it's just like a pipeline out of that province. Most of them, or a lot of them, end up in the U.S., and we're importing people from South Africa who are doctors. I'm sure South Africa needs doctors. I think there's a moral question involved with that if you really want to pursue it far enough.

    You said you're out of the big company business, but I have a report here that says WD has handed out something in the order of $96 million to things like Canadian Pacific, Domtar, Ballard Power Systems, Bristol Aerospace, Sherritt, Western Star, Canadian National Railroads, Pratt and Whitney, and Bombardier.

    Obviously, they're not entirely out of this business; they've been involved with these organizations. I just want to have that on the record. Maybe you're trying to exit that way of doing things, but they're on the books and you deal with them and there has been an involvement with these outfits.

    I guess what I really want to get into, Mr. Owen, is that this government says it wants to lead us in innovation and entrepreneurship. Quite honestly, government, especially government in Ottawa, would be the last place in the world I would expect to find real innovation. In fact, my observation is that very often government is the thing that stifles innovation with its regulations.

    The Chair: Can we get to the question?

    Mr. Brian Fitzpatrick: Entrepreneurship involves the entrepreneur assuming a high degree of risk, and in this scenario the government's assuming the risk, not the businesses involved. I guess I'm just curious; how in the world could you or your colleagues actually go out in the private sector and lead people in the area of innovation and entrepreneurship?

º  (1645)  

    Mr. Stephen Owen: Thank you. You've raised a number of issues.

    I have very high regard for my colleague, Reg Alcock, but that doesn't mean that people have to agree on all issues, and on this, we may have some disagreement.

    Beyond that, I wasn't addressing the issue of immigration. That is a major issue, and you've raised a very interesting moral issue with respect to immigration in this country. I'd enjoy having that conservation with you at another time. But my concern was yours, the general need for an increase in trained people in this country, just based on our own demographics. The point I was making was that given the high proportion of aboriginal people in this country who are young--the bulge is in youth--and the need for employment of those young people, because of their location, often in the more rural areas of our country, there is an opportunity, through enhanced education, proper training and apprenticeship programs, and joint ventures with large resource companies, for those people to step into the jobs they need, the jobs that need to be filled in the renewal that's necessary. So I think, as a matter of public policy, we have to turn what can be a situation of despair or lack of trained people into a positive partnership.

    In regard to the large-company issues, those were, I gather, mainly between 1987 and 1995. I did mention that WD, after the core review that was done in the mid-1990s, shifted from being a direct funder of corporations to these partnership arrangements and other programs, so I think we're dealing with a historical situation there. I take your observation; I don't think we should be involved in those situations, and I gather we're not.

    In terms of the lead, you're absolutely right that big government shouldn't be the one applying the spark of entrepreneurship to people in small enterprises, and yet the more regional an agency, the more trusted and expert it is, and the more partnered it is with the people in the communities, who are the most affected, most knowledgeable, and most interested in the issue. Those partnerships are going to make sure that the service or advice being provided is relevant, expert, targeted, locally appreciated, and needed, and that, I think, is the strength of WD--not that it's part of a federal government.

º  (1650)  

    Mr. Brian Fitzpatrick: Are you saying decentralized government works better than centralized government?

    Mr. Stephen Owen: In many ways it does. The whole notion of subsidiarity is let's make the public policy decisions at the most logically local level. The decisions you're suggesting are best made at that level, and that's the way WD operates. I'm not competent to compare WD with ACOA, but I know the objectives are different for the two agencies.

    Mr. Brian Fitzpatrick: The provinces will be glad to hear that, too.

    Mr. Stephen Owen: Well, they're our key partners.

    The Chair: One more, Mr. Fitzpatrick.

    Mr. Brian Fitzpatrick: Another area for getting economic development going in the various regions--taking from Mr. McKenna--is to increase the limits on our RRSPs. If you want to attract investment and capital, increase the RRSP limit. In my mind, that would probably do just as much good as churning all this money through this bureaucracy and trying to sort it out. Basically, my observation of what you've said and what I've read on this thing is that this industry department and your economic development agencies have become so large they're basically unmanageable and incoherent. I think it would be a lot wiser if we looked at other ways of trying to stimulate economic growth and development in this country rather than going through these big government bureaucracies.

    Mr. Stephen Owen: Thank you for your observation. It's not mine. This is a relatively small program that does a vast number of things extremely well by all accounts from the people who are partnered with and benefiting from it.

    As to other efforts to stimulate the economy, we should be looking at the widest range of opportunities, which is why the Canadian economy is in fact doing as well as it is. Compared with our OECD partners, we're forecast to be at the very front of all of them over the next couple of years, and we have been in the past.

    So I don't think we're in the category of the failed state that it sometimes sounds like we are, from our own self-criticism. But that doesn't mean we don't need to innovate more effectively, increase our R and D, and make sure all of these programs are well run and as productive as they can be.

    Your general criticism of government programs is a good caution to us all to make sure we use this money as effectively as we possibly can.

    The Chair: Thank you.

    Mr. Bagnell.

    Mr. Larry Bagnell: Well, that was interesting. Mr. Fitzpatrick suggested you've become so big that it's unwieldy, and Mr. Rajotte had suggested earlier that we fold the programs--it was a thoughtful suggestion, actually--into yet a bigger bureaucracy. So I'm not sure what the solution is.

    But those aren't my questions.

    Mr. Stephen Owen: It shows the level of independent thought within the Canadian Alliance.

    Some hon. members: Oh, oh!

    The Chair: Can we get to the question, Mr. Bagnell, before 5 o'clock?

    Mr. Larry Bagnell: Okay.

    You provide a number of loans as opposed to grants.

    Mr. Stephen Owen: They're loan funds, which can be drawn upon...loan funds through the CFDCs are drawn upon. They're a revolving fund run by the local, volunteer, business-led community that funds local enterprises and start-ups. It gives them an opportunity to get further funding at a commercial rate and also to invest their own funds. But those are repayable loans.

    Mr. Larry Bagnell: So they started out with some seed money, and now they're actually generating their own money because they're making interest, and it carries on?

    Mr. Stephen Owen: Making profits, yes.

    Mr. Larry Bagnell: And keeping the economy going.

    I assume that the success rate of those loans is relatively good in relation to comparable loans in the private sector.

º  (1655)  

    Mr. Stephen Owen: As I mentioned in my remarks, we are bridging a gap between venture capital, which can be very high risk, and regular commercial financing and other equity financing.

    The Auditor General looked at this loan program and reported on it in 1995. He expected a default rate of about 22%. In fact, the default rate over all of the loan programs up until this very year has been 12.8%. So it's a very healthy return from what we are stimulating in terms of business that otherwise wouldn't have been created or assisted.

    Mr. Larry Bagnell: You talked about research. Are there any results on the benefits of the research compared with that funded by the private sector? I assume it's at least equally successful.

    Mr. Stephen Owen: I think we can provide extra funding or funding at a particular time in taking research to development and commercialization. For instance, the early funding for Ballard Power Systems was at a pivotal time for them to be able to attract wider funding.

    Mr. Larry Bagnell: In the private sector there's a very high failure rate for new entrepreneurs. What is the success rate of your entrepreneurial programs? I assume it's relatively good.

    Mr. Stephen Owen: I think the default rate on loans is a surrogate for the failure rate of new enterprises. So I think that's fairly comparable. That would suggest that it's very effective.

    Mr. Larry Bagnell: My last question is on economic generators. I assume we've made an investment for the federal government. We have these 38,000-plus jobs and all the revenue going into the economy. But are there not also spinoff generators? We have more people employed, so we have less national debt. I assume there's an analysis of all those types of added benefits to the economy.

    Mr. Stephen Owen: You list a number of important benefits. One is just the multiplier effect of generating economic activity throughout the economy. Another is not simply creating jobs, but when we're looking at a diversifying, value-added resource economy, then we're saving jobs as well.

    The other area of amplified investment, of course, is the leveraging that goes on.

    The infrastructure programs are administered through WD in the west rather than from Ottawa, and I think that being the only full department that has a western head office is significant to the success of the program.

    But it's not only leverage funds through private investment. It's also the other levels of government that provide their own due diligence, priority setting, and determination of the value of this, as I say, from across the political spectrum. So we're also tripling our money in that way as well.

    The Chair: Thank you, Mr. Bagnell.

    Before we close, I'd like to make sure I have a proper explanation. On page 7 you talked about 400,000 small business clients. We've now talked clients, contacts, hits. Could you just explain what that 400,000 is? Is that hits on the WD British Columbia website? Is it 400,000 small businesses?

    Ms. Oryssia Lennie: It's small business clients, yes, and it's ours partners as well, our partners in the western Canada business services network, including the Canada business service centres, the CFDCs, the women's entrepreneur enterprise initiatives--

»  (1700)  

    The Chair: That's across the west?

    Ms. Lennie Oryssia: Yes.

    The Chair: Not just British Columbia.

    Ms. Lennie Oryssia: No, this is in British Columbia.

    The Chair: Okay.

    If there are any summary remarks you'd like to make, you may make them now.

    Mr. Owen.

    Mr. Stephen Owen: I'd like to thank you all for your skill-testing questions and the gentle way you've treated my neck. It was nice to be here, and I look forward to joining you again.

    The Chair: Thank you very much for appearing today.

    I want to remind the committee that we have two more secretary of states coming tomorrow morning. I'd ask you to be here at nine o'clock sharp so that we can spend the full two hours grilling the next two secretaries of state.

    Thank you very much. The meeting is adjourned.